In re MF Global Australia Ltd (in liq) [2012] NSWSC 994

In re MF Global Australia Ltd (in liq) [2012] NSWSC 994

The statutory trust regime for client money under the Corporations Act applies so that the liquidators are entitled to pool CSAs by MFGA product line (including Singapore CSAs), calculate client entitlements on a contractual basis as at the Appointment Date using mark-to-market value, convert foreign currency to AUD for pro-rata distribution, set off positive and negative balances within product line, and attribute recoveries from third parties for the benefit of all clients in the relevant pool. No right of indemnity/subrogation arises in favour of unsecured creditors to defeat client claims. Interest is apportioned according to contractual terms and disclosure. Physical and...

Parties
First Plaintiff: Christopher Robert Campbell, Vaughan Neil Strawbridge and David John Frank Lombe in their capacity as liquidators of MF Global Australia Limited (in liquidation); Second Plaintiff: MF Global Australia Limited (in liquidation); First Defendant: RMF Management Services Pty Limited; Second Defendant: GrainCorp Operations Limited; Third Defendant: The GFL Group Pty Limited; Fourth Defendant: Underdog Clothing Pty Limited; Fifth Defendant: Practical Human Resource Solutions Pty Limited; Sixth Defendant: Jilliby Pty Limited; Seventh Defendant: Transmarket Trading Pty Limited; Eighth Defendant: Deutsche Bank AG; Ninth Defendant: Three Crowns Investments Pty Limited; First Defendant (mfgs Proceedings): MF Global Singapore Pte Limited (provisional liquidators appointed)
Jurisdiction
Australia
Judgment Date
29 August 2012
Procedural Posture
Directions/declaratory Relief in Liquidation (corporations Winding Up) / Interlocutory and Principal Judgment; Orders as to Form and Reserved Issues to Be Made.
Outcome
Directions made (with form of orders and some issues reserved for further hearing); key issues determined as detailed in summary paragraph 255.
Legal Topics
Liquidation of Financial Intermediary, Statutory Trusts Over Client Money, Pooling of Segregated/trust Accounts, Foreign Currency in Insolvency, Distributions to Clients and Creditors, Interest on Client Money, Set Off in Trust Bank Accounts, Right of Indemnity and Subrogation
Corporations Law Insolvency Financial Services Trusts Liquidation of Financial Intermediary Statutory Trusts Over Client Money Pooling of Segregated/trust Accounts Foreign Currency in Insolvency +4 more

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Parties

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

MF Global Singapore Pte Limited (provisional liquidators appointed)

First Defendant (mfgs Proceedings)

Procedural Posture

Directions/declaratory Relief in Liquidation (corporations Winding Up) / Interlocutory and Principal Judgment; Orders as to Form and Reserved Issues to Be Made.

Legal Issues

  1. 1 Whether liquidators can pool client segregated accounts and if so, on what basis
  2. 2 Whether foreign currency in the client accounts is 'money' for statutory trust distribution
  3. 3 Whether and when to convert foreign currency balances to AUD

Ratio Decidendi

The statutory trust regime for client money under the Corporations Act applies so that the liquidators are entitled to pool CSAs by MFGA product line (including Singapore CSAs), calculate client entitlements on a contractual basis as at the Appointment Date using mark-to-market value, convert foreign currency to AUD for pro-rata distribution, set off positive and negative balances within product line, and attribute recoveries from third parties for the benefit of all clients in the relevant pool. No right of indemnity/subrogation arises in favour of unsecured creditors to defeat client claims. Interest is apportioned according to contractual terms and disclosure. Physical and...

Court Disposition

Directions made (with form of orders and some issues reserved for further hearing); key issues determined as detailed in summary paragraph 255.

Orders

  • Liquidators may pool CSAs by product line (including Singapore-based CFD CSAs with Australian CSAs for CFDs) due to evidence of mixing.
  • Liquidators justified in treating foreign currency as 'money' subject to Pt 7.8 Div 2 for distribution and may convert all to AUD prior to payment.