The lie of the land
It is estimated that the majority of rural properties in New Zealand are owned by trusts. Against this backdrop, this article offers a useful round-up of the fairly simple, yet ironclad, rules that all trustees working with rural-based entities should operate in accordance with.
Trusteeship fundamentals apply
A good trustee welds technical know-how with relationship skills, and ‘rural trustees’ must have a good amount of the former, often requiring some specialist knowledge about complex primary industry-related operations. To bolster their own knowledge and experience, a rural trustee will need to work with a range of professional advisors – often including farming experts – as well as various members of the interested family.
Maintain professional distance
The job of a rural trustee can be a delicate dance; they must know their clients well, but remember that they are a service provider, not a friend. For rural trustees who are not also part of the family, it is arguably easier to maintain professional boundaries, but this can also mean being more distant physically from the (often remote) property or asset under trusteeship. In this scenario, a trustee will often work with another on-site expert, such as a farm advisor or manager, to ensure the free flow of information and full compliance.
Professionalism at all times can be tricky when the rural trustee is part of the family involved in the trust. Given the close, sentimental attachment many farming families have to the land, it is common for a member (or members) of a family to be a trustee. The overriding responsibility is to understand from the trust beneficiaries what their desired outcomes are, and then to monitor and accommodate the inevitable changes over time.
Stay aware, stay compliant
Get the governance right. The diversity of business conducted on rural properties and the legislative requirements in trust law mean the trustee needs a clear game plan to ensure the productive and compliant running of the rural business and sound trust governance. The rural trustee must be familiar with a variety of laws pertaining to trust-owned rural land or businesses, including the Trustee Act 1956,1 in particular its prudent person rule; the Health and Safety at Work Act 2015 (HSWA);2 the Resource Management Act 1991 (RMA);3 the Employment Relations Act 2000 and the subsequent amendments; and contract law.
HSWA and RMA
There are a couple of key examples where the rural trustee is deemed responsible. First, HSWA obligations on any site or property held by the trust: New Zealand has an alarmingly high rate of workplace accidents, injuries and deaths, and over 50 per cent of work-related deaths between 2011 and 2017 were attributable to the agriculture industry.4A trustee must consider how they can prove what they have done to understand and enhance hazard identification in the workplace environment for employees or third parties working on property owned by the trust.
Under the HSWA there is neither a ‘firewall’ nor the ability for a trustee to indemnify or insure themselves. Trustees stand personally exposed should legislative or regulatory obligations not be met – and ignorance of the law is not a defence.
Second, the RMA is New Zealand’s primary legislation for environmental management, and is based on the principle of sustainability. Prosecution for breaching the terms of the RMA is not necessarily limited to the person actually carrying out the illegal act, with sentencing options under the Criminal Procedure Act 2011 including monetary fines or imprisonment.
As well as a risk advisor and wealth manager, rural trustees in particular will benefit from close cooperation with the following:
- Farm advisors, who assess whether the farming practice is current, and whether benchmarking is necessary to provide good husbandry and geographical competitiveness.
- Specialist advisors, who may advise on niche industries, e.g. honey production, viticulture or mussel farming.
- Regional authority liaison officers, who ensure an informed approach is taken to working with the land.
This team should operate like any other successful business. It should be based on a sound business model that is directed at achieving the stated goals and objectives of the business of the rural operation and its owners, e.g. providing regular and consistent cash flow, long-term capital appreciation and intergenerational sustainability.
Sustainability, financial or otherwise, is particularly important, and the rural trustee must remain cognisant of their role in not only protecting the family’s wealth, but also preserving the history represented by the rural asset.