In the late 1980s - working for Elders Finance - David Brown Douglas repossessed Rod Petricevic's corporate jet after the businessman's investment company became one of the high-profile failures of the market crash.
Brown Douglas, now the chief executive of the Trustee Corporations Association, jokes that the acquisition of a status symbol like a jet, a Rolls-Royce or Ferrari by a company's top executive is one of the early warning signs of impending insolvency.
Ironically it is those early warning signs of trouble for finance companies that Brown Douglas' organisation is concerned with.
Trustees are the finance sector's front line regulators. They are arguably the best placed people to prevent investor losses. It's their job to pick up on early indications that a company is in difficulty and either make sure the issues are addressed, or, if there's no other way out, bring in the receivers, hopefully before investors' funds evaporate completely.
Twenty years after Petricevic lost his jet, he's been back in the news again because of last year's failure of finance company Bridgecorp.
The trustees, whose role remains poorly understood by the public and who have largely keep a low profile, are now in the spotlight.
The latest receiver's report on Bridgecorp suggests secured investors may receive as little as 16c back for every dollar they had in the company.
It's understandable that disgruntled investors are wondering what happened and who screwed up.
Investors, industry figures and the media have variously lashed out against the management and directors of failed businesses, financial advisers who prompted investors' cash into them and government regulators including the Securities Commission. Attention is now increasingly turning to the trustees.
At least some investors are angry that members of Brown Douglas' organisation failed to pick up or act sooner on signs that the finance companies they were overseeing were in trouble and that their less than rigorous execution of their fiduciary duties has served to deepen their losses. This criticism is similar to that levelled at the Securities Commission and arguably stems from a lack of understanding of the roles of both entities.
Chief executive of Covenant Trustee Company Graham Miller says his profession is a "PR nightmare".
Trustees' work goes mostly unseen, much of what they do is necessarily confidential either for professional or statutory reasons, and they are
"enormously constrained" in what they can say publicly.
"If we intervene successfully, the only people who may know may be the client and their professional advisers, or in a more serious situation potentially the Companies Office and/or the Securities Commission."
The trustee's image is not helped by the fact that even they struggle to explain their duties in plain language. Furthermore, the profession, whose members will often boast their companies were created by an Act of Parliament in the 19th century, generally exudes an aura of impenetrable fustiness.
The biggest PR nightmare Miller is facing though, is the fact that out of five trustee companies in New Zealand, his company along with one other - Perpetual Trust - was responsible for the oversight of the overwhelming majority of the 20 or so finance companies that have gone bust in the past two years.
Critics are asking why these two companies have such an abysmal record.
Some argue it all stems from a basic conflict of interest. While the trustees' duty is to the investor, they are actually selected and hired by the finance companies themselves.
Financial planner Robert Oddy says there is danger in this: "You just don't know if that is inhibiting their ability to ask the right questions."
Another industry figure says any trustee that's seen to be proactively enforcing investors' interests ahead of those of the company's is making themselves an unattractive appointment for other businesses. Those with a lighter touch become popular.
But Louise Edwards, of Perpetual Trust, says trustees are not the only profession hired by the same organisation they are charged with monitoring. She says Perpetual and Covenant's dominance of the finance company space is simply the result of the two companies targeting that type of business.
Furthermore, once hired, it is very difficult for a company to get rid of a trustee if it doesn't like their approach.
Meanwhile, Oddy, the director of International Financial Planners, says that if anything, the recent finance company collapses show trustees simply don't have enough power to require information to be provided to them. "There is a misconception of what people believe trustees can do. "This is something that has been encouraged by the marketing of fund managers and finance companies to reassure people they are protected."
Oddy also questions whether some trustee staff had the experience to ask the right questions of the companies they were supposed to be monitoring.
In fact, it has been clear over the last two years that one or two finance companies have kept important information from their trustees in order to stave off action such as receivership.
The Business Herald is aware of a number of instances where trustees have learned of particular issues at finance companies only when contacted by reporters for comment.
"That's not a good look," concedes Brown Douglas.
Oddy believes that trustees should be funded by the Government to ensure their independence, but ultimately he reckons they are well past their use-by date.
"I think trustees have had their day - they are anachronistic."
Edwards will have none of that.
"The Reserve Bank and Securities Commission do not have the depth of resource and experience to take on these roles and I guess these were the factors that were recognised by the Ministry of Economic Development during the Review of Financial Products and Providers," said Edwards.
Commerce Minister Lianne Dalziel has said: "The proximity of trustees to the market and the knowledge and expertise that have been developed over the years confirms they are best-positioned to provide that frontline role."
Following the spate of collapses, Dalziel saw fit to give trustees increased powers to force finance companies to disclose requested information.
Those powers will be further boosted in upcoming legislation and trustees will also be subject to greater scrutiny from the Securities Commission.
"A graduated set of powers to ensure that trustees are held to account for their actions" will include "enforcement provisions, including criminal offence provisions, where a trustee fails to meet their obligations or fails to comply with a direction of the Securities Commission".
HOW TRUSTEE SYSTEM WORKS
At present there are four "statutory" trustee companies that were established by an act of Parliament.
In addition, Covenant Trustee Company is approved to act as a statutory supervisor but is ultimately overseen by the Securities Commission.
So what exactly is the trustee's job?
As far as finance companies go, the trustee's role is, first, to ensurethe company is complying with the terms of its trust deed and then to ascertain whether the assets of the company are sufficient to repay investors.
"The trustees are there to make sure companies don't trade on if they're in a situation where they've breached their borrowing ratios as contained in the trust deed," says Trustee Corporations Association (TCA) chief executive David Brown Douglas.
And what is a trust deed? Brown Douglas struggles to answer easily in plain language
"It's essentially the document whereby the borrower and the trustee agree to operate to provide the level of security to support the borrowings," he says.
Trust deeds are available from the Companies Office website along with prospectuses. They vary from company to company.
The TCA has guidelines for finance company trust deeds, and suggests that no more than 35 per cent of shareholders' funds should be lent out to any one borrower.
Lombard Finance & Investments had a single loan worth more than 150 per cent of what was less-than-gold-plated shareholders' equity, yet trustee Louise Edwards of Perpetual Trust said the loan did not put the company in breach of its trust deed.
Yesterday, Edwards said she saw little benefit in having different trust deeds.
"We would certainly prefer a standardised approach and, in fact, some of the elements of the Reserve Bank Amendment Bill will be standardising the documents."
- Tamsyn Parker