Application of the test in Fortress to Eagle and Mr Scolaros' applications
38 Leaving aside for the moment the question as to whether the proposed appeal is arguable, I consider that Eagle sufficiently meets the various factors in Fortress to justify the exercise of my discretion to grant leave to appeal to a non-party. I consider that Mr Scolaro does not.
39 First, the nature of the proceeding is an application for directions by the liquidators and does not directly concern remedies. However if the liquidators act as directed they will have practical consequences on the claim that each of Eagle and Mr Scolaro make in the administration.
40 Eagle's claim, while personal to itself, could be of benefit to a large number of Sonray Clients within the same sub-class. Its claims therefore have a public flavour. This is so, even though I refuse its application to be appointed in a representative capacity, because the orders made in its and the liquidators' appeal will inevitably apply to the claims of all like Sonray Clients.
41 The same is not true in relation to Mr Scolaro's claims. His claims have no public flavour whatsoever. Mr Scolaro does not contend that he represents a sub-class of other Sonray Clients. Instead, he says his claims are unique. They are of little assistance in dealing with the broad principles relevant to the distribution which is the liquidators' aim in seeking directions.
42 Second, in my view Eagle could have been made a party at first instance. In fact it should have been made a party at first instance if, as it contends, none of the other contradictors properly represent its interests. Eagle's solicitor deposes that Eagle did not seek to be joined as a defendant on its understanding that the liquidators would advance the case against Efax that shares to be transferred from Saxo to Sonray pursuant to the settlement should be pooled and distributed rateably. Efax contends in response that, as Eagle would have been advancing the same position as the liquidators, it could not have been a contradictor. This is not necessarily so as Eagle's solicitor deposes that it is now clear that none of the parties who were joined as contradictors represent Eagle's interest or the interests of like Sonray Clients who paid funds into Tainted Segregated Accounts. If Eagle had understood this at the time of appointment of the contradictors it could have applied to represent the interests of this sub-class, in the same way it now seeks to prosecute an appeal on behalf of itself and like Sonray Clients.
43 The same is not true in Mr Scolaro's case. The Court determined not to appoint Mr Scolaro as a party at the time the defendants were added to the proceeding. This militates against the view that it could have been added. In my view, the Court's determination at that time was vindicated when it later considered the written submissions made by him. The Court found that there was nothing about the claims of Mr Scolaro and Travel Arcade that was significantly different to the claims addressed by the defendants appointed. Insofar as his claim has an unusual feature the Court considered that it should be dealt with in the adjudication stage of the administration.
44 Third, Eagle's rights are plainly affected by the directions, and the effect is of some significance. When Sonray went into administration and Eagle's trading positions were closed out, it was due $6.79m under its trading account with Sonray. The effect of the judgment is that Eagle stands to receive a distribution under the administration of 51% of its $6.79m loss, or $3.46m. If the appeal it proposes is successful it will receive about 62% of its loss which is $747,000 more. I have no information about the losses of the Eagle sub-class.
45 The same is not as clear in relation the claims of Mr Scolaro and Travel Arcade, as the claim that he makes is capable of being dealt with in the adjudication stage of the administration. It amounts to a claim that, because of the unique circumstances of the transfer of shorted exchange traded options to Interactive Brokers at the same time that shares were transferred, no funds from a Tainted Segregated Account were sent to Interactive Brokers. In fact, it is more efficient and less expensive for this issue to be dealt with at the adjudication stage rather than have another appellant in the proceeding. I am required by s 37M of the FCA to take comparative efficiency and cost into account.
46 Fourth, while in theory Eagle could commence a separate proceeding it is likely that there would be difficulties with it doing so. For example, it is likely that Efax would point to the judgment and contend that Eagle was estopped from bringing its claim. There are also significant practical difficulties as unless the entire administration is held up, the available monies would have been distributed before Eagle's individual claim is heard.
47 Mr Scolaro would have similar difficulties in commencing a separate proceeding. However Mr Scolaro does not need to appeal to preserve his rights because the judgment specifically contemplates at [289] that his main concern can be resolved in the adjudication phase of the administration. The liquidators accept that he is free to pursue the proof of debt process and, as contemplated in the judgement at [239], conduct an appeal if dissatisfied.