What Is an Interim Trustee in Papua New Guinea?

A unit trust cannot be left without a trustee for even a day. Redemptions fall due, dividends arrive, bank mandates must be signed. The Capital Market Act 2015 therefore provides a stopgap: the interim trustee.

When an interim trustee is needed

The office of trustee can fall vacant in several ways. The trustee may retire without the members choosing a successor (section 200(3) then requires the Commission to appoint an interim trustee). The trustee company may be wound up, which revokes its licence automatically under section 48(1)(a). Most commonly, the Commission revokes or suspends the licence under section 48(2) or (3), so the company no longer meets section 189 and cannot lawfully act. Because section 198 keeps the named corporation in the Commission’s record until the record is altered, the interim appointment is also the mechanism by which the record is changed. See how the trustee is changed.

Appointment by the Commission

The provision is brief. The appointee must be a corporation holding a capital market licence authorising it to operate a scheme, because section 199 applies the section 189 requirements to interim trustees. The 12-hour period is strikingly short and the Act does not say what happens if the Commission misses it; the sensible reading is that the time limit prompts the Commission to act at once and that a later appointment is not void, but the point is untested. In practice the Commission has made the appointment in the same letter as the revocation, so that the vacancy and the replacement coincide.

Appointment by the Court

Section 203(1) provides a fallback: “The Court may, on application by a member of the scheme, by order, appoint a company which has a trustee licence issued under this Act as an interim trustee of a registered scheme if the Commission failed to appoint an interim trustee under Section 202”. Any unit holder, including a single Port Moresby retiree, has standing. The Court may make “any further orders that it considers necessary” (section 203(2)), for instance directing the former trustee to hand over records or freezing payments pending the handover. Notice of the order must be lodged with the Commission, which must then alter the record to name the appointee as interim trustee (section 203(3)–(4)). Section 203(3) oddly refers to the application being made by “the current trustee”, although subsection (1) gives the right to a member; the intention appears to be that whoever obtains the order notifies the Commission.

What the interim trustee must do

The interim trustee is a trustee for all purposes: section 198 names it in the record, section 206 vests the former trustee’s rights and liabilities in it, and the duties in section 191 apply. Its distinctive task is in section 204:

• it “shall call a members’ meeting for the purpose, by resolution, to choose a new trustee”, as soon as practicable and in any event within three months of becoming interim trustee (subsections (1)–(2));
• within those three months it may call further meetings if the first fails to choose (subsection (3));
• before the three months expire it may apply to the Court for an extension, and may call further meetings within any extended period (subsections (4)–(5));
• once members choose a consenting licensed corporation, it must lodge a notice asking the Commission to alter the record (subsection (6));
• “nothing prevents the unit holders from choosing the interim trustee as the new trustee”, provided it meets section 189(2) (subsection (7)).

The meeting is called under Division 5. Notice, proxies and voting follow the ordinary rules, and the trustee and its associates cannot vote if interested (section 241). See calling meetings.

The 2023 Pacific Balance Fund appointment

The only reported use of section 202 concerns the Pacific Balance Fund. By letter of 9 August 2023 the Commission revoked the capital market licence of Melanesian Trustee Services Ltd (MTSL) under section 48 and appointed Weathermen Capital Advisors Ltd as interim trustee. MTSL appealed under section 56, and on 18 August 2023 the National Court set both decisions aside and gave MTSL 30 days to respond to the allegations. After considering the response, the Commission on 25 September 2023 again revoked the licence and again appointed Weathermen under section 202, directing it “to perform the functions of the Trustee and Fund Manager of PBF for a period of three months until such time a new Trustee and Fund Manager are appointed”, and directing MTSL to transfer custody of assets and bank accounts and hand over the books. MTSL appealed again and sought a stay. In Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524 Anis J held the stay application misconceived: section 56(3) makes the Commission’s decision effective immediately and permits only an interim restraining order sought before the decision is implemented, not a general stay, and other sources of power cannot be invoked in a section 56 appeal. Readers should check the outcome of the substantive appeal and the Commission’s current record before relying on who the fund’s trustee is. See the 2023 case explained.