Viaduct Capital: FMA v. Prince & Partners

Prince & Partners, trustee for debenture holders in failed Viaduct Capital, is paying $4.5 million in a court-approved settlement after admitting it failed to properly protect investor interests.

Terms of the settlement spell out Prince & Partners dereliction of duty in failing to carry out due diligence or exercise proper professional scepticism when signing off on deals which saw cash spirited out of Viaduct, replaced by what was described as assets of uncertain value and limited liquidity.  When the crunch came with Viaduct going into receivership in May 2010, investors were out of pocket to the tune of $7.8 million.  Most of that loss has been absorbed by taxpayers with a government guarantee given after the 2008 financial crisis.

The Financial Markets Authority sued Prince & Partners Trustee Co Ltd in what is the first time it has taken a representative action against a licensed securities supervisor on behalf of investors.  Approving the settlement, Justice van Bohemen said payment of $4.5 million is within the range of investor losses caused by Prince & Partners default.  A settlement saves the cost of what was expected to be a five week trial.  Prince & Partners has agreed not to act as a licensed supervisor for the next five years.

Terms of the settlement agreement criticise Prince & Partners for failing to act in the best interests of investors in relation to two transactions: the February 2009 purchase of Viaduct Capital (then known as Priority Finance) by Nick Wevers’ Phoenix Finance with financial assistance provided by Paul Bublitz’s Hunter Capital (this assistance funded in part by cash generated by the sale of Hunter Capital assets to Viaduct); and days later an asset swap with Viaduct Capital acquiring further Hunter Capital assets in return $1.5 million in Viaduct capital notes.  These deals had the economic effect of Hunter Capital quitting assets with proceeds sheltered as government-guaranteed investments in Viaduct Capital.  Viaduct’s government guarantee was removed in April 2009 on the grounds guarantees were intended to benefit retail investors, not the likes of Mr Bublitz and Hunter Capital.       

Financial Markets Authority v. Prince & Partners Trustee – High Court (25.08.17) & FMA/Prince & Partners Settlement Agreement (25.08.17)

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Maori: Ngati Te Ata v. Minister for Treaty

Loss of land in pitched battles between Ngati Te Ata and Ngati Tamaoho in the 1840s was revisited in a High Court challenge to Ngati Tamaoho’s proposed Treaty settlement.  The High Court blocked Ngati Te Ata attempts to veto implementation.

The two iwi claim mana whenua over land bordering the southern shores of Manukau Harbour, south Auckland.  Ngati Tamaoho has negotiated a $10.3 million Treaty of Waitangi settlement, currently awaiting parliamentary approval. Government set in train the process of earmarking two properties in South Auckland for transfer to Ngati Tamaoho: 725 Great South Road, Wiri and 112 Bairds Road, Otara.  Ngati Te Ata objects.  It lays claim to the two properties, disputing Ngati Tamaoho’s Treaty claim.

Treaty settlements across Auckland isthmus are hampered by multiple claims and cross claims.  Multiple iwi are neighbours; sharing kin groups with overlapping interests in land, history and whakapapa.  A dozen Auckland iwi signed up to a 2012 Collective Redress Deed providing a framework for multiple Treaty negotiations.  The Deed, now enshrined in legislation, sets out a process for identifying properties (described as right of first refusal land) which might be used as commercial compensation in settling Treaty claims.

In the High Court, Ngati Te Ata challenged government steps setting aside first refusal land for Ngati Tamaoho.  In essence, this was a challenge to the breadth of Ngati Tamaoho’s Treaty claim.  Reference was made to battles fought between 1845 and 1846 in which a victorious Ngati Te Ata recovered disputed land.  Ngati Te Ata claims defeated Ngati Tamaoho then proceeded to sell land it no longer controlled.

Justice Whata ruled government followed the procedure set out in the Collective Redress Act when setting aside land for Ngati Tamaoho’s settlement.  This could not be overturned merely because another iwi claimed a genuine tikanga-based interest in the land.  That would amount to a veto over Treaty settlements, he said.                    

Ngati Te Ata v. Minister for Treaty Negotiations – High Court (25.08.17)

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Trustees: Butterfield v. Public Trust

Trustees of the Mount Cook Station Charitable Trust unwittingly continued running Trust affairs after their term of appointment expired.  Facing personal liability, court approval was needed to validate contracts and have costs and expenses paid by the Trust.

The romance surrounding iconic Mount Cook high-country sheep station and the fact it had been in Burnett family ownership for some 150 years triggered much angst when Donald Burnett died childless in 2010, the last of the family line.  On his death, a Trust established the previous year was to buy the station at current market value.  However, the property was by then an uneconomic farming unit.  Banks would not lend.  Trustees decided to on-sell to a private buyer, finding a buyer at $4.7 million.  A furore erupted.  Friends of the Burnett family claimed this departed from Donald Burnett’s wishes.  Tramping and hunting groups lobbied government to step in.  Trustees then discovered to their dismay that their original appointment was for five years only.  Work done on behalf of the Trust after their appointment expired and the subsequent private sale were done without authority.  The High Court subsequently validated these unauthorised acts.  But it refused to allow Trust assets to be used for trustees’ expenses.

The Court of Appeal said the trustees were trustees de son tort; no longer trustees, but acting as such.  There was no criticism of the actions they took.  Reasonable costs and expenses incurred in bringing court applications to regularise the Trust’s affairs are to be paid out of Trust assets, the court ruled.  A September 2016 High Court order appointed the Public Trust as sole trustee of the Mount Cook Station Charitable Trust.  Purposes of the Trust highlight preservation of the area’s historical and natural heritage.  The Trust’s most recent financial statements list assets of $5.89 million.

Butterfield v. Public Trust – Court of Appeal (24.08.17)

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