Perpetual Trust's "illiquid" mortgage fund has been ordered terminated by the High Court in Auckland.

On Wednesday Justice Paul Heath ordered Perpetual, the wealth management arm of NZX-listed Pyne Gould Corporation, to wind up its mortgage fund and pay for the costs of doing so with its own money.

The fund remains frozen, as it has since July when the court ordered a moratorium on it.

By September 11, redemption requests for almost a third of the mortgage fund units - worth an estimated $18.3 million - had been received from 437 investors.

Adam Holloway, lawyer for the fund's statutory supervisor, Trustees Executors, said the mortgage fund was illiquid, needed to be wound up and investors may be left with less than $1 for each unit.

The court needed to amend the fund's deed documents because they no longer protected investors' interests, he said.

Justice Heath agreed and said the statutory supervisor had good reason to be uneasy about the situation.

"There was an ample foundation for the statutory supervisor's view. It flowed from the nature of the Torchlight loan, the circumstances in which it was made and Perpetual's denial that the loan was made in breach of the deeds and offer documents."

Between February and April, Torchlight was given loans totalling $28m from a smaller Perpetual fund, authorised by Perpetual parent Pyne Gould Corporation, to the Torchlight fund, run by Pyne Gould's 76 per cent controlling shareholderG eorge Kerr.

The first loan, worth $18m, was made at Kerr's request, by email on a Sunday evening asking for the money to be paid the next day. Those loans have since been repaid.

Perpetual remained adamant that its loan to Torchlight did not breach its trust deed and Justice Heath said the court had not ruled on whether it did or not.

Regardless, the fact that Perpetual defended the transaction meant that without a court-imposed modification of the trust deed it was likely similar risky loans could be made, he said.

Meanwhile, the Financial Markets Authority is still considering whether to grant Perpetual Trust a corporate trustee licence.

A corporate trustee is appointed to look after investors' interests for certain securities or investments such as those offered by credit unions, building societies and finance companies, and for unit trusts and for retirement villages.

Perpetual is one of three companies the FMA is still mulling over. A decision will be made by September 30.

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