TRUSTS LAW

Gisborne Times, Volume LXXXII, Issue 12521, 5 April 1935, Page 5

TRUSTS LAW

LIQUIDATION BILL BEFORE . 'tip. ■ Douse.r ■' * THIRTEEN COMPANIES TO BE WOUND UP. PUBLIC TRUSTEE AS * LIQUIDATOR. SYDNEY BUILDING IMPOUNDED BY N.S.W. BILL. (Press Association.; WELLINGTON, April 4. In moving the second reading of the Companies (Special Liquidations) Bill Mr. Coates said that the Bill contained legislation foreshadowed in his statement to the House last week. That statement had been printed and made available to members. It was common knowledge that the Parlia-. mcnts of New Zealand and New South Wales were dealing with the subject matter of the Bills by complementary and reciprocal legislation. The New South Wales Bill had already been introduced and had pased the first reading, and he had been informed by cable that the Government of New South Wales expected to pass the measure this week. The Bill before tho House was comparatively simple . and short. It provided for the wind-ing-up of thirteen specified companies, and -the appointment of the Public Trustee as liquidator. It determined the receivership in relation to those companies. Mr. Coates explained the basic features of the agreement between the two Governments. He said that the New South Wales legislation impounded the Trust building in Sydney, and placed it in the hands of a trustee. It was to be held in trust, firstly to “nurse,” and manage it; and secondly, to sell it when a favorable opportunity occurred. The proceeds of the sale were to bo paid by the trustee in the proportion of twothirds -to the liquidator of the Investment Executixe Trust of New Zealand, and one-third to the liquidator of the Southern British National Trust of New South Wales. In the meantime, tho two companies must in the same proportions provide funds to carry on the building until it could be made self-supporting. The proportions agreed upon were arriv,ed at after many days of negotiations, which were carried on in an amicable spirit, and with the help of all information that could be gained from books and records. The factors taken ‘ into account included the respective amounts of cash put into the building by the two companies as nearly as they could be traced,, and the position as disclosed by the existing records after adjusting tho results of transactions which clearly should notstand. DEBENTURE-HOLDERS’ LUNDS. ' •(jh'Tvi-- Bill also dealt With the posicreated by unauthorised and incomplete dealings with the respective funds of different classes of deben-ture-holders, continued the Minister. The details of these were given in Jast week’s statement, and it was plain that this difficulty could not bo cleared away except by legislation. The Bill provided that all debentures should be viewed as being one of class, ranking equally in the division of the debenture holders’ security. FOUR COMPANIES IN ALCORN GROUP INCLUDED. The schedule of the companies to be wound up, included four companies that had very little connection with the McArthur group. These could be described as the Alcorn group. Three of them possessed features resembling those apparent in companies of the McArthur group. They involved an issue of debentures to the public, and the investment of the resulting debenture monies in securities of other companies in the group under the control of the same directors. There were also transactions with companies relating to the private properties of the directors. The inspectors in their reports recommend that these companies should be wound up and the Government had thought it wise to act on that recommendation. N.Z. ACT DEPENDS ON N.S.W. LEGISLATION. The Bill was drafted ip the expectation that tlie New South Wales legislation would have been enacted before this measure was inrtoduced. This, however, might not b,e possible if the session of this House were to end this week, and it consequently became necessary to legislate without delay. The Bill consequently contained certain references to the proposed legislation of New South Wales, and as the effective operation of the Act would depend on the passage of the New South Wales legislation it was provided that the New Zealand Act would not come into operation until the issue of tho proclamation of the Governor-General. That proclamation might- be expected to follow the passing of the Act in New South V ales. FURTHER LEGISLATION. PROTECTION OF DECEASED ESTATES. When the House resumed in tho cveing the Trustee Companies Protection Bill and the Companies (Special Investigation) Amendment Bill Y were introduced. Speaking to the former measure, Mr. Coates said that representatives of the British National Investment Trust and the Southern British National Trust, or at any rate, some group of directors, had acquired sufficient shares in the Trustees Executors and- Agency Co. of New ; Zealand to prevent that .company carrying through resolutions that it deemed necessary, for' the administration of the company’s ' affairs. It was believed and felt by the Government, and ho thought by the great majority of the people in New Zealand, that it

would not be right to allow deceased, etsates that are under the administration of the Trustees Executors Company to pass over to the - McArthur group. Since it became known that sufficient shares were held by the nominees of those companies, business had been adversely affected. He said that shares had been obtained at market rates by the representatives of that group that controlled the McArthur group. Mr. Mason (L.) said the matter raised the whole matter of private , companies being entrusted with the administration of decoased and trust estates. It was a very grave question. It meant there was no security in any of those companies, and they would have to take grave notiec of it. Mr. Goates said there were now six trustee companies operating in New Zealand. Each was working under special legislation, and it was never contemplated when the legislation was passed, that it would bo possible for companies of that description or reputation to obtain control. When the legislation was passed it prescribed a certain formula, and one of them was that the directors must strictly comply with the terms of the Act-. • • Both Bills were read a first time. PLEA FOR DEBENTUREHOLDERS. NO OPPORTUNITY TO CONSIDER MEASURE. Mr. Savage, leader of the Opposition, complained that tho bondholders had not had an opportunity to consider the measure, and said that the Bill should not have been brought down at such a stage of the session. He did not say that legislation was unnecessary, but there were a lot of people involved, and they were afraid they were going to be crushed altogether. They felt they cuuld carry on, and get some of their money back, but they were four hundred miles away, and the Bill was to be put light through to the Statute Book. The first measure was merely to let the light- of day into the ramifications of the companies, and there could be no objection to that, hut the Bill before the House provided that the companies should bo wound up. The debenture holders at Auckland were concerned that they could not put- their case; they were not concerned with defending McArthur, but they were concerned about their savings. Mr. Atmore (I.) supported Mr. Savage. He said the debentureholders were sending a statement to both Houses, but that would not arrive until alter the Bill was passed. He protested against- the passing of the Bill without giving debentureholders a chance to state their case. Mr; Lee (L.) said the debentureholders should be given the right to make representations to the Public Trustee. No one could oppose the Bill as it promised something better than the existing conditions, but it was desirable that the debentureholders should have a say. Mr. Aiisell (C.) said the Government was protecting the interests of the investors. He had not heard any protests from the debenture-holders. H.c did not think the Public Trustee should force liquidation to a stage where the assets of the debentureholders would be wiped out. ‘EXTRAORDINARY LEGIS L ATI ON ’ Mr. Barnard (L.) said it was disquieting to have such extraordinary legislation rushed through the House when the debenture-holders were anxious to be heard. The situation was unprecedented in New Zealand, but it might happen again, and it was the duty of the Government to so amend the Jaw that such things could not happen in the future. “MANY COMPANIES QUITE SOUND.” Mr. Wright (I.) said he believed the Government wanted to help the debenture-holders, but- unfortunately the legislation did not satisfy the debenture holders. The Government was trying to get them out of their difficulty, but it was impossible to convince them that the . Government was doing the right thing. Mr Wright said no one would question the bona fides of the Public Trustee, but the Public Trustee had a great many estates to manage and the de-benture-holders were afraid he might not be able to give the time required to the companies’ affairs to get the most out of them. Many of tlie investments were good, and it appealed from a document he had perused that manv of the companies were quite sound. He added that litigation should be avoided because if McArthur had his way he would take the case to every court in the land. Mr. W. Nash (L.) said the deben-ture-holders had expected to have the opportunity to place their views before the Governent. The main object the Government should have in mind, should be to safeguard the money of those who had invested in tho companies. Mr. jull (C.) said the suggestion that 'the coinmitee should be associated with the Public Trustee appealed to hill as a sound one. DEBENTURE-HOLDERS SHOE LD CONTROL OWN AFFAIRS. Mr. Yeirtch (I.) considered that tho legislation was somewhat overdone. One of tho main assets was a largo city property, and that was to be handed oyer for liquidation at the earliest reasonable moment. He. considered any' large building in Uydvpy would have a better holding than «• selling value at the present time. If the debenture holders were allowed to appoint a managing directorate of their own they would be in control of their own interests, aqd the fear that most might not be made qf their .assets would be removed. Mr. .Stall worthy agreed that a committee of debenture-holders should be” set up to advise the Public Truste.e. ' My. Coates, in reply, said it whs held that nothing was to be gained by postponing the measure till to-rnor-bow’, sis "trli-o present- wms

considered fair, and could not be amended. He thought the present Companies Act definitely prevented anything of the kind happening in the future. The second reading with carried. CHECK ON McARTHUR’S ACTIVITIES. Mr. Coates then moved the socond reading of the Trustee Companies Protection Bill. Ho said McArthur’s plan was designed to place and might place McArthur and one or more of his assoicates on the hoard of directors of tlie Trustees Executors Com-pany.-The grounds for tho Government’s action in the matter was that those men were so discredited that it was not in the public interest that they should be allowed to take charge of over £3,500,000 of trust funds, largely funds of deceased estates. The second reading was ■parried without discussion. SPECIAL LIQUIDATIONS. CONCERNS TO BE WOUND UP. < Press WELLINGTON, April 4. The Companies (Special Liquidations) Bill provides for the winding up of the following 13 companies incorporated in New Zealand. Investment Executive Trust of New Zealand, Ltd. Sterling Investments Company of New Zealand Ltd. Investment Securities Assn. Ltd. British National Investment Trust Ltd. New Zealand •Shareholders' Trust Ltd. Pacific Exploration Company Ltd. Farms and Farmlots Ltd. Transport. Mutual and General Insurance Co. Ltd. V. B. Mclnnes and Co. Ltd. Alcorn, Trowcr and Co. Ltd. Auckland Provincial Town Properties Ltd. New Zealand Freeholds and Buildings Ltd., and Freeholds Ltd. The winding up shall commence from the date on which the Bill becomes effective. The Bill appoints the Public Trustee liquidator of the companies and his appointment as receiver under tlie Companies (Temporary Receivership) Act 1934 shall be deemed to be determined as from, the commencement ol the winding up. In addition to other powers the Public Trustee is vested with the following functions: (1) To appoint servants, clerks, managers and agents on such terms and conditions as lie thinks fit; (2) To consult and employ counsel, accountants, sharebrokers and other persons ; (3). To postpone, the realisation of any asset of any of the companies for such a period as lie thinks fit. Such additional powers, however, are subject to tlie control of the court and any creditor or contributory may apply to tlm court with respect to any exercise or proposed, exercise of any of those powers. Where the Public Trustee commences any action or other legal proceeding by any company of which he is liquidator or receiver against any other such company or against himself acting in any capacity (whether as liquidator or receiver of any company or otherwise) or by himself acting in any capacity against any such company, he shall obtain the directions of the Court as to liow the opposing interests are to be represented. The expenses of winding up a company shall be payable cut of the assets of the company concerned, including assets securing debentures issued by the company in priority to all other claims, except any claims of the Public Trustee for.costs, charges and expenses. Pending the distribution of the proceeds of the sale of the Trust building, the liquidator of 'the Investment Executive Trust of New Zealand shall, from time to time, pay out of the assets of that company to the Public Trustee of New South Wales, as and when required by him to do so the company’s proportionate .share of any moneys required by the New South Wales Public Trustee to enable him to defray the expenses incurred in respect of the Trust building. The share to which the Investment Executive Trust may be entitled under the New South Whies legislation in the proceeds of the sale of the Trust building and any other property and in any rents and profits of such building and property shall be received by the liquidator ol the company in reduction of the amount owing to the company under the debentures of British National Tiust Ltd. held by the Investment Executive Trust. The share of the Investment Executive Trust in the proceeds, rents and profits shall be applied by the liquidator, as the assets of the company securing debentures issued. For the purpose of winding up all debentures issued by the company shall be deemed to be : o,f one class and to rank pari passu and every charge pyer the property in favour of any class of debenture-holders shall be deemed to be a charge in favour of all.' In the winding up of any companies, the claims of directors and officers iii whatever capacity shall rank alter all other claims. TRIBUTE TO INVESTIGATION COMMITTEE. Both Bills were put through committee without amendment, read a third time and passed. Mr Coates paid a tribute to the work of Mr. Barton, Professor Bclshaiv and Mr. Graham and the inspectors who had investigated the affairs pf the qohipabiqs they, had been dealing with. - As the result of theii inquiries and recommendations the two Bills were. promoted and, had it not been, for their devotion to duty and thorough investigation of all the matters concerned, that would not haye been possible:. As r a' result of the investigations further amendments to the Companies Act were contemplated. ' ■ ■ ' ■■*■',

LEGISLATION IN N t S:W. CIRCULAR ALLEGEDLY ISSUED ■ BY ''MeARTHUR. STATED BY PREMIER TO BE FULL OF INACCURACIES'.' ‘ (U.P.A. by Elec. Tel. Copyright! SYDNEY, April 4, In the Legislative Assembly last night the Premier, Mr. B. S. Stevens, in moving the second reading of tho Bill winding up certain trust companies, quoted from a circular allegedly • issued by McArthur, in which it was asserted that tho debentures were worth more than 20s in the pound, and that the New, Zealand Government had used the New South Wales Government to destroy trust companies competing with a financial institution which was behind the New Zealand Government. Mr. Stevens declared that the circular was full of inaccuracies. Mr. Stevens added that ho had received letters from a number ol people beseeching him fo protect them. The Premier spoke lor over an hour, and was not interrupted by a single interjection. The Bill passed all stages, and was forwarded to the Legislative Council.