Perpetual
Trust pre-empted an investor mutiny by having the High Court unilaterally
remove it as trustee of a host of failed finance companies. Corporate Trust Ltd was appointed in its
place, but Perpetual remains liable for any proved wrongdoing whilst it was
trustee.
When the finance
company sector in New Zealand all but collapsed in 2008-2010, thousands of
investors were left out of pocket. They
are looking to those corporates acting as trustees for investors as one solvent
avenue for compensation.
Perpetual Trust was
the named trustee for a long list of failed finance companies, now in
receivership, liquidation, or both: Lombard, Irongate, Strategic, LDC, Nathans,
Dominion, Boston, St Laurence, Five Star Hotel and Finance & Leasing.
The number of investors
in each finance company range from 230 to 13,000. Each finance company has differing rules for
investor meetings to have an existing trustee retire and be replaced. Perpetual Trust is facing multiple legal
actions following allegations that it failed to properly carry out its duties
as trustee. The extent of any liability
has yet to be decided.
Perpetual Trust asked the
High Court to remove it as trustee of each of the listed failed companies. Perpetual Trust said it would be an expensive
and probably futile task to call investor meetings for each finance company to
get their approval to retirement.
Disgruntled investors are gunning for Perpetual Trust and were expected
to disrupt any meetings and block any retirement procedures.
The High Court agreed
to remove Perpetual Trust unilaterally, saying that investors would not be
prejudiced. Notice of the court
application had been widely advertised.
No investors had objected.
Receivers and liquidators of the various failed finance companies had consented
to the move. Retirement does not absolve
Perpetual Trust from any liability for proved wrongdoing. The court received confidential evidence as
to Perpetual’s insurance cover which would be available if it were found
liable.
The court appointed Corporate
Trust Ltd in place of Perpetual Trust for the failed finance companies. Corporate Trust had been acting as de facto trustee
while Perpetual was trying to extricate itself from the position.
Perpetual Trust told
the court it had sold its corporate trustee business and in future would offer only
personal trustee services.
re
Perpetual Trust Ltd – High Court (19.12.13)
14.002