THE PUBLIC TRUST OFFICE.

Press, Volume LX, Issue 18208, 20 October 1924, Page 9

THE PUBLIC TRUST OFFICE.

POWERS OF THE PUBLIC TRUSTEE. iSPECIALLT TnUTHSS FOB "TOS MUMS.") (By the Rev. J. AY. Dowling, M.A.) L The phenomenal growth of the Public Trust Office during the last decade must have arrested the attention of those interested in New Zealand's experiments in State enterprise. After the first thirty years of the Department's existence (.1572-190-), its staff numbered less than fifty persons, and the value of estates and funds committed to it amounted to less than two millions sterling, whereas it. now employs a staff of about six hundred ]x*rsons, and the value of estates and funds entrusted to it has reached the large sum of thirty-two millions sterling. Since 'he war years its growth has been exceptionally rapid, the funds held by it for investment having more than trebled during that time. Many factors account for this recent growth. Sineo the war years tho services rendered by the Department have become more widely known and appreciated, and more business has been placed in the hands of tho Public Trustee by the general public. Tho profits .made by the Department as a lending institution, and tho large reserves built up have enabled it to extend its operations further. Moreover, the powers and privileges of the Public Trustee have been greatly increased. The reason given from time to time for an extension of these powers is often that such jvowers are rendered necessary by new business entrusted to the Department, but- it often happens that the new powers are tho causo of much new business. Tho principle has also been laid down that among trustees the Public Trustee holds an unique and privileged position, and that wider powers can be more safely entrusted to him than arc entrusted to private trustees. It should not be overlooked, however, that such wider powers and privileges tend to eliminate tho competition of private trustees and to secure for tho Public Trusti Office much business that would otherwise fall to the lot of private trustees. When one has in mind tho opposition met with by thosa who proposed the establishment of the office, one cannot but marvel at the wido powers which have since been conferred upon tint Public Trustee with but little protest.

The lark of security experienced by the early settlers of New Zealand as I well as the fact, that they iound it difficult to find trustees in whom they would naturally eowfide, caused the late Hon. E. C. J. Steven's to urge upon Mr (afterwards Sir Julius) Vogcl, Colonial Treasurer, the necessity of establishing a Public Trust Office, tho aim of which should not be high profits, hut tlie certainty that anyone desiring to make provision for his family .might have tlis* satisfaction of knowing that lie left on absolute security the money lie possessed at the time of his death, without any possibility of its being made away by fraudulent trustees, by malversation/or by improper treatment in anv direction A liill authorising its establishment was framed and proHC.iited to the House of .Representatives in 1870. It passed tlio Lower House, but was thrown out in the Legislative Council. Two years later, another measure was drafted omitting the clauses to which strong objection had been taken, and this Bill succeeded in oassing both Houses. As defined bv this. original Act, the powers of the Public Trustee were: very limited indeed'. He could act only in those cases in which he had been specially appointed by testators, and he had to observe all the minor formalities required by the law as in the case of private trustees. Very soon, however, his nowers were extended. In 18(3 the Curators of Intestate Estates for tlic various provinces were required to hand over to tho Public Trustee for administration the estates hitherto untftv their administration. Tlio Public " rustee however, was exempted irorn the nor'essitv of applying to the Court tor an order to administer where the value of these estates did not exceed 100. In nich cas.es he was simply to file an rMotion to administer. As showing how his powers h.UC increased.it may be mentioned that this limit has been until ill 1013, it was provided that Jic had no heed to apply for such an order unices the value of the estate exceeded £4o<). The Act of 1873 also authorised tho Public Trustee to adniinister m cases where the person entitled to such administration was absent from Aexv Zealand, a minor, or under so'iic othci disability. Ho was empowered likewise to take care of, preserve, etc., the estates of lunatics. A few years afterwards private trustees were authorised, under certain conditions, to hand ovei their trusts j.o the Public Trustee. Later enactments conferred upon lura power to act as attorney, agent for absentees, receiver, arbitrator, guardian of infants, and administrator of the property of convicts. . Estates of all kinde thus come into tho hands of the Public Trustee for administration. The management and realisation of these comprise a wide range of activities. Powers of selling, leasing, exchanging, purchasing and mortgaging, partitioning, repairing md insuring property, paying outgciMS, exercising powers of appointment, granting powers of attorney, etc., etc., have all to be exercised as occasion demands. In many eases a large property lias to be dealt with and its realisation takes time and presents special problems. It often happens that a business has to be run, or a farm managed for a considerable time in order to prevent the realisation of assets at a disadvantage. In carrying out these duties tho Public Trustee is dispensed from the observance of many legal formalities which have to be observed by private trustees. "Wide discretionary powers are permitted to him. An amending Act of 1895, for instance, provided that the consent of the Supreme Court to sell, lease, purchase, exchange, or mortgage, should not be necessary -where the value of the property to be dealt with or the amount to be borrowed did not exceed £.500. In 1901 this amount was extended in respect of leases, exchangee, purchases and mortgages to £2OOO. A more, recent Act (1922) extended the limit in respect of gales also to £2OOO.

The original Act of 1872 provided that the Government might instruct the Public Trustee to take charge of certain public trust property and funds. Of the Government funds entrusted to him for investment, the chief hare been the Sinking Funds of the Central Government- and of Local Bodies and Superannuation Funds of the Government Departments. A verv large sum is provided by Sinking Funds. Between 1892 and 1910 instalments were annually paid in, in connexion with ioans raised by the Central Government. As a result of Section 12 of the Public Debt Extinction Act, 1910, mast of these instalments ceased, but the capital sums are still held by the Public Trustee for investment, the interest being paid annuallv into the Consolidated Fund. These Government funds have contributed for a considerable time about one half of

the sum held by the Publid Trustee for investment. The capital sum held bv him on arcouut of the Sinking Ftuids of tho Centra] Government on March LUst, was £'t>,7-1-1,620. and on account of 7 .oca I Bodies' Sinking Funds Common hind investment*! that vcar totalled £-l,V2<X>.7i:.. Tho Public Trustee also holds for investment large sums a", credit of .various he no tit and relief tunds and also tho National P'ovidcn I frund, The interest earned by these Government funds, oavs a large portion of the expense* of the office and Yields considerable prom. In 15)13 power was given to the .Publie Trustee to act as a pent for investors. JCven prior to 1013 ho had acted in this capacity, a practice which the Royal Commission on tho Public. Trust. Office. 19PJ, regarded as "an abuse of the statutory power to act as' agent. Jhe Public 1 rust Office converts it-self into a bank of deposit." Previous Acts did not allow of this in terms, but it was deemed to be legalised by the Public Trustee taking an agreement from the depositor constituting the Public Trustee the depositor's agent for the sole and particular purpose of investing tho .sum deposited, the Public Trustee undertaking to allow interest, at such and such a rate per cent, per annum. All doubt* as to the legality of the "Public Trustee's power to net in this capacity were dispelled by tiio praciMons of tho Act of 15)13. * The amount hold by the Public Trustee for investment as agent, now "exceeds half ;v million pounds. Those who thus deposit money with tile l*ublie Trustee have as their aim perfect- security, while they are satisfied with a somewhat lesser rate of interest, than could ho obtained from other investments. The banks operating in New Zealand are inclined to object to this function ot the. Public Trust Oflico as an inI'ritißomont of their charters. Inasmuch as these transactions are of the nature of a trust and allowing for the iact thar. depositors arc desirous of availing themselves of the expert knowledge oi the otlieersi of the Department in regard to investments, there seems little objection to the Public Trustee's acting in this capacity. There i« growing competition between the Trust. OHico and the banks as lending institutions. Last year new loans to private borrowers, to the Government., and to local bodies, exceeded the sum of two million pounds. The total amount invested by the .Department as shown in its latest report has now ivaehed the sum of nearly twentv million pounds. The Department hen shared in the gains secured in recent years by lending institutions and has intercepted much profit, which Mould have gone to tho banks. Tho profits secured from-this source havo enabled tho Department to grant vain-' able concessions to clients, so that its competition with legal firms is more formidable than that with banks. The Public Trust Office is undoubtedly rendering a most valuable cenvice to beneficiaries and to others. It would appear, however, that the powers ami privileges conferred upon tho Public Trustee place.him in an unduly advantageous position with regard to competition with private trustee?. (To ho Continued.)