Perpetual is proposing to wind up the mortgage fund, which was placed temporarily into a moratorium last month because of a high level of requests by investors to get their money out.
It is also proposing to "internalise" the cash fund, which would restrict allotment of units in that fund.
While the loan to Torchlight is being looked into by the FMA, Trustees Executors' lawyer, Craig Stevens, voiced concerns yesterday over a separate $3.3 million advance Perpetual made in February.
This involved a short-term loan from Perpetual to a company directed by Michael Tinkler, also PGC's general counsel at the time.
Tinkler is now a director of PGC.
Stevens told Justice Paul Heath the loan did not have the proper documentation, nor had any security been given for it.
"With respect, sir, I say it doesn't matter if it was $33 or $3.3 million, the principle's the same.
"There was not a completed loan application, there was no security," Stevens said.
To describe the loan as irregular was a euphemism, Stevens said.
Perpetual disputed aspects of Stevens' submission but Justice Heath said it was not his role to resolve any of those issues raised at the hearing.
The judge ordered Perpetual to give its proposal for liquidating and internalising the two funds to Trustee Executors within 10 working days.
He also ordered observers Vivian Fatupaito and Christopher Duffy of accountancy firm WHK to continue in their role.
The observers were put in place last month to monitor the Perpetual Trust Board to provide confidence to the market that there was independent oversight of Perpetual's trusteeship.
Trustees Executors and Perpetual are due to appear in court again later this month.
