Perpetual allowed to bow out as trustee of failed companies
Perpetual Trust, trustee to more than a dozen failed finance companies, has been given High Court approval to retire as trustee of the companies.
High Court Justice Jill Mallon also ordered that Corporate Trust be appointed as the new trustee for the companies.
The companies Perpetual was a trustee for included Lombard Finance, Irongate Property, Strategic Finance, OPI Pacific Finance, LDC Finance, Nathans, Dominion Finance and various St Laurence companies.
Perpetual was trustee to the companies, all of which are insolvent and unable to repay the "vast sums of money owed to investors", Justice Mallon said.
Perpetual applied to the court for approval to retire as trustee and for Corporate Trust to be appointed in its place. Court approval was sought because the process for a change under each trust deed was said to be "inexpedient, difficult and impracticable".
Mallon said that Perpetual's resignation as trustee could not alter any liability for acts or omissions at the time it was trustee. Given the collapse of all the companies of which Perpetual was trustee and the significant shortfall to investors "litigation … cannot be ruled out" Mallon said. LDC Finance is pursuing legal action against Perpetual and others.
Perpetual's licence expires at the end of March 2014 and it does not want to apply to the Financial Markets Authority to extend that because it has sold its corporate trustee business. So Perpetual want to retire from the various trusteeships and appoint Corporate Trust, headed by Kim von Lanthen, in its place.
Perpetual engaged Kim von Lanthen & Associates in late 2012 to provide management and administrative services for the trusteeships. That included liaising with receivers and liquidators of the companies and overseeing negotiations relating to possible litigation resulting from the collapse of the companies and reporting back to Perpetual.
In September 2013, Corporate Trust was able to gain insurance that it needed to manage the trusteeships. At that point Perpetual asked it to take over the role.
Each of the failed finance companies has between hundreds and thousands of investors, and because of the large numbers, Perpetual thought holding meetings of investors to approve a new trustee would be a "lengthy, expensive and difficult process".
There was a risk that disgruntled investors would boycott an extraordinary resolution to appoint Corporate Trust and that could lead to long delays. That could have led to Perpetual seeking court approval for handing over the trusteeships, so it decided to pre-emptively seek court approval, which was granted yesterday.
Perpetual was entitled to retire by giving notice, but investors could have declined to approve the new trustee.
The court approval means investors will not have a say on whether Corporate Trust is the appropriate replacement trustee. However, it is licensed and there was no information before the court to suggest it was not "a fit and proper trustee".
"There is nothing to suggest there is any better option available to the investors," an adviser to the court said.