EATON AND MARSHALL v LDC FINANCE LIMITED & Ors [2013] NZHC 1242

EATON AND MARSHALL v LDC FINANCE LIMITED & Ors [2013] NZHC 1242

The Court held that Eaton and Marshall were de facto trustees with fiduciary duties and, to remove doubt about the extent of their authority, formally appointed them under s51 of the Trustee Act; the Court further authorised them under s64 to enter into the conditional settlement negotiated on 6 March 2013 and to receive and dispose of the funds paid into Court, directing pro rata distribution to depositors and granting customary ancillary directions including confidentiality; the settlement was found to be a prudent exercise of trustee power given the real appellate risk to the fund.

Citation
[2013] NZHC 1242
Parties
Plaintiff (trustee Applicant): Stephen Desmond Eaton; Plaintiff (trustee Applicant): Seddon James Marshall; First Defendant: LDC Finance Limited; Second Defendant (receivers): PricewaterhouseCoopers; Third and Counterclaim Defendant: Perpetual Trust Limited; Fourth Defendant: Buddle Findlay; Second Counterclaim Defendant: Andrew John Harding; Second Counterclaim Defendant: Murray Scholfield
Court
High Court
Jurisdiction
New Zealand
Judgment Date
29 May 2013
Procedural Posture
Civil Trust and Recovery of Funds Arising From Failed Finance Company; Application Under Trustee Act / Interlocutory Application for Formal Appointment of Trustees and Court Approval/authority to Settle and Distribute Funds (post Judgment, Pre Final Distribution)
Outcome
Application granted. Plaintiffs appointed trustees, authorised to enter settlement and receive and distribute funds pro rata; confidentiality order granted; costs reserved.
Legal Topics
Appointment of Trustees Under Trustee Act S51, Court Authorisation of Trustee Dealings Under S64, Approval of Settlement Binding Beneficiaries, Distribution of Trust Funds Pro Rata, Confidentiality of Settlement
Trusts and Equity Civil Procedure Insolvency/receivership Securities Law Appointment of Trustees Under Trustee Act S51 Court Authorisation of Trustee Dealings Under S64 Approval of Settlement Binding Beneficiaries Distribution of Trust Funds Pro Rata +1 more

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Parties

Stephen Desmond Eaton

Plaintiff (trustee Applicant)

Seddon James Marshall

Plaintiff (trustee Applicant)

LDC Finance Limited

First Defendant

PricewaterhouseCoopers

Second Defendant (receivers)

Perpetual Trust Limited

Third and Counterclaim Defendant

Buddle Findlay

Fourth Defendant

Andrew John Harding

Second Counterclaim Defendant

Murray Scholfield

Second Counterclaim Defendant

Procedural Posture

Civil Trust and Recovery of Funds Arising From Failed Finance Company; Application Under Trustee Act / Interlocutory Application for Formal Appointment of Trustees and Court Approval/authority to Settle and Distribute Funds (post Judgment, Pre Final Distribution)

Legal Issues

  1. 1 Whether Messrs Eaton and Marshall are trustees of the depositors' interests
  2. 2 Whether the Court should formally appoint them under s51 Trustee Act
  3. 3 Whether the Court should authorise the trustees to enter into the settlement under s64 Trustee Act

Ratio Decidendi

The Court held that Eaton and Marshall were de facto trustees with fiduciary duties and, to remove doubt about the extent of their authority, formally appointed them under s51 of the Trustee Act; the Court further authorised them under s64 to enter into the conditional settlement negotiated on 6 March 2013 and to receive and dispose of the funds paid into Court, directing pro rata distribution to depositors and granting customary ancillary directions including confidentiality; the settlement was found to be a prudent exercise of trustee power given the real appellate risk to the fund.

Court Disposition

Application granted. Plaintiffs appointed trustees, authorised to enter settlement and receive and distribute funds pro rata; confidentiality order granted; costs reserved.

Orders

  • Plaintiffs appointed as trustees under s51(1) Trustee Act 1956 of the funds paid into Court for benefit of the depositors and Registrar directed to remit funds and accrued interest to plaintiffs' solicitors
  • Plaintiffs authorised and directed under s64(1) Trustee Act 1956 to enter into the settlement reached 6 March 2013, to receive the funds and to dispose of the funds pursuant to that conditional agreement