Australia and New Zealand Banking Group (PNG) Ltd v Melanesian Trustee Services Ltd [2019] PGNC 100; N7805 was decided by Dingake J in the National Court on 9 April 2019. It shows what happens when the regulator moves against a trustee’s bank accounts, and how little a court will do for a trustee that cannot show its licence.
Background
Melanesian Trustee Services Ltd (MTSL) was the trustee of the Pacific Balance Fund (PBF) under the trust deed of 22 October 2001. In letters of 7 August, 1 November and 7 December 2018 the Chairman of the Securities Commission directed ANZ to restrict the bank accounts of MTSL, PBF and its subsidiaries, relying on section 48(6) of the Capital Market Act 2015, which lets the Commission restrict a licensee’s activities. The accounts became inoperative.
MTSL appealed to the National Court (CIA 90 of 2018). On 13 March 2019 Nablu J stayed the Chairman’s restrictions pending the appeal, restrained the Commission from issuing further section 48(6) directions, and refused the Commission’s motion to dismiss the appeal, which had argued that MTSL’s licence expired on 17 December 2018 and was never renewed. ANZ, served with those orders, took the view that it was not bound because it was not a party to the appeal.
MTSL therefore moved in a proceeding in which the bank was a party (OS 55 of 2019, brought by ANZ against MTSL, Oxley Equities Ltd, the Chairman and the Commission). By notice of motion filed 23 March 2019 it asked for an order that, until the proceeding was determined, it could operate its own account and PBF’s accounts on normal banking terms “without any restrictions, direction and intimidation” from the Commission under section 48(6) or section 40(1) of the Securities Commission Act 2015. ANZ did not oppose the order but did not consent. The Commission opposed it: a trustee with an expired licence could not operate the fund’s accounts.
The issues
- Must a trustee seeking to operate a scheme’s bank accounts prove that it is licensed?
- Had Nablu J already decided the licence question, making it res judicata?
What the Court decided
A party moving by notice of motion “stands or falls on the papers filed of record”. Whether MTSL held a licence, or could operate a trust account without one, was “both a question of law and fact” and critical. MTSL’s affidavit did not annex a licence; its counsel conceded as much but did not seek an adjournment to produce it.
“In an application for an injunction an Applicant is bound to disclose all the relevant and necessary information that might affect the grant of the injunction sought. In this case the license is one such relevant evidence.”
On res judicata, applying Telikom PNG Ltd v ICCC (2008) SC906, MTSL had not produced Nablu J’s reasons, so the Court could not tell whether the licence issue had been conclusively determined; and ANZ had not been a party to CIA 90 of 2018 in any event.
Quoting section 44 of the Capital Market Act, under which a licence expires 12 months after issue unless the Commission specifies a later date, the judge held that “on the basis of the above provision alone, the Applicant was bound to prove to the Court, at the very least, that it has a license to operate the account”. Finding no such evidence, he did not reach the other arguments. The application was dismissed with costs.
Why it matters for unit holders and trustees today
- Licences run out. A capital market licence lasts 12 months unless the Commission extends it (section 44). A trustee whose licence is revoked or suspended is deemed unlicensed from that date (section 48(10)), and carrying on a regulated activity while unlicensed or in breach of a section 48(6) restriction is an offence punishable by a fine of up to K10 million or ten years’ imprisonment, or both (section 48(11)). See revocation and suspension.
- The Commission can reach the bank directly. Section 40(1) of the Securities Commission Act requires banks to freeze accounts and hand over records when directed; a bank that refuses faces a fine of up to K10 million plus K5,000 a day. That is why ANZ obeyed and would not lift the freeze on an order made in a case it was not part of. Any order meant to bind a bank must be made in a proceeding to which the bank is a party.
- Appeal routes. A licensing or restriction decision is appealed to the National Court within 14 days under section 56 and takes effect immediately unless a restraining order is obtained first (section 56(3)); see the 2023 revocation case. Other Commission decisions go to Board review under section 111 within 30 days, then to the Court on a question of law under section 114.
- Scheme money must be kept apart. The trustee must keep scheme property separate from its own (section 191(1)(g)), hold it in trust for members (section 191(2)) and operate a trust account for it (section 193). When those accounts freeze, distributions and redemptions stop. Unit holders can require a meeting (section 214) and remove the trustee for a licensed replacement (section 201); if the office falls vacant the Commission or the Court appoints an interim trustee (sections 202–203).
In a 2019 Gazette notice the Commission stated that a 2018 review had found MTSL insolvent since 2014 and that the trustee had paid itself significant fees. MTSL remained in office until the Commission revoked its licence in 2023, the subject of the next case in this series.
Sources
- Australia and New Zealand Banking Group (PNG) Ltd v Melanesian Trustee Services Ltd [2019] PGNC 100; N7805 (Dingake J, 9 April 2019)
- Capital Market Act 2015 — ss 44, 48(6), (10), (11), 56, 191, 193, 201–203, 214
- Securities Commission Act 2015 — ss 40, 111, 114 (as amended 2023)
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.