Nikitins (Liquidator) v EncoreFX (Australia) Pty Ltd (in liq), in the matter of EncoreFX (Australia) Pty Ltd (in liq) (No 2)

The decision in Nikitins (Liquidator) v EncoreFX (Australia) Pty Ltd (in liq), in the matter of EncoreFX (Australia) Pty Ltd (in liq) (No 2) involved a dispute over contested funds held by the liquidators of EncoreFX (Australia) Pty Ltd, a company that provided foreign exchange and global payment services. The liquidators sought directions from the court to determine whether it was justified in treating the contested funds as property of the liquidation. Client companies had entered into arrangements for foreign exchange transactions and wire transfer of funds, but these were not completed due to EncoreFX being placed in administration. The liquidators had swept the company's settlement account after receipt of the funds for the transaction.

The central legal issues the court had to decide were whether the amounts paid by the client companies were held by the liquidators on trust under sections 1017E or 981H of the Corporations Act 2001 (Cth), and whether the amounts were paid for the purpose of securing the issue of a financial product or as part of the performance of arrangements that constitute a financial product. Additionally, the court had to determine whether the amounts were held on trust according to Quistclose principles.

The court found that the amounts of $140,673.33 and $638,157.81 held in the Client Settlement Account were held on trust for Verbatim and Next, respectively. The trust arose according to the provisions of the Corporations Act. The court held that the client companies' claims regarding the existence of a Quistclose trust were upheld. The court invited the parties to provide a minute of orders or competing minutes to give effect to the reasons of the Court and to address the question of costs.

The final orders of the court required the parties to bring in an agreed minute or competing minutes by 5 February 2021. If competing minutes were filed, the parties were to file a short written outline of submissions in support of the orders sought by that party.