Prudent Charitable Trustees

Prudent trustee obligations In Re Mulligan (Deceased) [1998] 1 NZLR 481 a trustee company, along with the executors of a widow trustee’s estate, were held liable for the financial consequences of failing to preserve the capital value of the testator’s estate and ordered to pay the estate’s residuary beneficiaries the estimated losses: The testator died in 1949 leaving his widow a substantial legacy and a life interest in a farm with nephews and nieces as residual beneficiaries.  The trustees of the estate were a trustee company and the widow.  The farm was sold in 1965 and the estate invested in fixed-interest securities until the widow died in 1990.  Between 1965 and 1990 different trust company officers tried to persuade the widow to invest shares to counter inflation but she adamantly refused to agree or allow direct contact with beneficiaries by the trust company.  The widow bought a rental property in 1965, her own home with a rental flat in 1972 and (unknown to the trust company) owned significantly valuable shares.  At the widow’s death, the capital of the testator’s estate was in real terms a small proportion of what it had been in 1965. The well-known principles arising from this case are: The “duty of trustees to act with due diligence and prudence in the discharge of their duties,” The separate responsibility of each trustee, it being “elementary that a duty of diligence rests on each trustee,” and The “duty of impartiality”, it being “elementary that a trustee must act with strict impartiality and endeavour to maintain a balance” between the interests of different beneficiaries or, “Put another way,...

The “Pecuniary Gain” Conundrum in Society Law

Statutory provisions Section 20(1), Incorporated Societies Act 1908, provides that “No society shall do any act of such a nature that if the doing thereof were one of the objects for which the society was established the members of the society would be deemed to be associated for pecuniary gain within the meaning of sections 4 and 5 hereof.”  Those sections relevantly read as follows (emphasis added): 4.  Incorporated societies— (1)  Any society consisting of not less than 15 persons associated for any lawful purpose but not for pecuniary gain may, on application being made to the Registrar in accordance with this Act, become incorporated as a society under this Act. 5.  Pecuniary gain— Persons shall not be deemed to be associated for pecuniary gain merely by reason of any of the following circumstances, namely: (a)  That the society itself makes a pecuniary gain, unless that gain or some part thereof is divided among or received by the members or some of them: (b)  That the members of the society are entitled to divide between them the property of the society on its dissolution: (c)  That the society is established for the protection or regulation of some trade, business, industry, or calling in which the members are engaged or interested, if the society itself does not engage or take part in any such trade, business, industry, or calling, or any part or branch thereof: (d)  That any member of the society derives pecuniary gain from the society by way of salary as the servant or officer of the society: (e)  That any member of the society derives from the society any...