GRA Blogs

Articles by The Professional Trustee Team

The Professional Trustee Team

Could Your Trust be Wound Up Without You? Janet Xuccoa Interview by the National Business Review


An Auckland family trust accountant is not surprised by moves to wind up the trusts of two fraudulent accounts, but says it is a rare move.

JT Law's Jamie Grant has applied to the Wellington High Court to liquidate the TPS Asset Trust and TPS Asset No 2 Trust, which were set up by jailed accountants Barrie James Skinner and David Ingram Rowley.

The pair was found guilty in July on 80 charges each of tax avoidance, fraud and attempting to pervert the course of justice.

Gilligan Rowe and Associates trustee services director Janet Xuccoa says the High Court has over-riding power when it comes to trusts and even if the terms of the trust deed do not allow for the trust to be wound up, the court can allow for it in these circumstances.

According to the Companies Office, a trust can be liquidated by the High Court "if it considers it just and equitable to do so".

Ms Xuccoa says it is uncommon because trusts are not meant to be wound up.

"When you set up a trust, you intend for it to last anything up to 80 years. You want it to carry on."

Ms Xuccoa says it is not too hard to wind up a trust, but people first need to look at the terms of the deed to see whether it is possible, and if it is, all the liabilities would first need to be cleared and the assets returned.

If it is not possible, then trustees would have to look to legislation or case study history.

She says if anything, trusts are more popular than ever because most New Zealanders are aware of the possibility of means testing in the future and it is a protection against creditors.

"People have been burnt, through no fault of their own, during the global financial crisis."

Ms Xuccoa says people turn to trusts because of the rise of blended families and second families.

In the case of Skinner and Rowley, over five years from September 2005 they sold a scheme to clients which they said would "shelter" them from tax payments.

The scheme involved false invoices and a trail of "shell" entities for services which were never provided or, if they were, were provided at a value much lower than that recorded on the invoice.

The scheme cost the IRD between $1.8 million and $2.3 million in lost tax – of which about $1.5 million is "uncollectable".

Skinner was sentenced to eight and a half years' jail, while Rowley got eight years.

They have already been bankrupted and Mr Grant, who is acting on behalf of BNZ, has filed and served the papers to liquidate the trusts.

He told NBR ONLINE it is not a very common process but he cannot understand why.

"There's no good reason why it's not done very often. The process itself is a hangover, it's an old provision which is actually contained in the Judicature Act, as opposed to the High Court rules.

"I have no idea why it's not used more."

He says the trustees of a trust maintain an indemnity from the assets of a trust for any debts they incur in the names of the trust. The trust is what is commonly used to access trust assets when an individual is bankrupted for the debts of the trust.

Mr Grant believes there is no reason why it should be any different to a normal application to liquidate a company. He expects the possibility of more applications in the future, given it's not hard to liquidate a trust.

The Insolvency and Trustee Service was not sure how common the practice is.

Ministry for business, innovation and employment spokesman Brittin Broun says if the liquidation goes ahead, the official assignee will fix a date for creditors to lodge claims and those claims will be assessed.

The Professional Trustee Team
signed
The Professional Trustee Team
© Gilligan Rowe & Associates LP

Did you like this article? Subscribe to our newsletter to receive tips, updates and useful information to help you protect your assets and grow your net worth. We're expert accountants providing expert advice to clients in NZ and around the world.

Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
Testimonials
Hi Salesh, I just wanted to send you an email on behalf of GRA to say how fantastic we have found your company to date. As you know, Ben and I joined GRA a couple of months ago and have just found you so amazingly helpful in getting our new property set up correctly and sorted out. We have what I would consider a rather complicated structure as a result and it’s a fantastic feeling to know that we are getting everything done in the best way possible. We have just had approval to put a minor dwelling on the property which will make a massive difference in terms of cash flow and obviously value, something we would never have even thought of without GRA and which we are very excited about. During the buying process we attended a seminar with Matthew and from the outset thought he was fab. We therein signed up for property school and found this nothing short of fantastic. The content was relevant, up to date and comprehensive, but more importantly it was taught in a way that we could actually understand and really get value out of. I wanted to mention also, that everybody GRA have recommended to us has been just so efficient and absolute masters at what they do. A wonderful network of people that we feel very lucky to now be able to call on. From Kris Pederson and Bryan Rist who put our mortgage together to the insurance guys they then referred us to, I’m super impressed. Within GRA, Ellery has probably turned things around for us faster than I’ve ever known before, something which we appreciated so very much when it came to crunch time. She’s always a pleasure to deal with and again, we’re stoked. We’ve just settled on the property today and are about to go and get the keys. I’m pretty pumped and hence this email is probably rather excitable. So, a massive thank you to you Salesh, the partners for such a fabulous 6 weeks at property school and everyone at GRA for their help. May this be the start of our property empire. Thanks again, - A & B - July 2015
We can help
Here's how

GRA logo

Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.

We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.

Learn More
GRA Senior Partners
TOP