New law protects Public Trust

Justice Minister Judith Collins says a new law passed in Parliament tonight protects the Public Trust from having to wear the costs of stepping in to replace the trustees of failed finance companies.

Ms Collins says previously the Trustee Act allowed the High Court to appoint Public Trust as replacement trustee ‘of last resort’ for any trustee that wished to retire or resign, without the Public Trust’s agreement.

“This rule was first enacted in 1899 to ensure that family trusts did not fail for lack of a trustee. Since then, trusts have changed significantly and rules applying to traditional trusts are out of place when applied to corporate trusts.

“Without this law change, securities trustees were simply able to walk away from their responsibilities to investors by asking the court to have Public Trust appointed in their place. The Public Trust was at risk of incurring huge and unrecoverable costs.

“There may be very good reasons for appointing Public Trust to stop a family trust from failing. But we need a different approach for appointing a replacement trustee for a failed finance company,” Ms Collins says.

The new Trustee (Public Trust) Amendment Act makes it clear the retiring trustee must first try to appoint a replacement trustee before seeking Public Trust’s appointment.

If Public Trust is to be trustee of last resort, the retiring trustee must cover Public Trust for its reasonable fees and expenses, if they cannot be paid otherwise.

The new law provides an interim solution until the Financial Markets Conduct Bill, which is currently before Parliament, is enacted and comes into force.

Under this Bill, the Financial Markets Authority will take over the role of determining the replacement trustee for investment products regulated by the Bill.