New Zealand Guardian Trust Company Amendment Bill — In Committee Third Reading 
New Zealand Guardian Trust Company Amendment Bill — In Committee Third Reading 
[Volume:626;Page:21184] 
New Zealand Guardian Trust Company Amendment Bill 
In Committee 
JILL PETTIS (Senior Whip—Labour) 
: 
 I seek leave for the bill to be taken as one question to facilitate the debate. 
The CHAIRPERSON (H V Ross Robertson) 
: The member is seeking leave that the bill be taken as one question to facilitate the debate. Is there any objection to that course of action being taken? There appears to be none. 
Preamble and clauses 1 to 4 
BRIAN CONNELL (National—Rakaia) 
: 
 The National Party supports this legislation but I want to raise a couple of issues through the course of this Committee stage. At the bill’s first reading it was suggested by one speaker that the legislation would put New Zealand’s assets at risk because the Promina Group which bought the Royal and SunAlliance group of businesses is incorporated in Australia and Australian legislation gives a statutory priority in a winding up situation to Australian creditors in relation to assets of Australian banks financial institutions and insurance companies. 
I have to say that the suggestion made by that speaker is misleading. It is true that the Australian legislation the speaker referred to does apply to some of the companies of the Promina Group but it does not apply to trust funds under the control of the New Zealand Guardian Trust Co. Hence Australian creditors would not have a priority over those trust funds. That really goes to the heart of the issue. 
When I was taking a call during the second reading I suggested that this type of legislation should not be brought to the House every time there is a change of ownership. Although I respect the fact that beneficiaries should not have their funds put at risk I suggest that there is no conflict whatsoever. The Guardian Trust Co. is just one of many companies that will have their parent companies change ownership all the time. I think it is a waste of parliamentary time that every time that happens Parliament will have to go through this protracted process. 
Some of the members I was dealing with on the Commerce Committee were concerned about the financial stability of a company like Promina. I think that that concern is misplaced. On 25 August 2004 that company announced a A$204 million half-year net profit after tax. That is a 51 percent increase over the prior year’s comparative period a return on equity of 17.5 percent and an earnings per share of 19.3c or if you like a 52 percent increase. I want to bring the size of that balance sheet to the attention of members in the Committee only to try to allay any fears they might have that if we pass this bill that company will in some way put beneficiaries’ funds at risk. That is just not the case. I argued before and I will mount the argument again that Parliament’s time should not be wasted in members being asked to pass this sort of legislation every time there is a change of company ownership. 
Hon Judith Tizard 
: I completely agree. 
BRIAN CONNELL 
: If I recall correctly the Minister in the chair Judith Tizard was building the same argument when she made her first reading speech. I think that all we are doing essentially by making this decision now is just putting the decision off for another Parliament. I think it is time we just bit the bullet and said: “Let’s invest in the Minister of the time the ability to make decisions based on the information presented.” I think that that is an entirely reasonable position. I know a couple of members in Parliament have a contrary view but the vast majority of submitters who came to the select committee actually supported the argument that the Minister in the chair and I are now mounting. [ 
Interruption 
] The member who is calling out will get his chance in a moment I am sure. 
But the point is that the vast majority of submitters in a very cogent way said that there was no need to be concerned so we are simply putting off making that decision to the time of another Parliament. I think we have lost a huge opportunity—in fact I have called it a lost opportunity—to make that decision now and stop wasting the time of this Parliament. This will not be the last occasion in which the ownership of the Guardian Trust Co. will change and we will then go through this debate again. Then it will happen again and we will do it again—and again. All the members on the select committee who looked at the legislation agreed that it was essentially a technical issue. 
Russell Fairbrother 
: No they didn’t. 
BRIAN CONNELL 
: Well that member will get his chance in a moment. The vast majority then if I can put it that way of members on the select committee agreed that it was a technical issue only and essentially a waste of time for Parliament. The right thing to do as the National Party argued at the time would be for the Act to be changed by Order in Council and I know that the Minister in the chair agrees with me. A rugby match is on with a very close score but here we are at 25 past 8 spending our time debating an issue that is simply unnecessary! 
In conclusion I say that the National Party’s position is to support the Act. It was never in doubt that we would not do that. But we suggest that it is time parties in this House had the courage to change the legislation so that relevant decisions can be made by the Minister at the time by Orders in Council with the absolute surety that beneficiaries’ funds will not be put at risk. We say that those decisions are for the Minister at the time to make. 
BRENT CATCHPOLE (NZ First) 
: 
 I would like to express New Zealand First’s support of Brian Connell’s comments. It is time that this particular legislation was made far easier and more manageable. The Commerce Committee discussed this during its deliberations and made some recommendations to that effect. However it was decided that we could not go ahead with it at this point in time because four trusts are involved with similar legislation and each one of those pieces of legislation would have to be changed individually. Whereas if we go down the track of making one separate piece of legislation that is an umbrella legislation for those four trusts that would leave the mechanism for all four trusts to go through the process of an Order in Council. 
Under those circumstances New Zealand First agreed that it would proceed with this bill as it is but with the understanding from the Minister and the officials that the review was under way and the legislation would be not very far down the track. However I was very disturbed by the Minister’s comments when she was winding up her second reading speech that the review and the legislation is not a high priority for this Government. That tells me one thing—that this Government’s high priority is to waste the time of this Parliament simply because we will have to go through this process time and time again as the trusts change ownership. It is unfortunate that change of ownership takes place so regularly but that is one of the situations of the commercial world. Unfortunately this Government is of the opinion that to stop wasting Parliament’s time is not a high priority. 
New Zealand First supports this legislation as it is but would like to see it come under an umbrella that takes this whole process out of the way and the name of the owner can be changed instead of having to go through separate legislation. 
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. 
Hon JUDITH TIZARD (Labour—Auckland Central) 
: 
 I thank honourable members for their contribution in the Committee stage of this bill. I share the concern that this issue frequently comes back to Parliament. I also share the concern that Mr Catchpole and Mr Franks expressed. We all recognise I think that it is often the more vulnerable investors and beneficiaries who use the trustee companies. Four trustee companies have been established by a private Act: New Zealand Guardian Trust Co. Ltd; Trustees Executors Ltd formerly TOWER; Perpetual Trust Ltd and PGG Trust Ltd trading together; and New Zealand Permanent Trustees Co. Ltd. They have indeed asked for a privilege and it is a privilege that Parliament has given them through the method of private bills. 
I want to read into the record the Commerce Committee’s decision which I think is very thoughtful. It states that although the committee members felt that the proposal to deal with the matter by Order in Council has merit most of them believed that “the ability of a trust company to transact business with its parent company is such a significant departure from the general rule against trustees taking profit from their administration of a trust that approval to allow this should remain in Parliament’s hands. Most of us consider that the preparation and introduction of a private bill to Parliament does not constitute an onerous liability on a company. Further this obligation sends a clear message to trust companies and their parent companies about the paramount importance of their obligations to their beneficiaries and the trust that these beneficiaries place in them.” I am happy to accept the view of the committee. I do not think we can change the laws and provisions relating to four companies in the one private bill before us. 
I noted Mr Catchpole’s comment. It is not that I do not think this issue is a priority but unfortunately the Minister of Justice has meagre resources—because this Government is so frugal with taxpayers’ money—which means that we limit the number of public servants we employ. We note that the Minister of Justice informed the previous Commerce Committee that a review would be undertaken by the Ministry of Justice and completed by mid-2003. At the second reading I expressed my regret that that review had not taken place but I absolutely accept that taxpayers’ money should not necessarily be used to give highest priority to matters that are basically commercial issues for the benefit of commercial companies and not necessarily of the people who are the beneficiaries of the trusts they undertake. 
So I thank the Committee. I particularly thank Mr Franks for the useful comments he has made. I assure the Committee that I am not the owner of this bill. I am merely as the local member of Parliament proposing it on behalf of the New Zealand Guardian Trust Co. I readily accept the collective view of the select committee. After all that is its job and I think that this has been a very good process. 
GORDON COPELAND (United Future) 
: 
 In rising to speak I hope Stephen Franks is not about to go because I was thinking I might ask him a question to which he may—or may not—be able to provide me with an answer. All the clauses in this fairly short bill provide for the bringing in of Promina as the new parent company of the New Zealand Guardian Trust Co. Most of the wording is around that—related companies the fact that Promina is incorporated outside of New Zealand which was some new wording brought in by the select committee and so on. 
But what really puzzles me—and I mentioned this in my second reading speech—is that the select committee in its report back to the House says that there is a general rule against trustees taking profit from their administration of a trust and that approval to allow this should remain in Parliament’s hands. So the implication is that by this bill Parliament is making a decision to allow Promina Group Ltd to take a profit from the administration of the trust through New Zealand Guardian Trust Co. I would like to ask somebody who was on the select committee or maybe the Minister in the chair the Hon Judith Tizard to take a call to reassure Parliament that the intention of this Act is not to allow Promina to take a profit but to allow transactions to occur between New Zealand Guardian Trust Co. If they are the same thing then I would appreciate an explanation of that point because to me a transaction although it may include a profit would not necessarily mean that Promina would profit from the activities of these trusts. 
I guess that related to that if it is taking out a profit how did the select committee assure itself that the profits would be fair and reasonable and would not be to the detriment of the beneficiaries of the various trusts? 
Preamble and clauses 1 to 4 agreed to. 
Bill reported without amendment. 
Report adopted. 
Third Reading 
Hon JUDITH TIZARD (Labour—Auckland Central) 
: 
 I move  
That the New Zealand Guardian Trust Company Amendment Bill be now read a third time 
. I introduced this private bill as the local member of Parliament for the area that covers the head office of this organisation—Auckland Central. I do so on behalf of the New Zealand Guardian Trust Co. Ltd which has its head office in my electorate. 
Briefly this bill amends the New Zealand Guardian Trust Company Act 1982 to expressly authorise Guardian Trust to transact business with Promina Group Ltd and Promina’s subsidiaries and associated companies to validate any business transacted with such companies on or after the commencement of the principal Act until the commencement of the bill as an Act and to ensure that the principal Act accurately reflects Promina’s ownership of Guardian Trust. 
As previously noted the Commerce Committee has recommended by majority with only minor technical amendments that the bill be passed. It has also reported that the statements in the preamble have been proved to its satisfaction. Once again I take the opportunity to thank the Commerce Committee and the House for their work on this bill. I commend the bill to the House. 
LINDSAY TISCH (National—Piako) 
: 
 National members have supported this bill. We have made some points about a lost opportunity to get it right. 
Darren Hughes 
: Oh don’t be churlish. 
LINDSAY TISCH 
: The member should look on page 3 of the commentary which states: “We note that in 2001 the Minister of Justice informed the previous Commerce Committee that such a review would be undertaken by the Ministry of Justice and completed by mid-2003. This review is now long overdue.” So the point I make is that while we support this legislation an opportunity to correct it right through has been lost. When we look at the reason for the proposals we see quite clearly that each time there is a change in the parent company a trustee company must secure changes to its private Act to authorise it to transact business with its new parent company. 
The situation has gone on and on and this will happen again next year and the year after. Four trustee companies are mentioned in the bill. They will come back and will want to make the changes. National’s minority view indicates that while we support the proposal to approve the new parent company by Order in Council we are disappointed with the decision of the committee not to support this initiative. 
That is our position. We do support the bill and if members over there did not object so much I might have had the chance to finish what I was going to say. 
The ASSISTANT SPEAKER (Hon Clem Simich) 
: I call Brent Catchpole. 
Jill Pettis 
: Nobody’s listening. 
BRENT CATCHPOLE (NZ First) 
: 
 I raise a point of order Mr Speaker. I take exception to the senior Government whip’s comment. 
The ASSISTANT SPEAKER (Hon Clem Simich) 
: I take that on board. I ask the senior whip to desist from comments like that when a member is starting a speech. 
BRENT CATCHPOLE 
: This bill as explained in the Committee stage and in the second reading is a technical measure that basically changes the ownership of the trust company from its previous owner to Promina and gives the seal of approval for the company to operate its business as it has been operating till now. 
The bill goes back to 1982 when the original New Zealand Guardian Trust Act was enacted. It was amended in 1989 and again subsequently. There are four private Acts that cover four different companies; the New Zealand Guardian Trust Co. is one of them. New Zealand First feels that requiring these companies to appear constantly before the select committee and go through the process to change the name of ownership is a waste of time and money. I note that the Minister’s third reading speech picked up on an issue I raised about priorities but she may have missed the point or miscalculated the cost of bringing these bills to the House and putting them through the select committee process. If these four trust companies change time and time again the cost in parliamentary terms adds up to a considerable amount. 
Although there would be an initial cost of the work of officials on an umbrella Act it would save the time and expense of the House and select committee debating these different Acts. So New Zealand First supports umbrella legislation to cover these four private Acts because that would give the ability to seek an Order in Council and for the measure to be signed off with the approval of the Ministers involved. It would make the process much easier. 
I note that Stephen Franks has concerns about the Australian interest in these companies. New Zealand First is also concerned about the offshore ownership of all of the trusts but by having them under umbrella legislation all the issues raised by Stephen Franks could be covered. It would streamline the process for it to go through Order in Council and we would not have to bring the particular organisations before a select committee and go right through the process. 
New Zealand First will support such legislation and we look forward to its being brought to the House in the very near future. We hate to see this matter drag on and on with the Government not getting priorities right. It is costing the Parliament a considerable amount of money to just keep on repeating the process through the select committees. New Zealand First does support this legislation in its present state noting that it was unable to make the changes in this legislation because it would have to go through the process for each individual one again. It needs to be brought under umbrella legislation and we will support that as well. 
GORDON COPELAND (United Future) 
: 
 At the second reading and also in the Committee stage I expressed my apprehension that the Commerce Committee in its examination of the bill may not have taken steps to completely satisfy itself that the beneficiaries of trusts administered by New Zealand Guardian Trust will be protected following the passage of this bill by Parliament tonight. I must say that on both occasions I invited either members of the select committee or the member in charge of the bill Judith Tizard to try to allay my apprehension in that regard. No one endeavoured to do that and that only increases my apprehension. 
So I think that at this late stage of the bill all I can do is add my voice to that of the National Party and of Lindsay Tisch in particular and say that it is time for the Minister of Justice to undertake a review of the statutory regime for companies in respect of the naming of current parent companies in trustee legislation in general. From my point of view that review now takes on a measure of urgency. It has been promised—it was promised by mid-2003. The promise has not been fulfilled; we are now 2 years past that date. I believe that unless and until that review is done this Parliament remains exposed to the possibility that we have failed to protect the beneficiaries of those trusts. 
Bill read a third time.