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Law Society comments on Newmarket Trustees

Although the Newmarket Trustees case appeal has yet to be heard, the Law Society has come out in support for the single corporate trustee model.

See http://www.adls.org.nz/about-adls/committees/public-issues-committee/public-issue-papers

Another advantage of the single or dedicated corporate trustee model is the ease (and cost effectiveness) at which the effective control of the corporate trustee can be changed. However, on a cautionary note, a point not made by the Law Society is that where a single corporate trustee is appointed there is a risk, albeit largely theoretical at present, whereby in certain circumstances beneficiaries can claim against the director of a corporate trustee pursuant to a dog-leg claim. The basis for such a claim lies in the proposition that a director’s duty of care is a trust asset. While this has been rejected in Australia (Young v Murphy) the proposition has been entertained (if not positively endorsed) in the English case of HR v JAPT.

One solution to the matter is greater consideration of the use of professional body corporates where fees are paid for trustee services provided by a competent capitalised trustee rather than what Professor Ford has described as the commercial monstrosity that is represented by the fruit of the union of the law of limited liability companies and trust law.

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