19 December 2013

Securities: re Perpetual Trust

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