PUBLIC TRUST OFFICE.

Auckland Star, Volume XXII, Issue 145, 20 June 1891, Page 2

PUBLIC TRUST OFFICE.

(BY TELEGRAPH.—OWN REPORTER.)

Wellington, this day.

The following is the conclusion of the report of the Public Trust Commission, the first part of which was published in last evening's issue :—

~Y our Commissioners have examined into the circumstances connected with the administration of many estates, wherein tha treatment by the Public Trustee of moneys and assets has proved to have been imprudent and unwise, and the reamlb appears to show that in many cases persons entitled to benefits from such estatas havo been treated in a somewhat arbitrary and cruel manner. « c regret to say that the Public Trust Office appears to have displayed a total ,absence of capacity and knowledge of how these estates should havo been managed and controlled, and have asked attention to evidence relating fco many such estates as shown in the statements accompanying this report, more especially to tho sad history of the treatment by the Public Trustee of the estates of Mrs Dallon, Hugh Wright (a lunatic), the Meorant Trust, Holmes (a lunatic), Parmintor, Samuel Young and others, also to note tbe manner of dealing by the Pablic Trustee with W. F. Ross, who became a purchaser of certain frontage freehold land at Lambton Quay, Wellington. A most unusual and peculiar method has obtained with the Public Trust Office, perhaps legally, of keeping its profife and loss account under the heading "Expenses" account, to which all salaries and charges during the currency of the financial year have been debited, while afc the same time all commissions, interest and fees have been credited to ib, and the latter three items of credit being greater than the debit entries, expenses, etc., hold the anomalous position of always appearing in credit, and your Commissioners desire to indicate this as an example of the inefficient mode of book-keeping. The "Expenditure" account should only contain debit charges for salaries, law costs, and petty cash, and should not contain credit entries unices in the shape of a refund of some charge previously made to it and during the year,. Commission account should be a separate account, and always in credit. The " Interest " account should bo a separate account and in credit, and the "Fees"account should also be a separate account in credit. At the end of a half-yearly or annual balance, the balances of theae several accounts should be brought to a profit and loss account in the general ledger, and disposed of by showing the result balance of either profit or loss.

Your Commissioners have had returns prepared, showiug in detail how each total amounb that appears on tbe balance-sheet of tho 31st of December last was made up, and they recommend that similar returns should be continued at future annual or half-yearly balances. Had a regular system of this kind obtained hitherto, and books and files of papers been in proper order, there would have been no necessity for the employment by the Public Trustee of a largo staff of extra clerks during the tedious investigation on which the Commissioners have beon engaged. Thirdly, the investment of trusb and other funds by the said office, whether under deed, will, or other instrument or in any other manner authorised by law, general or particular, and class terms and mode of investment in all or any guch cases.

The investment of funds under mortgage by Public Trustee appears to require the sanction of a quorum of the Public Tru3t Board, Applications for loans are entered in the Board's niinuto book, with the name of tho applicant and amount of loan applied for; bub no particulars, description, or locality of securities have been entered on the minutes placed before the Board. The loans, after consideration by the Board, are either " granted " or " declined," and such decision has been written in the minutes as each case has _occurred. Your Commissioners are of opinion that a proper description, and full"particulars of every security offered for loan, should be carefully and minutely described in the Board's minute book before being placed before the Board. Had this system beon practised hitherto much trouble would have been avoided. The investigation just made into the duties of the Public Trust Board do not seem to extend beyond the sanctioning of loans. For instance, .it does nob appear to have been within the province of the Board te inquire into or know anything of the securities after loans had been granted, not even to know whether a loan granted had been completed ac a security, and whether the value of such security had subsequently fluctuated. In the opinion of the Commissioners this ia a most important duty, and ought to have been attended to by either the members of the Board or by the Audib Department, and any loan granted by tho Board, after its acceptance and completion by tho mortgagor, should again have been reported in the minutes of the Board, and the date of its completion The securities in which the Public Truetee is at preeenb authorised to invest the funds under hie control are Government securities of the United Kingdom, the colony of New Zealand or of the Australasian colonies, including Tasmania, the securities issued by acounty council, borough council, harbour board, road bqard, or. town board, mortgages of freehold lands, fixed deposits with any incorporated bank carrvins on business within the colony, and in any way provided by a will or trust instrunfent. The Board of the Public Trust Office is bound by the regulations not to advance on mortgage out of the general fund a larger sum than fifty per cent, of the valuation of any property offered as a security, bub in many instances the eyidence discloses the fact that the Board has failed to keep within the regulations. Neither Board nor Public Trustee ever appea- to haTe taken infeo consideration that they had two funds entirely distinct, out of which they could make advances, namely, the general funds of the office, and special funds arising out of trusts and wills, the first beine subject to the regulation as to fifty per cent, margin, and the latter being controlled either by the specific trust or will, or being absolutely free of anj ' restriction. The evidence of the Public Trustee, and the returns furnished by him, also show that in several instances moneys bave been advanced on mortgages without any valuation of securities having been made by way of mortgage securities. The Public Trustee has chiefly dealt with what are generally known as contributory mortgages without having realised the risks fnd confusion he might entail upon the colony and himself. This plan of f dealing with the balances ab the credit of estates on such a class of security _ was »P««"«J unknown to the members of the PublicTrusb Board The position will be recognised by assuming as examples of these mortgages that three applications for different Joans on different days had been placed for approval before the Public Trust Board, say For 110.000, £3,000, and £1,000. Several securities having been approved by the Board, loans were granted and mortgages prepared in favour of the Public Trustee, who then paid to the mortgagor his cheques drawn on his general account. The Public Trustee then takes from thecredit balances of estates without the knowledge and consent of the beneficiairea or of the Board unequal sums ot money Scient in the aggregate to make up each of the said mortgagee. If

the securities turn out to be good, and the interest thereon is paid regularly for the benefit of the many estates involved in the loans, no question is likely to arise ; but, on the other hand, if the securities become unsatisfactory, and the beneticiaires make urgent and unavailing demands for the unpaid interest and for the loes of the principal moneys, serious difficulties and complications are sure to ensue ; indeed,, such an undesirable state of things already exists. The Commissioners, without expressing any opinion as to the legality of such mortgages, can not refrain from pointing out their many difficult and inconvenient surroundings. In the first place, if an excellent inveefctnenb of the kind were made by the Public Trustee bearing intereet at 7 per cent, or even at a higher rate, there exists no stated or fair principle by which the Public Trustee should be obliged to give a preference to those balances or moneys that had stood uninvested for the greabesb length of time in his books, and therefore any contributory mortgagee would have good cause of complaint if he found hia money invested under that form of security at a lower rate of interest than that received by any other client of the Public Trusb Office. The Public Trustee might quite unintentionally give great advantage to an estate only recently brought under his control and overlook other estates that had been for years on the books of the Trust Office. Again, where a loss or losses had to be faced—and there are many such — the plan of the Public Tru3tee is to distribute any loss pro rala among the contributing estates from which he had taken the money for the original mortgage ; but as the various sums so taken have been unequal,of amounts varying from fifty pounds from one estate to many hundreds from another, it will easily be realised how confusion and discontent, and perhaps litigation, may arise from such transactions. In several cases the Public Trustee has made allocations from eitates that had come into his hands as contributions towards mortgages that had been executed and in hie possession for many months, and subsequently when losses had occurred in connection with tho latter securities the Public Trustee charged the same to the former estates on the pro rata principle without the knowledge of beneficiaires as to the facts. Your Commiisioners are therefore of opinion that contributory mortgages are not satisfactory securities , ' to deal with, either for tho Public Trustee as mortgagee or for many of the contributing estates as mortgagees. The same power of investment can be obtained at a reduced and certain rate of interest and without the risk or inconveinewce to any of the interests concerned if the colony were to guarantee five per cent, per annum on daily credit. The balance of the hotchpotch account! in the name of Public Trustee should be called " General Estates Account," and be composed entirely of balances belonging to intestate estates. Then from this General Estates Account the Public Trustee, with the advice of his Board, could more easily and safely advance any sum or sums of money at a marginal higher rate of interest, say, from one half to two per cenb., end so provide for a guarantee and expenses. Id would also be much more eafcisfactoryto the beneficiaires, and particularly those interested in the smaller intestacies, to know that their moneys were safely invested at five per cent., and that the half-yearly or annual income, clear of deductions for legal charges, was secured to them, and that their principal moneys were safe. The Commissioners are further of opinion that all intestacies, whether of reality or of personalty or of both, that may be brought under the control of the Public Trustee, should as soon as convenient afterwards be sold by public auction, and the proceeds placedinthe "General Estates Account"soas to produce five per cent, to the beneficiairea. This course would save the Public Trustee much clerical labour and trouble, besides the risk and less unsatisfactory nature of carrying on the business of an intestacy. The care of house property and of vacant land, repairs to bouses and the collection of rents would become a thing of the past, so far as this class of estates is concerned. In regard to testate estates the position of the Pablic Trustee is different, as he is only called upon to follow the directions of wills dealing respectively with them. The same remark is applicable to estates in the Public Trust Office by deed. Fourthly: In what respects (if any) the scope of the powers and duties of the Public Trustee could be enlarged, or whether any class or classes of property now administered by the eaid office or its agents should cease to be so administered.

Your Commissioners, in bbc earlier part of this report, have offered the opinion that the powers of the Public Trustee should be of a very extended character, and after farther consideration they think that he should be authorised to manage estates for people either resident or non-resident in the colony ; that, in fact, he should be empowered to become attorney for the conduct and managing of any business pertaining to and within New Zealand. So far as their investigation of the classes of property hitherto administered by the Public Trustee has assisted them to judge, they have come to the conclusion that the Public Trust Office of the "colony, under capable management, is the proper and responsible institution to take upon itself the care and control of all classes of property whether appertaining to realty or to personalty, and whether belonging to Europeans or to the native race. ' The Commissioners have been informed that it is the desire ef the Public Trustee to divest) the Public Trust Office of all business in relation to the natives and in connection with native reserves, and it may be a matter of prudent policy or otherwise to withdraw such business from his control; but that is a question of which Your Excellency's Ministers ought io be the proper judges. Under capable and experienced management, the Public Trust Office might be made not only a bona fide revenue - producing institution for the benefit of the colony, but a most economically useful one in the management and custodianship of both real and personal property of every kind. There also seema geod reason that the Public Trust Office should be authorised to receive moneyejon fixed deposits at rates of interest varying with the term of deposit. Moneys might also be received on deposit at call bearing interest at 2J per cent., provided that upon any euch deposit at call no interest should be allowed if withdrawn within thirty days after it had been first made. Conditions of this kind would prove very advantageous to the public, and : become a profitable source of bueinese to tho Trust Office.

Fifthly : How the law affecting to allow any of the several matters aforesaid could or might be amended, altered, re-enacted or regulated, and by ffhafc mean* and in whae manner or form the same should be done. . . Your Commissioners are of opinion that the law should be so amended as to provide the greatest facilities for the Public Trustee carrying on general and financial buniness ; for the values and character of properties that from time to time may come under hi.s control are so different that one estate or property -may require a totally distinct kind of management from another. The unfortunate system of contributing mortgages which has obtained with the currency of the ordinary business of tho Public Trustee ia one which cannot be approved. When the difficulties in connection with thoir management had been made apparent your Commissioners felt so uneasy in respects to this class of security bhab they deemed i* a prudent course to require the Public Trustee to obtain the opinion of leading counsel. This was done, but as the Public Trustee seemed to think that the single opinion of one legal

firm was sufficient to satisfy the doubb that had existed in their minds, and _refuaod to take another opinion without the consent and approval of the Colonial Treasurer, or the Commissioners took upon themselves the responsibility of procuring a second opinion upon the subject of the law regulating the rublie Trustee on the modo of doing business, and aleo on the duties of the Audit Department in relation to the Public Trust Office. These two valuable opinions appear in evidence, and there cannot be any doubt but that the law ehould be altered as early as possible to give freedom for the transaction ot all business that may be intrusted to the Public Trust Office, and the new legislation should tend in that direction. Your Commissioners recommend that the I üblic Trustee ehould have power to lease by public tender any land for any term up to twenty-one yeara, and in the event of not finding a tenant after three months notice he ehould be empowered to sell by public auction without the intervention of the Registrar of the Supreme Court. Under the present Rating Acta the coats of selling property on which rates are overdue are exceedingly high.

Sixthly and generally: Into all or any matters or things incident to or arising out of your inquiries into the matters aforesaid, the intent and object hereof being that full inquiry shall be made into all business and operations of aaid office. • A cause of irritation has arisen with clients of the Public Truet Office in connection with petty charges. No proper system of keeping an account of postage chargeable to each particular estate ever obtained in the Trust Office, bub estates have been at different periods charged according to the caprice of the ledger-keepers. Attention wae directed to the return of postages debited to the estates in the Trust Office during the annual periods of 1888-89 and '90, which shows resoectively in round numbers, £250, £257, and £165. These several earns amount to overcharges, for the annual amount paid by the Public Trust Office to the Postal Department has varied from £100 to £150. Your Commissioners are of opinion that the commissions and fees charged by the Public Trust Office in tho management of estates are sufficient to cover petty charges for postages, which of themselves, when charged to estates direct, are very apt to occasion irritation and discontent in the minds of beneficiaires 'and clients, and fclr that reason such j>. system ehould not be continued in future, particularly as the rates of postage are shortly to become of a uniform low rate. In respect of telegrams, your Commissioners are of opinion that the cost of these ehould be charged direct to the estate interested. Your Commissioners would draw attention to the interest return, that forme the appendices and relates to the law charges and legal expenses incurred by the Public Trustee, and paid largely out of the profits of the Trust Office. The total amount exceeds £13,000.

A considerable parb of these costi have been incurred notwithstanding the fact that a solicitor of experience, subordinate only to the Public Trustee, has been for some years a member of the official staff employed in the head office. Your Commissioners can not help feeling that a considerable want of businees tact and management ie obvious from this fact alone, and they have little hesitation in Btating that a largo proportion of such costs should never have been incurred. There are estates in the Public Truet Office that have suffered vei-y severely and injuriously in this respect, and one especially, that of Hugh Wright, a lunatic, was greatly impoverished by the heavy legal cost* incurred ab Christchurch. Your Commissioners, in examining the methods adopted by the Trust Otßce in the disposal of the personalty of intestate estates, wore very much startled by the disclosures made in evidence. The revelations in connection with the purchases of officers in the highest positions of the service of the Trust Office were of the most unexpected character. Your Commissioners cannot too strongly deprecate such conduct, not only as being improper and open to grave nuspicion, but utterly indefensible and illegal. Your Commissioners in their- examination of various lunatic estates discovered that the provisions of the Lunatic Act, 1882, with respect to the maintenance of lunatics out of their estates, had not been given eflect to in several instances. The greater park of the estate of a lunatic had been used for his maintenance in the asylum, very little consideration being shown for the wants of his wife and family. Your Commissioners are of opinion that the Public Trustee should, in every case where he has control of the estates of lunatics, make provision for the requirements of the wife and family before disbursing any moneys for the lunatic's maintenance at the asylum. The evidence reveals the fact that considerable hardship has often been experienced by pationta discharged from lunatic asylums without means, their estates having been exhausted during their treatment in the asylum. In all such cases some pecuniary assistance should be given. The Public Trustee has not acted with due consideration in reference to the re-leasing of certain native reserves on the West Coast of the Middle Island. Some of the lessors, after oflering fair rentals, have been compelled by fche Public Trustee, without consent of his Board, to submit to arbitration, and as a result) have been saddled with considerable expenses, amounting to several times more than tba Bum in dispute. Your Commissioners are of opinion that the Public Trust Office should be managed by the Public Trustee and Deputy Trustee with powers almost co-equal, and that they should be men of largo commercial and financial experience. The trustees should have the assistance of an Advising Board composed of two commercial men possessing special knowledge. It would bo desirable that one of the trustees and Advising Board should meet twice each week in order to facilitate the despatch of important business. If the Public Trustee assisted by the Deputy Trusteo were carrying on the management of the Public Trust Office, it would be advisable that one of these officers should travel frequently through the colony, with the object of acquiring information that would be of value in the interests of the Public Trust Office, and of overlooking the working of its many agencies, Besides inspecting and judging of the values of any properties held as securities, about which there might be uneasiness. Your Commissioners have learned that a feeling of dissatisfaction existed in parts of the colony among those who had desired to communicate personally with the Public Trustee, and who were unable to make the journey to Wellington for that purpose. On the question of the conversion of local agencies into distinct branch offices of the Public Trust, your .Commissioners adviso that for some time to come no change in that direction should bo made, and certainly not until the administration at the head office has been placed on a sound and satisfactory basis, and until the income of the Public Trust Office wiil allow of adequate salaries being paid to the officers appointed to manage and conduct the businees of the branch office. Your Commissioners deem it their duty bo point out the great inconvenience that exists owing to the want of sufficient office and strong-room accommodation at the head office. They recommend that no unnecessary delay Bhould take place in providing ample room with every necessary convenience for conducting with facility the business of the Trust Office. The real necessity for extensive fire-proof strong-room accommodation in such an institution ac- the Public Trust Office for the safe keeping of securities, deeds, and other important document? cannot be questioned,

and it is due alike to clients and to the management that adequate provision should be made for the proper carrying on of the important business of co valuable a department of the State. Your Commissioners have been unable to fully investigate the papers and accounts connected with all estates at the head office, nor have they been able to visit any branch or agency of the Trust Office, for the reason that your Excellency's Ministers throughout the term of investigation have deemed it advisable to confine the labours of the Commissioners within a too limited space of time, apparently not realising the heavy nature of the task nor the laborious work involved by its many difficult and technical intricacies. Tho investigation consequently has nob been bo thorough as the Commissioners would have desired. Accompanying the report is 340 pages of evidence.