Franks Stephen: New Zealand Guardian Trust Company Amendment Bill — In Committee Third Reading 
Franks Stephen: New Zealand Guardian Trust Company Amendment Bill — In Committee Third Reading 
[Volume:626;Page:21186] 
STEPHEN FRANKS (ACT) 
: 
 The ACT party position on this bill was made clear during the first reading. When my colleague Kenneth Wang came to Parliament and was appointed to the Commerce Committee the committee’s dealing with this bill was very advanced. As is appropriate for a new member he has been biting his tongue—or breathing through his nose as I think Mr Holyoake advised—and watching. 
It is a matter of regret to me that the committee saw its function on this matter as finding expeditious ways to get rid of a problem whereas it should have been looking at it in the same way that Dr Bollard has been looking at the issues of Australian banks now controlling the New Zealand banking system and asking what that would mean in the event of financial stringency in Australia or in the event of something in Australia that made New Zealand seem disposable. 
That is the problem with this bill. Trustee companies because of trust law that has evolved for hundreds of years normally would not be allowed to run transactions with themselves involving trust assets. This bill provides a privilege. The privilege that the New Zealand Guardian Trust seeks is a waiver of trustee law. It comes before us and asks for that privilege on the basis that Parliament will look at whom the waiver is to be granted to—that is the parent company—and say that yes it is OK it has probity and it is not going to abuse the privilege. I am sorry to see the committee the National Party and indeed the Government treating this matter as a nuisance. This bill should have written into it the kinds of rules that would prevent or impede the exploitation of the trust by a controlling shareholder by an owner of a 100-percent subsidiary where it procures self-dealing transactions. 
There is no indication in the report that the committee chose to ask the Reserve Bank to comment. It has been facing exactly those issues and trying to think about how to deal with the fact that the Aussies have an Aussie preference. Quite nakedly Australian banking law states that if there is a banking collapse Aussies will come first—the Kiwis come second. That is a natural human instinct. That I fear is what will happen to people dealing with trustee companies if the trust assets are allowed to be deployed through a head office treasury or through an accounting system that is in Australia—suddenly the shutters will go up. 
The bill could have dealt with that by setting out a series of protections—for example requirements for routine reporting requirements or a stipulation for a review every few years to see whether the body that is approved is still regarded as being in good hands. I am not making any allegations against the parent company the New Zealand Guardian Trust at all but the bill treats the matter as though a once-and-for-all approval is OK. For a commerce select committee that is pathetic. There has been no insight whatsoever into the purpose of parliamentary scrutiny and approval and no insight into the risks and pressures that could face parent companies in the event of stringency at home. Because they will look after themselves. Directors sitting in Australia facing liabilities to Australians will make sure that those liabilities are satisfied before liabilities to someone outside the jurisdiction. It is just human nature. If the trust is run as a wholly owned subsidiary and the local board has become a bit of a cipher a mere formality the local board will not be given the slightest protection. 
I think this matter is evidence of the poverty this Government has brought the Ministry of Commerce to—the absence of analytical inability and insight of resource. It reminds me of the report I saw today of the Parliamentary Counsel Office which was quite blunt about the low ebb that legal resources available to Government departments had come to. This bill is not very complex. It did not need the select committee to explore at great length what appears to have been National’s proposal to set up a regime for ministerial Order in Council approval. That is simply a mechanical or procedural step. What was needed was for this bill to pioneer—it could have been done at the expense of the New Zealand Guardian Trust; we could have required that the thinking work be done by the trust in order for it to get itself this privilege—a set of restrictions a set of reporting requirements a set of constraints on the self-dealing privilege that made it of much less risk to the widows and orphans that the New Zealand Guardian Trust looks after. 
This concern is not far-fetched. In my practising lifetime three trust companies have got into serious difficulties and in each case they have been rescued—in one case by a moratorium and in another by excellent management and a dedicated majority shareholder a patient shareholder willing to invest in the hope that it would come right. But it is very much easier for a foreign head office for a foreign board to say: “Let’s write it off to experience. Our reputation will be trash in New Zealand but New Zealand is a very small market. We would rather do that than feed back what would be needed to rescue a trust company in failure there.” 
This measure is a primitive response. It gets the Government through the immediate request. The attitude to it was typified by Brian Connell’s suggestion that he would rather listen to the rugby. I am sorry that on something like this the Government was so bereft of resources that it was not able to come up with something better than we see in the reported-back version of this bill from the Commerce Committee.