Latest News [index] Like rust, trustee liability might doze but it is never asleep â¦
A decision to wind up a trust is a common response to creditor issues.
However, some trustees may be surprised to learn that trustee liability isn't simply erased on winding up a trust. This is demonstrated by the case of Wiltshire Investments v Halstead (2010) 3 NZTR ¶20-015 the facts of which are as follows:
- the trust in question had been wound up two years prior to the proceedings
- prior to winding up the trust the trustees had agreed to indemnify any losses one Mr Halstead might incur pursuant to a lease guarantee
- when the landlord claimed against Mr Halstead, Mr Halstead joined the trustees to the action
- judgment was given against the trustees
- no payment was made in respect of the judgment against the trustees
The purpose of the proceedings at hand was to establish whether the trustees could be required to make themselves and trust documents available to the Court for the purpose of examination. In ordering the trustees to present themselves for examination together with trust documents dating back for the 7 years prior to the trust being wound up, Associate Judge Abbot noted that:
"Whilst I accept that there may be a relatively fine line at times, between an inquiry into the trust's assets and into a trustee's actions, it is permissible to examine how the judgement debtor cam to have no assets … Mr Halstead is not seeking to challenge the trustee's action as such; he is simply seeking to establish whether there is a case for recovering distributions by way of identifying former trust property that may have been alienated in breach of the terms of the trust and thus giving rise to a right of recovery."
The trustees were also ordered to meet the costs of the examination application. As the trust had no assets these costs would be required to be met by the trustees personally.