(2006) 202 FCR 343
- Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (as trustee for Confidens Investment Trust) [2002] NSWSC 576
(2009) 239 CLR 129
- Handberg (in his capacity as liquidator of S & D International Pty Ltd) (in liq) v MIG Property Services Pty Ltd [2010] VSC 336
(2015) 255 CLR 62
- PFL Ltd (formerly known as Palandri Finance Ltd) (admins apptd) v Public Trustee of Queensland (No 2) [2008] WASC 234
Source
Original judgment source is linked above.
Catchwords
(2006) 202 FCR 343
- Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (as trustee for Confidens Investment Trust) [2002] NSWSC 576(2009) 76 ACSR 129
- Friend v Brooker [2009] HCA 21(2009) 239 CLR 129
- Handberg (in his capacity as liquidator of S & D International Pty Ltd) (in liq) v MIG Property Services Pty Ltd [2010] VSC 336(2015) 255 CLR 62
- PFL Ltd (formerly known as Palandri Finance Ltd) (admins apptd) v Public Trustee of Queensland (No 2) [2008] WASC 234(2009) 73 ACSR 622
- Re MF Global Australia Ltd (in liq) [2012] NSWSC 994(2012) 267 FLR 27
- Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) [2011] NSWSC 91
- Re Rowena Nominees Pty LtdEx Parte Conlan (2006) 199 FLR 415
- Re SutherlandFrench Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008(2003) 59 NSWLR 361
- Re Willmott Forests Ltd (recs and mgrs apptd) (in liq) (No 2) [2012] VSC 125
Judgment (18 paragraphs)
[1]
thony Taylor and Andrew Fletcher Needham (Applicants)
Representation: Counsel:
M Oakes SC/B Lim (Applicants)
[2]
Solicitors:
K & L Gates (Applicants)
File Number(s): 2016/54337
[3]
Judgment
By a Third Amended Originating Process filed, by leave, on 27 June 2016, Messrs Taylor and Needham as liquidators appointed to several unregistered managed investment schemes apply for directions under s 601EE(2) of the Corporations Act 2001 (Cth). The scope of the application narrowed somewhat in the course of the hearing, since the liquidators, appropriately, did not press for directions as to several matters which appeared to involve questions of fact rather than matters of law, principle or any existing controversy between the parties. The application was further narrowed by the filing of the Third Amended Originating Process, after the conclusion of the hearing before me.
The liquidators rely on a lengthy affidavit of Mr Taylor sworn on 12 February 2016 to which is exhibited a voluminous bundle of documents; a further supplementary affidavit of Mr Taylor sworn on 9 June 2016; a third affidavit of Mr Taylor sworn 22 June 2016 and an affidavit of service of Ridhwaanah Iffat affirmed on 10 June 2016. The liquidators also rely on a further affidavit of Mr Taylor, dated 27 June 2016, filed by leave after the conclusion of the hearing before me, which corrected one aspect of his first affidavit. Notice of the application was given to interested persons in accordance with orders made by Brereton J on 7 March 2016, although the application was subsequently amended in respect of one issue relating to a particular investor, Mr Zhang, in a manner that is not material to the outcome and its scope was narrowed as noted above.
[4]
Factual background
I should first set out the factual background, although an application of this kind is not an occasion for findings of contested fact and the matters to which I refer below should be treated as in the nature of factual assumptions on which the Court has proceeded in determining the application. The liquidators were appointed to four unregistered managed investment schemes, which had been operated in contravention of s 601ED(5) of the Corporations Act, to which I will refer as the Good Value Scheme; the Best Fund; the Enhanced Fund; the Prestige Unit Trust ("Prestige Scheme") and Mr Taylor was appointed as liquidator of the Master Fund Scheme.
Mr Taylor's evidence (Taylor 12.2.16 [9], [51]-[55], [59]) is that the Good Value Scheme was administered by North Wave Limited ("North Wave"), a company incorporated in Vanuatu, and operated from December 2006 to December 2008; there were five investors in the scheme; an amount of USD $90,087.39 was invested and there was no "return" (in the sense noted below) from the scheme. The Court has found in other proceedings that the persons attending to the administration of that company and scheme acted at the direction of Mr Hobbs, although I treat that finding as background and not proof of the fact in this application: Idylic Solutions Pty Ltd - Australian Securities and Investments Commission v Hobbs [2012] NSWSC 1276 ("Idylic Solutions (Ward J)") at [1824]. North Wave maintained a US Dollar account ("North Wave Technocash Account") into which capital contributions received from investors in the Good Value Scheme were paid (Taylor [64]-[67]). From September 2009, North Wave also maintained a commodity trading account and a cash account ("North Wave Cadent Account") with Cadent Financial Services LLC ("Cadent") and funds invested in the North Wave Technocash Account were periodically transferred to the North Wave Cadent Account for investment (Taylor [90]-[98]).
Mr Taylor's evidence (Taylor 12.2.16 [10], [114]-[116], [123], [125]-[127], [136]-[140], [148]) is that the Best Fund was administered by GP Global Limited ("GP Global"), also an entity incorporated in Vanuatu, and operated from January 2005 to June 2009; there were five investors in the scheme; amounts of USD $180,912 and AUD $31,200 was invested and the "return" from the scheme was USD $6,519, AUD $7,397.44, and NZD $1,206.31; and substantive operational decisions in relation to GP Global and the Best Fund were made by Ms Min Hua Li acting on instructions from Mr Hobbs (Idylic Solutions (Ward J) above at [1862]-[1866]). The term "return" here requires a significant qualification, since Mr Taylor's evidence is that any "return" from the schemes (with the exception of the Good Value Scheme where no returns were paid to investors) was paid from a combination of capital contributed by investors and any profits which may have been earned by that scheme and, where profits were earned on capital, the total "return" paid to investors exceeded the total profit. Payments of that kind are consistent with what is often described as a "Ponzi" scheme. GP Global maintained a Technocash Account which operated in US Dollars, AU Dollars and NZ Dollars ("GP Global Technocash Account") into which payments were made by investors (Taylor [141]-[147]). From September 2006, GP Global also maintained four segregated trading accounts and a cash account with Cadent ("GP Global Cadent Account") and funds in the GP Global Technocash Account were periodically transferred for investment into the GP Global Cadent Account (Taylor [241]-[250].
[5]
The applicable legal principles
Before turning to the particular directions sought, I should say something as to the applicable legal principles. A direction made under s 601EE(2) of the Corporations Act is, in part, analogous to that which might be given to a liquidator under s 479 or s 511 of the Corporations Act, in order to assist a liquidator in the proper performance and discharge of his or her statutory functions and duties: Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 679; Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq) [2011] NSWSC 91 at [33]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [7]; Re Willmott Forests Ltd (recs and mgrs. apptd) (in liq) (No 2) [2012] VSC 125; (2012) 88 ACSR 18 at [51].
Early authority indicated the importance of distinguishing, in the context of a liquidator's and administrator's applications for directions, between that process and proceedings for the determination of substantive rights: Re G B Nathan & Co Pty Ltd (in liq) above at 679-680; PFL Ltd (formerly known as Palandri Finance Ltd) (admins apptd) v Public Trustee of Queensland (No 2) [2008] WASC 234; (2008) 68 ACSR 309. A somewhat broader view of the scope of the directions power was taken by Robson J in Re Mento Developments (Aust) Pty Ltd (in liq) [2009] VSC 343; (2009) 73 ACSR 622 at [49], in respect of a liquidator's application for directions under s 479 of the Corporations Act and, in Willmott Forests above at [45]-[48], Davies J treated the question as one of discretion rather than one of power. In 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, Warren CJ observed that it may be appropriate for the Court to make a direction, at least in circumstances of contest, that a liquidator would be justified in acting in accordance with an appropriate and reasonable commercial decision that he or she has made, so as to protect the liquidator from "potentially unreasonable behaviour of other parties involved [in a winding up]". It seems to me that that principle will typically be applicable where there is evidence that the views taken by a liquidator are likely to be contested, and does not warrant the making of directions by the Court merely because a liquidator proposes to make a decision, absent evidence of such a contest. There is here no evidence that any particular issue as to which the liquidators seek directions is the subject of current controversy between the liquidators and investors in the relevant schemes, with the exception of one matter raised by Mr Zhang that I will address below.
[6]
Treatment of investments made by international business companies
The liquidators identify the first general issue as to which they seek a direction, in paragraph 3 of the Third Amended Originating Process, as relating to the circumstance that each of the schemes generally accepted investments from international business companies ("IBCs") and not from individual investors (Third Amended Originating Process [3]; Taylor 12.2.16 [57]-[58], [136]-[140], [286]-[289], [382], [813]). The issue raised by this direction is whether the liquidators would be justified in treating as the true investors in the schemes the individuals who established the IBCs rather than the IBCs themselves. The liquidators identify the question of law or principle raised by this matter as:
"does the legal personality of an IBC prevent the liquidator from adjudging the individual investor who established the IBC as the true investor in a scheme and paying any distributions to the individual instead of to the IBC?"
Mr Taylor's evidence is that the IBCs were entities incorporated outside Australia, typically in Vanuatu or Anguilla, frequently for the sole purpose of investing in the relevant schemes, which did not have bank accounts into which any returns could be paid or out of which any investments could be paid. Mr Taylor's evidence is also that the scheme promoters treated the individual or individuals who established the IBCs as the true investor or investors and, where returns were paid from a scheme, the payment was made to an account held in the name of the individual who established the IBC. Mr Taylor's evidence is also that the IBCs, in the main, are now deregistered (Taylor [58]). Mr Taylor's evidence is that, in those circumstances, the liquidators propose to treat the individuals who established the IBC vehicles as the true investors in the relevant schemes. Mr Taylor also led further evidence as to the role of IBCs in respect of the Prestige Scheme and the Master Fund Scheme in his affidavit dated 22 June 2016, which indicated the views which he had formed, as a result of his investigations, that the promoters of those schemes treated the person or entity behind the relevant IBC as the true investor and paid returns in respect of those schemes to the true investor rather than the IBC; many of those IBCs did not have a bank account to which returns were or could be paid and the IBCs were, in the main, now deregistered. Mr Taylor indicated that, subject to any contrary Court order, he proposed to treat the individual or individuals who established the IBC as the true investor in the Prestige Scheme and the Master Fund Scheme.
[7]
Good Value Scheme
By paragraph 6 of the Third Amended Originating Process, the liquidators seek a direction that they would be justified in treating the amount of US$40,000 received on 6 December 2006 into the North Wave Technocash Account as an investment by the Master Fund Scheme in the Good Value Scheme. The liquidators identify the question of law or principle raised by this matter as:
"was it a breach of trust for [Mr] Collard and [Ms Min Hua Li] to direct that the transfer of USD $40,000 from Secured Bond Limited to North Wave Limited be credited to the benefit of their own IBCs, Mr Mac Incorporated and Shunfu Corporation, instead of to the benefit of the investors in the Master Fund Scheme and, if so, would the liquidators be justified in treating the amount as an investment by the Master Fund Scheme and not by Mr Mac Incorporated ([Mr] Collard) and Shunfu Corporation ([Ms Min Hua Li]), whether because the Good Value Scheme administrator holds the monies on constructive trust for the Master Fund Scheme investors, or because [Mr] Collard and [Ms Min Hua Li] would hold any distribution payable to them on constructive trust for the Master Fund Scheme investors?"
This matter is addressed in paragraphs 79-89 of Mr Taylor's affidavit. Mr Taylor refers to various documents which he has reviewed in the course of his investigation, and to the view that he has formed that the payment into the North Wave Technocash Account was an investment in the Good Value Scheme utilising funds from the Master Fund Scheme, made at the direction of entities associated with two of the promoters and administrators of the Master Fund Scheme. The conclusions that Mr Taylor has drawn from the documents he has reviewed seem to me to be reasonably based, assuming the correctness of the factual material from which they are drawn. Those conclusions have the result that the monies credited to Mr Mac Incorporated and Shunfu Corporation were, at all relevant times, held in trust for the Master Fund Scheme (and, indirectly, for the benefit of its investors) and remained subject to that trust when invested in the Good Value Scheme. Mr Mac Incorporated and Shunfu Corporation would hold any distribution paid to them on trust for the Master Fund Scheme and the direction sought by the liquidators should be made on that basis.
The direction sought in paragraph 7(a)(i) of the Third Amended Originating Process relates to the priority of the liquidators' remuneration and should be deferred to the point at which that remuneration is addressed.
[8]
Best Fund
Paragraph 10(a) of the Third Amended Originating Process seeks a direction that the liquidators would be justified in treating First Zurich Financial Limited, incorporated in Anguilla on 19 August 2002 and deregistered on 21 July 2006, and First Zurich Financial Limited, incorporated in Vanuatu on 22 March 2007, as a single international business company known as First Zurich Financial Limited ("FZF"). The liquidators identify the question of law or principle raised by this direction as:
"do the separate legal personalities of FZF (Anguilla) and FZF (Vanuatu) prevent the liquidator[s] from treating both IBCs as though they were a single IBC in circumstances where the two IBCs existed at different times and were under the control of the same person at those different times and where the [l]iquidators are not always able to reconcile which of the two IBCs made certain payments and withdrawals because the IBC is referred to only as "FZF"?"
That matter is addressed in paragraphs 158-165 of Mr Taylor's affidavit and Ex A1, Tab 52, and in paragraphs 55-59 of the liquidators' written outline of submissions. Mr Taylor refers to views that he has formed by reference to Idylic Solutions (Ward J) above, his review of documents lodged with ASIC and conversations with a proxy for FZF at the first meeting of investors in the Master Fund Scheme. It appears that FZF was the name adopted by the two entities noted above, each of which operated during a different period of time, and of both of which Mr Hobbs was the beneficial owner and controller (Idylic Solutions (Ward J) above at [1596]-[1627]; Taylor [158]-[160]).
Obviously enough, two separate legal entities are obviously not a single legal entity as a matter of law. However, it seems to me that the evidence to which Mr Taylor refers, treated for this purpose as assumed facts, supports the view that the two FZF entities were treated as a continuing entity by the promoters of the schemes and, to the extent that the liquidators propose to proceed on that basis in making distributions from the scheme, they would be justified in doing so and a direction should be made to that effect.
Paragraph 10(b) of the Third Amended Originating Process seeks a direction that the liquidators would be justified in treating Mr Hobbs as the individual investor "behind FZF". The liquidators observed, in respect of this direction, that:
"Although the direction could be characterised as one about the justification for a particular inference drawn from the available documents, the [l]iquidators might be perceived to have a conflict of interest relation to the inference that is sought to be drawn. Specifically, the [l]iquidators are appointed by orders of the Court as the receivers of [Mr] David Hobbs' assets located in Australia. The perceived conflict of interests between the [l]iquidators' capacity as liquidators of the scheme and their capacity as [Mr] Hobbs' receiver means that this direction is analogous to a direction sought in circumstances of controversy. It would be desirable for the [l]iquidators to have the Court's approval in this instance for that reason."
[9]
Enhanced Fund
The liquidators seek a direction as the appropriate treatment of individuals who were solicited to purchase shares in Barclaywest, the administrator of the Enhanced Fund. The liquidators identified the question of law or principle raised by this issue as:
"does the intermingling of share purchase funds with investor funds prevent the [l]iquidators from treating the shareholders otherwise than as investors?'
This issue is addressed in paragraph 15(a) of the Third Amended Originating Process and paragraphs 298-312 of Mr Taylor's affidavit. Mr Taylor's evidence is that he has formed the view that the promoters of the Enhanced Fund, Mr Collard, Ms Min Hua Li and Ms Wu, solicited 18 individuals to purchase shares in Barclaywest, the administrator of the Enhanced Fund (Taylor [298], [305]). Mr Taylor's evidence is that these individuals paid USD $10,000 for each share in Barclaywest and were directed to make such payment into the Secured Bond Technocash Accounts (Taylor [308], [480]) and profits on their shareholding were paid from the Barclaywest accounts in the amounts of US$129,421.38 and AU$503.25 (Taylor [306]). These views are consistent with the evidence put before the Court but should properly be treated as matters of assumption.
Mr Oakes submits that, while the funds used to purchase the shares were commingled with investor monies for the Master Fund Scheme held in the Secured Bond Technocash Accounts, the individuals were (or, at least, believed they were) purchasing shares in Barclaywest and, of the thirteen investors in Enhanced Fund, ten of those were also shareholders and received their shareholding profit from Barclaywest Accounts and not Secured Bond Technocash Accounts. The liquidators propose to treat those persons as shareholders, and seek a direction that they would be justified in not treating the shareholding as an investment in the Enhanced Fund and, where investors in the Enhanced Fund are also shareholders in Barclaywest, in making distributions in respect of their investment in the Enhanced Fund only and not in respect of their shareholding, until all investors in the fund receive 100 cents in the dollar.
It seems to me that the liquidators may justifiably take that approach, on the basis that the dealing between the relevant investors and Barclaywest was directed to an investment in shares in that entity, and that trust funds must be applied to discharging the claims of beneficiaries of the trusts prior to any surplus being dealt with. It does not seem to me that the manner in which the monies paid to acquire the shares were held affects that analysis. The direction sought in paragraph 15(a) of the Third Amended Originating Process should be made on that basis. It is not, however, apparent why Barclaywest as trustee or its shareholders would, other than by exercise of any right of exoneration or indemnity, have a claim to that surplus and I express no view as to whether such a claim exists, if the claims of investors in the Enhanced Fund are discharged in full.
[10]
Treatment of pooled or joint IBC investments in the Enhanced Fund
The liquidators identify a further issue as to which they seek a direction as to the treatment of the investments in circumstances where a number of IBC investors in a scheme pooled their respective investments during the operation of the scheme. Paragraph 15(b) of the Third Amended Originating Process seeks a direction that the liquidators would be justified in treating several individuals as investors in the Enhanced Fund rather than paying a distribution to Amazing Glory Corporation ("AGC"), an IBC in which they (or the IBCs associated with them) had pooled their investments. The liquidators identified the question of law or principle raised by this issue as:
"was the joint venture IBC, Amazing Glory Corporation, trustee for the individual IBCs which transferred their investments to it, either as a resulting trust (because of the absence of consideration on the part of Amazing Glory Corporation) or as an express trust (the mutual intention being inferred from the nature of the transaction)?"
This issue is addressed by paragraphs 314-324 of Mr Taylor's affidavit and associated documents and by paragraphs 46-50 of the liquidators' outline of submissions. Mr Taylor's evidence is that his investigations indicate that, around November 2007, at about the same time as a similar transfer in respect of the Master Fund (to which I will refer below), Hao Tai Corp (of which Ms Wu was the administrator), Anthony & Julia Corporation, BR Joyce Corp and Ying Corp transferred their respective investments in the Enhanced Fund to AGC (Taylor [314]-[324]). Mr Taylor's evidence is that the liquidators have formed the views that AGC is a joint venture IBC which pooled existing investments in the schemes, and that "returns" were paid to AGC in respect of its investment in the Enhanced Fund but were not passed on to the IBCs behind AGC and AGC had retained these returns (Taylor 12.2.16 [322], Taylor 9.6.16 [24]).
Mr Oakes rightly accepted that Mr Taylor's evidence as to these matters should be treated as analogous to the facts that would be set out in a statement of facts assumed for the purposes of giving judicial advice to a trustee. I will treat these matters as assumptions and the directions which are made should be formulated in a manner that addresses the issues of principle, rather than the assumed facts on which they are based. Mr Oakes submits that the liquidators have formed the view that, during the operation of the schemes, some investors sought to pool their respective investments in a scheme into a single joint venture IBC, by a process which appears to have involved an investor requesting a transfer of his or her respective investment in the scheme to the new IBC and the joint venture IBC holding the pooled investment in the relevant scheme.
[11]
Prestige Scheme
Paragraph 19(a) of the Third Amended Originating Process relates to a treatment of an amount of AU$300,000 paid into the Geneva Westpac Account. The liquidators identify the first of these directions as raising the same issue as paragraph 10(b) of the Third Amended Originating Process, reflecting their perceived conflict of interest as receivers of Mr Hobbs' assets in Australia, and I repeat my comment above in that respect. Mr Taylor's treatment of the first issue in his affidavit refers to matters from which he has formed the view that the amount of AU$300,000 was invested by Mr Yobo Qiu on behalf of FZF in the Prestige Scheme; it does not seem to me that this matter raises any issue of law, principle or apparent controversy, and the conclusion reached appears to be dependent on the adequacy of the factual inquiry which leads to it. It does not seem to me that it is a proper matter for a direction by the Court.
Paragraph 19(b) of the Third Amended Originating Process relates to the treatment of PJCB International Limited ("PJCB") which was the administrator of the "Integrity Scheme" as a creditor of the Prestige Scheme for the amount of US$352,000. Paragraph 19(c) of the Third Amended Originating Process relates to whether the liquidators would be justified in treating PJCB as an investor in the Prestige Scheme with an investment in the amount of US$1,450,000. The liquidators identify the question of law or principle raised by these directions as follows:
"Where Richid Yarak is adjudged by the liquidators to be an investor in the Prestige Scheme, but "returns" on that investment were paid by the Integrity Scheme, and there is no documentation about the relationship between Integrity Scheme and the Prestige Scheme in respect of returns (but where there is documentation about Integrity as an investor in Prestige), would the liquidators be justified in treating the payments by Integrity to Yarak as payments made on behalf of the Prestige Scheme, with the consequence that:
(a) to the extent the payments were a return of Yarak's capital ($200,000), Integrity is an investor in Prestige; and
(b) to the extent the payments were "returns" on investment ($352,000), Integrity is a priority creditor of Prestige?"
The liquidators also note that:
"There are alternative characterisations: for example, the payments by Integrity could be characterised as payments in breach of trust, the loss of which is not to be borne by the Prestige investors. This characterisation would, it is submitted, lead to unfair results as between the Integrity and Prestige schemes because Yarak is, in the [l]iquidators' judgment, properly to be treated as an investor in Prestige, such that the payments he received should have come from Prestige and not from Integrity."
[12]
First Secured Bond Scheme
Paragraph 23 of the Second Amended Originating Process sought several directions in respect of dealings in the First Secured Bond Scheme, which were rightly not pressed in the Third Amended Originating Process, where these matters did not seem to raise any question of law, principle or apparent controversy.
[13]
Master Fund Scheme
Paragraph 25(a) of the Second Amended Originating Process seeks a direction that the liquidator (who is only Mr Taylor in respect of the Master Fund Scheme) would be justified in treating several individuals as investors in the Master Fund Scheme, rather than paying a distribution to AGC. The liquidators identified the questions of law or principle raised by this direction as those raised by paragraphs 3 and 15(b) of the Third Amended Originating Process, namely whether the legal personality of an IBC prevents the liquidator from adjudging the individual investor who established the IBC as the true investor in a scheme and paying any distributions to the individual instead of to the IBC, and whether payments to the IBC were held on trust for the underlying investors.
This issue is addressed in paragraphs [543]-[562] and [599]-[603] of Mr Taylor's affidavit in respect of the Master Fund and by paragraphs 44-45 of the liquidators' written outline of submissions. I also addressed an issue as the treatment of investments in circumstances where a number of IBC investors in a scheme pooled their respective investments during the operation of the scheme in respect of the Enhanced Scheme above. As I noted above, Mr Taylor's evidence is that he has formed the view that AGC is a joint venture IBC which pooled existing investments in the schemes. Mr Taylor's evidence is that his investigations indicate that, around November 2007, Ying Corp, BR Joyce Corp and Profect Trading Pty Ltd each transferred their existing investment in the Master Fund Scheme to AGC (Taylor [543]-[562]). Mr Taylor's evidence is that he has also formed the view that an IBC in the name "Mr Mac Incorporated, Shunfu Corporation, First Zurich Financial Limited" ("Joint IBC") is a joint venture IBC that pooled existing investments in the schemes (Taylor [665], Ex A1, tab 285). Mr Taylor's evidence is that his investigations indicate that Hao Tai Corp, Media Ltd and Universal Assets Incorporation transferred their investments in the Master Fund Scheme to Joint IBC in February and March 2007 (Taylor [665]). Mr Taylor's evidence is that his investigations also indicate that certain "returns" were paid to the underlying IBCs behind Joint IBC in the Master Fund Scheme (Taylor [665]-[670]) and no "returns" were paid in relation to AGC's investment in the Master Fund Scheme (Taylor [599]-[603]). It seems to me that this matter raises a question of principle, as to which a direction is properly made for the reasons as in respect of the same issues addressed above. There appears to be no contest as to the identity of the individuals or the amount due to them, so a direction in a form that refers to those persons and amounts follows from the resolution of the issue of principle and should be made.
[14]
Liquidators' role as receivers
Paragraph 34 of the Third Amended Originating Process seeks a direction that the liquidators, in their capacity as receivers appointed to Mr Hobbs and Ms Wu, would be justified in receiving any distribution payments which would otherwise be payable to Mr Hobbs or Ms Wu from the various schemes. The liquidators treat this issues as raising the same issue as paragraph 10(b) of the Third Amended Originating Process, reflecting his perceived conflict of interest as receivers of Mr Hobbs' assets in Australia, and I repeat my comment above in that respect. Presumably, whether the liquidators are justified in taking that course will depend upon the terms of their appointment as receivers. It does not seem to me that the direction sought should be made, although that is not to suggest that the liquidators may not properly take that course, depending upon the scope of that appointment.
[15]
Claim by Mr Zhang
An investor in another scheme associated with Mr Hobbs, Mr Jian Zhang, who was an investor in the Master Fund and Enhanced Fund through an IBC known as BR Joyce Corp, sent correspondence to the Court in respect of this application, which the Court in turn drew to the attention of the liquidators' solicitors. The liquidators subsequently corresponded with Mr Zhang in respect of the matters raised by that correspondence, which were addressed by a further affidavit of Mr Taylor dated 22 June 2016. Mr Zhang did not appear at the hearing, having advised the Court that he was travelling overseas, and sought to have the Court have regard to the material which he had sent to it. It is difficult to follow that material, without any real assistance from Mr Zhang as to the inferences which he says should be drawn from it. However, it appears that Mr Zhang claims that he should be granted the right to recover US$80,000, which appears to relate to a payment of RMB600,000 to a relative of Ms Wu, as part consideration for the purchase of nine shares in another entity, Procash Ltd, at US$20,000 each. By his affidavit dated 22 June 2016, Mr Taylor points out that he was not appointed as liquidator of the Procash Scheme and that there are no unreconciled amounts in any of the schemes as to which he has been appointed liquidator that could represent the amount which Mr Zhang claims to have paid. Mr Taylor's evidence is that nothing in Mr Zhang's email causes him to change his view that Mr Zhang is not entitled to any further claims to the schemes over which he has been appointed, because his investigations indicate that Mr Zhang's funds were not received in those schemes. Mr Taylor indicates his view that the matters raised by Mr Zhang do not affect his proposed treatment of the transactions which are the subject of the proceedings or the orders sought by him in the proceedings.
These proceedings involve an application by the liquidators of the relevant schemes for directions, and it is a matter for the liquidators to identify those matters as to which they require such directions. It does not seem to me that the matters raised by Mr Zhang have a connection with any of the matters as to which the liquidators seek a direction, such that the Court should not make the direction that is sought. To the extent that Mr Zhang has a proper claim, whether in respect of Procash Ltd, Ms Wu, or any other person, that claim is outside the scope of this application.
[16]
Liquidators' remuneration
As I have noted in the course of this judgment, several orders (Second Amended Originating Process [7(a)(i)] and [8] (Good Value Scheme), [12(a)(i)] and [13] (Best Fund), [16(a)(i)] and [17] (Enhanced Fund), [20(a)(i)] and [21] (Prestige Scheme), and [32(a)(i)] and [33] (Master Fund Scheme) concern the liquidators' remuneration and the application in respect of those directions was stood over to allow the liquidators to notify investors of the proposed remuneration that will be sought.
[17]
Orders and costs
The liquidators should bring in short minutes of order to give effect to this judgment at the earliest opportunity. An order should be made that the liquidators' costs of this application be costs of the winding up of the schemes.
[18]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 19 April 2018
Mr Taylor's evidence (Taylor 12.2.16 [11], [271], [275], [313]-[314], [344]) is that the Enhanced Fund was administered by Barclaywest Ltd ("Barclaywest"), an entity also incorporated in Vanuatu, and operated from August 2007 to December 2008; there were thirteen investors in the scheme; amounts of USD $15,725 and AUD $317,093 were invested and the "return" from the scheme was USD$35,876.36; and substantive decisions in relation to the Enhanced Fund and Barclaywest were made by Mr Hobbs and Ms Min Hua Li (Idylic Solutions (Ward J) at [1834]-[1835], [1846], [1849]). Barclaywest maintained a Technocash Account in both US Dollars and AU Dollars (Barclaywest Technocash Account) and also maintained two sovereign accounts in US Dollars although no investor funds were paid into the sovereign accounts by investors (Taylor [290]-[297]). From August 2007, Barclaywest also maintained three segregated trading accounts and a cash account with Cadent ("Barclaywest Cadent Account") and funds in the Barclaywest Technocash Account were periodically transferred for investment into the Barclaywest Cadent Account (Taylor [325]-[327], [334]).
Mr Taylor's evidence (Taylor 12.2.16 [12], [349], [356] [358], [377], [473]) is that the Prestige Scheme was administered by Geneva Financial Ltd ("Geneva"), an entity incorporated in Anguilla, British West Indies and operated from February 2005 to March 2008; there were seven investors in the scheme; an amount of approximately USD $1.9 million was invested. The liquidators submit that the "return" from the scheme was USD $129,826. Prior to administering the Prestige Scheme, Geneva also administered an unregistered managed investment scheme known as the Smart Money Scheme from around September 2002 to September 2005. Mr Taylor's evidence is that the Smart Money Scheme was inactive for the period October 2005 to March 2008 and, after April 2008, distributions were paid out to investors in the Smart Money scheme, leaving no funds in the Smart Money Scheme (Taylor [356], [358], [365], [435]-[437]). Geneva maintained accounts with Westpac Banking Corporation in US Dollars, AU Dollars and NZ Dollars and investors in the Prestige Scheme were instructed to make payments into the US Dollar Account ("Geneva US Westpac Account") (Taylor [357], [376]). From February 2005 Geneva also maintained eleven segregated trading accounts and a cash account with Cadent ("Geneva Cadent Account") and funds were periodically transferred from the Geneva US Westpac Account to the Geneva Cadent Account (Taylor [438]-[445]). Mr Taylor's evidence is also that, from October 2007, Geneva also maintained a separate Cadent account ("Geneva FZF Cadent Account") into which the amount of US$268,500 was invested on behalf of First Zurich Financial ("FZF"), an entity controlled and beneficially owned by Mr Hobbs. The funds in the Geneva FZF Cadent Account were not commingled with any of the funds in the Geneva Cadent Account until the accounts stopped trading and were seized and paid into Court (Taylor [389]-[399], [454]-[464]).
Mr Taylor's evidence (Taylor [14], [478], [488]-[489], [499], [522], [523], [537]-[540]) is that the Master Fund Scheme, which was the largest in number of participants and value, was administered by Secured Bond Ltd ("Secured Bond"), an entity incorporated in Anguilla, British West Indies and operated from October 2004 to March 2008; there were forty five investors in the scheme; amounts of approximately USD $1,783,550 and AUD $1,214,191 were invested and the "returns" from the scheme were USD $171,437 and AUD $76,509. Mr Taylor's evidence is that Secured Bond maintained Technocash accounts in US Dollars, AU Dollars and NZ Dollars ("Secured Bond Technocash Accounts") and maintained accounts with the Bank of New Zealand in US Dollars, AU Dollars and NZ Dollars ("Secured Bond BNZ Accounts") (Taylor [480], [484], [488]). From June 2006, Secured Bond also maintained five segregated trading accounts and a cash account with Cadent ("Secured Bond Cadent Account") and funds would periodically be transferred between the Secured Bond Cadent Account and both of the Secured Bond Technocash Accounts and the Secured Bond BNZ Accounts (Taylor [771], [777], [786]).
Mr Taylor's evidence is that, from 30 September 2003 to 30 September 2004, Secured Bond also administered an unregistered managed investment scheme known as the First Secured Bond Scheme. Mr Taylor notes that the First Secured Bond Scheme had 14 investors; funds invested in the First Secured Bond Scheme were periodically transferred from the Secured Bond BNZ Accounts to Preserved Investment Group (PIG) and KJB Trust Foundation (KJB) for investment; the majority of the funds transferred from the First Secured Bond Scheme to PIG or KJB were subsequently returned to the First Secured Bond Scheme; and some funds were also transferred to another related unregistered managed investment scheme known as Elite Premier Option Two Unit Trust (EPOT), from which no recoveries have been made (Taylor [497]). The First Secured Bond Scheme ceased operating on 30 September 2004; US$69,222 was rolled over from the First Secured Bond Scheme into the Master Fund Scheme, representing an investment by REC International in the amount of US$19,222 and an investment by Guo Zhen Corporation in the amount of $50,000; and the remaining funds which had previously been in the First Secured Bond Scheme were withdrawn by investors (Taylor [499]-[520]). Mr Taylor's evidence is that, after the First Secured Bond Scheme ceased to operate, Secured Bond administered the Master Fund Scheme. Mr Taylor's evidence is that there were also a number of "intra investor" transfers to the Master Fund Scheme, where investors who had invested in the Master Fund Scheme purported to transfer some or all of their investment to other investors in the Master Fund Scheme (Taylor [542]).
The liquidators also submit, and I accept, that the several schemes were related because Mr Hobbs ultimately controlled each of them, either directly or through promoters who acted under his direction, and the schemes were related also because of a number of co-investments and commingling of funds between the schemes. The Master Fund Scheme was wound up on 28 May 2012, on the application of the Australian Securities and Investments Commission in proceedings 2007/00258119, by orders made under s 601EE of the Corporations Act and Mr Taylor was appointed as liquidator of the Master Fund Scheme (Taylor [2], Ex A1, tab 1). The Good Value Scheme, the Best Fund, the Enhanced Fund and the Prestige Scheme were wound up on 21 February 2013, also on ASIC's application and Messrs Taylor and Needham were appointed joint and several liquidators of those schemes (Taylor [34], Ex A1, tab 10). Mr Taylor and Mr Needham were also appointed as the receivers to the assets situated in Australia of persons associated with the schemes, Ms Hui Min ("Nancy") Wu, Mr David Hobbs and Mrs Jacqueline Hobbs (Ex A1, tab 10, order 38).
Mr Taylor's evidence is that the funds held by the liquidators and estimated to be available for distribution to investors in each Scheme are derived principally from the creditor balances of the North Wave Cadent Account (AUD $127,067.33 - Good Value Scheme); the GP Global Cadent Account (AUD $116,050.76 - Best Fund); the Barclaywest Cadent Account (AUD $194,370 - Enhanced Fund); the Geneva Cadent Account (AUD $522,050.53 - Prestige Scheme); the Secured Bond Cadent Account (USD $963,765.80 - Master Fund Scheme) and the Secured Bond Technocash Accounts (USD $374.04 and USD $1,936 - Master Fund Scheme) (Taylor [105]-[106], [262]-[263], [340]-[341], [465]-[469], [788]-[789], [853], [875]). Those accounts were closed and their balances transferred to the Supreme Court of New South Wales Trust Account following the intervention of ASIC, and funds were subsequently transferred to the liquidators (Taylor [788]-[789]).
Mr Oakes, with whom Mr Lim appears, for the liquidators rightly submits that s 601EE(2) of the Corporations Act also extends to authorising the Court to make "any orders it considers appropriate for the winding up of" a managed investment scheme operated in contravention of s 601ED(5) of the Corporations Act. Mr Oakes also rightly notes that that power is expressed in very wide terms and enables the Court "to settle or prescribe any aspect or element of the basis for winding up or the winding up process which it is necessary to supply because that element cannot be obtained from any other source": Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (as trustee for Confidens Investment Trust) [2002] NSWSC 576; (2002) 42 ACSR 240 at [12]-[13]. The power also extends, in circumstances where the rights and duties of the investors in a scheme are not fully defined in the scheme documents available to the liquidator, to making orders "by way of clarification or refinement of the legal rights and obligations or by way of procedural facilitation" and also to giving directions to the effect that the liquidator of a scheme "would be justified" in taking a proposed course of action: Australian Securities and Investments Commission v Idylic Solutions Ltd [2009] NSWSC 1306; (2009) 76 ACSR 129. In Australian Securities and Investments Commission v Idylic Solutions Ltd [2009] NSWSC 1306; (2009) 76 ACSR 129 ("Idylic Solutions (Barrett J)"), Barrett J referred to several decisions where directions had been made under s 601EE(2) of the Corporations Act, so as to give "guidance and protection" to a person administering a winding up of an unregistered investment scheme. His Honour observed that, after the import and effect of the relevant scheme documents had been ascertained, and the circumstances considered to "discover whether general law principles supplement in a meaningful way the results of analysis of the documents", that section also allowed the Court to supply an additional element necessary to effect the winding up, by way of clarification or refinement of legal rights and obligations or by way of procedural facilitation. His Honour also noted that an overriding principle is that orders under that section should not sanction the release of funds to persons who had no entitlement to them: Australian Securities and Investments Commission v Edwards [2009] QSC 360. Orders made under that section confirm that there is a reasonable basis for a liquidator proceeding in a particular way without determining rights inter partes: Idylic Solutions (Barrett J) above at [91].
Mr Oakes points out that, in Idylic Solutions Ltd (Barrett J) above, Barrett J made directions that the liquidators of other schemes, in which Mr Hobbs was also involved, would be justified in this approach and noted (at [27]) that the payment of "returns" by the administrators of those schemes to the individuals behind the IBCs appeared to have occurred with the IBCs' consent such that they could be treated as having received the benefit of those returns. It seems to me that the direction sought by the liquidator as to this matter should be made for these reasons. However, the form of that direction will need to be amended to remove the language "adjudged by the liquidators to be the true investors", since the Court cannot sanction a subjective assessment of the matter by the liquidators, as distinct from the objective assessment of those persons who invested through particular IBCs.
Several directions sought in the Third Amended Originating Process relate to the manner of distribution of assets in the schemes. This issue is initially raised in respect of the Good Value Scheme by paragraph 7(a)(ii) of the Third Amended Originating Process. The proposed method of distribution for that scheme is a pari passu distribution in proportion to the investors' respective unit holdings (Taylor [112]). The liquidators identify the question of law or principle raised by this issue as:
"is there a trust relationship between the administrator of the Good Value Scheme and the investors in the scheme such that a rateable distribution is appropriate?"
An issue whether the liquidators would be justified in calculating the pari passu distribution on the basis that investors must first bring into hotchpot any "returns" that they received during the operation of the scheme, which arises in respect of other schemes and which I will address below, does not arise in respect of the Good Value Scheme, from which no "returns" were paid (Taylor [108]).
I will refer to the general background to this issue here and address the relevant funds separately below. Mr Taylor's evidence is that the various investors in the schemes contributed capital to the relevant scheme by paying money into a nominated account in the name of the scheme administrator. With the exception of the Good Value Scheme (in relation to which the liquidators do not have equivalent documentation) (Taylor [56]) each scheme was documented by an agreement (Taylor [115] (Best Fund), [273] (Enhanced Fund), [372]-[373] (Prestige Scheme), [527] (Master Fund Scheme)) and in some cases (but not the Prestige Scheme) a private placement memorandum (Taylor [128]-[130] (Best Fund); [272], [277]-[279] (Enhanced Fund); [372]-[376] (Prestige Scheme); [524] (Master Fund Scheme)), which outlined the basis of the investment. Each agreement was effectively structured in the same way. Mr Oakes refers, by way of example, to the terms governing investments in the Best Fund Scheme included those set out in the Best Fund Private Placement Memorandum Prospectus (Best Fund Memorandum) and a "Contract of Administration of Private Placement Investment" (Best Fund Contract of Administration) (Taylor [113], [132]). The Best Fund Memorandum contained the following statements:
"GP Global Ltd's Best Fund is a pooled investment vehicle. When you invest in Best Fund, you pool your money with all other investors. Your investment amount is defined by contract"
…
"GP Global Ltd is the administrator of the pooled investment. GP Global Ltd does not retain the investor's money during the term of the investment. Your investment is forwarded to an account held by the issuing fund manager." (Taylor [128]-[129])
The Best Fund Contract of Administration in turn provided that each investor granted a "limited power of attorney" to GP Global to pool a specified amount of US dollar capital contribution to a "private placement investment" (Taylor [133]).
Mr Oakes submits and I accept that, to determine the appropriate method for distributing the available funds to investors, it is first necessary to characterise the relationship between the investors and the schemes. Mr Oakes also submits, and I also accept for the reasons noted below, that the relevant schemes were structured such that an investor had a beneficial interest in the totality of the pooled funds in the relevant scheme, such that "the prima facie position must be that the proceeds of realisation by the liquidator should be allocated pro rata to the contributions of the several investors, so that losses are likewise borne pro rata": Idylic Solutions (Barrett J) above at [47]. Mr Oakes also submits, and I accept, that the documents to which I have referred above indicate that each investor intended his or her investment to be pooled or commingled with the funds contributed by other investors and sought the advantage of aggregation for the investment, and that the common intention of the investor and the promoter or administrator of the relevant scheme was that the investor should "obtain an interest in the whole fund made up of the totality of contributions" together with accretions and diminished by any losses arising from the deployment of the aggregated funds: that characterisation is consistent with the views reached in respect of similar schemes in Idylic Solutions (Barrett J) above at [45].
Mr Oakes submits that the intention disclosed in the scheme documents is consistent with the creation of an express trust: Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 at 502-503; Twinsectra Limited v Yardley [2002] 2 AC 164 at [13], [68]-[69] and [73]-[76]; Shortall v White [2007] NSWCA 372 at [24]-[29]; Quince v Varga [2008] QCA 376 at [25]-[40]; Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6; (2015) 255 CLR 62. Mr Oakes submits that the pool of capital contributed by investors in each scheme was a mixed fund held on express trust by the relevant scheme administrator for investors in that scheme, subject to the power to invest the funds in accordance with the terms of the applicable memorandum and Contract of Private Placement Administration, and could not be appropriated by the scheme administrator or applied for any purpose other than investment of the kind and on the basis described in the relevant memorandum. Mr Oakes in turn submits that funds paid by an investor could be mixed with funds paid by other investors, but each investor retained a beneficial entitlement to the pool to the extent of their own contribution, which was defined by reference to a unit certificate or contract. Mr Oakes submits that the reference in each memorandum to "Trans Management Corporation" as the trustee does not alter or avoid this conclusion, and that funds paid by the investors and held in an account in the name of a scheme administrator were held on express trust for the investors in that scheme (as a group). Mr Oakes also points out that, in Idylic Solutions (Barrett J) above, which concerned similar schemes, Barrett J held (at [41]-[46] that the common investment pools created by other schemes controlled by Mr Hobbs, on similar terms to the present schemes, were held on trust for the investors and did not accept an alternative characterisation of the relationship as a merely contractual relationship between the investor and the administrator of each scheme.
Mr Oakes submits that, alternatively, the investors retained the beneficial ownership of funds they subscribed in response to the relevant memorandum on resulting trust, on the basis that there was a transfer of funds to the scheme administrator, who received them in trust, to hold on terms that have not wholly divested the investors of their interest in the funds: ASIC v Tasman Investment Management Ltd [2006] NSWSC 943; (2006) 202 FCR 343 at 355 [53]; Twinsectra Ltd v Yardley above at [91]-[92] and [100].
Turning now specifically to the Good Value Scheme, Mr Taylor's evidence is that there is no evidence of any express terms on which investors invested funds in the scheme (Taylor [56]), although the evidence suggests that the administrator of the scheme pooled the investment funds for deployment in the North Wave Cadent Account (Taylor [91]-[106]). On that basis, and despite the absence of documents evidencing an express trust, Mr Oakes submits that the Court should infer that the relationship between the investors in the Good Value Scheme and the administrator of that scheme was, as with the other schemes, one of trust. It seems to me that inference is properly drawn given the similarity of the relevant arrangements.
It seems to me that a direction should properly be made confirming that the liquidators would be justified in proceeding, in respect of the Good Value Scheme (and other schemes to which I will refer below) on the basis of a pari passu distribution among investors in the scheme, in proportion to their unit holdings, and subject to the issues of treatment of returns in respect of other schemes that I will address below. It seems to me that that approach is reasonably and properly taken by the liquidators, consistent with Mr Oakes' submissions and the reasoning in Idylic Solutions (Barrett J) above, on the basis that the relevant arrangements were express trusts, or at least gave rise to a resulting trust so far as investors placed funds in the scheme administrator's control for a limited purpose; the arrangements contemplated the pooling of funds within the relevant trust constituted by its scheme as between the investors; and that treatment of losses and gains on a pro rata basis is consistent with that intention, and with the approach which will commonly be adopted in the case of a shortfall in a fund held on trust for several persons. I should note, however, that the form of the direction sought in paragraph 7(a)(ii) of the Third Amended Originating Process is not appropriate to reflect this direction as to the issue of principle, so far as it seeks to extend to a distribution of amounts on the basis of the liquidator's judgment as to who are investors in the relevant schemes and what are their investments. These are questions of fact and are not determined by this application. The form of direction sought should be amended accordingly.
Paragraph 7(b) of the Second Amended Originating Process, which sought a declaration that, in paying distributions to investors, the liquidators would be justified in applying the exchange rates prevailing at the time the payments were made, was not pressed in the Third Amended Originating Process.
Paragraph 8 of the Third Amended Originating Process relates to the liquidators' remuneration and was deferred.
This matter is addressed in paragraphs 170-172 of Mr Taylor's affidavit and in paragraph 55 of the liquidators' written submissions, which does little more than assert that proposition. Mr Taylor refers to findings made in Idylic Solutions (Ward J) above as to Mr Hobbs' ownership and control of the two FPZ entities and indicates that he proposes to treat Mr Hobbs as "the individual investor behind FZF". It seems to me that the language of the direction sought, adopting the concept of "behind FZF", is too imprecise to allow a direction to be made in that form. However, it seems to me that the liquidators would be justified in proceeding on the basis, consistent with the findings of Ward J, that Mr Hobbs had an ownership interest (of at least 50% in the case of FZF Anguilla) and controlled the two FPZ companies, and a direction could properly be made to that effect. I note, however, that the basis on which the liquidators seeks this direction may raise a question as to whether they should properly continue as receivers of Mr Hobbs' assets, if they now perceive that role to be in conflict with their role as liquidators of the schemes.
Paragraph 10(c) of the Third Amended Originating Process seeks a direction that the liquidators would be justified in treating an investment held by FZF in the Best Fund in the amount of US$60,528.86 as an investment by the Master Fund Scheme in the Best Fund for an equivalent amount. The liquidators identify the question of law raised by this direction as "was there a breach of trust (see analogously Order 6)?". The liquidators also submit that, as this involves FZF, their perceived conflict of interest is potentially engaged, and I refer to my comment above in that respect.
This matter is addressed in paragraphs 179-190 of Mr Taylor's affidavit and in paragraph 59(a) of the liquidators' outline of submissions. Mr Taylor's investigations indicate that FZF purported to make two investments in the Best Fund, the first in the amount of US$45,096.71 and the second in the amount of US$15,400.15 (Taylor [173], [177]) and was also an investor in the Master Fund Scheme (Taylor [179]). Each of these payments was made from the Secured Bond Technocash Account, being the account maintained for the operation of the Master Fund Scheme. However, no corresponding deductions were made from FZF's investment in the Master Fund Scheme. The liquidators have formed the view that Mr Hobbs then made two withdrawals for his own personal use, in the amounts of NZD $19,000 and USD $12,600, from FZF's purported investment in the Best Fund (Taylor [181]-[188]).
This direction is sought on the basis that the amount of US$60,528.86, which approximate to the US$45,096.71 and US$15,400.15 invested by FZF in the Best Fund were drawn from the totality of the pooled funds in the Master Fund Scheme and not FZF's share of the pooled funds, where no reduction was made to FZF's investment in the Master Fund Scheme to reflect the investment in Best Fund, and where the Master Fund Scheme received no benefit from Mr Hobbs' withdrawal of funds from the Best Fund. Mr Oakes also refers to Idylic Solutions Limited (Barrett J) above at [88], where his Honour observed that:
"Where the administrators of one scheme applied funds of that scheme in 'purchasing' investments held by a third party in the other scheme, the first scheme should be regarded as having an interest in the second scheme equivalent to that which the third party would have had but for the 'purchase'".
The approach which the liquidator proposes reflects the application of the principle noted by Barrett J to the facts to which Mr Taylor refers; and, assuming the correctness of those facts, then it seems to me that the liquidators are justified in taking that approach. The same result would be reached on the basis that the monies invested by FZF in the Best Fund were, at all relevant times, held in trust for the Master Fund Scheme (and, indirectly, for the benefit of its investors) and remained subject to that trust when invested in the Best Fund. FZF would hold any distribution paid to it on trust for the Master Fund Scheme. The direction sought by the liquidators should accordingly be made.
Paragraphs 10(d)-(e) of the Second Amended Originating Process relate to the treatment of investments made by Xiong-Qi International Biotechnology Co Limited or Qing Hu Dong in the Best Fund and the treatment of an investment by Yang Wen Xiong in the Best Fund. This relief was rightly not pressed in the Third Amended Originating Process, where this matter did not raise any question of law or principle and there is no evidence that it is presently contentious. A direction previously sought in paragraph 10(f) of the Second Amended Originating Process in respect of the treatment of Mr Zhang as an investor in the Best Fund was also not pressed.
Paragraph 11 of the Third Amended Originating process seeks a direction that the liquidator would be justified in treating the amount of US$26,494.17 of any entitlement of Mr Hobbs to a distribution in the winding up of the Master Fund as an amount owing to the Best Fund, in priority to any distributions being paid from the Master Fund to its investors. The liquidators identify the question of principle raised by this direction as:
"where the [l]iquidators can "trace" sums transferred at the direction of [Mr] Hobbs from the pooled funds of the Master Fund to the Best Fund and then withdrawn for Hobbs' personal use, would they be justified in deducting those sums from any distribution he would notionally receive in the winding up of the Master Fund and credit the sum to the Best Fund?"
The liquidators also identify an additional reason for direction that, as this issue involves Mr Hobbs's entitlement to distributions, their perceived conflict of interest is potentially engaged, and I repeat my comment above in that respect.
This issue was addressed in paragraph 190 of Mr Taylor's first affidavit, and Mr Taylor corrected that affidavit in his further affidavit dated 27 June 2016 to indicate the conclusion that he had formed that amounts transferred from the Secured Bond Technocash Account to the GP Global Technocash Account, and credited as an investment for the benefit of FZF without changing FZF's entitlement in the Master Fund amounted to intermingled investor monies of the Master Fund Scheme that were transferred to the Best Fund in breach of trust. Again assuming the correctness of the facts to which Mr Taylor refers, these monies were, at all relevant times, held in trust for the Master Fund Scheme (and, indirectly, for the benefit of its investors) and remained subject to that trust when invested in the Best Fund. It seems to me the liquidator would be justified in proceeding on the specified basis and a direction should be made to that effect.
Paragraph 12(a)(i) of the Third Amended Originating Process relates to the priority of the liquidators' remuneration and should be deferred until the question of that remuneration is addressed.
The liquidators also seek directions in respect of several schemes as to whether they would be justified in calculating the pari passu distribution to investors on the basis that investors must first bring into hotchpot any "returns" that they received during the operation of the scheme. This issue is raised by paragraph 12(a)(ii) of the Third Amended Originating Process in respect of the Best Fund. The liquidators identify the question of law or principle raised by this direction as being the same as for paragraph 7(a)(ii) of the Third Amended Originating Process, which I have addressed above, and also whether:
"an investor's equitable entitlement to participate in a pro rata distribution contingent on him or her first bringing into "hotchpot" amounts received by way of "return" out of the capital of the scheme?"
Mr Oakes points out that the effect of this proposed method is that any "returns" paid during the period of the operation of a scheme, which were in fact paid from capital, are treated as a preliminary distribution in the winding up of each scheme. The appropriateness of such an approach was considered in Idylic Solutions (Barrett J) above at [61]-[78] where, as here, the purported "returns" "were not in truth distributions of profits and were paid … not in accordance with the basis on which each scheme had been promoted and established" (at [76]). His Honour there observed (at [77]) that, consistent with the equitable maxims that "equity is equality" (understood as a proportionate equality) and that he who seeks equity must "do equity", those investors who received "returns":
"must, as against the other persons interested in the pooled fund as a whole, do equity by giving up the advantage of the 'returns' before participating rateably in what remains of the fund."
Mr Oakes also submits, consistent with the approach adopted in Idylic Solutions (Barrett J) that the personal equities reflected in the application of the hotchpot principle arise because investors who received "returns" would be unfairly advantaged, as against investors who did not, if they were entitled to keep those amounts and then share rateably in the reduced pool of capital that remains: Re Rowena Nominees Pty Ltd; Ex Parte Conlan (2006) 199 FLR 415 at [71]. The equitable entitlement to surplus scheme funds of an investor who already received "returns" is of lower priority to the equitable entitlement of an investor who did not receive "returns", but may become of equal priority if those "returns" are accounted for in the winding up: Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 at [183]; Re Idylic Solutions (Barrett J) at [77]. Mr Oakes submits that the requirement to bring "returns" into hotchpot is analogous to the requirement for a plaintiff relying on an equity giving rise to a right of contribution to do equity by being ready, willing and able to pay his or her share of the coordinate liability: Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 at [60] per French CJ, Gummow, Hayne and Bell JJ.
Mr Oakes submits, and I accept that bringing any "returns" into hotchpot is therefore a precondition to investors being entitled to participate equally with all other investors in the distribution of the available net funds in proportion to their respective capital contributions to the relevant scheme. Mr Oakes points out that the liquidators had also considered, but rejected, whether it would be appropriate to distribute between investors pari passu in proportion to their respective unit holdings; or distribute between investors pari passu in proportion to their respective unit holdings, but on the basis that investors had during the period of operation of the schemes redeemed units equivalent to the value of the total amount of "returns" paid to them by the relevant scheme administrator.
It seems to me that the approach which the liquidators propose to adopt in respect of the treatment of "returns" from the Best Fund, and the schemes generally, is consistent with the authorities, which were comprehensively reviewed in Idylic Solutions (Barrett J) and plainly equitable to investors in the relevant schemes in the circumstances, where the other approaches considered by the liquidators have the capacity to advantage earlier investors who received greater "returns" and disadvantage later investors. A direction should be made that the liquidators would be justified in proceeding on that basis, but the particular direction sought will need to be amended to remove the concept of "adjudged by the liquidators" for the reasons noted above.
Paragraph 12(b) of the Third Amended Originating Process sought a direction, in respect of the Best Fund, that the liquidators would be justified, when paying distributions to investors, in applying the exchange rates prevailing at the time the payments were made. The liquidators identified the question of principle raised by this issue as:
"where the liquidator is to pay distributions in Australian dollars, is an amount received by an investor by way of "return" out of the capital of the scheme, and therefore to be brought into hotchpot, properly calculated as the Australian dollar equivalent of that amount at the time it was paid to the investor?"
No evidence or submissions were made as to that matter and it does not seem to me that direction should presently be made.
Paragraph 13 of the Second Amended Originating Process relates to the liquidators' remuneration and was deferred.
Mr Oakes identifies the issue as whether the liquidators would be justified in treating the original IBC who invested in the relevant schemes, but later transferred their entitlement to a joint venture IBC, as being entitled to prove in the winding up of that particular scheme for the amount which was transferred to the joint venture IBC. Mr Oakes submits that the basis for this approach is that the joint venture IBC was trustee for the underlying IBCs who transferred their investments, either as a resulting trust, because of the absence of consideration given by the joint venture IBC for the investments transferred to it, or as an express trust on the basis that the mutual intention to create that trust should be inferred from the nature of the transaction. Mr Oakes submits that, on the same basis, the liquidators would be justified as treating each underlying IBC as having received "returns" only to the extent that those "returns" were actually paid to the underlying IBC and not simply to the joint venture IBC without being passed on, consistently with the joint venture IBC's position as trustee. Mr Oakes submits that, where Ms Wu was the administrator of AGC, which retained returns from the Enhanced Fund contrary to the trust for the benefit of the pooled investors, the liquidators would also reasonably treat those "returns" as having flowed to Ms Wu's investment in AGC (by her IBC, Hao Tai Corp) and that other investors pooled in AGC's investment in the Enhanced Fund should be permitted to prove in the winding up of the Enhanced Fund for the full amount of their investment unaffected by the "returns" paid to AGC.
On the basis of the facts identified by the liquidators' investigations, treated as matters of assumption rather than findings of the Court, it seems to me that the liquidators would be justified in taking that approach. It seems to me that the pooling of several investments in the joint venture IBC should be treated as having given rise to an express trust or a resulting trust, by parity of reasoning with that with which investments in the schemes give rise to an express trust or resulting trust. It seems to me that it is justifiable, in that situation, for the liquidators to treat the underlying investors as having received a return only where that return was in fact received, and not where it was paid to the IBC and not passed on to them. Where, as I have noted above, the schemes generally were administered on the basis that returns on the scheme were paid to the ultimate investor, rather than to the IBC, it is consistent with that approach that the returns paid to AGC and not passed on to the underlying IBCs or investors should be treated as having flowed to Hao Tai Corp and Ms Wu, and accounted for as a deduction from its or her entitlement from the Enhanced Fund. The result reached in that way is consistent with an adjustment to recognise claims that the underlying investors would have against Hao Tai Corp or Ms Wu, so far as amounts received by AGC have been appropriated for its or her benefit, rather than passed on to individual investors. There appears to be no contest as to the identity of the individuals or the amounts due to them, so a direction in a form that refers to those persons and amounts follows from the resolution of the issue of principle and should be made.
Paragraph 16(a)(i) of the Third Amended Originating Process relates to the priority of the liquidators' remuneration and should be deferred until the question of that remuneration is addressed. Paragraph 16(a)(ii) of the Third Amended Originating Process raises the issue whether the liquidators would be justified in adopting a pari passu distribution on the basis that investors must first bring into hotchpot any "returns" that they received during the operation of the Enhanced Fund is raised by. That direction should be made for the same reasons it should be made in respect of the Best Fund. Paragraph 16(b) of the Second Amended Originating Process relates to the application of exchange rates in respect of distributions in the Enhanced Fund. No such direction should presently be made, for the reasons I have indicated above in respect of the corresponding direction sought as to the Best Fund.
Paragraph 17 of the Third Amended Originating Process relates to the liquidators' remuneration and was deferred.
Mr Taylor's treatment of these issues in his affidavit refers to dealings involving Mr Yarak, by reference to which Mr Taylor has formed the view that Mr Yarak had received payments from another scheme, the Integrity Scheme, in respect of his investment in the Prestige Scheme, and indicates that he proposes to treat PJCB (as administrator of the Integrity Scheme) as a creditor of the Prestige Scheme for returns paid by PJCB to Mr Yarak on behalf of the Prestige Scheme, and also to treat PJCB as an investor in the Prestige Scheme for a capital amount returned to Mr Yarak on 28 May 2007 by PJCB, apparently on behalf of the Prestige Scheme, and to treat PJCB as an investor in the Prestige Scheme for an amount of US$1,450,000. It seems to me that, assuming the correctness of the facts to which Mr Taylor refers, the inferences which he has drawn from them are reasonably based, and the approach which he proposes to adopt is also justifiable in the circumstances. To the extent that funds of PJCB, in its capacity as administrator of the Integrity Scheme, have been used to discharge a liability of the Prestige Scheme to Mr Yarak for "returns" payable to Mr Yarak, payment can justifiably be treated as giving rise to an obligation of reimbursement by the Prestige Scheme, such that PJCB should be treated as a creditor of the Prestige Scheme on the amount of the returns that it has paid out on its behalf. To the extent that PJCB has paid out the capital value of the investment in the Prestige Scheme to Mr Yarak, then it should be treated as standing in Mr Yarak's shoes as an investor in the Prestige Scheme in that amount. Assuming the correctness of those facts, a direction should therefore be made in the form of paragraphs 19(b)-(c) of the Third Amended Originating Process.
Paragraph 19(d) of the Third Amended Originating Process relates to whether the liquidators would be justified in treating Mr Hobbs as an investor in the Prestige Scheme for an amount equivalent to 16.48% of the pool of funds, on the basis that a payment of US$213,697.39 was not mixed with other investments. The liquidators identify the question of law or principle raised by these directions as follows:
"In circumstances where an investment of FZF was not pooled with Prestige funds, but became mixed with investor funds upon its payment into Court by Cadent, would the Liquidators be justified in treating the investment as not pooled with Prestige funds?"
This issue is addressed in paragraphs 454-464 of Mr Taylor's affidavit which sets out the matters from which he has drawn an inference that he should admit FZF as an investor in the Prestige Scheme on the basis that certain funds were not mixed. Paragraph 474 in turn refers to the basis on which Mr Taylor has derived the percentage interests of pooled investors and FZF in the Prestige Scheme. It seems to me that these matters depend on questions of fact, rather than inferences to be drawn from the underlying facts; they raise no question or law or principle; and it is not clear whether they are controversial and, if they are controversial, whose interests would be adversely affected by proceeding on the basis which the liquidator proposes. It does not seem to me that that direction can properly be made by the Court.
Paragraph 20(a)(i) of the Third Amended Originating Process relates to the liquidators' remuneration and should be deferred until the question of that remuneration is addressed. Paragraph 20(a)(ii) of the Third Amended Originating Process appears to raise the same issue as the direction sought in paragraph 19(b) of the Second Amended Originating Process, relating to an amount paid by PJCB to Mr Yarak, which Mr Taylor has concluded was paid on behalf of the Prestige Scheme. I have addressed that issue above. However, a direction in the form of paragraph 20(a)(ii) should not be made in the form proposed, since it would depend on the direction as to Mr Hobbs' interest in the Prestige Scheme, which I have not made for the reasons set out above. If a more limited direction is sought, consistent with paragraph 19(b) of the Third Amended Originating Process, that PJCB should be treated as a creditor of the Prestige Scheme, then the direction could be made in that form.
Paragraph 20(a)(iii) of the Third Amended Originating Process relates to the calculation of a pari passu distribution on the basis that investors in the Prestige Scheme must first bring into hotchpot any "returns" that they received during the operation of the scheme. That direction should be made, but limited to the applicable principle and omitting reference to amounts "adjudged" by the liquidators, for the reasons set out above in respect of the Best Fund. I note, for completeness, that the direction previously sought in paragraph 20(a)(iv) of the Second Amended Originating Process in respect of an adjustment of AU$955,986.27 for funds already received by PJCB was not pressed in the Third Amended Originating Process.
Paragraph 20(b) of the Second Amended Originating Process deals with the question whether distributions to investors in the Prestige Scheme should be paid at exchange rates prevailing at the time when the payments are made. I do not consider that I should make that direction, for the reasons set out above in respect of other schemes. I note, for completeness, that direction previously sought in paragraph 20(c) of the Second Amended Originating Process in respect of distributions to investors in the Smart Money Scheme were not pressed in the Third Amended Originating Process.
Paragraph 21 of the Second Amended Originating Process relates to the liquidators' remuneration and was deferred.
The liquidator did not press the directions sought in paragraphs 25(c) and 25(d) of the Second Amended Originating Process and addressed in paragraphs 580-597 of Mr Taylor's affidavit in the Third Amended Originating Process, and it again seems to me that he was correct in that course, where it does not seem to me that these matters raise any question of law, principle or apparent controversy. Directions initially sought in paragraphs 26-27 of the Amended Originating Process, in respect of the claimed reinvestment of "returns" to certain investors by subscribing to additional units in the Master Fund Scheme and in respect of Mr Zhang are also not pressed.
Paragraph 28 of the Third Amended Originating Process relates to the treatment of investments by four entities, and raises a question of principle as to whether the investments made through IBCs can be treated as investments by individuals in the Master Fund Scheme. This issue is addressed in paragraphs 622-657 of Mr Taylor's affidavit. A direction sought as to AC Global was not pressed but the direction sought as to the other investors was pressed. Mr Taylor's evidence is that he has formed the view that the relevant investors, Well Advise Investments Ltd, Win Shung International Inc, Tianchi Co Ltd, and Yong Xin International Trading Investment Co Ltd, made cash payments or transfers totalling USD $139,986 which were intended to be investments in the Master Fund Scheme but which were not ultimately received into the Master Fund Scheme accounts (Taylor [622]-[657]) and at least some of these payments were made to Ms Min Hua Li, a promoter of the Master Fund Scheme (Taylor [623]-[624] (AC Global), [641] (Win Shung), [646] (Tianchi), [655] (Yong Xin)).
The liquidator seeks the relevant direction on the basis that the promoters provided these investors with an acknowledgement of the investment (such as providing a receipt or unit certificate, or allowing a withdrawal by the investor) and submits that they would be justified in treating the cash investments as investments in the Master Fund Scheme, consistent with the observation in Idylic Solutions (Barrett J) above at [88] that:
"Where a person intending to invest in a particular scheme paid to an intermediary the funds to be invested and those funds never reached the administrators of the relevant scheme but have been recovered by the liquidator from the intermediary (and the person providing the funds has been recognised in the scheme's records as an investor), the person should be regarded as having an interest in the scheme in question commensurate with the recovered moneys and those moneys should be treated as part of the assets of that scheme."
I accept that the principle identified by Barrett J is appropriate and supports the direction sought. Although it is not clear whether there has been a recovery from Ms Min Hua Li, that does not seem to be essential to the justification for this approach where the investors have in fact been recognised as investors in the scheme. There appears to be no contest as to the identity of the individuals or the amount due to them, so a direction that refers to those persons and amounts follows from the resolution of the issue of principle. Accordingly, the directions sought should be made.
The liquidator presses the directions sought in paragraph 29(b)(i)-(iii) of the Third Amended Originating Process, which relate to the treatment of investments by FZF, Mr Mac Incorporated and Shunfu in the Master Fund Scheme. The liquidator identified the issue of principle raised by this direction as for paragraph 15(b) of the Third Amended Originating Process, namely whether the Joint IBC was trustee for the individual IBCs which transferred their investments to it, either as a resulting trust (because of the absence of consideration on the part of the Joint IBC) or as an express trust (the mutual intention being inferred from the nature of the transaction). This issue is addressed by paragraphs 671-677 and 870-877 of Mr Taylor's affidavit and associated documents. Assuming the correctness of the facts identified by Mr Taylor, should be made on the same basis as the direction in paragraph 15(b) of the Third Amended Originating Process.
The liquidator also presses the direction sought in paragraph 29(c) of the Third Amended Originating Process and addressed in paragraphs 308-311 and 870-877 of Mr Taylor's affidavit. This paragraph seeks a declaration that the liquidator would be justified in treating any funds received from the sale of Barclaywest shares which are not attributable to an investment in the Master Fund Scheme, as separate from investor monies of the Master Fund Scheme and as excluded from the funds available for distribution to investors of the Master Fund Scheme. The liquidator identifies the question of law or principle raised by this direction as that raised by paragraph 15(a) of the Third Amended Originating Process, namely whether the intermingling of share purchase funds with investor funds prevent the liquidators from treating the shareholders otherwise than as investors in Barclaywest. Although this matter is not separately addressed by submissions, it seems to me that the direction sought should be given consequential upon the direction given in respect of paragraph 15(a) of the Third Amended Originating Process.
The liquidator rightly did not press the direction sought in paragraph 29(d) of the Second Amended Originating Process and addressed in paragraphs 678-684 of Mr Taylor's affidavit in the Third Amended Originating Process. This direction is to the effect that the liquidator would be justified in treating Guo Zhen Xu (by IBC Guo Zhen) as having withdrawn capital from the Master Fund Scheme in the amount of US$30,000 on or around 29 September 2005. It is not apparent that this direction raises any question of law, principle or controversy, or any issue beyond the correctness of the matters referred to in Mr Taylor's affidavit, from which he has drawn this conclusion.
Paragraph 29(f) of the Third Amended Originating Process is directed to an issue as to funds apparently received for the benefit of the Integrity Scheme. This issue is addressed in paragraphs 685-689 of Mr Taylor's affidavit. It appears that the Integrity Scheme is a related scheme the subject of a winding up pursuant to orders of this Court: Idylic Solutions Limited (Barrett J) above. Mr Taylor's evidence is that, on 26 September 2007, AUD $200,000 from the Integrity Scheme was deposited into the account of Liu Qiang, who administered an IBC named Da Shun Corporation. Neither Liu Qiang nor Da Shun Corporation was an investor in the Integrity Scheme, and Da Shun Corporation was an investor in the Master Fund Scheme. The liquidator submits that it appears that the AUD$200,000, beneficially owned by the investors in the Integrity Scheme, was used to pay a "return" to or to effect a withdrawal of capital by Da Shun Corporation as an investor in the Master Fund Scheme. The liquidator has formed the view that he would therefore be justified in treating the Integrity Scheme as an investor in the Master Fund Scheme for the sum of AUD $200,000 such that any distribution from the Master Fund Scheme notionally owing to Da Shun Corporation or Liu Qiang be applied instead to the Integrity Scheme. This approach accords with the approach identified by Barrett J in Idylic Solutions (Barrett J) above at [88], which seems to me to be persuasive, and the direction sought should be made on that basis.
Paragraph 30(d) of the Third Amended Originating Process seeks a declaration that the liquidator would be justified in deducting the amount of US$100,000 from any entitlement of FZF in respect of the Master Fund Scheme and that the equivalent amount should be treated as part of the general pool of funds available for distribution from the Master Fund Scheme. The liquidator treats this issues as raising the same issue as paragraph 10(b) of the Third Amended Originating Process, reflecting his perceived conflict of interest as receivers of Mr Hobbs' assets in Australia, and I repeat my comment above in that respect.
This issue is addressed by paragraphs 727-740 of Mr Taylor's affidavit and associated documents and by paragraph 73 of the liquidator's written outline of submissions. Mr Taylor's evidence is that the liquidator's investigations have revealed that, during the operation of the Master Fund Scheme, a number of withdrawals were made by the scheme promoters or related parties from the Master Fund Scheme in breach of the Master Fund Scheme Memorandum. In particular, the withdrawal of US$100,000 was made from the Master Fund Scheme at the direction of FZF to R & B Hobbs Family Trust, contrary to the terms of the Master Fund Scheme Memorandum. The liquidator has sought to recover that amount by a letter of demand, which was not met (Taylor [737]-[738]) and has formed the view that litigation brought to recover that amount may not result in a net benefit to the investors in the Master Fund Scheme (Taylor [739]). The liquidator proposes to take the approach that, as FZF directed the unauthorised withdrawal, he should deduct $100,000 from any entitlement that FZF has as an investor in the Master Fund Scheme (Taylor [727]-[740]). That approach seems to me to be justifiably taken and the direction sought should be made.
The liquidator did not press the direction sought in paragraph 30(i) of the Second Amended Originating Process and addressed in paragraphs 697-702 and 768-770 of Mr Taylor's affidavit in the Third Amended Originating Process. This direction is to the effect that the liquidator would be justified in treating Shun Fu Corporation ("Shun Fu") as having no investment in the Master Fund Scheme for the purposes of making a distribution from that scheme. Mr Taylor refers to a profit statement issued to Shun Fu disclosing an investment of capital of US$142,225.53 made on 6 December 2006. His evidence is that he has reviewed relevant bank accounts and has formed the view that that amount was not received in those accounts and he is unable to establish the basis for a treatment of this investment as capital in the Master Fund Scheme. He also refers to inconsistency in his calculation of the investor position for Shun Fu and the position in an affidavit of Mr Collard, which is exhibited to his affidavit. It appears that Shun Fu is an entity associated with Ms Min Hua Li, who was involved in the administration of the scheme. Mr Taylor refers to conclusions formed, as a result of his investigation, that Ms Min Hua Li, as administrator of Shun Fu, withdrew substantial funds by shareholder profits, commissions, intra investor transfers and other withdrawals in excess of her residual investment from the Master Fund Scheme and that, subject to any contrary orders of the Court, he proposes to disregard Shun Fu's investment position in distributing the remaining assets of the Master Fund Scheme. I am not in a position to assess the basis of the views formed by Mr Taylor, since he does not exhibit any of the evidence on which he has formed the views as to the extent of the payments to Ms Min Hua Li, and it would not be appropriate to seek to reach a factual determination as to that matter in an application of this kind in any event. It seems to me that the liquidators were correct in not pressing this direction.
The direction sought in paragraph 32(a)(i) of the Third Amended Originating Process relates to the priority of the liquidator's remuneration and should be deferred until that remuneration is addressed. Paragraph 32(a)(ii) raises the issue whether the liquidator would be justified in adopting a pari passu distribution on the basis that investors must first bring into hotchpot any "returns" that they received during the operation of the Master Fund Scheme. That direction should be made for the same reasons it should be made in respect of the Best Fund. Paragraph 32(b) of the Third Amended Originating Process seeks a direction, in respect of the Master Fund Scheme, that distributions to investors are to be paid applying the exchange rates prevailing at the time the payments were made. That direction should not be made where no evidence was identified as addressed to that issue, no submissions were made about it and it is not apparent that it raises a question of law, principle or contention.
Paragraph 33 of the Third Amended Originating Process relates to the liquidator's remuneration and that issue was deferred.