//
you're reading...
Cases, Corporate trustee, Trustee liability, Trustees

Corporate trustee in the firing line

The Financial Markets Authority (FMA) has filed civil proceedings against Prince & Partners Trustee Company Limited (“the Trustee”) using the powers of section 34 of the Financial Markets Authority Act (see below).  

The Trustee was the trustee for finance company Viaduct Capital Limited, which collapsed in 2009. The FMA alleges that the Trustee breached the obligations it owed to Viaduct investors and to the Treasury (the Crown) under the Retail Deposit Crown Guarantee.

Section 34 of the Financial Markets Authority Act provides that the FMA can stand in the shoes of another, and exercise that person’s right to take action against an individual or company who is or has been in the financial markets industry.  The potential scope of claims that may be pursued under s34 is very broad and includes claims in contract, tort or arising from breach of statutory obligations (such as a claim by the company for breach of directors’ duties under ss133-137 of the Companies Act 1993). 

Exercising the right of action of Viaduct investors and the Treasury (who holds the rights of investors paid out under the Crown Guarantee), FMA alleges that the Trustee failed to fulfil its obligations to protect the interests of investors in Viaduct and that loss resulted.

The FMA has stated that it has serious concerns about the conduct of the Trustee.  This is the first claim filed by FMA against a trustee.  Belinda Moffat, FMA Director of Enforcement has stated that:

“Trustees play a critical role in protecting the rights of investors and it is vital the public have confidence that a trustee’s obligations will be discharged.”

These proceedings will highlight the fact that while the corporate trustee model may provide greater protection than a trustee acting personally – it is not fail-safe and directors of corporate trustees can face liability in their capacity as directors.  However, it is important to appreciate that the FMAs powers under s 34 are broad and do not necessarily transpose to other parties.

In this regard it is noted that Prince & Partners Trustee Company Limited is the corporate trustee for a large number of trusts and in that in its capacity as a trustee the company is the shareholder of a significant number of companies and the registered proprietor of a large number of properties.  Again this questions the practice of non-statutory corporate trustees acting for multiple trusts. 

See:FMA files civil proceedings against trustee

Also see: FMA files suit against trustee of failed Viaduct Capital and  FMA files suit against Prince and Partners as trustee of failed Viaduct Capital

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: