New Zealand Guardian Trust Company Amendment Bill

I move, That the New Zealand Guardian Trust Company Amendment Bill be now read a second time. This is a private bill promoted by the New Zealand Guardian Trust Co. Ltd., which I am happy to promote on its behalf as the MP for Auckland Central. This bill amends the New Zealand Guardian Trust Company Act 1982, which currently allows Guardian Trust to transact business with its former parent company, Royal and Sun Alliance Insurance Group plc, or any subsidiary or company associated with that parent company. The purposes of this bill are to expressly authorise Guardian Trust to transact business with its present parent company, Promina Group Ltd, and the parent company’s subsidiaries and associated companies, whether or not they are overseas companies. The purposes are also to validate any business transacted with Guardian Trust’s various parent companies or with subsidiaries or associated companies of those parent companies, whether or not they are overseas companies, on or between the commencement of the principal Act and the commencement of this legislation, and to ensure that the principal Act accurately reflects the current ownership structure of Guardian Trust.

This bill was introduced on 7 October 2004, had its first reading on 20 October that year, and was then referred to the Commerce Committee. The committee received and considered five submissions from interested groups and individuals, and received advice on the bill from the Ministry of Justice. The Commerce Committee, which I thank for its work, has recommended that the bill be passed by majority, with only minor technical amendments. The committee has reported also that the statements in the preamble have been proven to its satisfaction. The committee spent some time considering a proposal suggested by Guardian Trust that the bill be amended to enable the company to seek an Order in Council made by the Governor-General on the recommendation of the Minister of Justice, after consultation with the Minister of Commerce, to approve any future change in ownership.

This is not the first time Guardian Trust and other trust companies have sought such an amendment. Under Guardian Trust’s proposal, if the company were to provide sufficient information to demonstrate to the Minister of Justice that the systems and procedures placed beneficiaries’ best interests before its own commercial advantage, then the Minister could decide—after consultation, as I said, with the Minister of Commerce—that it would be appropriate to authorise Guardian Trust to trade with a new parent company. The name of that parent company, if and when it changed, could then be amended in the schedule of the Act by Order in Council made by the Governor-General. The Order in Council would be subject to review by the Regulations Review Committee, and decisions made in relation to it could, of course, be judicially reviewed. The acceptance of that proposal would have meant that Parliament no longer needed to take the time to consider any future changes in this private Act.

Ultimately the majority of the committee, whilst feeling that the proposal had merit, believed that the ability of a trust company to transact business with its parent company should be controlled by Parliament. The majority were unwilling also to support the proposal until the Government has completed a thorough review of the regime for statutory companies in respect of the naming of current parent companies in trustee legislation. The committee noted that such a review had been recommended by several committees before it, that in 2001 the Minister of Justice had informed a previous Commerce Committee that such a review would be undertaken by the Ministry of Justice and completed by mid-2003, and that the review is therefore now long overdue. I will continue to urge that the work be carried out, though I recognise that it is not necessarily the highest priority for the Ministry of Justice.

I again thank the Commerce Committee for the work it has done on this bill. I commend this bill to the House for its second reading.

As the previous speaker has already pointed out, the New Zealand Guardian Trust Company Amendment Bill is, by its nature, fairly technical and straightforward. I do not intend to take up a lot of the House’s time in discussing the bill in much more detail than the member in charge of it has. I would like to point out, however, that the National Party considers that it is something of a lost opportunity.

The proposal that was put to the Commerce Committee by the Guardian Trust was that it seems that every time there is a change of ownership of a trustee company, the company has to take the time of Parliament, unreasonably in the view of the company—and I tend to agree with it—to pass legislation to, essentially, rubber-stamp the proposal. Some members of the select committee felt there was a clear conflict of interest. I, on behalf of the National Party, argued that a simple change by Order in Council was all that was necessary, because the time it takes to change legislation is significant, notwithstanding what some members might argue. We have gone through the process of a first reading, we have gone through the select committee process, we are now going through a second reading, and we will go through a third reading, yet the bill simply allows a company to continue with its business in the way it did prior to a change of ownership. Surely, we have better things to do with our time than to change an Act of Parliament every time there is a change of ownership.

Once upon a time, I will concede, it was a fairly rare occurrence. The member in charge of the bill made the same recommendation in her speech on the first reading as I am making now. We should deal with this matter once and for all, and just leave it to the Minister at the time to make sure that there is no conflict of interest, and that the funds of the trust’s beneficiaries are being managed in a sensible and safe way. We should let the Minister at the time make those decisions.

I conclude by saying that I think it is a lost opportunity. I am not for a moment suggesting that we should in any way put at risk beneficiaries’ money, but I think the time has come when we can trust the judgment of the Minister, with all the checks and balances that are in place, and allow him or her to make some commercial decisions. We, as members of Parliament, should invest in him or her the confidence to do just that.

The New Zealand Guardian Trust Company Amendment Bill is very much a technical bill. It simply formalises the change from one ownership to another. As the Minister and the previous speaker said, this is something that happens from time to time. There are four such trust companies that have been through this process. I understand that another trust company bill is about to come up for the same reason as this one. The trust company needs to go through the formal process of changing the ownership and the name of the owner in the Act.

To New Zealand First, this is a waste of Parliament’s time, and the select committee agrees with that. It went through the process and basically came up with the simple solution that this could be done by Order in Council, with the recommendations of the Minister of Justice and the Minister of Commerce, and approved by the Governor-General. It is not necessary to go through the House every time such a change needs to take effect, because it is just a simple waste of time. As the previous speaker said, we are going through the motions of simply formalising a change. New Zealand First feels strongly that one simple Act should cover all the trust companies, so that the process can be formalised and simply done through an Order in Council. New Zealand First would support that. We recognise that it was not possible to do it in this particular case, because it needs an overall umbrella Act.

I take issue with the Minister for saying that this is not a high priority. I ask her what is high priority? Is it wasting Parliament’s time, or is it getting the job done properly—and doing it properly once—so that we have an umbrella piece of legislation that covers all those companies and so that it can be done by a simple Order in Council? I say to the Minister that she should get the whole process under way now and do it properly once.

I came to Parliament at the end of November, which was after this bill was introduced in September 2004. The bill, as previous speakers have said, is highly technical, and I agree with their comments that it is purely a waste of members’ time. However, although the bill was considered by the Commerce Committee relatively quickly, we did conduct quite a substantial consideration of the submissions. There were some very significant things showing through the submissions. I particularly want to quote a submission from Mr Geoffrey John Fuller. In his submission, he stated: “My concern is with the ability of the Guardian Trust to lend funds under its administration to its parent company … thus linking the security of those funds to the financial viability of those companies.”

In other words, if we allowed funds to be freely transferred between the New Zealand Guardian Trust Co. to its parent company without substantial or adequate monitoring, that would leave the door open at the other end, because we do not know how those funds would be managed, or whether those funds, if they are under any security risk, would be secured for those customers. In other words, with their funds, those mums and dads put their trust into the hands of the New Zealand Guardian Trust and give it their total faith. It seems to me that the funds would not be adequately secured. Although I do not object to the bill overall, I wish to raise this concern while all members are in the House and I can draw their attention to it.

The ACT party would like to vote for the bill, but would like to draw attention to its very significant shortcomings. We agree with the National Party’s proposal that would enable the bill to be considered under a proposal to seek an Order in Council and to seek options in the future for new ownership. That proposal was refused during the select committee stage, which I think was a mistake. However, the bill is before Parliament now, and I would like to invite other parties’ comments.

I rise to take a call on behalf of United Future on the second reading of the New Zealand Guardian Trust Company Amendment Bill. Let me say at the outset that there was no United Future member on the Commerce Committee, which considered this bill, but had any United Future members been there, I am sure we would have sided with National, New Zealand First—as it now appears—and also ACT in preferring to make this change in the future by following the Order in Council route, although on this occasion it will be done by an Act of Parliament. It seems to us to be an absolute nonsense that every time the New Zealand Guardian Trust Co. changes its parent company, which happens with increasing frequency in these days of mergers, acquisitions, and so on, it has to come back to Parliament to undertake what, as everybody has said so far, is purely a technical matter.

I find the logic that the committee has followed in deciding not to adopt that course of action quite troubling. Let me quote the committee’s decision on the Order in Council proposal: “While we feel this proposal has merit, most of us believe 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.” Members should note that last part very carefully. If I take those words literally, the committee is saying that, by this legislation, Parliament is allowing Promina Group Ltd to take profit from its administration of the trust managed by the New Zealand Guardian Trust Co. I sincerely hope that is not the case, because if it is the case, then Parliament should not pass this bill.

Subclause (5) of the preamble simply states: “The company wishes—(a) to be able to transact business with its current parent company and with its current parent company’s subsidiaries and associate companies, … and (b) to validate business transacted with its various parent companies, or subsidiary or associate companies …”. The bill actually says nothing about Promina Group, the new parent company, being able to take profit from its administration of its trusts.

I draw the House’s attention to the fact that the Committee stage of this bill will follow later this evening, and I for one will ask the committee members to clarify exactly what they are saying there. I do not see anything in the bill that authorises Promina Group to take a profit from the administration of trusts that are under the supervision of the New Zealand Guardian Trust Co. If that is in the bill, then I want somebody on the committee to point it out to me, because it would certainly affect how United Future will vote on the remaining stages of this bill.

With that caveat, I signal, however, that United Future will vote for this second reading.

Amendments recommended by the Commerce Committee by majority agreed to.

Bill read a second time.