Trustees Executors and Agency Company
Encyclopedia
Trustees Executors and Agency Company (TEA, 1879 – 1983) was the first trustee company formed in Australia. It carried on unexciting business for its first 90 years, before collapsing after an excursion into bad property deals in the early 1980s.
TEA was established by William Templeton
in 1878 when he perceived a need for wealthy or moderately wealthy people to have a good executor
after their death. The company's formation required a special act of parliament because such matters had previously only been handled by individuals. The company floated in 1879 with tight restrictions on the capital investments it could make and on how many shares any one person could control. Those shareholding limits had the effect of making the board and management largely self-perpetuating, since so many shareholders would have to act together to effect change.
In the 1970s the labour-intensive nature of the business was putting profits under pressure and TEA came up with the idea of offering a money market
deposit service for clients, on which it would make a margin. If they actively solicited funds they would have had to prepare a costly prospectus
, so the service was just quietly hinted at, letting clients request it.
These client deposits took off in a big way, growing to some $133m by 1982. Yet what was supposed to be money market investments was by the 1980s being invested in property construction ventures, among them for instance the prominent apartment building The Quay overlooking Sydney harbour. Much of this activity was kept off the company balance sheet, so shareholders saw profits rising (often only due to revaluations) without really knowing the basis. Complacency at board level meant the board also had little idea what management was doing.
It was not until 1983 that the board had a good overview of the property ventures, at which point, depending on the basis for valuing the properties, the company was close to insolvent. The board hoped for a merger with Perpetual Trustees (which could have suited Perpetual since a trustee company failure might have resulted in new regulations on them) but in the end TEA was wound up. Its trustee operations were taken over by the ANZ Bank
and very little information on the collapse was provided to shareholders, or the public, until a government inspector's report in 1990.
Chief executive Peter Bunning had been chiefly responsible for the property strategy, and was jailed for falsifying TEA's accounts and for secret commissions in the course of the deals. As Trevor Sykes
remarks, despite all the corporate goings-on in Australia in the 1980s, Bunning was the only person of prominence to be jailed actually within that decade itself.
TEA was established by William Templeton
William Templeton
William Templeton , butcher, was the sixth Mayor of Vancouver, British Columbia, serving only one term in 1897. He committed suicide after losing his seat to James Garden.- External links :*...
in 1878 when he perceived a need for wealthy or moderately wealthy people to have a good executor
Executor
An executor, in the broadest sense, is one who carries something out .-Overview:...
after their death. The company's formation required a special act of parliament because such matters had previously only been handled by individuals. The company floated in 1879 with tight restrictions on the capital investments it could make and on how many shares any one person could control. Those shareholding limits had the effect of making the board and management largely self-perpetuating, since so many shareholders would have to act together to effect change.
In the 1970s the labour-intensive nature of the business was putting profits under pressure and TEA came up with the idea of offering a money market
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
deposit service for clients, on which it would make a margin. If they actively solicited funds they would have had to prepare a costly prospectus
Prospectus (finance)
In finance, a prospectus is a document that describes a financial security for potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements,...
, so the service was just quietly hinted at, letting clients request it.
These client deposits took off in a big way, growing to some $133m by 1982. Yet what was supposed to be money market investments was by the 1980s being invested in property construction ventures, among them for instance the prominent apartment building The Quay overlooking Sydney harbour. Much of this activity was kept off the company balance sheet, so shareholders saw profits rising (often only due to revaluations) without really knowing the basis. Complacency at board level meant the board also had little idea what management was doing.
It was not until 1983 that the board had a good overview of the property ventures, at which point, depending on the basis for valuing the properties, the company was close to insolvent. The board hoped for a merger with Perpetual Trustees (which could have suited Perpetual since a trustee company failure might have resulted in new regulations on them) but in the end TEA was wound up. Its trustee operations were taken over by the ANZ Bank
ANZ Bank
The Australia and New Zealand Banking Group Limited , commonly called ANZ, is the fourth largest bank in Australia, after the Commonwealth Bank, Westpac Banking Corporation and the National Australia Bank. Australian operations make up the largest part of ANZ's business, with commercial and retail...
and very little information on the collapse was provided to shareholders, or the public, until a government inspector's report in 1990.
Chief executive Peter Bunning had been chiefly responsible for the property strategy, and was jailed for falsifying TEA's accounts and for secret commissions in the course of the deals. As Trevor Sykes
Trevor Sykes
Trevor Sykes is an Australian finance journalist who until his retirement in 2005 wrote the Pierpont column in the Australian Financial Review...
remarks, despite all the corporate goings-on in Australia in the 1980s, Bunning was the only person of prominence to be jailed actually within that decade itself.