'Do I really have to pay these trivial debts?' | Direct FX Trading (in liq) (No 2) [2024] NSWSC 1079

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2,653 clients deposited money with a Co, who was a trustee. Only 74 of those beneficiary clients had a balance worth over $100: [2], [3]

A liquidator, P, was appointed to the Co: [1]

P approached the Court seeking advice as to whether (i) the benefs with a less than $100 balance could be treated as having no right to participate in the dist'n of funds, and (ii) the balance could be distributed to the remaining 74 pro rata: [4]

Advice was sought pursuant to both s90-15 and s63: [6]

None of the notified less than $100 beneficiaries raised objections or appeared at the hearing: [8]

When operational, the Co engaged in various foreign currency related financial dealings. In 2019 it was placed into liquidation. As part of the liquidation, an investigation found that around $50K was held by the Co on trust for the Co’s (former) clients: [9] - [29]

The liquidator did not have banking details of the benefs: [31]

In order to make payment to each benef the liquidator (by their staff) would have to find and confirm payment details of each of them. Costs would arise from this process: [32]

A proportionality issue.

By way of example, the liquidator pointed to 48 benefs whose shared claim was $26.10; the highest individual claim from that group being $1.34: [33]

The Court traversed the relevant law relating to s90-15 and s63 applications noting the breadth of the Court’s power to give advice: [38] - [43]

P drew particular attention to authority that suggested Courts in such proceedings (which are, of course, ex parte) sometimes had to do “rough justice” with benefs’ rights which might be affected on the basis of evidence that would not necessarily sustain a claim in contested litigation: [44]

The Court gave the P the advice they sought I.e. that they would be justified in distributing only to the greater than $100 benefs. This was because (i) the very small sums held for the other benefs, (ii) the practical steps required to distribute to all benefs, and (iii) the cost of distributing to all benefs: [53]

The Court found it was significant that P had notified all creditors whose details they had, and that having done so there were no objections: [59]

P applied to have their costs paid from the outstanding balances. The Court acceded, ordering that this was justified in part because what P was doing was essentially administering a trust i.e. the order having been made, P would be indemnified from the property of the trust they were acting as trustee of: [64]

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