Eaton v LDC Finance Limited

[2013] NZHC 1242

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2008-409-1140 [2013] NZHC 1242

BETWEEN  STEPHEN DESMOND EATON AND SEDDON JAMES MARSHALL Plaintiffs

ANDLDC FINANCE LIMITED First Defendant

PRICEWATERHOUSECOOPERS Second Defendant

PERPETUAL TRUST LIMITED Third and Counterclaim Defendants

BUDDLE FINDLAY Fourth Defendant

ANDANDREW JOHN HARDING AND MURRAY SCHOLFIELD

Second Counterclaim Defendants

Hearing:                   21 May 2013

Appearances:           JBM Smith QC and J D Haig for Plaintiffs and Second

Counterclaim Defendants
P J Woods for First Defendant
T C Weston QC for Second and Fourth Defendants
No appearance for Third and Counterclaim Defendants

Judgment:                29 May 2013

RESERVED JUDGMENT OF FOGARTY J

EATON AND MARSHALL v LDC FINANCE LIMITED & Ors [2013] NZHC 1242 [29 May 2013]

Introduction

[1]      In  a judgment  of this  Court,  delivered  by myself  on  23 May 2012,1   the plaintiffs succeeded in a claim that they had brought on behalf of a large number of depositors of an unincorporated finance company, being the partnership of Messrs Harding and Scholfield, trading as Finance and Investments (F & I) against the receivers of another failed company, LDC Finance Limited and against Perpetual Trustee Limited as the trustee of LDC Finance Limited.

[2]      It  was  for  a substantial  sum  of money,  being  the sum  of $7,792,197.36 together with accrued interest and costs (the fund).  These were the receivables of F&I loans assigned to LDC. The fund has been paid into Court.

[3]      That judgment was appealed, and was set down for hearing in April 2013. On 6 March 2013, the parties to the Court of Appeal entered into a conditional settlement (“settlement agreement”).   Some of the terms of that settlement are confidential.

[4]      The plaintiffs have negotiated a settlement from the fund for $5,800,000 plus a small amount of interest, yet to be determined, with the consequence that the dividend the depositors of F & I will receive will amount to more than 40 cents in the dollar to be paid pro rata.

[5]      In  a  judgment  of  this  Court  delivered  on  11 April  2013,2   I  granted  an application by Messrs Simpson and Ruscoe, as receivers of LDC Finance, for approval of the settlement agreement.

[6]      The  same  judgment  contained  also  a  preliminary  examination  of  this application by Messrs Eaton and Marshall for approval of the settlement agreement.

[7]      This application is for various orders, summed up in the backing sheet as

“Application for Orders Enforcing Trust”.  It seeks orders on two alternative bases:

1      Eaton v LDC Finance Ltd (in Rec) [2012] NZHC 1105.

2      Eaton & Anor V LDC Finance Limited [2013] NZHC 728.

(1)That  Messrs  Eaton  and  Marshall  be appointed  as  trustees  for the benefit of the depositors of the right of action against LDC, and be authorised to settle it and to disperse the funds pro rata.

(2)That  Messrs  Eaton  and  Marshall  be  appointed  trustees  of  the settlement fund paid into Court, together with accrued interest (which is the $7 million+ figure referred to above), and then be authorised to dispose of the fund by settling the claims in accordance with the terms of the conditional agreement.

[8]      In the preliminary analysis of the application, I advised I was satisfied that it was prudent for Messrs Eaton and Marshall to enter into settlement negotiations prior to the Court of Appeal hearing against the presumption that any settlement they would reach would require retrospective approval of the Court.  I also expressed the view that they were, in any event, trustees, and arguably this application did not need to be served on the beneficiaries.

[9]      I advised:

[24]     As this judgment already indicates, I am satisfied that the decision which  the  trustees  have  made  seems  to  be  a  prudent  one.   Any of  the beneficiary depositors opposing the settlement would need to include in their opposition reasons why the settlement should not be entered into.   Such submissions would have to address the risk of the appeal succeeding.

[25]      The  fact  that  any  one  beneficiary  disagrees  with  the  settlement would not mean that this Court would not approve the settlement, and, as part of that package, empower the trustees to enter into it.

[10]     I arranged for that judgment of 23 May 2012, containing these observations, to be sent in the package of material to the depositors.

Outcome of service of the application on the depositors

[11]     Almost all the depositors have had notice of this proceeding.  One depositor, Mr Mytton, requested copies of the application.   He received the originating application together with the affidavit of Mr Eaton in support, which in turn included the settlement agreement.   Confidential aspects of that settlement agreement were

redacted.   A few of the depositors could not be traced; they had changed their address or gone overseas.  Efforts were made to try to track them down.

[12]     The overall position is that all of the original unpaid depositors know of the settlement, as set out above, having been advised informally prior to the High Court application in a report by the plaintiffs as trustees.  Second, they have had notice of the hearing this morning.

[13]     Two of these depositors have filed a response for this Court.   One is Mr Mytton and the other is Ms Leigh Donoghue.  I will return to their submissions later in the judgment.   The reason for that is their submissions have to be considered against the status and responsibilities of the plaintiffs, Messrs Eaton and Marshall.

Messrs Eaton and Marshall’s status as trustees

[14]     As   explained   in   the   introduction,   Messrs   Eaton   and   Marshall   seek appointment as trustees under the Trustee Act.   In the judgment of 11 April 2013, already referred to, I observed that I was of the view that the law of equity already recognises now that they are trustees of the interests of the unsecured depositors, by reason of the fiduciary obligations they assumed at the general meeting of the depositors who appointed them to their role to conduct the litigation.

[15]     Messrs Eaton and Marshall applied in 1979 to join these proceedings, which were originally commenced by Messrs Harding and Scholfield.  They sought orders that they be appointed as representatives to bring the claim(s) on behalf of and for the benefit of the depositors of F & I.  That application was granted in a judgment of Associate Judge Faire on 19 November 2009.3

[16]     In support of that application, Mr Eaton filed an affidavit, sworn on 6 July

2009.  It is relevant to set out some of the paragraphs of that affidavit:

1.I [Mr Eaton] am one of two trustees [the other being Mr Marshall] appointed by the creditors of the plaintiffs’ insolvent partnership Finance and Investments (“F&I”).

3      Harding v LDC Finance Ltd (in Receivership) HC CHCH CIV 2008-409-001140, 19 November 2009.

2.      F&I has around 300 creditors.  A list of F&I’s creditors is attached...

The total principal sum owing to creditors (excluding interest) as at 30

June 2007 is $16,194,351.71.

3.Myself and the other trustee Seddon James Marshall were appointed trustees following a meeting of F&I creditors in Nelson on or about 29

April 2009 (“the meeting”).

4.As trustees, myself and Mr Marshall are to act on the creditors’ behalf with the aim of recovering sums owing to them by F&I following its collapse.

5.      The trustees’ role has been defined as:

a.      To collect the assets of Messrs Harding and Scholfield;

b.      To sell or realise the assets;

c.To make decisions on behalf of the parties as to the conduct of the litigation.

d.To meet the costs of the realisation of the assets, the costs of any litigation   taken   on   behalf   of   the   parties   and   the   reasonable remuneration of the trustees from funds realised;

e.      To disburse any surplus funds to all creditors on a pro rata basis.

[17]     Mr Eaton was not a depositor.   His father was a significant depositor.   Mr Marshall was not a depositor.  The trustees’ first report to the depositors set out their role  in  terms  identical  to  paragraph  5  above.    Messrs  Eaton  and  Marshall  had acquired the responsibility of trustees when first agreeing to be trustees of a proposal to creditors by Messrs Harding and Scholfield, the owners of F & I, as trustees of their insolvent estates.

[18]     Mr Eaton in his affidavit filed in support of these applications noted that although they are called “trustees” and the trustees role is described in the above documents, they were never formally appointed as trustees.  I note that.  But the test of whether or not there is a trust is the identification of a fiduciary obligation.  There is no doubt that Messrs Eaton and Marshall do have a fiduciary obligation to the depositor creditors.  It was natural for them to use the term trustees to describe their role.  The absence of formal appointment does, however, contribute to the merit of the Court intervening using the powers under the Trustee Act, as are discussed below.

[19]     Counsel  before  me  agreed  that  the  depositors  and  the  trustees  did  not expressly  address  the  power  of  the  trustees  to  compromise  the  claim  or  any judgment.

[20]     The claim to collect these receivables was initially lodged by the owners of F&I, which traded as a partnership, Messrs Harding and Scholfield.  To the extent that F&I or its depositors had a claim against the receivables, they had what the law calls a “chose in action”.  Choses in action can be assigned.  There is no difficulty in there being a trust of a chose in action:4

There can be a trust of a chattel or of a chose in action, or of a right or obligation under an ordinary legal contract just as much as a trust of land or money.

[21]     The Trustee Act also contemplates such a trust.5  A trust arises when a person or persons hold assets for the benefit of others.  I do not think it is either possible, let alone necessary in this case, to classify the trust, arising from the appointment of Messrs Eaton and Marshall, as an express trust or a constructive trust.  This is not to say that the distinctions are not a useful starting point of analysis.  In Fortex Group Limited (in receivership and liquidation) v MacIntosh,6 Tipping J said:

An express trust is one which is deliberately established and which the trustee deliberately accepts.  An institution or constructive trust is one which arises by operations of the principles of equity and whose existence the Court simply recognises in a declaratory way.  A remedial constructive trust is one which is imposed by the Court as a remedy in circumstances, where, before the order of the Court, no trust of any kind existed.

[22]     In my view, there is no doubt that from the time that the depositors resolved to appoint Messrs Eaton and Marshall as their representatives for the purposes of bringing this litigation, Messrs Eaton and Marshall correctly recognised that they were trustees for all the depositors, not just in respect of realising the personal assets

of Messrs Harding and Scholfield.

4      Lord  Strathcona  Steamship  Company  Limited  v  Dominion  Coal  Company  Limited  [1926] AC108, 124 per Lord Shaw. See Equity in the Law of Trusts (12th ed, 2012), Petti at p51.

5      See s 18(1)(g).

6      Fortex Group Limited (in receivership and liquidation) v MacIntosh [1998] 3 NZLR 171 (CA), at p172-173.

[23] The decision that Messrs Eaton and Marshall had to make in March of this year was to risk the benefits of the whole of the judgment of the High Court by proceeding with the fixture in the Court of Appeal in April, or securing a certain outcome by a compromise. This was clearly a decision “on behalf of the parties as to the conduct of the litigation”, see s 5(e) above in [16]. The fact that the depositors did not anticipate and provide for the compromise of a claim does not mean that the trustees powers do not extend to a compromise of the claim.

[24]     The existence of a trust does not depend on the duties of the trustee being anticipated and crystallised.  On the contrary, it is the norm that trusts are brought into being entrusting assets to persons whose duty is to be the steward of them in the interests of the beneficiaries through all the uncertainties over a period of time.

[25]     For these reasons, I am confirmed in my initial preliminary observation that Messrs Eaton and Marshall are trustees.  This is a material finding of mixed law and fact.   It goes to the question as to whether or not there is any need to formally appoint them as trustees, utilising powers given in the Trustee Act 1956.

[26]     In his submissions to the Court in this hearing, Mr Justin Smith QC refined his legal argument, seeking the formal appointment of Messrs Eaton and Marshall as trustees, appointed pursuant to s 51(1) of the Trustee Act, of the fund paid into Court.

[27]     Section 51(1) of the Trustee Act provides:

51     Power of court to appoint new trustees

(1)     The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

...

[28]     I note that s 51 pre-supposes that there is an existing trust, and so trustees.  It can be read as to prevent the appointment of Messrs Eaton and Marshall as trustees, given that I have found they are already trustees.  However, there is doubt as to the

extent of the fiduciary authority given to them, as to whether they have power to settle these proceedings.

[29]     That doubt is brought squarely into the picture by one of the two submissions received on the day of the hearing, that of Mr Peter Mytton.   He sent a two page letter to the Court expressing concerns about the amount of information he received about the settlement, complaining about the actions of the second defendant and the third and counterclaim defendants and other persons.  He then went on:

Sir,

I understand that many of the matters I comment on are peripheral to your ruling in the High Court of May 2012 and I infer no disrespect to your Honour or to the Court.

It is because of these peripheral but serious concerns that I would feel most uncomfortable about being bound by any agreement which would preclude me from taking an action or actions against anyone or all of these parties in the future, should I so decide.

[30]     The  other  depositor  who  made  a  submission  to  the  Court,  Ms  Leigh Donoghue, did not seek such a reservation.  She was, however, similarly critical of the conduct of many of the persons involved in the decision-making prior to the collapse of both F&I and LDC Finance.   She objected to some of the aspects of confidentiality of the settlement.  It is clear that her submission was not necessarily a complete statement of her understanding of her rights and expectations.   It opens with the phrase:

Following is a quick precise of my thoughts and beliefs over the last six years... Six years for a bit of pocket money.

[31]     As one would expect, the settlement agreement is detailed.  Included in the detail is an agreement that subject to two precise reservations the parties “agree to settle all claims that any party may have against any other party arising out of or in connection  with  the  matters  that  are  subject  to  the  High  Court  proceedings...” Putting aside the reservations, which do not need to be addressed, it is likely that the principle of merger in judgment of all available other causes of action (not identified in the settlement agreement) are likely to prevent Ms Donoghue or Mr Mytton from

separately pursuing legal proceedings against the parties to this settlement, if the

Court approves it.

[32]     This   means   for   practical   purposes   that   all   the   depositors,   including Mr Mytton and Ms Donoghue, will be bound by the settlement agreement as if they had signed it personally.  This is the consequence of the trustees making the decision for their benefit.  To explain this, let me take a simple example.  If trustees own land on behalf of beneficiaries and want to cash up, they may be faced with a difficult decision, of considerable financial consequence, whether to sell the land with subdivision potential, or whether to embark upon a scheme of subdivision and sale of sections over time.  They make a judgment on this as prudent trustees, without the obligation to obtain the prior approval of the beneficiaries.   Such prior approval would only be required if that was an express term of the trust.

[33]     The right to sue someone, a chose in action, is another piece of property. Careful decision-making is required to extract its best value.  In this case, there is a present risk of its value being completely lost if the Court of Appeal allows the appeal against the decision of the High Court.

[34]     It is clear, and part of the application, that the trustees have been at all times advised by expert legal counsel.  These legal counsel understand the case thoroughly. It is obvious that the trustees’ legal advisers consider that there is a real risk that the benefits of the High Court judgment could be lost in the appellate Courts.   The trustees have to take and rely on professional advice in a case of this complexity.  It would be irresponsible to do otherwise.

[35]     On 30 November 2012, the parties to the litigation met for the purpose of conducting a mediation of the dispute.  Settlement was not reached.   Negotiations continued from that point in time until 6 March 2013, when a settlement agreement was completed between all the parties, excluding Mr Harding’s solicitor.

[36]     Mr Eaton reports that he and Mr Marshall were aware of the strong likelihood that, as in the High Court, the result of the appeal would be binary.   That is, the successful  party  would  take  all  of  the  fund  held  by  PWC  as  receivers,  and

correspondingly the unsuccessful party would take none of that fund.  Accordingly, they understood that if the appeal against the judgment was successful, the value of the judgment in the High Court would be wholly lost to the F&I depositors.  They also took into account that whoever lost in the Court of Appeal would probably seek leave to appeal to the Supreme Court, and their advice was that leave to appeal would likely be granted, given the nature of the points involved.

[37]     Messrs Eaton and Marshall also were taking into account the prospects of pursuing those parts of the litigation that had been stayed pending these issues, known to them as the “balance” litigation.   In considering the prospects of this litigation, they took into account the high cost of funding it and the likely return.

[38]     Both  Messrs  Eaton  and  Marshall  were  obviously in  receipt  of  specialist professional advice.  They also had qualifications of their own.  Mr Eaton was for 17 years the Chief Executive Officer of Perpetual Trust Limited.  Mr Marshall served for 33 years in the Nelson City Council, including holding the position of Deputy Mayor, and has been the director of several of Nelson’s major companies, and is currently a director and chairman of a number of private entities.

[39]     Judges of inherent jurisdiction are guardians of all trusts.   Trustees always have the right of audience before a Judge of inherent jurisdiction for direction as to discharge of their trust duties.  The Trustee Act 1956 should be understood to be one of a number of Parliamentary interventions designed to enhance the power of the Judges of the High Court to assist trustees in the discharge of their duties to beneficiaries.

[40]     It is in that context that I approach s 51(1).  In my view, this section should be given a liberal meaning.   Given the absence of an express power to compromise being included in the duties cast on the trustees by the depositors addressed, it is appropriate for the trustees to come to the High Court for approval of the settlement.

[41]     “Approval” should be understood as seeking a clearance from the Court that the decision the trustees have entered into is a prudent one.  It is not the function of the Court in this context to make the decision for the trustees.

[42]     In  my  preliminary  observations  in  the  decision  in  April  of  this  year,  I expressed the view, as noted above, that I thought this was a prudent decision being taken by the trustees.  I still do.  Plainly, it is a disappointing decision, not only for Ms Donoghue and Mr Mytton who have made submissions, but for all of the unpaid depositors  of F&I,  the  beneficiaries  of the trust.    Only the trustees,  relying on professional advice, can assess what can be achieved by negotiation against what ought to be risked.  This is a judgment formed by analysis of the risks, and by the interplay of arguments in negotiations.  The task of the Court is to assess whether they have acted reasonably, carefully and prudently in this exercise.   I think they have.

[43]     My overall judgment is that this Court should assist the trustees, and in that way pursue the welfare of the depositors as a whole, by making certain what is currently uncertain, namely the extent of the trustees’ authority to enter into the settlement agreement.

[44]     For this reason, I interpret s 51(1) as enabling this Court to formally appoint Messrs Eaton and Marshall as trustees, to remove any doubt that might exist as to the existence and extent of their fiduciary obligations and their powers.  This order takes effect immediately.   They are trustees of the whole of the fund, together with accumulated interest, paid into this Court by LDC, to which the F&I depositors are now entitled by reason of the judgment of this Court, but subject to distribution in terms of the settlement agreement.  The formal order is numbered 1. in the attached orders for sealing, which forms part of this judgment.

[45]     The second order sought by Messrs Eaton and Marshall is to give them express authority to dispose of the fund paid into Court pursuant to the terms of the settlement agreement.  In that regard, the settlement agreement, after providing for the benefit to the depositors, provides that $3,578,696.30 of the payment in is to be paid to the LDC receivers, together with certain wrap up additional provisions.

[46]     Section 64(1) of the Trustee Act provides:

64     Power of court to authorise dealings with trust property

(1)     Subject to any contrary intention expressed in the instrument (if any) creating the trust, where in the opinion of the court any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, retention, expenditure, or other transaction is expedient in the management or administration of any property vested in  a  trustee,  or  would  be  in  the  best  interests  of  the  persons beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the same without the assistance of the court, or the same cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by  law,  the  court  may  by  order  confer  upon  the  trustee,  either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income:

provided that, notwithstanding anything to the contrary in the instrument (if any)  creating the trust, the court, in proceedings in which all trustees and persons who are or may be interested are parties or are represented or consent to the order, may make such an order and may give such directions as it thinks fit to the trustee in respect of the exercise of any power conferred by the order.

[47]     Mr Smith submitted, in respect of that provision, that in this instance there is no contrary intention in the trust in respect of the funds paid into Court by LDC. The statutory trust in s 36A of the Securities Act7  required the partners at F&I to hold subscription moneys in trust until subscriptions were repaid to subscribers.   The issue is whether the proposed settlement agreement is expedient for the trust as a whole.    Messrs  Eaton  and  Marshall  have  taken  legal  advice  and  set  out  their reasoning as to the benefits entering into the settlement transaction (as I have summarised).  Settlement of the right of action is, in their view, in the best interests

of all the F&I depositor beneficiaries.

[48]     Mr Smith submitted that none of the depositor beneficiaries have expressed opposition to the course proposed.   On one reading that is right, although clearly Mr Mytton and Ms Donoghue have severe reservations at the least, although they fall short of directly opposing the settlement.

[49]     Since it is arguable as to whether the terms of the trust established at the F&I creditors meeting, or the representation order by Associate Judge Faire, or to be implied or construed from the context, address the power to settle the claim against LDC, it is appropriate that express authority to enter into the agreement be sought by the trustees.

[50]     In  my  view,  the  phrase  in  s 64(1),  “the  absence  of  any  power  for  that purpose” can include the lesser proposition – the doubt as to any power for that purpose.  There is no doubt that the scope of s 64(1) is intended by Parliament to be wide:   “or any other deposition... or any other transaction”.   For these reasons, I think it is appropriate for the Court to utilise s 64.  I am satisfied that this settlement agreement is in the language of s 64(1):   “Expedient in the management... of the property  vested  in  the  trustees”.    And  now  that  the  trustees  have  made  their judgment, confirming the settlement will be in the best interests of the beneficiaries. It is difficult or impractical to effect the same without the assistance of the Court. For these reasons, I am satisfied it is appropriate that this Court should, and now does, confer on the trustees the power to enter into this settlement agreement.  The formal order is numbered 2. in the attachment to the judgment.

[51]     It has always been anticipated from the beginning that any benefits from the litigation would be distributed pro rata.8    Further, a majority of the depositors have already accepted an interim distribution on a pro rata basis.  Distributions on a pro rata basis in cases like this are common in equity.   Accordingly, the trustees are authorised and directed to disperse the funds arising from settlement to the F&I depositors pro rata according to the levels of their respective investments, such distributions to consist of an interim distribution of the majority of funds within two months of the Court’s final direction, and the balance, when all matters relating to

F&I’s affairs are completed, after allowing for legal fees and other disbursements in relation to the continued conduct of this matter.   This order is numbered 3. in the attachment.

Final matters

[52]     On the plaintiffs’ application, the plaintiffs are directed that, before the final distribution of the trust funds as referred to above, to have prepared a report setting out the funds they have received as trustees for the depositors in respect of the assets of Messrs Harding and Scholfield, the funds or portion of the funds referred to in [305](a) of the said judgment of this Court dated 23 May 2012, and all amounts dispersed in dividends to depositors, paid in legal fees, expert witness fees, filing fees and other expenses, together with the proposed final dividend, and any provisional allowances for further costs to enable the F&I depositors to be informed of the receipt and expenditure of the funds concerned, and to file that report as annexure to a verifying affidavit in this Court, and to make it available to the F&I depositors. This order is numbered 4. in the attachment.

[53]     Directing that the costs of and incidental to this application be paid from the trust fund referred to in [305](a) of the judgment of this Court dated 23 May 2012, in the event that the plaintiffs are not otherwise in possession of sufficient funds to cover these payments. This order is numbered 5. in the attachment.

[54]     The remaining outstanding application by the plaintiffs is an application that these applications be kept confidential, that no person may search the Court file in relation to the application without leave of a Judge sought, on not less than 20 working days notice to the parties.  It is commonplace for settlements of litigation to be confidential.  This is because they are private contracts, to which the parties to them only are privy. This application is granted.

[55]     Costs are reserved.

Solicitors:

Gibson Sheat, Wellington

Anthony Harper Lawyers, Christchurch

Lane Neave, Christchurch

Gilbert Walker, Auckland

JBM Smith, Wellington

PRW Chisnall/J D Haig, Wellington

D J Goddard QC, Wellington

ATTACHMENT:  ORDERS FOR SEALING

Before the Honourable Justice Fogarty on 21 May 2013.

After reading the plaintiffs’ interlocutory application dated 19 March 2013, memoranda of counsel for the plaintiffs dated 19 March and 6 May 2013 and the affidavits of Stephen Desmond Eaton dated 6 July 2009 and 19 March 2013, the affidavits of Edward Michael Somers Cox dated 3, 16 and 20 May 2013 and after hearing J B M Smith QC and J D Haig, counsel on behalf of the plaintiffs and the second counterclaim defendants, and P J Woods, counsel on behalf of the first defendant, and T C Weston QC, counsel on behalf of the second and fourth defendants and the third and counterclaim defendant having indicated it would not appear, this court orders:

1.      That the plaintiffs be appointed as trustees under section 51(1) of the Trustee Act

1956 of the funds paid into Court by the first defendant for the benefit of the depositors represented by the plaintiffs pursuant to paragraph 305(a) of the judgment of Justice Fogarty dated 23 May 2012 and that the Registrar of this Court be directed to remit the funds together with accrued interest (“Funds”) to the plaintiffs’ solicitors on their request following the making of this order, in order that the plaintiffs may carry out the orders set out below.

2.     That the plaintiffs be authorised and directed in terms of section 64(1) of the Trustee Act to enter into the settlement for and on behalf of F&I’s depositors, to receive the Funds and to dispose of the Funds as per the terms of the conditional agreement reached between the parties on 6 March 2013;

3.      Authorising and directing the plaintiffs to disburse that part of the Funds which under the said agreement remain available to them (after making the payment required under the agreement to the LDC receivers) to Finance and Investments (F&I)’s depositors pro rata according to the levels of their respective investments, such distributions to consist of:

(a) an interim distribution of the majority of funds within 2 months of the date of this order; and

(b) the balance when all matters relating to F&I’s affairs are completed after allowing for legal fees and other disbursements in relation to the continued conduct of this matter.

4.      Directing the plaintiffs, before the final distribution of that part of the Funds to be paid to F&I’s depositors as referred to at 3(b) above, to have prepared a report setting out the amounts they have received as trustees for the depositors in respect of the assets of Messrs Harding and Scholfield, stating the portion of the

Funds available for distribution to the F&I depositors, and stating all amounts disbursed in dividends to depositors, paid in legal fees, expert witness fees, filing fees and other expenses together with the proposed final dividend and  any provisional allowances for further costs to enable the F&I depositors to be informed of the receipt and expenditure of the amounts concerned and to file that report as an annexure to a verifying affidavit in this Court and to make it available to the F&I depositors.

5.      Directing the plaintiffs’ costs of and incidental to this application be paid from that part of the Funds available to the plaintiffs as described in paragraph 3 above in the event that the plaintiffs are not otherwise in sufficient funds to cover these payments.

6.      That this application be kept confidential, and that no person may search the Court file in relation to the application without the leave of a Judge sought on not less than 20 working days’ notice to the parties.

Date:

Deputy Registrar