I remember a long time ago, in the last century, that we were promised that with the improvements of technology and computers life would be made significantly easier. Well we certainly seem to have gotten that one wrong. In reality it often seems that computers have only, in reality, allowed us to over complicate even the most simple of things.
So what has prompted this little gem? In a recent decision in the New South Wales Supreme Court, the issues surrounding dealing with trusts has again come up and we now have some very new guidance in respect to how trusts and their assets and liabilities are treated. What is most concerning about this is that in essence, to deal with the assets will require significant involvement of lawyers and in fact the Court, with many decisions needing to be made by the Court itself.
In all my dealings with Creditors there is one focal point that they approach, and that is “when do I get my money back?” It is only after they are advised that they are not going to get their money that other issues come in such as ‘getting even’, ‘getting the directors’ or seeking an ability to sue someone else come to the forefront. Therefore, if we truly focus on what Creditors REALLY want, then we should be seeking to make the process as simple and cost effective as possible. Requiring commercial and operational decisions to be made by a Court simply seems to be a logger heads with the Creditors desired endstate.
Many years ago, when it was necessary that certain aspects of a matter were dealt with by a Court, such as remuneration when you couldn’t get a quorum at a Meeting of Creditors, the liquidator would prepare an affidavit in the prescribed (by the Court) form, swear it and arrangements would be made for an appropriate member of the liquidator’s staff to meet with a Registrar, and if all was appropriate an Order approving the fees was made. Approval was by no means automatic and I can assure you the employee never went unprepared, it was singularly embarrassing. Today the same process requires the not inexpensive involvement of lawyer and the consumption of valuable Court time.
Given that a Trust, on its own, is incapable of doing things, hence the need of a Trustee, then it is the Trustee that incurs the Creditors on behalf of the Trust, in doing so, the Trustee creates an asset for itself in the right to claim against the assets held (by the trustee) in the Trust for compensation. Thus in the simplest view the liabilities are the liability of the Trustee and thus fall within the constraints of either the Bankruptcy Act or the Corporations Law, depending upon the nature of the Trustee.
I acknowledge that there can be complications where, as occasionally happens someone seeks to leave the Trustee with the liabilities, but remove the Trust and its assets from the Trustees control, or where the Trustee was either operating on its own as well, or was the Trustee of multiple trusts. Certainly in such cases judicial involvement may not just be necessary, but in fact critical to the expedient resolution of the matter. That is the action is taken to reduce costs and protect assets, not create costs.
These days it is far too easy to lose sight of what the true endstate should be. Regrettably, as many can focus on nothing more than making money, then the endstate can get diverted into being the journey.
Nothing gives me greater professional pleasure than advising people that they will get all of their money back, or if not, then at least giving them more back than they expected. As I am often told this is a very rare occurrence in our industry.
Leadership is about making things simple, and getting them done. Stupidity is complicating things to the point that only you understand what is going on.