Re MF Global Australia Ltd (in liq)
[2012] NSWSC 994
•29 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: In re MF Global Australia Ltd (in liq) [2012] NSWSC 994 Hearing dates: 26 - 29 June 2012 Decision date: 29 August 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Parties to be heard as to form of orders and specified issues reserved for further submissions.
Catchwords: CORPORATIONS - Winding up - Corporations Act 2001 (Cth) ss 479(3) and 511 - Application for directions in relation to matters arising under winding up - Pooling - Whether liquidators can pool all or some of client segregated accounts - Foreign currency - Whether foreign currency should be converted to Australian dollars for pooling - Entitlement - Basis for client entitlement to be paid money from client segregated accounts - Recovered funds - Where recovered funds should be deposited. Legislation Cited: - Acts Interpretation Act 1901 (Cth) ss 2, 2(2), 15AA, 23
- Australian Securities and Investments Commission Act 2001 (Cth)
- Corporations Act 2001 (Cth) Ch 7, Pts 5.6, 7.8, 7.8 Div 2, 7.8 Div 2 Subdiv A, ss 9, 436A, 479, 479(3), 506(1)(b), 511, 554(1), 554C, 760A(a), 761A, 761D, 761E(4), 761E(5), 763B, 763C, 763D, 764A(1), 912A(1)(a), 912A(1)(aa), 981A-981H, 981A, 981A(1), 981A(1)(a), 981A(1)(a)(i), 981A(1)(b)(i), 981A(1)(b)(ii), 981A(1)(b)(iii), 981A(2), 981A(2)(a), 981A(2)(b), 981A(2)(c) 981A(3), 981A(4), 981B, 981B(1), 981B(1)(c), 981B(2), 981C, 981D, 981D(a), 981D(b), 981E, 981E(2), 981F, 981H, 981H(1), 981H(1)(c), 981H(3), 981H(3)(a), 981H(3)(b), 1012D
- Corporations Law ss 865-878, 1209, 1209(5)(b), 1224-1227
- Corporations Regulations 2001 (Cth) regs 7.8.01-7.8.05, 7.8.01(2), 7.8.01(4), 7.8.01(5), 7.8.01(5)(c), 7.8.01(8), 7.8.01(11), 7.8.01(14), 7.8.02(1)(a), 7.8.02(1)(c), 7.8.02(2), 7.8.02(3), 7.8.02(7), 7.8.03, 7.8.03(1), 7.8.03(2), 7.8.03(3), 7.8.03(4)-(5), 7.8.03(4), 7.8.03(5), 7.8.03(6), 7.8.03(6)(a), 7.8.03(6)(b)-(c), 7.8.03(6)(d), 7.8.03(6)(e), 7.8.03(7)
- Financial Services Reform Act 2001 (Cth)
- Futures Industry Act 1986 (Cth) ss 86, 101-104
- Insurance (Agents and Brokers) Act 1984 (Cth) ss 26, 28
- Judiciary Act 1903 (Cth)
- Securities Industry Act 1980 (Cth) ss 73-74, 83-86
- Trustee Act 1925 (NSW) s 63
- Uniform Civil Procedure Rules 2005 (NSW) rr 7.6, 7.7Cases Cited: - Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
- Allianz Australia Insurance Ltd v Lo-Giudice [2012] NSWSC 145
- Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) [2000] HCA 25; (2000) 202 CLR 588
- Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) [1978] HCA 45; (1978) 141 CLR 335
- Australian Securities Commission v Buckley (1996) 7 BPR 15,024
- Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd [2001] QSC 082
- Australian Securities and Investments Commission v Letten (No 7) [2010] FCA 1231; (2010) 190 FCR 59; 80 ACSR 401
- Australian Securities and Investments Commission v Nelson [2003] NSWSC 129; (2003) 44 ACSR 719
- Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
- Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566
- Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
- Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83; (2009) 78 NSWLR 43
- Chang v Laidley Shire Council [2007] HCA 37; (2007) 234 CLR 1
- Chief Commissioner of Stamp Duties v Buckle [1998] HCA 4; (1998) 192 CLR 226
- Commonwealth v Sterling Nicholas Duty Free Pty Ltd [1972] HCA 19; (1972) 126 CLR 297
- Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292
- Council of the Law Society of New South Wales v Australia Injury Helpline Ltd [2008] NSWSC 627; (2008) 71 NSWLR 715
- Daly v Sydney Stock Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371
- Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209
- Edwards v Santos Ltd [2011] HCA 8; (2011) 242 CLR 421
- George v Webb [2011] NSWSC 1608
- Georges (in his capacity as joint and several liquidator of Sonray Capital Markets Pty Ltd (in liq)) v Seaborn International (as trustee for the Seaborn Family Trust) [2012] FCA 75; (2012) 87 ACSR 442
- Gibert v Gonard (1884) 54 LJ Ch 439
- Handberg (in his capacity as liquidator of S&D International Pty Ltd (in liq)) v MIG Property Services Pty Ltd [2010] VSC 336; (2010) 79 ACSR 373
- Hill v Hasler [1921] 3 KB 643
- Kimberly-Clark Ltd v Commissioner of Patents (No 3) (1988) 84 ALR 685
- Little v Registrar of the High Court of Australia (1991) 29 FCR 544
- Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
- McLellan v Australian Stock Exchange Ltd [2005] FCA 585; (2005) 144 FCR 327
- McManus RE Pty Ltd v Ward [2009] NSWSC 440; (2009) 74 NSWLR 662
- Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634
- Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360
- Paul A Davies (Australia) Pty Ltd (in liq) v Davies [1983] 1 NSWLR 440
- Peter Cox Investments Pty Ltd (in liq) v International Air Transport Association [1999] FCA 27; (1999) 161 ALR 105
- Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
- R v Portus; Ex parte Federated Clerks Union of Australia [1949] HCA 53; (1949) 79 CLR 428
- R v Toohey; Ex parte Attorney-General (NT) [1980] HCA 2; (1980) 145 CLR 374
- Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135
- Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491
- Re Ansett Australia Ltd (admins apptd) and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433
- Re European Assurance Society Arbitration (Wallberg's Case) (1872) 17 SJ 69
- Re EVTR Ltd [1987] BCLC 646
- Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361
- Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674; 5 ACSR 673; 9 ACLC 1291
- Re Global Finance Group Pty Ltd (in liq) [2002] WASC 63; (2002) 26 WAR 385
- Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301
- Re Griffiths [2004] FCAFC 102; (2004) 139 FCR 185
- Re Lehman Brothers International (Europe) (in admin) [2009] EWHC 3228 (Ch)
- Re Lehman Brothers International (Europe) (in admin) [2010] EWCA Civ 917
- Re Lehman Brothers International (Europe) (in admin) [2012] UKSC 6; [2012] 3 All ER 1
- Re Lines Bros Ltd (in liq) [1983] Ch 1; [1982] 2 All ER 183
- Re Magarey Farlam Lawyers Trust Accounts (No 3) [2007] SASC 9; (2007) 96 SASR 337
- Re Northern Counties of England Fire Insurance Co (1880) 17 Ch D 337
- Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83
- Re Opes Prime Stockbroking Ltd [2008] FCA 1425; (2008) 171 FCR 473; 68 ACSR 88
- Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) [2011] NSWSC 91
- Re Saker & Ors (as liquidators of Great Southern Managers Australia Ltd (recs and mgrs apptd) (in liq)) (No 2) [2011] FCA 958; (2011) 85 ACSR 211
- Re Suco Gold Pty Ltd (in liq) (1984) 33 SASR 99
- Rich v Lennox Palms Estate Pty Ltd [2010] NSWCA 242
- Russell-Cooke Trust Co v Prentis [2002] EWHC 2227; [2003] 2 All ER 478
- Salvo v New Tel Ltd [2005] NSWCA 281
- Samuel Holdings Pty Ltd v Securities Exchange Guarantee Corporation Ltd [2010] QSC 450; (2010) 80 ACSR 706
- Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115; (1986) 4 ACLC 114
- Santos v Western Australia [2011] WASCA 216
- Scott v Scott (1963) 109 CLR 649
- Securities Exchange Guarantee Corporation Pty Ltd v Samuel Holdings Pty Ltd [2011] QCA 228; [2012] 1 Qd R 377; (2011) 253 FLR 221
- Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119
- The Halcyon the Great [1975] 1 WLR 515; [1975] 1 All ER 882
- Toovey v Milne (1819) 2 B & A 683; 105 ER 514
- Twinsectra Ltd v Yardley [2002] UKHL12; [2002] 2 AC 164
- Walker v Corboy (1990) 19 NSWLR 382
- Warne v GDK Financial Solutions Pty Ltd [2006] NSWSC 464; (2006) 57 ACSR 525
- Western Australia v Richards [2008] WASCA 134; (2008) 37 WAR 229
- Wik Peoples v Queensland [1996] HCA 40; (1996) 187 CLR 1
- Wilson v State Rail Authority of New South Wales [2010] NSWCA 198; (2010) 78 NSWLR 704Texts Cited: - J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, 2006
- S B Thomas, "Clayton's Case and the 'Common Pool' Exception" (2004) 15 JBFLP 177Category: Principal judgment Parties: 411117 of 2011
Christopher Robert Campbell, Vaughan Neil Strawbridge and David John Frank Lombe in their capacity as liquidators of MF Global Australia Limited (in liquidation) (First Plaintiff)
MF Global Australia Limited (in liquidation) (Second Plaintiff)RMF Management Services Pty Limited (First Defendant)
GrainCorp Operations Limited (Second Defendant)
The GFL Group Pty Limited (Third Defendant)
Underdog Clothing Pty Limited (Fourth Defendant)
Practical Human Resource Solutions Pty Limited (Fifth Defendant)
Jilliby Pty Limited (Sixth Defendant)
Transmarket Trading Pty Limited (Seventh Defendant)
Deutsche Bank AG (Eighth Defendant)
Three Crowns Investments Pty Limited (Ninth Defendant)102788 of 2012
MF Global Singapore Pte Limited (provisional liquidators appointed) (First Defendant)
Christopher Robert Campbell, Vaughan Neil Strawbridge and David John Frank Lombe in their capacity as liquidators of MF Global Australia Limited (in liquidation) (First Plaintiff)
MF Global Australia Limited (in liquidation) (Second Plaintiff)
RMF Management Services Pty Limited (Second Defendant)Representation: Counsel:
411117 of 2011
F. Gleeson SC/ R. Foreman (First Plaintiff)
F. Gleeson SC/ R. Foreman (Second Plaintiff)J. C. Sheahan SC/D. Hogan-Doran/T. Glover (First Defendant)
L. Gyles SC/T. W. Marskell (Second Defendant)
S. D. Robb QC/N. J. Kidd (Third Defendant)
J. Stoljar SC/ R. Scruby (Fourth Defendant)
C. R. Newlinds SC/D. R. Sulan (Fifth Defendant)
D. B. Studdy SC/C. Colquhoun (Sixth Defendant)
P. Brereton SC (Seventh Defendant)
F. Douglas QC/D. Healey/S. Clemmett (Eighth Defendant)
D. B. Studdy SC/C. Colquhoun (Ninth Defendant)102788 of 2012
F. Gleeson SC/ R. Foreman (First Plaintiff)
F. Gleeson SC/ R. Foreman (Second Plaintiff)M. J. Leeming SC/J. White (First Defendant)
J. C. Sheahan SC/D. Hogan-Doran/T. Glover (Second Defendant)
Solicitors:
411117 of 2011
Ashurst (First Plaintiff)
Ashurst (Second Plaintiff)Arnold Bloch Leibler (First Defendant)
Gilbert & Tobin (Second Defendant)
HWL Ebsworth (Third Defendant)
Gadens (Fourth Defendant)
Gillis Delaney (Fifth Defendant)
Watson Mangioni (Sixth Defendant)
Freehills (Seventh Defendant)
King & Wood Mallesons (Eighth Defendant)
Watson Mangioni (Ninth Defendant)102788 of 2012
Kemp Strang (First Defendant)
Ashurst (First Plaintiff)
Ashurst (Second Plaintiff)
Arnold Bloch Leibler (Second Defendant)
File Number(s): 11/411117 and 12/102788
Judgment
The First Plaintiffs ("Liquidators") in these two proceedings are the liquidators of the Second Plaintiff, MF Global Australia Limited (in liquidation) ("MFGA"). The Liquidators were previously appointed as administrators of MFGA on 1 November 2011 ("Appointment Date") under s 436A of the Corporations Act 2001 (Cth) and were appointed as liquidators on 2 March 2012. MFGA was a company within the MF Global Group which was a financial services intermediary operating in several countries (Affidavit of Christopher Robert Campbell, 16 March 2012 ("Main Campbell Affidavit"), [19]). The majority of the companies in the MF Global Group were placed into some form of external administration in or around early November 2011 (Main Campbell Affidavit [22]-[30]).
The Liquidators seek directions under ss 479(3) and 511 of the Corporations Act and s 63 of the Trustee Act 1925 (NSW) and declaratory and other relief. The Liquidators have properly taken a neutral approach in respect of controversial issues in the proceedings, while providing submissions to assist the Court, consistent with the proper approach in a "trust dispute" recognised in, for example, Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119 at [6].
Various defendants were joined in the first of these proceedings ("MFGA Proceedings") under Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 7.6 to represent the interests of various groups of clients and creditors. In particular:
- The First Defendant, RMF Management Services Pty Limited ("RMF"), represented the interest of contracts for differences ("CFD") account clients.
- The Second Defendant, GrainCorp Operations Limited ("GrainCorp"), represented the interests of clients who traded in futures contracts and options over futures contracts ("Futures").
- The Third Defendant, The GFL Group Pty Limited ("GFL"), represented the interests of margin foreign exchange ("Margin FX") account clients.
- The Fourth Defendant, Underdog Clothing Pty Limited ("Underdog") represented the interests of online foreign exchange ("Online FX") account clients.
- The Fifth Defendant, Practical Human Resource Solutions Pty Limited ("PHRS"), represented the interest of creditors other than clients.
- The Sixth Defendant, Jilliby Pty Limited ("Jilliby"), represented the interests of "cash only" clients, who had no open positions at the Appointment Date.
- The Seventh Defendant, Transmarket Trading Pty Limited (which was joined in place of George Weston Foods Limited in the course of the hearing) ("Transmarket"), represented the interests of some clients who traded in Futures in respect of an issue as to valuation.
- The Ninth Defendant, Three Crowns Investments Pty Limited ("Three Crowns"), was joined to advance arguments in relation to funds recovered by MFGA from Futures brokers who placed and cleared Futures trades on markets outside Australia ("Futures Agents").
The Eighth Defendant, Deutsche Bank AG ("Deutsche Bank") was not a representative party but traded in Futures with MFGA and was a counterparty to MFGA in CFD trading and was joined as party to the proceedings in its own right.
Separate proceedings ("MFGS Proceedings") were brought by the Plaintiffs in which MF Global Singapore Pte Limited (provisional liquidators appointed) ("MFGS") was named as a defendant. The relief sought in the Amended Originating Process in the MFGS Proceedings was substantially the same as the relief sought in the MGFA Proceedings and the two proceedings were heard together. The primary issue in controversy in the MFGS Proceedings was whether certain bank accounts maintained by MFGA with Standard Chartered Bank in Singapore ("Singapore-based accounts") should be pooled with client segregated accounts for CFD clients maintained by MFGA in Australia. RMF, which represented the interests of CFD clients in the MFGA Proceedings, also represented the interests of CFD clients in the MFGS Proceedings. I have had regard to the submissions made by MFGS in respect of issues of law in determining corresponding issues in the MFGA Proceedings, and I also deal in this judgment with issues which were specific to the dealings between MFGA and MFGS in the MFGS Proceedings.
The Court was fortunate in receiving comprehensive written and oral submissions which addressed the relevant legal issues and I have drawn on those submissions in this judgment. The quality of the submissions made was of real assistance in dealing with the complex issues raised by this application.
The basis of the Court's jurisdiction
Section 479(3) of the Corporations Act allows a liquidator to apply to the Court for directions in relation to a matter arising under a winding up. The function of a liquidator's application for directions under this section is to
give the liquidator advice as to the proper course of action for him or her to take in the liquidation: Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 at 117; (1986) 4 ACLC 114; Re Ansett Australia Ltd (admins apptd) and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433 at [46]. The Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will typically not do so where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision: Sanderson v Classic Car Insurances Pty Ltd above at 117; Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-7; 5 ACSR 673; 9 ACLC 1291; Re Ansett Australia Ltd above at [65]; Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83 at [32]. A direction can be made under 479(3) in a voluntary liquidation, by reason of ss 506(1)(b) and 511: Warne v GDK Financial Solutions Pty Ltd [2006] NSWSC 464; (2006) 57 ACSR 525 at [63]-[64], [82].
Section 511 of the Corporations Act provides an alternative source of power to give such a direction and the Liquidators also rely on that section. The principles applicable to an application under that section were recently reviewed by Ward J in Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) [2011] NSWSC 91 and I gratefully adopt her Honour's summary of the relevant principles. Applications made under this section in a voluntary winding up are determined in a similar manner to applications in a Court ordered winding up under s 479(3) of the Corporations Act notwithstanding that section does not expressly require that it be "just and beneficial" to give the relevant direction. The Court may give such a direction where it will be "of advantage in the liquidation": Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212; Handberg (in his capacity as liquidator of S&D International Pty Ltd) v MIG Property Services Pty Ltd [2010] VSC 336; (2010) 79 ACSR 373 at [7]. The effect of a determination under the section is to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from the risk of personal liability for breach of duty: S&D International at [7].
The Liquidators' application is alternatively brought under s 63 of the Trustee Act which permits relief aimed at resolving legitimate doubts held by a trustee as to the proper course of action and protecting the trust and those entitled to it: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 at [70]-[71]; Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) at [39]. In this case, the Liquidators' application reflects at least a potential dispute between different claimants to the relevant client segregated accounts and the general rule is that opinion or advice will not be given under s 63 of the Trustee Act where a question concerns the respective rights of beneficiaries or their identity: J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, 7th ed, LexisNexis Butterworths, 2006 at [2134]; Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) above at [40]. I will therefore largely proceed under s 479(3) and s 511 of the Corporations Act rather than under s 63 of the Trustee Act.
The Plaintiffs contend that declarations can be made in the proceedings where representative defendants have been joined and the Plaintiffs seek to utilise UCPR rr 7.6 and 7.7 to obtain a binding determination against all interested persons. The Plaintiffs contend that the questions concerning pooling or grouping of accounts and the date and basis for determining entitlements are properly the subject of a declaration, because the Court is being asked to construe the language of the statute, and the Plaintiffs are not seeking to address the individual determination of each client's entitlement (Plaintiffs SIC [36]-[38], [42]; Plaintiffs SIR [10]-[12). The Plaintiffs accept that the formulation of the terms of any declarations and directions should await the reasons for judgment (T221).
On the other hand, PHRS contends that it is not clear what findings of fact the parties are contending for in respect of the various issues and that the Court should not bind parties given the manner in which the proceedings have been constituted and at best the Court may make certain directions, but not declarations (T3-T5; T153-T154). Deutsche Bank contends that no declarations are necessary in addition to directions given to the liquidator and in any event should not be made where there are contentious matters or alleged breaches of trust without proper proof or means of challenging such allegations (Deutsche Bank SIC [90]). Deutsche Bank also contends that the form of directions given (or declarations of right made) should take into account a right of set off asserted by Deutsche Bank, the validity of which is not a matter raised in these proceedings (Deutsche Bank SIC [56]-[57], [99]-[102]).
I will indicate below where I consider that declarations can properly be made, either because the issues are primarily matters of law or the factual issues were fully addressed between appropriate parties, and will otherwise make directions under s 479(3) or s 511 of the Corporations Act as appropriate.
Factual background
MFGA was the holder of an Australian Financial Services Licence and provided financial products and services, primarily as a Futures broker and as the issuer of over-the-counter ("OTC") derivative products, to a large number of clients in Australia and overseas; it had approximately 16,124 separate client accounts, of which approximately 11,049 were active on the Appointment Date (Main Campbell Affidavit [21]).
The Futures traded by MFGA were exchange-traded financial products. The client agreements between MFGA and its clients in relation to Futures provided that MFGA acted as a broker in Futures transactions.
The OTC financial products traded by MFGA included CFDs. A CFD is an OTC derivative product which allows a person to take a position:
... on future changes in the market price of a share or commodity, or the value of an index or a currency exchange rate. With a long CFD, investors are looking to profit from increases in the market price of a particular asset. With a short CFD, they are seeking to profit from falls in the market price of the asset. As CFDs are derivatives, investors do not actually invest in the underlying asset, but rather in a contract whose value is determined by reference to the market price of the underlying asset (Australian Securities and Investments Commission, Report 205, Contracts for difference and retail investors, July 2010, p 12).
MFGA also offered Margin FX products by telephone, facsimile or email, by which a client could profit or loss from fluctuations in the exchange rate between two currencies (the Reference Currency and the Settlement Currency) without exchanging those two currencies, by taking a forward position in a specified amount of the Reference Currency. A Margin FX contract could be "closed out" by the client entering into an equal and opposite transaction with MFGA. MFGA also offered Online FX products, which corresponded to Margin FX products, except that Online FX clients entered into such transactions through an online trading portal rather than placing orders through MFGA's Margin FX trading desk by telephone, facsimile or email. The client agreements between MFGA and its clients in relation to the OTC products, namely the CFDs, Margin FX and Online FX, provided that MFGA acted as principal in transactions relating to those products. The parties referred to Futures, CFDs, Margin FX and Online FX as "Product Lines" and I will use the same term.
The Futures, CFDs, Margin FX and Online FX traded by MFGA were "financial products" for the purposes of the Corporations Act. A financial product is a facility through which, or through the acquisition of which, a person "makes a financial investment" (Corporations Act s 763B), "manages financial risk" (Corporations Act s 763C) or "makes a non-cash payment" (Corporations Act s 763D). The Futures, CFDs, Margin FX and Online FX were respectively "derivatives" or "foreign exchange contracts" within the meaning of ss 761A and 761D of the Corporations Act and "derivatives" and "foreign exchange contracts" are "financial products" under s 764A(1) of the Act. MFGA is taken to issue CFDs, Margin FX and Online FX contracts to its clients, because those contracts are derivatives not entered into on a financial market and MF Global is party to the contract: s 761E(5). If an Online FX Contract was properly characterised as a "foreign exchange contract", MFGA would be the issuer under s 761E(4) as the party responsible for the obligations owed to the client under the contract. MFGA provided financial services (as defined) to its clients in respect of those products.
MFGA operated 51 bank accounts denominated in 11 different currencies which were referred to in the proceedings as "Client Segregated Accounts" ("CSAs") (Main Campbell Affidavit [168]). Each separate CSA was associated with one of the four Product Lines.
MFGA maintained two AUD-denominated CSAs and nine foreign currency CSAs with Westpac Banking Corporation ("Westpac") for Futures and also maintained an NZD-denominated Futures CSA at Westpac, New Zealand.
Nine CFD CSAs were maintained with Westpac comprising a single CSA denominated in each of seven foreign currencies and two AUD-denominated CSAs (Main Campbell Affidavit [169]). MFGA also maintained an AUD-denominated CSA with Australia and New Zealand Banking Group Limited ("ANZ") ("E*Trade CSA"), which received deposits from CFD clients referred to MFGA by another financial intermediary, E*Trade. Funds were in turn transferred by MFGA from the E*Trade CSA to its standard interest bearing AUD-denominated Westpac CSA (Main Campbell Affidavit [170]). MFGA also maintained the Singapore-based accounts at Standard Chartered Bank, Singapore comprising a further eleven CFD accounts comprising an AUD-denominated account and a single account denominated in each of 10 foreign currencies. MFGS in turn operated a "client omnibus" account with MFGA by which MFGS placed orders for CFDs with MFGA on behalf of its clients (Main Campbell Affidavit [171]).
MFGA maintained two AUD-denominated CSAs and nine foreign currency CSAs with Westpac for Margin FX.
MFGA maintained a single AUD-denominated CSA and four foreign currency CSAs with Westpac for Online FX. MFGA also maintained two foreign currency denominated CSAs with Standard Chartered Bank, Hong Kong for Online FX.
The accounts established at Westpac (Australia) and ANZ for all products were designated "Client Segregated Accounts"; the Singapore-based accounts in respect of CFD products were designated as "trust accounts"; and accounts established at Standard Chartered Bank Hong Kong in respect of Online FX accounts and Westpac (New Zealand) in respect of Futures were not specifically designated as trust accounts or client segregated accounts.
The balance in the CSAs was approximately AUD$150.4 million on the Appointment Date and interest has been earned in the CSAs since that date. The Liquidators have identified payments into the CSAs comprising client deposits, receipts from Futures Agents and OTC counterparties, transfers from MFGA's house accounts and transfers from other CSAs (Main Campbell Affidavit [176]) and payments out of the CSAs being client withdrawals, payment to counterparties, payments to house accounts by way of interest, commission and fees and transfers to other CSAs (Main Campbell Affidavit [177]).
The Liquidators had also recovered, as at 23 April 2012, approximately AUD$86.646 million from third parties and approximately AUD$80.187 million remained outstanding from third parties (including other companies in the MF Global Group) as at that date (Affidavit of Christopher Robert Campbell, 4 May 2012 ("Second Campbell Affidavit"), Ex CC-8A; "Distribution Analysis Report", Ex CC-8A, [3.2]). The amounts recovered have been paid into separate accounts pending the outcome of these proceedings.
The statutory regime
The provisions in issue in these proceedings are contained in Pt 7.8 Div 2 Subdiv A (ss 981A-981H) of the Corporations Act and regs 7.8.01-7.8.05 of the Corporations Regulations 2001 (Cth), which broadly provide for both segregation and the imposition of a statutory trust over client monies, with significant qualifications.
These provisions were introduced by the Financial Services Reform Act 2001 (Cth) and replaced ss 865-878 and ss 1209 and 1224-1227 of the Corporations Law which respectively required accounts operated by securities dealers to be designated as trust accounts and required accounts opened by futures brokers to be designated as clients' segregated accounts and provided (inter alia) that, subject to specified exceptions, none of the money deposited in a clients' segregated account was available for the payment of a debt or liability of the futures broker. The predecessors of the provisions in the Corporations Law were ss 73-74 and 83-86 of the Securities Industry Act 1980 (Cth), ss 86 and 101-104 of the Futures Industry Act 1986 (Cth) and ss 26 and 28 of the Insurance (Agents and Brokers) Act 1984 (Cth).
ASIC RG 212 Client money relating to dealing in OTC derivatives notes that this Division is intended to protect the interests of clients of Australian financial services licensees by separating client money from money belonging to licensees; generally requiring that licensees hold client money on trust; limiting the use of client money; limiting the circumstances in which client money may be withdrawn from client money accounts; specifying how client money may be dealt with if a licensee ceases to be licensed or becomes insolvent; requiring auditors to verify a licensees' compliance with the client money provisions; and imposing sanctions on licensees who fail to comply with those provisions (ASIC RG [212.1]). The importance of segregation and the imposition of a statutory trust was noted in respect of corresponding English provisions in Re Lehman Brothers International (Europe) (in admin)) [2012] UKSC 6; [2012] 3 All ER 1, where Lord Hope observed at [3] that:
"Under English law the mere segregation of money into separate bank accounts is not sufficient to establish a proprietary interest in those funds in anyone other than the account holder. A declaration of trust over the balances standing to the credit of the segregated accounts is needed to protect those funds in the event of the firm's insolvency. Segregation on its own is not enough to provide that protection. Nor is a declaration of trust, in a case where the client's money has been so mixed in with the firm's money that it cannot be traced. So segregation is a necessary part of the system. When both elements are present they work together to give the complete protection against the risk of the firm's insolvency that the client requires."
Section 981A specifies the money to which Pt 7.8 Div 2 Subdiv A applies. Section 981A(1) provides that (subject to sub-sections (2), (3) and (4) of s 981A), the Subdivision applies to money paid to a financial services licensee (such as MFGA) where:
- the money is paid in connection with a financial service that has been provided or will/may be provided to the client or a financial product held by the client; and
- the money is paid (1) "by the client"; or (2) "by a person acting on behalf of the client"; or (3) "to the licensee in the licensee's capacity as a person acting on behalf of the client".
Part 7.8 Div 2 Subdiv A does not apply to money paid as mentioned in s 981A(1) to the extent that the money is paid in the circumstances specified in s 981A(2). Money is not subject to the Subdivision where it is, inter alia, received as remuneration for the financial services licensee (s 981A(2)(a)); paid to reimburse a licensee for payments made to acquire a financial product or to discharge liabilities incurred by a licensee relating to the acquisition of a financial product (s 981A(2)(b)); or paid to acquire a financial product issued or sold by the licensee (s 981A(2)(c)). Section 981A(4) provides for regulations to be made exempting money from the Subdivision.
Section 981B(1) requires a licensee to ensure that money to which the Subdivision applies is paid into an account that satisfies the requirements set out in that section and any additional requirements imposed by the Corporations Regulations. That section requires a licensee to ensure that the only money that is paid into an account is money to which the Subdivision applies (and associated amounts such as interest) and other money permitted to be paid into the account by the Corporations Regulations. The section requires segregation of money to which the Subdivision applies from other money of a licensee to which the licensee is beneficially entitled. Section 981B(2) permits a licensee, for the purposes of the section, to maintain a single account or two or more accounts. It follows that a licensee may mix monies as between clients, although not as between the licensee's and client funds.
Regulation 7.8.01(5), made for s 981B(1)(c) of the Corporations Act, requires a licensee to operate a s 981B account as a trust account; designate the account to be a trust account; and hold all monies paid into the account on trust for the benefit of the person who is entitled to the monies, subject to an exception for:
"...moneys paid to the financial services licensee under the financial services licensee's obligation to call margins from clients under the market integrity rules, the operating rules of a licensed market or the operating rules of a licensed CS facility".
Regulation 7.8.01(8) in turn provides that, if a licensee is required to call margins from a client under the operating rules of a licensed market or the operating rules of a licensed CS facility, it may operate a s 981B account as a client segregated account or a trust account in accordance with the operating rules.
The exception in reg 7.8.01(5) applied in respect of margins paid by MFGA's Futures clients, since MFGA was required to call margin from its clients under the ASIC ASX Market Integrity Rules and the ASIC ASX24 Market Integrity Rules. Regulation 7.8.01(8) also permitted s 981B accounts maintained by MFGA in respect of Futures clients to be operated as a client segregated account or a trust account for the same reason. Neither the exception in reg 7.8.01(5) nor the permission in reg 7.8.01(8) applied in respect of OTC products (CFDs, Margin FX and Online FX), where the obligation of clients to pay margin arose under client agreements rather than under the operating rules of a licensed market or licensed CS facility.
Section 981C provides that the regulations may deal with specified matters in relation to accounts or a class of accounts maintained for the purposes of s 981B, including the circumstances in which payments may be made out of those accounts.
Section 981D provides:
"Despite anything in regulations made for the purposes of section 981C, if:
(a) the financial service referred to in subparagraph 981A(1)(a)(i) is or relates to a dealing in a derivative; or
(b) the financial product referred to in subparagraph 981A(1)(a)(ii)is a derivative;
the money concerned may also be used for the purpose of meeting obligations incurred by the licensee in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by the licensee (including dealings on behalf of people other than the client)."
This section permits monies deposited by one client may be used in respect of the specified matters on behalf of other clients. ASIC RG 212 notes that this provision originated in respect of dealings in exchange-traded futures through futures brokers but now has broader application through the reference to derivatives, although it does not extend to obligations incurred by the licensee's proprietary trading in derivatives (ASIC RG [212.66]-[212.67]).
Section 981E(2) provides that, except at the suit of a person who is otherwise entitled to the money or investment, money and investments to which it applies are not capable of being attached or otherwise taken in execution or being the subject of a set off, charge or charging or to any process of a similar nature.
Section 981F provides that the Regulations may include provisions dealing with how money in an account maintained for the purposes of s 981B, or an investment of such money, is to be dealt with if (inter alia) the licensee becomes insolvent within the meaning of the Regulations. Regulation 7.8.03 has been made pursuant to that section and applies, inter alia, where a licensee ceases to be a financial services licensee; becomes insolvent or subject to a range of arrangements, including where an administrator is appointed to a licensee (as occurred here where administrators were appointed to MFGA on 1 November 2011); merges with another financial services licensee; or ceases to carry on some or all of the activities authorised by the licence. That regulation appears to have been modelled on s 28 of the Insurance (Agents and Brokers) Act, which applied on insolvency. The effect of that section was to impose a statutory trust over money in the insurance broking account on insolvency in favour of those persons who were relevantly entitled to receive payment from that account: Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634; Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301. Where the regulation applies, the s 981B account is taken to be subject to a trust in favour of each person who is entitled to be paid money from that account (reg 7.8.03(4)); and, if money in a s 981B account has been invested, that investment is taken to be subject to a trust in favour of each person who is entitled to be paid money from that account (reg 7.8.03(5)). That regulation applies "despite anything to the contrary in the Bankruptcy Act 1966 or a law relating to companies": reg 7.8.03(7).
Regulation 7.8.03(6) in turn provides:
"Money in the account of the financial services licensee maintained for section 981B of the Act is to be paid as follows:
(a) the first payment is of money that has been paid into the account in error;
(b) if money has been received on behalf of insureds in accordance with a contract of insurance, the second payment is payment to each insured person who is entitled to be paid money from the account, in the following order:
(i) the amounts that the insured persons are entitled to receive from the moneys in the account in respect of claims that have been made;
(ii) the amounts that the insured persons are entitled to receive from the moneys in the account in respect of other matters;
(c) if:
(i) paragraph (b) has been complied with; or
(ii) paragraph (b) does not apply;
the next payment is payment to each person who is entitled to be paid money from the account;
(d) if the money in the account is not sufficient to be paid in accordance with paragraph (a), (b) or (c), the money in the account must be paid in proportion to the amount of each person's entitlement;
(e) if there is money remaining in the account after payments made in accordance with paragraphs (a), (b) and (c), the remaining money is taken to be money payable to the financial services licensee." (emphasis added)
In Georges (in his capacity as joint and several liquidator of Sonray Capital Markets Pty Ltd (in liq))v Seaborn International (as trustee for the Seaborn Family Trust) [2012] FCA 75; (2012) 87 ACSR 442 ("Sonray"), Gordon J summarised the effect of reg 7.8.03(6) as follows:
"So, for example, where moneys are paid into a segregated account and the balance in that account represents a particular client's payment or the proceeds of that payment, the client will be entitled to an equitable charge over the whole balance of the account: s 981H of the Corporations Act read with reg 7.8.03(4). Regulation 7.8.03(6)(c) provides for the realisation of that entitlement. Where a number of clients have an entitlement to be paid moneys in a segregated account but the balance is insufficient to meet each entitlement in full, then the money is paid in proportion to each client's entitlement: reg 7.8.03(6)(d)."
The Act and the Regulations do not define what is meant by "the amount of each person's entitlement" or equivalent expressions. I will address that question in paragraphs 101-109 below.
Section 981H(1) in turn provides that:
"Subject to subsection (3), money to which this Subdivision applies that is paid to the licensee:
(a) by the client; or
(b) by a person acting on behalf of the client; or
(c) in the licensee's capacity as a person acting on behalf of the client;
is taken to be held in trust by the licensee for the benefit of the client."
The trust arising under s 981H(1) is a "statutory" trust and the phrase "in connection with" in that section does not have a narrow meaning: Samuel Holdings Pty Ltd v Securities Exchange Guarantee Corporation Ltd [2010] QSC 450; (2010) 80 ACSR 706 at [60], [65], aff'd Securities Exchange Corporation Ltd v Samuel Holdings Pty Ltd [2011] QCA 228; [2012] 1 Qd R 377; (2011) 253 FLR 221. The effect of that section was also considered in Sonray, where Gordon J observed at [81] that all monies paid to a licensee:
"by, or on behalf of, a person in connection with a financial service or a financial product are deemed to be held on trust for the client ..., whether or not those moneys are paid into a separate account in accordance with s 981B of the Act."
That reading of the section, which I would accept, treats the trust imposed by s 981H as applying on the licensee's receipt of the relevant monies rather than on payment of those monies into an account maintained in accordance with s 981B.
Section 981H(3) in turn provides that the regulations may provide that s 981H(1) does not apply in relation to money in specified circumstances and may:
"... provide for matters relating to the taking of money to be held in trust (including, for example, terms on which the money is taken to be held in trust and circumstances in which it is no longer taken to be held in trust)."
No regulations have been made for the purposes of s 981H(3)(a). Two regulations, which are not relevant for present purposes, have been made for the purposes of s 981H(3)(b). ASIC has also issued a class order, CO 03/1112, which relieves a licensee who is an Australian ADI from the obligation to hold a client's money on trust where the client is a wholesale client and the licensee and client agree in writing. That class order is also not presently relevant.
The effect of these provisions was summarized in Sonray, where Gordon J noted (at [77]) that:
"The effect of these provisions is to create one or more mixed trust funds with special characteristics: they are intended to be used specifically for the provision of financial services and for the holding of and dealing in financial products; they can be used to meet margin calls and to act as security for dealings in derivatives, including dealings on behalf of clients other than the depositing client; however, they cannot be used to satisfy the creditors of the licensee. Such money "is taken to be held on trust by the licensee for the benefit of the client"."
The client agreements used by MFGA, which are in similar although not identical form across the Product Lines, in turn reflected the statutory regime. Relevant provisions include the following:
Futures
cl 16.1 The Client agrees and acknowledges that:
... all the money and property deposited with MFGA or received by MFGA on behalf of the Client will be segregated by MFGA in accordance with the Futures Law and the relevant Operating Rules.
cl 16.2 The Client agrees and acknowledges that:
... the Client's monies and the monies of other client [sic] of MFGA will be combined and deposited by MFGA in a clients' segregated account. All monies credited to the clients' segregated account maintained by MFGA may be used by MFGA to meet the default of any client of MFGA.
CFD
cl 1.1 Client Segregated Account means a bank account established and maintained by MFGA with its bank into which money of MFGA's clients is paid in accordance with Chapter 7.8 of the Act and the purpose of which is to segregate MFGA's funds from those of its clients.
cl 3(a) To the extent that MFGA is required to do so under Chapter 7.8 Division 2 of the Act, MFGA must pay all monies paid to MFGA by the Client or by a person acting on behalf of the Client into a Client Segregated Account.
cl 3(c) The Client acknowledges that within the Client Segregated Account the balance of its CFD Account is pooled with the balance of other CFD accounts established by MFGA for its clients and other client money and that consequently, the Client's CFD Account balance may not be protected if there is a default in the overall Client Segregated Account balance. The Client also acknowledges that under s 981D of the Act, money held in the Client Segregated Account may be used by MFGA to meet obligations incurred by MFGA in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by MFGA (including dealings on behalf of persons other than the Client).
cl 3(d) The Client authorises MFGA to deduct from the Client Segregated Account client money to which the Client is entitled, for the purposes of discharging obligations which MFGA incurs to a counterparty with whom MFGA enters into derivatives to hedge its exposure to the Client in connection with CFDs or to hedge its exposure to other clients who have entered into contracts for difference with MFGA under agreements similar to this Agreement.
Margin FX
cl 1.1 Client Segregated Account means a bank account established and maintained by MFGA with its bank into which money of MFGA's clients is paid in accordance with Chapter 7.8 of the Act and the purpose of which is to segregate MFGA's funds from those of its clients.
cl 3(a) To the extent that MFGA is required to do so under Chapter 7.8 Division 2 of the Act, MFGA must pay all monies paid to MFGA by the Client or by a person acting on behalf of the Client into a Client Segregated Account.
cl 3(c) The Client acknowledges that within the Client Segregated Account the balance of its Margin FX Account is pooled with the balance of other accounts established by MFGA for its clients and other client money and that consequently, the Client's Margin FX Account balance may not be protected if there is a default in the overall Client Segregated Account balance. The Client also acknowledges that under s 981D of the Act, money held in the Client Segregated Account may be used by MFGA to meet obligations incurred by MFGA in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by MFGA (including dealings on behalf of persons other than the Client).
cl 3(d) The Client authorises MFGA to deduct from the Client Segregated Account client money to which the Client is entitled, for the purposes of discharging obligations which MFGA incurs to a counterparty with whom MFGA enters into derivatives to hedge its exposure to the Client in connection with Transaction or to hedge its exposure to other clients who have entered into Positions or Options with MFGA under agreements similar to this Agreement.
Online FX
cl 1.1 Client Segregated Account means a bank account established and maintained by MFGA with its bank into which money of MFGA's clients is paid in accordance with Chapter 7.8 of the Act and the purpose of which is to segregate MFGA's funds from those of its clients.
cl 3(b) All monies deposited to the credit of the Online FX Account shall be paid into a Client Segregated Account.
cl 3(e) The Client acknowledges that within the Client Segregated Account the balance of its Online FX Account is pooled with the balance of other Online FX accounts established by MFGA for its clients and other client money and that consequently, the Client's Online FX Account balance may not be protected if there is a default in the overall Client Segregated Account balance. The Client also acknowledges that under s 981D of the Act, money held in the Client Segregated Account may be used by MFGA to meet obligations incurred by MFGA in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by MFGA (including dealings on behalf of persons other than the Client).
The Liquidators correctly note that the term "Client Segregated Account" was properly used by MFGA in respect of exchange-traded Futures but not in respect of OTC products since regs 7.8.01(5) and 7.8.01(8) distinguish between a "trust account" and a "client's segregated account" and provide for the latter term to be used in limited circumstances. Nothing turned on any misdescription of the accounts in respect of OTC products in these proceedings.
Issues 1-2 - Pooling of CSAs
The Plaintiffs seek a direction as to the manner in which funds in the CSAs should be distributed having regard to reg 7.8.03(6) of the Corporations Regulations (Further Amended Originating Process [1]). Further or alternatively, the Plaintiffs seek a declaration as to whether the Liquidators may pool all or some of the CSAs and apply reg 7.8.03(6) to such pool(s) or whether reg 7.8.03(6) has to be applied separately to each such CSA (Further Amended Originating Process [1A]).
Availability of "pooling"
The parties identified the first issue as whether the Liquidators can pool all or some of the CSAs and apply reg 7.8.03(6) to such pool(s) or does reg 7.8.03(6) have to be applied separately to each CSA. The reference to "pooling" in this context may not be entirely apt, but includes at least the application of reg 7.8.03(6) to several CSAs where the funds in those CSAs have already been mixed.
This issue raises an initial question as to the proper construction of reg 7.8.03(6), namely whether "account" in that regulation refers to each CSA separately, all of the CSAs together or a group of CSAs together. One possible reading is that the expression "the account" in reg 7.8.03(6) refers to a single account, so that the balance of each of the 51 CSAs would in the ordinary course be distributed separately. A second reading of reg 7.8.03(6) is that the reference to "account" in that regulation should be understood as referring to the plural, having regard to s 23 of the Acts Interpretation Act 1901 (Cth) which provides that:
In any Act: ...
(b) words in the singular number include the plural and words in the plural number include the singular.
That section is in turn subject to s 2(2) of the Acts Interpretation Act which provides that the application of a provision of that Act to another Act or a provision of another Act is subject to a contrary intention. The effect of this second reading is that reg 7.8.03(6) would be that the balance of the 51 CSAs would be combined and then distributed. RMF contended for a third reading of reg 7.8.03(6), that the expression "the account" in that regulation refers to each group of client money accounts maintained by MFGA for the purposes of s 981B for its dealings with the clients within the relevant Product Lines and that reg 7.8.03(6) does not have to be applied separately to each CSA, so that the Liquidators can group or pool the 51 CSAs within the Product Lines (RMF SIC [35]; RMF SIR [8], [22]).
The decision in Sonray proceeds on the basis that each account constituted a separate trust and that (in the ordinary course) reg 7.8.03(6) involved an account by account distribution, although Gordon J there directed pooling of accounts based on the particular circumstances of that case (at [78]-[79]). However, it appears the potential application of s 23 of the Acts Interpretation Act was not specifically addressed in that case. The text of reg 7.8.03(6) is capable of being read as indicating a separate trust for each account. Regulation 7.8.03(6) refers to money in "the account" of a licensee and refers to each person who is "entitled to be paid money from the account". Regulation 7.8.03(4) similarly provides that "[f]or each person who is entitled to be paid money from an account of the financial services licensee maintained for section 981B of the Act, the account is taken to be subject to a trust in favour of the person".
In my view, a contrary intention for the purposes of ss 2 and 23 of the Acts Interpretation Act arises from the structure of the Corporations Act and the Corporations Regulations, so that the singular in reg 7.8.03(6) should not be read as referring to the plural. Several of the associated provisions distinguish the singular and the plural - for example, s 981B(2) refers to a "single account or 2 or more accounts", s 981C to "class of accounts", "accounts" and "an account" and reg 7.8.01(2) refers to "accounts" and also to "account" in the same sub-regulation, the first reference being plural and the second singular. Regulation 7.8.03(4) also provides that for each person who is entitled to be paid money from "an account ... the account is taken to be subject to a trust in favour of the person" (emphasis added). This provision creates or imposes a statutory trust and identifies the property that is the subject of the trust and the beneficiaries of that trust, in a manner that does not seem to me to contemplate pooling of accounts in the ordinary course.
There is also, in my view, no reason to read reg 7.8.03(6) in a manner which would require pooling where more than one account had been maintained as permitted by s 981B(2), but those accounts had in fact been maintained separately so that there was no mixing of funds between them. In particular, there would be no reason to require pooling where a licensee had maintained two separate accounts as permitted by s 981B(2) where it was required to have a client segregated account (not a trust account) for on-market futures trading under reg 7.8.01(8) and applicable ASIC Market Integrity Rules and was required to have a trust account (rather than a client segregated account) where it had also received money to which reg 7.8.01(5) applied. The expression "the account" in reg 7.8.03(6) is appropriately read to refer to each of those accounts separately, rather than to require a pooling of those accounts where they are conducted separately.
This conclusion does not, however, prevent the Court directing the Liquidators that pooling is appropriate in a particular case, at least where there has been mixing of funds across the relevant accounts. In Sonray, Gordon J permitted the pooling of accounts maintained for the purpose of s 981B. Her Honour noted (at [78]) that "[w]here a licensee ceases to be licensed, or becomes insolvent, reg 7.8.03(6) of the regulations determines how money in 'the account' of the licensee maintained for the purposes of s 981B is to be paid". Her Honour also noted (at [84]-[85]) that:
"Next, the Corporations Act and the regulations do not deal with the situation where it is not possible to work out precisely who is entitled to what moneys in particular segregated accounts. It was common ground that all the court can do in such circumstances is to permit the moneys in the segregated accounts to be pooled with a view to their proportionate distribution. ...
Such a course of action is consistent with the purpose of the statutory regime, namely the achievement of a fair outcome between clients by a pragmatic and even-handed distribution amongst them: ..."
The Liquidators pointed out that the books and records of MFGA do not permit distribution of each of the CSAs separately (Main Campbell Affidavit [180]-[200]; Plaintiffs SIC [87]-[100]). The Liquidators have not been able to identify records of MFGA that show the client or clients who are entitled to the balance of any particular CSA. For example, there is no document in the nature of a trust account, or a statement of trust account, for each client recording the contributions and withdrawals by that client into or from particular CSAs. MFGA did not record the individual cash balances of each client in each CSA. MFGA's books and records were organized by Product Line, and by currency within each Product Line, rather than by CSA, and the Liquidators have not identified any process or record of MFGA which sought to reconcile a client's contributions and withdrawals on an individual basis against the balance in each CSA. Mr Campbell's evidence is that, by reason of these matters and the volume of individual client transactions, it would not be possible, or at least would not be practicable in a cost-effective way, to calculate the portion of the balance of each CSA attributable to any individual client.
The evidence also indicates that the way in which MFGA operated the 51 CSAs was such that distribution by account would be impractical or inappropriate. In particular, MFGA engaged in various transactions which had the effect of altering the balances of the 51 CSAs that were not referable to client instructions. By way of summary:
- MFGA engaged in currency exchanges between the CSAs associated with different Product lines, when a Product Line had insufficient funds of a foreign currency to satisfy a payment that was required to be made in that currency or a client requested that part or all of his client balance be 'converted' to another currency. The Liquidators have identified 233 such transactions over a 3 month period to 31 October 2011 which was the subject of a detailed examination ("Inspection Period") with a total value of approximately AUD $230 million, of which 109 do not appear to relate to a client request and were undertaken to accommodate MFGA's foreign currency requirements, with a total value of approximately AUD $107 million. The Liquidators have identified Inter-Product Currency Exchanges in 29 of the CSAs associated with CFDs, Futures and Margin FX during the Inspection Period and none in CSAs associated with Online FX. The Liquidators note that the combined AUD-equivalent amount standing to the credit of the CSAs for both of the Product Lines involved in the transfers were unaffected, as both Product Lines paid and received an equivalent amount of different currencies; however, the balances of the individual CSAs involved were either increased or reduced as a result of the transactions.
- MFGA was entitled to certain fees and commissions from its clients. MFGA's practice was not to withdraw funds in respect of these liabilities owed to MFGA by its clients as and when they accrued. Instead, MFGA withdrew funds from the CSAs in respect of these liabilities by undertaking a sweep of "excess cash" at least once a month. The Liquidators note that MFGA did not prepare an excess funds report for each CSA, but instead prepared excess funds reports by CFDs, Futures and FX and cash sweeps were only taken from some of the CSAs and that those CSAs from which cash sweeps were taken were, in effect, "subsidising" other CSAs in relation to the payment of fees, commissions and interest.
- During the Inspection Period six transactions where cash was transferred from Online FX CSAs to Margin FX CSAs have been identified. The amounts transferred were apparently equivalent to the interest earned on the Online FX CSAs.
- MFGA permitted its clients to undertake trades in a currency in respect of which they had not deposited funds but did not always make cash transfers between CSAs to reflect the currency conversions required for such trades to occur, so that cash held in each CSA may not have been used for the trading activities related solely to the clients who had deposited funds in that CSA.
- The Liquidators have identified "bulk transfers" aggregating multiple transactions between the E*Trade AUD CFD CSA and the Westpac AUD CFD CSA. MFGA also frequently transferred funds between the high interest and standard interest AUD-denominated Westpac CSAs for the CFD and Futures Product Lines to maximise the interest earned on funds in the CSAs.
- MFGA hedged transactions on a nett basis and made payments to OTC counterparties from CSAs based on administrative convenience rather than necessarily from CSAs referable to the clients in respect of whose transactions the hedges were entered into.
I accept the Liquidators' submission that these matters have the result that distribution by account would be impractical or inappropriate, since the balance of all of the CSA accounts as at the Appointment Date has been affected by one or more of these transactions. This should not be taken as suggesting that any of these transactions were inappropriate, which is not in issue before me. Rather, they resulted in a mixing of the CSAs, at least within Product Lines, which does not now permit distribution by single account to fairly or sensibly occur.
Several of the representative parties have also made submissions supportive of pooling (using that term in a broad sense to mean treating the CSAs within a Product Line as a group) in the relevant circumstances. GrainCorp pointed out that the contractual arrangements between MFGA and its clients allowed MFGA a contractual discretion to pool and mix trust funds as between clients within one Product Line or generally, and that contractual discretion had been exercised by MFGA with the result that the property of the individual trusts has been mixed between clients within the same Product Line. GFL contended that, where a number of persons each hold an equitable charge over a notional pool of CSAs, they also each hold an equitable charge over each of the CSAs in the pool, and pooling of the CSAs involves reg 7.8.03(6) being applied to each CSA that is included in the mixed fund. GFL contended that, in this context, "pooling" is merely a description of the process of identifying the CSAs that together comprise a mixed trust fund and the persons entitled to the monies in each CSA included in the mixed trust fund. Underdog, which represents the interests of Online FX clients, contended that the term "pooling" is not entirely apt and that the Court should make directions to the effect that the Liquidators are justified in paying to the Online FX clients the funds which they or MFGA hold on statutory trust for those clients, without the necessity for strict adherence to the requirements of reg 7.8.03(6) (Underdog SIC [39]-[58]).
All parties accepted that, as a practical matter, a direction permitting "pooling" of accounts within particular Product Lines was appropriate in this case. In my view, that approach is, as Gordon J observed in Sonray at [85], consistent with the purpose of the statutory regime of achieving a fair outcome between clients by a pragmatic and even handed distribution amongst them. In the present case, it is also consistent with the acknowledgements given in writing by the clients in the client agreements, including the acknowledgement that the balance of the client's account is pooled with the balance of other client accounts and other client money. I consider that such a direction is justified. I address the somewhat more controversial question of which accounts should be pooled below.
I note that the same result could be reached, as Underdog points out, by the Court making a direction under s 479 of the Corporations Act permitting the Liquidators to make a distribution in a manner which did not strictly comply with reg 7.8.03(6), so far as accounts were pooled on an appropriate basis and that course amounted to "a wise and commercial breach of trust": Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 213. It is not necessary for present purposes to express a view as to whether such a direction could be made under s 511 of the Corporations Act. While Young J held to the contrary in Dean-Willcocks v Soluble Solution Hydroponics above, that view was not followed by Warren CJ in Handberg (in his capacity as liquidator of S&D International Pty Ltd (in liq)) v MIG Property Services Pty Ltd above at [9]-[15].
Which accounts should be pooled
The Plaintiffs seek a declaration as to whether the Liquidators should pool the CSAs (subject to any particular exclusions, and if so, what exclusions) by grouping the CSAs into a number of pools and, if so, comprising which CSAs, or alternatively a single pool (Further Amended Originating Process [1B]). This raised the question whether the Liquidators should pool the CSAs (subject to any particular exclusions) by grouping the CSAs into four pools representing the four business lines of MFGA, namely Futures; CFDs; Online FX and Margin FX; three pools comprising one pool for Futures, one pool for CFDs and one pool for Margin FX and Online FX; a single pool; or some other form of pooling and, if so, on what basis (Issue 2).
The Plaintiffs treat whether there should be one pool, three pools, four pools or some other pooling as principally a matter for submission by representative parties (who have advocated for four or three pools) and identify matters which may be relevant to grouping or pooling in their written submissions (Plaintiffs SIC [146]-[159]). None of the representative parties contend that the money in the 51 CSAs should be distributed on an account-by-account basis or on the basis of a single pool comprised of all 51 CSAs.
The Plaintiffs identify a number of matters which would support pooling on the basis of four pools corresponding to MFGA's four Product Lines. In at least some respects, MFGA operated the CSAs on the basis that they were four separate pools by Product Line, with each of the CSAs assigned to one of the four Product Lines (CSA Inspection Report, Ex CC-4A, [3.2(c)(i)]). There were no uncorrected deposits by clients for one Product Line into a CSA associated with another Product Line during the Inspection Period (CSA Inspection Report, Ex CC-4A, [3.21(a)], [3.30]).
MFGA had a standard form client agreement for each Product Line and clients were required to sign a separate client agreement and open a separate trading account with MFGA for each Product Line that they wished to trade in (Main Campbell affidavit [45]-[46]). MFGA appears to have had a practice of requiring clients wishing to trade in different Products to either deposit funds into the respective CSA for that Product Line or request the transfer of sufficient funds from their client account associated with another Product Line, at which point MFGA would transfer funds between CSAs associated with the relevant Product Lines (CSA Inspection Report, Ex CC-4A, [3.87]-[3.92]). Apart from one apparent error, every Inter-Product Currency Exchange identified in the Inspection Period involved corresponding transfers of currencies such that the combined AUD-equivalent amount standing to the credit of the CSAs for both of the Product Lines involved in the transfers was not affected. All of the counterparty receipts and payments identified during the Inspection Period were also paid to or from a CSA associated with the correct Product (CSA Inspection Report, Ex CC-4A, [3.69(c)]; Affiliate Receipts and Payments Report, Ex CC-8F, [2.3]).
The Plaintiffs note that arguments in favour of three pools, namely Futures, CFDs, and FX combining both Online FX and Margin FX, include that excess funds reports were prepared for each of the CFDs, Futures and FX (i.e. Margin FX and Online FX in combination) and cash sweeps were only taken out of Margin FX CSAs. However, the Plaintiffs also note that Online FX clients were not required to pay commission or transaction fees, although charges for certain administrative services, default interest and funding rates were applicable (Online FX Product Disclosure Statement, Ex CC-4, 2/603-604). Six transactions where cash was transferred from Online FX CSAs to Margin FX CSAs have been identified and the amounts transferred were apparently equivalent to the interest earned on the Online FX CSAs (Main Campbell Affidavit [178(a)]). MFGA prepared deposit posting slips to record details about client deposits for each of CFD CSAs; Futures CSAs; and Margin FX and Online FX CSAs together (CSA Inspection Report, Ex CC-4A, [3.23]) and payment posting sheets were prepared on the same basis (CSA Inspection Report, Ex CC-4A, [3.41]).
GFL (which represents the interests of Margin FX clients) contended that there should be three pools, with a single pool for CSAs for Margin FX and Online FX clients. GFL contends that the justification for pooling is the mixing of property held on trust for a beneficiary with property held on trust for another beneficiary or beneficiaries, in a manner that makes it impossible, or impracticable, to identify what parts of the mixed trust property belong to each beneficiary. GFL contends that the mixing of trust property occurred within three Product Lines (Futures, CFDs and FX) but does not occur between those Product Lines, and the Liquidators should group the CSAs into three pools comprising one pool for each of those Product Lines.
In particular, GFL refers to transactions that, it contends, result in Margin FX clients having an equitable interest in the Online FX CSAs. GFL points to evidence that all cash sweeps and top ups identified in the Inspection Period were paid to and from a Margin FX CSA (CSA#41) (CSA Inspection Report, Ex CC-4A, [3.53]-[3.54]). GFL contends that any excess funds in the Online FX CSAs necessarily contributed to the existence of excess funds in the Margin FX and Online FX CSAs collectively but did not contribute to the payment out of that excess to MFGA which was made exclusively from Margin FX CSAs. GFL points out that interest or fees payable to MFGA by an Online FX client would be paid by cash sweeps paid out of CSA #41 and points to various fees identified under the Online FX client agreement (Ex CC-4, Tab 18) and Product Disclosure Statement (Ex CC-4, Tab 19). On the other hand, Underdog (which represents the interests of Online FX Clients) responds that no commissions or fees were payable on Online FX unless the trading platform was not used so there were unlikely to be significant commission charges and that one would not expect there to be significant interest charges because the Online FX client agreement provided that the account would be automatically closed out if it went into debit.
GFL also argues that:
"The fact that the Online FX CSA cash as at 31 October 2011 exceeded 100% of Online FX client entitlement (even before adding the OTC [c]ounterparty recoveries that were subsequently received in respect of the Online FX clients) is likely explained by the fact that, and at the very least is consistent with the inference that, amounts payable by Online FX clients to MFGA for interest and fees were paid to MFGA out of cash held in a Margin FX CSA."
Underdog responds that the percentage of claims covered in respect of Online FX varies from time to time and simply reflects the relevant currency positions, rather than being indicative of any subsidy of Online FX CSAs by Margin FX CSAs.
GFL also notes that the CSA Inspection Report also identified six transactions in the Inspection Period where cash was transferred from Online FX CSAs to Margin FX CSAs (CSA Inspection Report, [3.93]-[3.94]) and contends that is evidence of further mixing of monies between the Margin FX CSAs and the Online FX CSAs. Mr Campbell's evidence is that these cash transfers were in amounts that were equivalent to the interest earned on the Online FX CSAs (Main Campbell Affidavit [178(a)]). GFL contends that the manner of mixing was such that, as between Online FX CSAs and Margin FX CSAs, it is not possible to identify particular funds in any CSA as belonging to a particular client. GFL contends that there should therefore be three pools, with one pool for Margin FX and Online FX.
The contrary position is taken by Underdog which submits that pooling should be by four Product Lines and that Online FX CSAs should be pooled solely for the benefit of Online FX clients. Underdog submits that the contention that there should be three pools should be rejected because no Margin FX funds have been deposited into Online FX CSAs and there is no proper foundation in the evidence for a conclusion that Online FX liabilities have been discharged using Margin FX funds. (Underdog also submits that such a conclusion would not, in any event, be a proper basis for pooling Margin FX and Online FX CSAs (Underdog SIC [59-[77]; Underdog SIR [1]-[9]; Underdog Further Submissions 2.7.2012 [1]-[22]). I do not accept that second submission for the reasons noted in paragraph 79 below in respect of the question of pooling of the Singapore-based accounts and the Australian-based CFD CSAs).
In my view, the balance of the evidence does not support pooling of the Margin FX and Online FX CSAs, with the result that pooling should take place on the basis of four Product Lines rather than three. In summary, the evidence indicates that funds in the Online FX CSAs were not mixed with the Margin FX CSAs or other Product Line CSAs, in that no monies from those other accounts flowed into the Online CSAs. There is force in Underdog's submission that it is unlikely that fees payable by Online FX clients were material and this is an answer to GFL's submission based on such fees; in any event, the fact that liabilities of any magnitude referable to Online FX clients were discharged from Margin FX accounts was not established by the evidence.
I will therefore direct the Liquidators that they are justified in proceeding on the basis of four pools in the four Product Lines, subject to the issue of how Singapore-based accounts are to be treated, to which I will now turn.
Pooling of Singapore-based accounts
An issue arises in the MFGS Proceedings as to whether the Singapore-based accounts should be excluded from any pooling or grouping with other CFD CSAs.
By way of background, MFGS acted on behalf of clients and, as between MFGS and its customers, CFD transactions were governed by a Master Trading Agreement (Ex YCG-1, Tab 1) which required MFGS to keep all funds on trust (and in a trust account) for its customers separate from the funds of MFGS, where they could be commingled with the "excess funds or assets of other Customers [of MFGS] in accordance with Applicable Laws" (cl A15.1). Those contractual stipulations were also subject to the provisions of the relevant provisions of the Singaporean statutory regime insofar as the right of commingling (pooling) is concerned: Securities & Futures Act, ss 103A-104A; Securities and Futures (Licensing and Conduct of Business) Regulations, regs 16-18.
MFGA undertook Futures trading on behalf of MFGS under a Futures client agreement dated 24 October 2011 (Main Campbell Affidavit [47]; Ex CC-4, Tab 20). Under that agreement, MFGA acted as MFGS's agent for the purpose of dealing in Futures (cl 3.2). All money deposited or received by MFGA on behalf of the client was to be segregated in accordance with the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) (cl 16.1). MFGS acted as agent for and on behalf of its customers in respect of such Futures transactions.
MFGA also undertook CFD trading for MFGS although MFGA and MFGS pointed to different versions of the CFD client agreement as the operative agreement. MFGA pointed to a CFD client agreement dated 30 June 2011 between MFGA and MFGS (Main Campbell Affidavit [47]; Ex CC-4, Tab 9) and also pointed to a CFD client agreement as at 23 June 2010 (Main Campbell Affidavit [48]; Ex CC-4, Tab 23). MFGS contends that CFD transactions were conducted under a CFD client agreement dated 7 December 2009 (Yap, 14.5.12, Ex YCG-2, p 154), which provided that MFGA would establish a CFD [ledger] account in MFGS's name to record all of MFGS's CFD dealings (cl 2(a)) and record each foreign currency balance in MFGS's account as a separate ledger, called a Foreign Currency Ledger (cl 2(c)). Nothing appears to turn on which version of the agreement applied for present purposes.
The CFD client agreement provided that, to the extent required by Pt 7.8 Div 2 of the Corporations Act, all monies received by MFGA from MFGS would be placed into a client segregated account. By clause 3(c) of that agreement, MFGS acknowledged that there would be pooling with other CFD accounts, and that:
"money held in the Client Segregated Account may be used by MFGA to meet its own obligations in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by MFGA (including dealings on behalf of persons other than MFGS)".
Clause 3(d) in turn authorised deductions from money held in the CSA for specified purposes, in the same form as the corresponding clause in other CFD client agreements to which I have referred above.
Significant findings of the CSA Inspection Report (Ex CC-4A) in relation to the Singapore-based accounts included that there were payments to Deutsche Bank and other counterparties within the MFG Group totalling $26,717,299 from the Singapore-based accounts denominated in SGD, CHF and CAD but, with the exceptions of three receipts totalling $421,468 from MFGHK, there were no other receipts from counterparties during the Extended Inspection Period (namely the 12 months ended 31 October 2011) in any of the Singapore-based accounts. It appears that receipts in relation to Deutsche Bank were received in the Westpac CFD CSA, regardless of whether the funds were in respect of amounts initially advanced to CFD counterparties from the Singapore accounts, and the amounts received would be based on net margins calculated by the counterparty for MFGA, not individual clients. The CSA Inspection Report also notes that SGD $17.9 million was transferred to Deutsche Bank in two transactions from the Singapore-based accounts during the 12 months ended 31 October 2011, in both instances, where Deutsche Bank required SGD to be remitted by MFGA.
The CSA Inspection Report concludes that:
"With the exception of those [Singapore-based accounts] into which receipts from MFGHK or an inter-product CSA Currency Exchange deposit was made ... it appears that the [Singapore-based accounts] may have exclusively held funds deposited by, or on behalf of, MFG[S].
However, it also appears (although we cannot conclusively determine) that transactions with Deutsche Bank may have occurred involving the [Singapore-based accounts] in respect of the trading activity of clients who deposited funds into the Westpac CFD CSAs, and vice a versa.
We have identified that although MFG[S] deposited funds into the [Singapore-based accounts] it did not necessarily receive a withdrawal from a [Singapore-based account], rather withdrawals were made from a Westpac CSA associated with the same Product.
We are able to determine that, in the one case of an Inter-Product Currency Exchange that took place involving a [Singapore-based account], the effect of which was that the balance of a [Singapore-based account] was increased and the balance of a Westpac CFD CSA was decreased by an equivalent amount. ...
... This transaction demonstrates that MFGA did not appear to regard the [Singapore-based accounts] as being isolated from the remainder of the CFD CSAs. This finding is consistent with statements made to us by [MFGA officers].
We also note that no cash sweeps or top-ups took place in relation to the [Singapore-based accounts] during the Inspection Period. Cash sweeps and top-ups were undertaken in respect of CFD CSAs on the basis of the [e]xcess [f]unds [r]eports for the aggregate of CFD client segregated assets, which included the [Singapore-based accounts]. In other words, the surpluses in the [Singapore-based accounts] would appear to have been swept out of other CSAs, leaving the [Singapore-based accounts] with an artificially high balance."
I should note that, in their detailed submissions for MFGS, Mr Leeming SC and Mr White took issue with several of the conclusions reached in the CSA Inspection Report. I have had regard to those criticisms and the detail of the evidence on which MFGS relied for those criticisms.
MFGS contends that an express trust was established over the Singapore-based accounts and points to the "consensual establishment of the Singapore Accounts as 'trust accounts'" (MFGS SIC [31], [34], [43(a)]). The question whether the Singapore-based accounts constituted a trust must be determined by reference to all relevant circumstances and by inference from the outward manifestations of intention: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) [2000] HCA 25; (2000) 202 CLR 588 at [605]; Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at [53]-[59], [102]-[115]; Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 at [48]. I do not consider that an intent to establish a separate trust over those accounts has been established, for the reasons set out below.
Whether a non-statutory trust attached when monies were received from OTC counterparties
The analysis set out above depends on the terms of the statutory trust created by s 981H of the Corporations Act, although it seems to me that the same result would be reached under the equitable principles applicable to payments made for an express purpose, on which several of the representative parties relied.
These principles have long been recognised. In Toovey v Milne (1819) 2 B & A 683; 106 ER 514, cited with apparent approval in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580 ("Quistclose") and Raulfs v Fishy Bite Pty Ltd above at [36]-[37], a bankrupt had borrowed money from the defendant for the purpose of paying his creditors and returned the unspent portion to the lender when not all of the money was used in payment of creditors before the bankruptcy. Abbott CJ observed at 684:
"I thought at the trial, and still think, that the fair inference from the facts proved was that this money was advanced for a special purpose, and that being so clothed with a specific trust, no property in it passed to the assignee of the bankrupt. Then the purpose having failed, there is an implied stipulation, that the money shall be repaid."
In referring to this case in Raulfs v Fishy Bite Pty Ltd above at [37], Campbell JA noted that, even if the bankrupt had acted in breach of trust in mixing the notes he received with his other money, an equitable charge would exist over the mixed fund, entitling the lender to receive back from the mixed fund the amount that had not been expended in paying creditors. Similarly, in Gibert v Gonard (1884) 54 LJ Ch 439 at 440, cited with approval by Lord Millett in Twinsectra Ltd v Yardley [2002] UKHL12; [2002] 2 AC 164 at [76], North J observed that "if one person makes a payment to another for a certain purpose, and that person takes the money knowing that it is for that purpose, he must apply it to the purpose for which it was given".
In Barclays Bank Ltd v Quistclose Investments Ltd above, a dividend was declared and the company sent a cheque to the appellant bank under the cover of a letter requesting, among other things, that it be banked into a new account and confirming that the sum will only be used to meet the dividend due on a specified date. The company went into liquidation and the bank wished to apply the fund by way of set off against other indebtedness of the company to it. In the House of Lords, Lord Wilberforce (Lord Reid, Lord Morris of Borth-y-Gest, Lord Guest and Lord Pearce agreeing) said (at 580) that the "mutual intention" of the company and the bank and "the essence of the bargain" between them was that the money advanced would not become part of the assets of the company but that it should have been applied exclusively to the payment of the dividend, disbursing the money to the particular class of creditors so entitled, namely the shareholders.
His Lordship distinguished cases where payments were made on the unqualified basis that they should be included in a company's assets and observed (at 581-582) that:
"... when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose (see Re Rogers [(1891) 8 Morr 243] where both Lindley and Kay LJJ explicitly recognised this): when the purpose has been carried out (ie, the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (ie, repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (and the money is intended to fall within the general fund of the debtor's assets) then there is the appropriate remedy for recovery of a loan. I can appreciate no reason why the flexible interplay of law and equity cannot let in these practical arrangements, and other variations if desired: it would be to the discredit of both systems if they could not. [T]he intention to create a secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it."
In the result, the money was to be held on trust by the company as trustee for the shareholders as beneficiaries until such a time that the dividend was paid. It was impossible to pay the dividend when the company went into liquidation so the money was held on trust for the lender.
In Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) [1978] HCA 45; (1978) 141 CLR 335, Gibbs ACJ (Jacobs and Murphy JJ agreeing) held that a Quistclose trust would not arise where the intention of the parties was that "the money was to form part of the general assets of the appellant, to be used as it wished" (at 353). His Honour noted that the Quistclose decision (at 353):
"... is authority for the proposition that where money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust."
In Re EVTR Ltd [1987] BCLC 646, which was applied in Salvo v New Tel Ltd [2005] NSWCA 281 at [45]-[46], funds were advanced for the sole purpose of purchasing equipment. The money was used to pay a deposit for the equipment but the company was placed into receivership before the equipment arrived. Most of the deposit was returned to the company and the Court held that the receiver could not retain the returned deposit money, which had to be returned to the lender. Dillon LJ (with whom Woolf LJ agreed) observed (at 650) that:
"On Quistclose principles, a resulting trust in favour of the provider of the money arises when money is provided for a particular purpose only, and that purpose fails."
Dillon LJ observed (at 651) that it is a long established principle of equity that, if a person who is a trustee receives money or property because of, or in respect of, trust property, he will hold what he receives as a constructive trustee on the trusts of the original trust property and that, by reason of that principle, the same trust must have attached to the repayment as attached to the original sum. However, his Lordship also observed that, if the equipment which was intended to be acquired had in fact been acquired, then "any trust attaching to that money because of that purpose, would indeed have been satisfied" and
"the company's interest in that equipment would have been a general asset of the company held by the company free from any proprietary or equitable interest of the appellant by way of trust or otherwise".
Bingham LJ observed (at 652) that:
"Until the sums were paid out, the company plainly held them on trust to apply them for the stipulated purpose and no other. Had the purpose failed before payment, the case would have been indistinguishable from Quistclose. But that did not happen. The sums were applied for the stipulated purpose. ...
It would, I think, strike most people as very hard if the appellant were in this situation to be confined to a claim as an unsecured creditor of the company. While it is literally true that the fund which he provided was applied to the stipulated purpose, the object of the payment was not achieved and that was why the balance was repaid to the respondents. My doubt has been whether the law as it stands enables effect to be given to what I can see as the common fairness of the situation. Our attention has not, I think, been drawn to any case closely analogous to the present. But the company certainly held the fund on trust in the first instance. The purpose for which the fund was paid out partially failed. The repayment to the respondents was a direct result of the company's original holding of the fund as trustee. The balance which was recovered may reasonably regarded as not having been paid out at all. I am happy to be persuaded that the sums repaid are to be treated as held on the same trusts as the original £60,000 and, in the present circumstances, on a resulting trust for the appellant."
In Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 at 500, Gummow J observed that it would be an error to treat the references to "purpose" by Lord Wilberforce in Quistclose (and by Gibbs ACJ in Australasian Conference Association at 353) as characterising an express trust which did not have to satisfy the ordinary requirements for any private (as distinct from public) trust, namely the three certainties of intention, subject matter and object. His Honour described the trust arising in Quistclose as an express trust with two limbs, as distinct from treating the secondary trust as a resulting trust in favour of the company. In Raulfs v Fishy Bite Pty Ltd above at [44], Campbell JA (Meagher and Barrett JJA agreeing) observed that:
"That remark concerns the analysis of the particular fact situation revealed in Quistclose. It does not purport to be, and should not be taken as, a statement about whether a "Quistclose trust" is "really" an express trust or a resulting trust, nor about whether there is any such legal institution as a "Quistclose trust"."
These principles were also recognised, although not found to be applicable in the particular cases, in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 per Gibbs CJ at 379-380 and Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292.
In Peter Cox Investments Pty Ltd (in liq) v International Air Transport Association [1999] FCA 27; (1999) 161 ALR 105 at [49]ff, O'Loughlin J noted that factual circumstances which were relevant to whether such a trust existed included whether the relationship between each client and the company was a routine commercial transaction epitomising the business that the company conducted (noting that the courts are reluctant to introduce trusts into such commercial transactions); the existence of discrete evidence pointing to the existence of a mutual intention of the parties to create a trust; evidence as to an agreement or directions or instructions having been given as to how and in what manner the monies were to be held or applied; other objective indicators, such as how the recipient and alleged trustee have dealt with the funds in question (for example, whether those funds are deposited in a general bank account, which would tend against the finding of a trust); and whether there exists any obligation (statutory or contractual) requiring the recipient separately to account for the paid monies.
ln Twinsectra v Yardley above at 185, Lord Millett emphasised the importance of the parties' intention, determined by the terms of the arrangement and the circumstances of the case, in determining the existence or otherwise of the trust. His Lordship noted that, in effect, a trust does not arise if the relevant purpose is carried out and distinguished between, on the one hand, the failure of purpose of the trust and, on the other, the disappointment of the settlor's motivations in providing the monies which will not necessarily give rise to such a failure.
In Salvo v New Tel Ltd above, a trust was found in respect of monies applied by investors to a deposit for the acquisition of a company. Spigelman CJ referred to the passages in EVTR to which I have referred above and noted that:
"It is not necessary to determine whether the analysis in English cases of a resulting trust applies in Australia. (See also Twinsectra Ltd v Yardley [2002] 2 AC 164 at [100].) The circumstances in which a trust should be classified as presumed, resulting or constructive are not the subject of any authoritative determination. (See the references set out in Rob Evans v European Bank Ltd (2004) 61 NSWLR 75 at [112]-[116].)
The reasoning in EVTR, where a deposit was returned by a third party, applies in the present case to support the conclusion that the original supplier of funds retained a beneficial interest in the funds.
In this case, as in EVTR, it was the intention of the supplier of funds, relevantly the Appellants, that the money was to be applied and applied only for a specific purpose (ie the purchase of the equipment in EVTR or the Digiplus acquisition in the present case). The money was applied towards a deposit in partial fulfilment of the purpose which was not fulfilled (ie the failure of the equipment purchase in EVTR or the Digiplus acquisition in the present case). The return of the deposit in each case meant that the beneficial interest in the funds of the supplier became an express trust of the deposit in the hands of the recipient."
Handley JA observed (at [78]) "a decision that there was a resulting trust seems to accord more closely with the realities" of the facts of that case and Young CJ in Eq noted (at [84]-[88]) that nothing turned on whether the relevant trust was an express trust or a resulting trust, although holding that the trust was express (at [96]).
In Raulfs v Fishy Bite Pty Ltd above, where Campbell JA (Meagher and Barrett JJA agreeing) also observed that (at [48]):
"[I]t is now clear that in deciding whether there is an intention to create a trust, the court ascertains that intention by inference from the outward manifestations of intention: Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at [53]-[59], [102]-[115]. Thus, the task of ascertaining whether there is an intention to create a trust and, if so, on what terms is a similar one to ascertaining the intention of parties to a contract for the purpose of deciding whether there is an intention to enter contractual relations and the terms of any contract that has been entered."
His Honour also noted at [51]:
"Quistclose recognises that sometimes there can be a trust whose terms are that the trust property is to be paid to particular people, and if it is not paid to those people, it is to be held for someone else. That is a matter arising from analysis of the facts of the particular case in accordance with well established principles for identifying when there is a trust, not because there is any separate legal institution known as a "Quistclose trust"."
In George v Webb [2011] NSWSC 1608 at [199], Ward J observed that:
"The decision in Barclays Bank Ltd v Quistclose Investments Ltd [above] is authority for the proposition that where money has been paid to another for a specific purpose, such that there can be said that there is a trust for that purpose, then where that purpose has not been fulfilled and the funds have not been applied to that specific purpose a trust may be impressed upon those funds in favour of the payer."
Her Honour also noted (at [199]) that:
"The Quistclose principle is not limited in its application to money paid for the purpose of discharging debts but can apply where the funds are to be applied for other purposes. In Re EVTR [1987] BCLC 646, for example, money was lent to buy equipment and in Re Associated Securities Ltd and the Companies Act [1981] 1 NSWLR 742, the money was lent to subscribe for shares. Nor does it seem necessarily to be limited to cases where the money was lent to the recipient as opposed to money paid to the recipient for particular purposes (say, as is the case on my view of the evidence in this case, in anticipation of a proposed acquisition)."
Her Honour also observed (at [282]) that the weight of authority in this jurisdiction is that the Quistclose trust is an express trust.
There is no need for particular caution in drawing the inference that a trust was intended: Australian Elizabethan Theatre Trust above at 503; Salvo above per Spigelman CJ at [34]. In the present case, the parties' intention in respect of funds paid to OTC counterparties for hedging purposes must be taken to conform to the limits of the statutory authority given under s 981D and the terms of the direction in the client agreements, which permitted the application of trust monies by MFGA for a limited purpose. The effect of the statutory scheme and the client agreements was that monies were paid by OTC clients to MFGA, on the basis they would be deposited in accounts subject to the statutory trust, and some of those monies may in turn be paid to OTC counterparties in accordance with s 981D of the Corporations Act and the authority granted under the client agreements.
However, a fundamental obstacle to finding a trust over the OTC Recoveries, by reference to the principles to which I have referred above, is that, as I noted above, the purpose authorised by s 981D of the Corporations Act and the client agreements was performed when monies from the OTC CSAs were applied by MFGA to paying margins to OTC counterparties in respect of hedge transactions, or at least when the OTC Recoveries were received. There has been no relevant failure of that purpose, and, to the contrary, the receipt of OTC Recoveries would assist MFGA in meeting its obligations to clients under the relevant client agreements, even if (subject to the matters which I address in paragraphs 238 - 241 below) they were received by MFGA on its own account rather than held on behalf of OTC clients. By contrast with, for example, Quistclose or EVTR, this was not a case where the contemplated hedging transactions could not be carried out, but one where those transactions were carried out and gave rise to the OTC Recoveries. That result is not altered by the fact that the appointment of administrators to MFGA may have brought about an earlier closing of the hedge positions and the earlier receipt of the OTC Recoveries than would otherwise be the case. A further obstacle to finding such a trust is the absence of any indication that the relevant monies, once applied by MFGA to paying margins to OTC counterparties in respect of hedge transactions, would be kept separate from other monies of MFGA or, indeed, the OTC counterparties, a matter which has often been recognised as relevant to whether such a trust is established: Walker v Corboy (1990) 19 NSWLR 382 at 385 per Priestley JA; McManus RE Pty Ltd v Ward [2009] NSWSC 440; (2009) 74 NSWLR 662 at [25]; George v Webb above at [212]. I do not consider that such a trust is established.
Whether OTC Recoveries are received "on behalf of" OTC clients
A further question is whether OTC Recoveries, once received by MFGA, are monies to which Pt 7.8 Div 2 Subdiv A applies by reason of s 981A of the Corporations Act. That money is neither money paid by the client nor by a person acting on behalf of the client. However, a question arises as to whether such OTC Recoveries are received by MFGA as a person acting "on behalf of" the relevant OTC clients within the meaning of s 981A(b)(iii).
RMF contends that "on behalf of" has a wider meaning than simply principal and agent. RMF contends that it is not to the point that MFGA entered into counterparty transactions as principal since the actual margining had the closest and most direct connection with clients' trading in CFDs and was for the benefit of clients in that it improved the prospects of recovery by the clients from MFGA (RMF SIC [89], [95], [96]; RMF SIR [12], [28]). RMF contends that OTC Recoveries relating to CFDs (including funds that were not required to meet an obligation incurred by MFGA with counterparties) should be treated as funds received for the benefit of the CFD clients with an entitlement to be paid from the CFD CSAs. MFGS also contends, in the MFGS Proceedings, that monies received by MFGA from OTC counterparties are payments made to MFGA in its capacity as person acting on behalf of OTC clients and therefore fall within s 981A of the Corporations Act (MFGS SIC [65]). On the other hand, PHRS contends MFGA does not receive funds repaid by OTC counterparties in its "capacity as a person acting on behalf of its client" for the purposes of s 981A(b)(iii) and receives such funds as a principal in accordance with its transaction with the counterparty. PHRS argues that, in the alternative, there would need to be an accounting for the funds that are excluded from the statutory trust by reason of s 981A(2).
As I noted in paragraphs 195-196 above, s 9 of the Corporations Act defines "on behalf of" in an inclusive manner, to include "on the instructions of" the relevant provisions (and particularly s 981D in its application to derivative transactions) indicate that the concept of "on behalf of" extends beyond transactions undertaken on an agency basis; and the term "on behalf of" in s 981B and s 981H has a wider meaning as a matter of its ordinary usage, extending to "the standing of one person as auxiliary to or representative of another person or thing" and to a transaction undertaken by one person "for the benefit of and in the interest" of another.
MFGA relied on the authority conferred under the relevant client agreements to pay margins to OTC counterparties in respect of hedge transactions and those agreements also provided the mechanism for closing out positions, including providing for MFGA to credit the amount payable to the relevant CFD ledger accounts (CFD client agreements, Ex L1, Tab 9, cl 8-9). Those transactions were also undertaken for the benefit of OTC clients, so far as they supported MFGA's capacity to discharge its obligations to OTC clients under the relevant client agreements. For these reasons, it seems to me that it can properly be said that MFGA undertook hedging transactions with OTC counterparties and received the proceeds of closing those transactions "on the instructions of" OTC clients, or at least that it acted as auxiliary to and for the benefit of OTC clients in undertaking those transactions and receiving those proceeds. In my view, funds returned by OTC counterparties to MFGA in respect of hedging were therefore received by MFGA in its capacity as a person "acting on behalf of the [OTC] client[s]" for the purposes of s 981A(1)(b)(iii) and were therefore monies which were required to be paid into the relevant CSAs maintained under s 981B. This position is not changed by the fact that the Liquidators have paid those monies into separate accounts pending the outcome of these proceedings.
"Investment" under reg 7.8.03(5)
GFL submits that the hedging positions taken out by MFGA are an investment of money for the purposes of reg 7.8.03(5) and accordingly are the subject of the trust created by that regulation on the appointment of administrators to MFGA. Pursuant to reg 7.8.02(2), specified investments may be made in relation to a 981B account. Regulation 7.8.02(3) provides that (except where reg 7.8.01(4) applies), a financial services licensee must not invest an amount in a way permitted by reg 7.8.02(2) unless the financial services licensee has obtained the client's written agreement as to the specified matters and the money is money to which the client is entitled. Pursuant to reg 7.8.03(5), if money in a s 981B account of the financial services licensee has been invested, the investment is taken to be subject to a trust in favour of each person who is entitled to be paid money from the s 981B account.
In my view, the term "investment" in reg 7.8.03(5) refers to an investment of funds in accordance with reg 7.8.02(2) and does not include a transaction in accordance with a client's specific direction of a client, such as would occur when a traded product is acquired on a client's instructions. As Deutsche Bank points out, reg 7.8.03(5) is directed to the situation where, for example, there are surplus funds which are invested in another type of investment to which reg 7.8.02(2) applies. I note that ASIC takes the same view in RG 212 Client money relating to dealing in OTC derivatives, [RG 212.45]-[RG212.49]. I therefore do not accept GFL's submissions in this regard.
Surplus Funds
The Plaintiffs also note that MFGA had a practice of maintaining funds that were not requiring to meet margin obligations incurred by MFGA ("surplus funds") with OTC counterparties, because of the higher interest rate offered by the counterparties and to provide a "buffer" to facilitate MFGA paying margin calls to counterparties in a short timeframe (Main Campbell Affidavit [128]). For example, the Liquidator's evidence is that total funds held by Deutsche Bank on 31 October 2011 was $52,718,000 whereas the margin required by Deutsche Bank on that date was $30,113,000 (Second Campbell Affidavit, Ex CC-8A, App F).
The Plaintiffs note the possibility that, to the extent that surplus funds were not required to meet a relevant obligation incurred by MFGA and had been withdrawn from the CSAs, they should have been returned to the CSAs. RMF submits that surplus funds left with Deutsche Bank in respect of OTC Recoveries are held on trust for the relevant clients. RMF contends that Surplus Funds were either client money used by MFGA in purported exercise of the power conferred by s 981D for a purpose which was not authorised by that section; or an investment which was not a permissible investment within the meaning of reg 7.8.02. MFGS also submits that "surplus funds" maintained by MFGA with the OTC counterparties ought to be returned to the respective CSAs (MFGS SIC [66]).
In my view, the payments which gave rise to any Surplus Funds were initially authorised by s 981D of the Corporations Act and the client directions and, when repaid to MFGA, those funds would be received by it "on behalf of" the OTC clients for the reasons noted above in respect of OTC Recoveries.
Issue 13 - Treatment of new CSAs for Recoveries
The parties also identified an issue whether any new CSAs established by the Liquidators, in which they have deposited (or will deposit) Recoveries, should be pooled with any existing CSAs, and if so, on what basis, and if not, how are the funds in any new CSAs to be distributed having regard to the Corporations Regulations or otherwise (Issue 13).
The Plaintiffs contend that the outcome of this issue should abide the outcome of Issues 11 and 12; Futures Recoveries should also be dealt with according to the pooling regime for CSAs otherwise determined by the Court; if OTC Recoveries are MFGA's money, they should be paid into MFGA's house account; and, if OTC Recoveries are trust monies, they should be dealt with according to the pooling regime for CSAs (Plaintiffs SIC [317]-[318]). RMF also submits that this issue should await the outcome of those issues. Several other parties made submissions as to this issue consistent with their submissions as to the treatment of the existing CSAs.
On the other hand, Deutsche Bank contends that the proper date for measuring entitlements is the date of payment out of the segregated accounts and that entitlements must be determined separately on the original and recoveries segregated accounts, and it follows that the old and new segregated accounts should not be pooled. MFGS submits, in the MFGS Proceedings, that the pooling of new CSAs in relation to Futures Recoveries and OTC Recoveries respectively should abide the determination of Issues 11 and 12. MFGS submits that any pooling of OTC Recoveries will (so far as Recoveries otherwise earmarked for CFD customers are concerned) require adjustment if the Court determines that the Singapore-based accounts are not to be pooled with other CSAs (MFGS SIC [68])
The findings which I have reached above suggest that, consistent with the treatment of existing CSAs, the new CSAs opened by the Liquidators should be pooled with the existing CSAs across the four Product Lines, with the Singapore-based accounts to be pooled with the Australian-based CSAs. However, the parties should have the opportunity to address this issue in submissions as to the form of orders.
Issues 14-15 - Liquidators' remuneration and expenses and costs of the proceedings
The Plaintiffs also seek an order or direction as to the appropriate source of payment and/or recoupment of the Liquidators' remuneration and expenses and MFGA's expenses in connection with administering property held by MFGA as trustee, including the CSAs, and the procedure to be adopted in connection with the payment of such remuneration and expenses, including the costs and expenses of these proceedings (Further Amended Originating Process [7]). In particular, the parties identified issues as to whether:
- the remuneration of and expenses incurred by the Liquidators in respect of their administration of MFGA relating to the CSAs and MFGA's costs during the liquidation and administration in connection with administering the property it holds as trustee, including the CSAs, should be paid solely out of MFGA's assets held beneficially, or should some part of the Liquidators' remuneration and expenses be paid out of the CSAs and Recoveries; and
- the Liquidators' costs and expenses in relation to these proceedings should be paid solely out of MFGA's assets held beneficially, or whether some part of those costs and expenses should be paid out of the CSAs and the Recoveries.
The Plaintiffs submit that the practical course is to defer these issues until after the reasons for judgment (Plaintiffs SIR [85]-[92]). They note that the representative defendants' costs are already the subject of a costs regime ordered by the Court, albeit there is an avenue for that regime to be revisited, and any such revisiting should occur after the reasons for judgment. Several other parties accepted that it was appropriate to take that course. PHRS contends that the issue of the costs, expenses and remuneration ought to be dealt with at the level of principle now rather than being deferred, but it also accepted that the result will abide by the outcome of the various issues.
There is, in my view, good reason to defer the determination of these issues where the orders which are necessary or desirable may depend on the extent of funds to which MFGA is beneficially entitled, which will in turn be affected by the matters which I have determined above. The parties should have the opportunity to address this issue in submissions as to the form of orders.
Summary
In summary:
- I will direct the Liquidators that they are justified in proceeding on the basis of four pools in the four Product Lines.
- I will direct the Liquidators in the MFGS Proceedings that they may properly proceed on the basis that the Singapore-based accounts and the Australian-based CFD CSAs may be pooled. I consider that it is also proper to make a declaration to that effect, where the issues have been fully contested on the basis of evidence led in the MFGS Proceedings.
- I will make a direction, and a corresponding declaration, that the Liquidators are justified in proceeding on the basis that foreign currency is "money" for the purposes of Pt 7.8 Div 2 of the Corporations Act and the Corporations Regulations.
- I will direct that the Liquidators are entitled to convert the funds, including funds held in the Singapore-based accounts, to Australian dollars.
- I will direct that the Liquidators would be justified in determining clients' entitlements on a contractual basis as at the Appointment Date, by reference to GLV calculated under the client agreements on the basis of 31 October 2011 mark-to-market prices. I have not accepted Jilliby's submission as to the persons who have such entitlements or PHRS's submission as to a prior-ranking claim by unsecured creditors arising by subrogation to any claim for indemnity by MFGA. The precise form of that direction will need to be addressed in submissions as to orders.
- I will direct that the Liquidators are entitled to set off positive nett account balances against negative nett account balances in all accounts owned by certain MFGA clients and that they are justified in exercising that power.
- I will direct that the Liquidators are justified in treating clients, in respect of each client account with a balance of $1 or less, as having no entitlement to participate in the CSAs or Recoveries.
- I will make a direction, and a corresponding declaration, that the Liquidators should return all client deposits which were paid into the CSAs after the Appointment Date on the basis that they were paid into such accounts in error within the meaning of reg 7.8.03(6)(a) of the Corporations Regulations.
- I will make declarations that Online FX clients and Futures clients have no right to interest on the CSAs; CFD clients and Margin FX clients are entitled to interest on the CSAs at the rates provided by MFGA in accordance with client agreements; and MFGA is only entitled to recover interest on the CSAs to the extent that monies remain in those accounts after making prior-ranking payments under reg 7.8.03(6).
- I will direct the Liquidators that Futures Recoveries are monies to which Pt 7.8 Div 2 Subdiv A applies and are held on behalf of all Futures Clients to be distributed in accordance with reg 7.8.03(6) without regard to whether a particular position was opened as agent for a particular client with a particular counterparty. I have not accepted Three Crown's submissions in that regard. I will also direct the Liquidators that OTC Recoveries are monies to which Pt 7.8 Div 2 Subdiv A applies and are held on behalf of OTC Clients in the three relevant Product Lines to be distributed in accordance with reg 7.8.03(6).
- The findings that I have reached above suggest that, consistent with the treatment of existing CSAs, the new CSAs opened by the Liquidators should be pooled with the existing CSAs across the four Product Lines, with the Singapore-based accounts to be pooled with the Australian-based CSAs. However, the parties should have the opportunity to address this issue in submissions as to the form of orders.
I will hear the parties as to the form of orders and the issues which have been reserved for further submissions above, including the Liquidators' remuneration, expenses and costs.
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Decision last updated: 29 August 2012
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