Loo v Quinlan - [2021] NZCA 561

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA348/2021
[2021] NZCA 561

BETWEEN

CHOO BOON LOO
Appellant

AND

PHILIP ALEXANDER QUINLAN AND MORGAN JOHN KELLY (IN THEIR CAPACITY AS LIQUIDATORS)
First Respondents

HALIFAX NEW ZEALAND LIMITED (IN LIQUIDATION)
Second Respondent

PHILIP ALEXANDER QUINLAN AND MORGAN JOHN KELLY (IN THEIR CAPACITY AS TRUSTEES)
Third Respondents

ELYSIUM BUSINESS SYSTEMS PTY LIMITED
Fourth Respondent

JASON PAUL HINGSTON
Fifth Respondent

ATLAS ASSET MANAGEMENT PTY LIMITED (AS TRUSTEE FOR THE ATLAS ASSET MANAGEMENT TRUST)
Sixth Respondent

FIONA MCMULLIN
Seventh Respondent

ANDREW PHILLIP WHITEHEAD AND MARLENE WHITEHEAD (AS TRUSTEES FOR THE BEELINE TRUST)
Eighth Respondents

ANDREW PHILLIP WHITEHEAD
Ninth Respondent

JEFFREY JOHN WORBOYS
Tenth Respondent

HONG KONG CAPITAL HOLDINGS PTY LIMITED
Eleventh Respondent

Hearing:	23 September 2021
Court:	Kós P, Cooper and Goddard JJ
Counsel:	I Jackman SC, E A J Hyde and R J Pietriche for Appellant A Leopold SC, E Holmes and M Kersey for First to Third Respondents S Couper QC and J V Gooley for Fourth Respondent Appearances excused for Fifth to Eleventh Respondents
Judgment:	26 October 2021 at 4 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BCosts are reserved.

___________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

A cross-border insolvency. Halifax Investment Services Pty Ltd, an Australian corporation, and Halifax New Zealand Ltd were financial services providers.[1] Clients could use Halifax online platforms to acquire exchange traded financial products (such as shares) and enter into derivatives contracts. Client cash contributions, shares and other exchange traded financial products, and money and other property connected with derivatives trading, were held by Halifax on trust. Halifax however used client assets to fund their own activities, in breach of trust, and mingled client funds and assets in a manner inconsistent with those trusts. The deficiency and mingling prevented tracing of most individual customer assets. As a result, it is uncontested that client assets were (and are now) held by Halifax on trust, in a single deficient mixed fund. Thereafter the Halifax companies failed.[2]
[1]Herein referred to as “Halifax AU”, “Halifax NZ” and, collectively, “Halifax”.
[2]See [7] below.
Halifax customers had “accounts” recording the investments they had chosen to acquire through the various trading platforms operated by Halifax. The deficiency and mingling of trust funds, and the inability to trace, meant that these accounts were, for most investors, bookkeeping fictions that did not correspond with proprietary claims to specific investments of the kind recorded in those accounts. However somewhat unusually, the liquidators permitted customers to keep the nominal market positions shown in their accounts open, and retained investments that corresponded with investors’ aggregate open positions.[3] Rather than cashing up in what were seen by many investors, at the end of 2018, as adverse market conditions, liquidators allowed customers to either close out their nominal positions or hold those positions open. The value of the investments retained by the liquidators to reflect those open positions rose substantially from late 2018 to the present day.[4] Correspondingly, the nominal value…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NZCA 561
Decision Date: 26 October 2021 at 4 pm

CaseChat Overview and Summary

Choo Boon Loo appeals against the judgment of Venning J in the High Court of New Zealand in relation to the valuation date of the investment positions of certain Halifax investors. The Court of Appeal dismissed the appeal. The Court of Appeal found the Judge did not err in concluding that the proportionate entitlements of the investors should be calculated on 27 November 2018, the date Halifax New Zealand went into administration. The appeal was dismissed and costs were reserved. The Court of Appeal emphasised that the accounts (or positions) of the investors were a book-keeping fiction that did not correspond with any proprietary claim of each investor to specific investments of the kind recorded in their accounts. Each investor had an equitable charge over the mixed fund and their proportionate entitlement of each investor would be fixed as at 27 November 2018, when it came under the control of the administrators.

Orders