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Court give Perpetual 10 days to sort out funds, keeps observers in place

Friday 3rd August 2012

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The High Court has given Pyne Gould Corp subsidiary Perpetual Trust 10 working days to come up with a plan to liquidate one fund and internalise another.

Judge Paul Heath today ordered Perpetual to figure out a way to wind down its frozen mortgage fund and internalise its cash management fund before another hearing on Aug. 17, according to his judgment. He also ordered observers, Vivian Fatupaito and Christopher Duffy of WHK, should continue in their role.

"At this stage there is a live issue over whether, in the form that internalisation is intended to take, the statutory supervisor (or some other form of supervision) should continue to be required, whether at the discretion of the court, or otherwise," the judgment said.

Perpetual's statutory supervisor, Trustees Executors, sought an order after the cash management fund was used to loan $28 million to the related Torchlight Fund No 1 LP, which is managed by Pyne Gould principal George Kerr.

"I am told by counsel that 'internalisation' of the cash fund is intended to restrict the allotment of units in that fund to investors which are, broadly, trusts of which Perpetual is a trustee, or other do not constitute 'members of the public'," the judgment said.

Perpetual froze repayments of its $56.2 million mortgage fund, which it now wants to wind up, after a surge in redemption requests after details of the cash fund's to the Torchlight fund emerged.

The loan has since been repaid by Torchlight, and Pyne Gould is now looking at ways to divest some or all of its Perpetual unit.

The repayment of the Torchlight loan means any concerns "arising out of the past conduct of those who were responsible for making the decisions to lend to Torchlight can now safely be left to the (Financial Markets) Authority or the statutory supervisor," the judge said. "No further action is presently required from the court."

The judge kept today's hearing in the High Court in Auckland public because "it seemed to me important that the outcome of discussions between Trustees Executors and Perpetual should be aired in open court."

Trustees Executors said it had more concerns about Perpetual's behaviour, in particular a $3.3 million loan "to a company associated with Mr (Michael) Tinkler, who was then general counsel to Pyne Gould Corporation (Perpetual's parent), and is now a director of that company," which didn't receive a written application and has since been repaid.

Perpetual disputed aspects of the loan, and Judge Heath said it wasn't his role to resolve any of those issues in today's hearing.

"They can be addressed further by the statutory supervisor, and, if necessary, by the Authority who may raise them later if they consider there is a need to do so," he said.

BusinessDesk.co.nz

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