Latest News [index] Corporate trustee warning
The recent decision in Newmarket Trustees Limited v CIR is a timely reminder of the risks inherent in the appointment of an assetless corporate trustee. In this case the trustee, which had no assets of its own, was a trustee for a number of trusts. One of those trusts owed a substantial amount of tax to the Inland Revenue Department, which served a statutory demand on the trustee seeking payment of the tax arrears. The trustee attempted to have the demand set aside for reasons that included its lack of involvment in the management of the trust and the fact that if the trustee was wound up there would be substantial cost and inconvenience for all the other trusts for which it was a trustee. However, the Court, which was highly critical of the trustee's lack of knowledge about the trust in question, declined the application. Two important facts highlighted by this case are the importance of:
- having sufficient information about a trust before accepting a trustee appointment; and
- knowing whether an assetless corporate trustee acts for other trusts so that an informed decision can be made about any risks or costs that could arise should that trustee be liquidated.