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Equitable Mortgages payouts delayed for some as Treasury wades through legal structure of investment platform, but outcome looks bright

Equitable Mortgages payouts delayed for some as Treasury wades through legal structure of investment platform, but outcome looks bright

By Alex Tarrant

Hundreds of investors in failed finance company Equitable Mortgages are still waiting for their payouts after Treasury was forced to wade through legal issues to determine whether these investors were in fact eligible to be covered under the Crown's retail deposit guarantee scheme.

Equitable was put in receivership in November last year owing about 6,000 secured debentureholders NZ$192.3 million, most of which was covered by the Crown's deposit guarantee. On Wednesday the second receivers' report for the company indicated taxpayers were unlikely to get back the full losses from the receivership. See more in Gareth Vaughan's article here.

Treasury says it has paid out about NZ$140 million to about 2,950 Equitable depositors under the Crown guarantee, representing about 78% of depositors and amounts owing. In their report the receivers say they have repaid NZ$35 million, or about 18% of the money owed, to investors and the Crown. They say it won't be possible to recover the full NZ$188.4 million worth of Equitable's loans.


Despite Treasury having paid out almost 80% of investors, some are questioning the length of time it has taken between when Equitable was put into receivership and the repayments to various investors.

Treasury says a delay arose after confusion over the legal structure of an investment platform used by a number of investors who used the platform to put money into Equitable. The government's retail deposit guarantee scheme only covered individual investors and not financial companies, with Treasury having to ascertain whether the legal structure of this platform meant it was a 'bare trust' for individual investors, which would mean they were eligible for repayment.

This group of investors had invested in Equitable via an investment platform called OneAnswer, owned by ANZ's OnePath and administered by custodians First NZ Capital.

OneAnswer is a 'wrap platform', described by a OnePath spokesman as being to:

Assist financial advisers in managing their clients’ portfolios through an administration, transaction and reporting service. OneAnswer effectively wraps all the client’s investments held in custody on OneAnswer into one consolidated portfolio.

"Some clients, through their advisers had purchased the Equitable Mortgages debentures and these were then held by OneAnswer’s custodian and recorded under the client’s names on the online platform," the OnePath spokesman said.

"The collapse of the  Equitable trusts triggered the eligibility of payments to be made to retail customers under the Crown Retail Deposit Guarantee. Subsequently we have been working with the custodian, FNZ, and Treasury to confirm the eligibility of the OneAnswer wrap platform under the bare trust rules of the CRDG," he said.

"We now have confirmation that OneAnswer is a bare trust for the purposes of the CRDG, meaning clients can be treated as individual retail investors. Treasury is now reviewing the individual cases of investors within OneAnswer who have purchased Equitable debentures. This is a process that obviously requires due diligence and time and we hope to get confirmation for each individual case in the near future.”

That was at the end of June, and understands this week investors were told by First NZ that having resolved legal issues, the custodian expected payments to eligible depositors would be processed within the next few weeks, nine months after Equitable was put into receivership.

What was all the fuss about?

Having decided OneAnswer was a bare trust for investors, a Treasury spokesman told claim assessments would go ahead under the deposit guarantee. However that was after a load of legal work to determine OneAnswer was what it said it was.

"By deliberate design, trusts and investment structures such as OneAnswer put a protective barrier around assets. They obscure the legal identity and legal status of the people controlling what’s inside. They build a wall that we need to find a way through," a Treasury spokesman told

"When the Treasury reaches into taxpayers' pockets to hand over taxpayer money to finance company depositors, we need to be sure that the people getting that money are entitled under the law to receive it. We need to balance our duty to taxpayers and our obligation to depositors, while also complying with the law," the spokesman said.

Every trust was different and needed to be looked at individually.

"They aren’t a “one size fits all” situation so we need to consider all the documentation relating to the trust, the laws and precedents that govern trusts, and in the case of OneAnswer we also needed to consider agreements and letters between OneAnswer and its clients," the Treasury spokesman said.

"We’ve found that OneAnswer is a quite complicated structure in a legal sense. In most circumstances this would pose no issues and the features designed in OneAnswer would work to benefit OneAnswer’s clients but in circumstances that were most likely not envisaged or designed for when OneAnswer was established (such as clients seeking repayment of a Crown guaranteed investment) then issues arise that need to be resolved," he said.

The Treasury did not have the discretion to ignore laws that governed the Crown guarantee and trusts.

"We need to be 100% certain about the legal status of the people who seek repayment," the spokesman said.

"Due to inconsistencies in the OneAnswer documentation, it took time to verify that a bare trust actually had been legally established. We’ve resolved that issue and others that became apparent when we have looked at claims for repayment. I would like to be able to say that resolving legal issues around trusts and eligibility is a simple and fast tick-the-box process; but it isn’t," he said.

"However, I can assure depositors that we’re making very good progress and moving as fast as we can to assess all claims made by Equitable Mortgages depositors."

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