Krejci, in the matter of Union Standard International Group Pty Limited (in liq) [2021] FCA 1483

Krejci, in the matter of Union Standard International Group Pty Limited (in liq) [2021] FCA 1483

The statutory trust created by s 981H of the Corporations Act applies equally to moneys deposited by both trading and investing clients with Union Standard International Group Pty Ltd. Despite distinctions in USIG's records, all investing clients were actual or potential trading clients, or their funds were used to generate financial returns through leverage for trading, satisfying the 'in connection with a financial service' requirement. Due to commingling, tracing is impractical; distribution should be proportional (pari passu) among all clients. The appropriate date for calculation of entitlements is the date of entry into administration (8 July 2020).

Parties
First Plaintiff: Peter Paul Krejci and Andrew John Cummins as joint and several liquidators of Union Standard International Group Pty Limited (in liquidation) (ACN 117 658 349); Second Plaintiff: Union Standard International Group Pty Limited (in liquidation) (ACN 117 658 349); First Intervener: Andrew McCloskey; Second Intervener: Shih Kuei Cheng
Jurisdiction
Australia
Judgment Date
26 November 2021
Procedural Posture
Application by Liquidators for Directions in Liquidation / Post Liquidation Directions
Outcome
Application granted; directions issued.
Legal Topics
Statutory Trusts in Insolvency, Priority in Distribution of Liquidation Proceeds, Financial Services Licensing, Commingling of Funds, Client Money Protection
Corporations Law Insolvency Law Financial Services Law Statutory Trusts in Insolvency Priority in Distribution of Liquidation Proceeds Financial Services Licensing Commingling of Funds Client Money Protection

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Parties

Peter Paul Krejci and Andrew John Cummins as joint and several liquidators of Union Standard International Group Pty Limited (in liquidation) (ACN 117 658 349)

First Plaintiff

Union Standard International Group Pty Limited (in liquidation) (ACN 117 658 349)

Second Plaintiff

Andrew McCloskey

First Intervener

Shih Kuei Cheng

Second Intervener

Procedural Posture

Application by Liquidators for Directions in Liquidation / Post Liquidation Directions

Legal Issues

  1. 1 Whether statutory trust applies to both trading clients and investing clients' moneys
  2. 2 Priority in distribution as between trading clients and investing clients
  3. 3 Whether investing clients' moneys are 'in connection with' a financial service or product under the Corporations Act

Ratio Decidendi

The statutory trust created by s 981H of the Corporations Act applies equally to moneys deposited by both trading and investing clients with Union Standard International Group Pty Ltd. Despite distinctions in USIG's records, all investing clients were actual or potential trading clients, or their funds were used to generate financial returns through leverage for trading, satisfying the 'in connection with a financial service' requirement. Due to commingling, tracing is impractical; distribution should be proportional (pari passu) among all clients. The appropriate date for calculation of entitlements is the date of entry into administration (8 July 2020).

Court Disposition

Application granted; directions issued.

Orders

  • Within 14 days the parties confer and file agreed or competing orders and directions reflecting these reasons for judgment.
  • Liquidators are justified in treating all available funds and recoveries as subject to the statutory trust in favour of both trading clients and investing clients, with distribution to be on a pari passu basis.