Legal Services Board v Gillespie-Jones

Commission 3. The Liquidators are justified in treating: (a) the Sims Commission in the Administration Account No 2; and (b) the Ardent Commission in the Administration Account No 2, as funds beneficially owned by the Company.

Other Orders 4. The proceedings be listed for further directions on 29 April 2025. 4A The Plaintiffs have leave to amend the Originating process. 5. Liberty to the Plaintiffs to apply to the Court on 24 hours' notice. 6. These Orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT JACKMAN J:

Introduction 1 This application follows on from a previous application made to the Court by the Liquidators of Goal Group Australia Pty Ltd (in liq) (GGA or the Company) (who were then the voluntary administrators of the Company) which was heard on 6 September 2024: see Spring, in the matter of Goal Group Australia Pty Ltd (Administrators Appointed) [2024] FCA 1043 (Reasons). 2 The relief now sought in the Interlocutory Process dated 28 November 2024 is for orders, pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 to the Corporations Act 2001 (Cth) (Corporations Act), and section 63 or section 81 of the Trustee Act 1925 (NSW) (Trustee Act), that the Liquidators would be justified in: (a) causing the Company to pay amounts identified below as "Sims Funds Entitlements", which total $3,110,998.49, to each "Sims Client" on the ground that the Sims Clients are respectively beneficially entitled to their respective Sims Funds Entitlements (para 2); (b) causing the Company to pay amounts identified below as "Ardent Funds Entitlements", which total $1,592,124.12, to each "Ardent Client" on the ground that the Ardent Clients are respectively beneficially entitled to their respective Ardent Funds Entitlements (para 3); and (c) treating the funds (identified below) described as the Sims Commission amount totalling $138,790.50 and the Adrent Commission amount totalling $71,386.09 as funds beneficially owned by the Company (para 4).

Factual background 3 The Liquidators were appointed as the voluntary administrators of the Company on 28 June 2024: Affidavit of Andrew John Spring 20 August 2024 (Spring 20.08.24) at [22]. On 4 October 2024 at the second creditors meeting, the creditors of the Company resolved that the Company be wound up and the Liquidators become the liquidators of the Company: Affidavit of Andrew John Spring 27 November 2024 (Spring 27.11.24) at [10]. 4 The Reasons at [3] to [12] set out some background in relation to the administration of the Company and its clients, which includes: (a) the Company was part of a group (Goal Group) which identified and managed potential recoveries for its clients (typically financial institutions and investment firms) in securities class actions, by administering the clients' participation in such claims; (b) the services provided by the Goal Group included accepting receipt of settlement funds; (c) each client's relationship with the Company is governed by a client agreement, and in a number of cases clients also provided powers of attorney to the Company; (d) based on their investigations, the Liquidators understand that: (i) an account described as the Westpac Account 1(Westpac Account 1) was the Company's main operating account; (ii) an account described as the Westpac Account 2 (Westpac Account 2) was the Company's main Australian based Client Account; and (e) following their appointment as voluntary administrators to the Company, the Administrators opened a bank account known as the Administration Account and arranged for the transfer of the credit balances of those accounts to their Administration Account. 5 The Administrators also established another account known as the Administration Account No 2 in which the Administrators intended to keep any further litigation recoveries received by the Company whilst they determine which clients are beneficially entitled to those funds: Spring 27.11.24 at [15].

Sims Funds Entitlement and the Company's Commission 6 On 30 July 2024, 54 deposits totalling $3,249,788.99 were paid into the Administration Account on account of "Sims Class Action" (Spring 27.11.24 at [12(a)], [17]). The Company had nominated that the payments be made to the Westpac Account 2, but subsequently payment to the Administration Account was requested as the payment was to be received post-appointment: Spring 27.11.24 at [18 (d) and (e)]. 7 Following receipt, these funds were transferred to the separate account also under the control of the Administrators known as the Administration Account No 2, to ensure that those funds were segregated from the General Company Money (to which the Company is beneficially entitled) whilst the Administrators sought to determine which clients were beneficially entitled to those funds (Spring 27.11.24 at [14]) 8 Based on the Liquidators' investigations (Spring 27.11.24 at [18]): (a) the "Sims Class Action" is a reference to a successfully resolved class action claim (the Sims Class Action), which was brought in the Federal Court of Australia in respect of which the applicant was represented by William Roberts Lawyers; (b) 8 of the Company's clients (Sims Clients) participated in the Sims Class Action, being the clients listed in column A of the table in Spring 27.11.24, Annexure A; (c) Final Distribution Notices on the letterhead of William Roberts Lawyers, confirmed the settlement amounts to be paid by Williams Roberts Lawyers in respect of each client who participated in the Sims Class Action as listed in column E of Annexure A; (d) each deposit amount matches the amount stated in a Final Distribution Notice and the narrations for each deposit include a suffix beginning with 'SID' followed by a four digit number, which matches the 'Claimant ID' as stated in the corresponding Final Distribution Notice for each particular deposit. 9 Each of the Sims Clients had entered into a client agreement (as listed in column B of the table in Spring 27.11.24, Annexure A): Spring 27.11.24 at [19]. 10 Each of the Sims Clients entered into a Power of Attorney with the Company (as listed in column C of the table in Spring 27.11.24, Annexure A): Spring 27.11.24 at [20]. 11 The Liquidators have calculated each Sims Client's net entitlement (Sims Funds Entitlement) at column I of the table in Spring 27.11.24, Annexure A which totals $3,110,998.49. The net entitlement includes a deduction on account of commission, calculated according to the percentage set out in the relevant client agreement and identified in columns G and H of Annexure A: Spring 27.11.24 at [19]-[22].

Ardent Funds Entitlement and the Company's Commission 12 On 20 August 2024, 37 deposits totalling $1,663,510.21 were paid into the Westpac Account 2 on account of "Ardent Class Action" (Spring 27.11.24 at [13], [27]) and are now held in the Administration Account No 2 (Spring 27.11.24 at [16]). 13 Based on the Liquidators' investigations (Spring 27.11.24 at [28]): (a) the "Ardent Class Action" is a reference to a successfully resolved class action claim, which was brought in the Federal Court of Australia, in respect of which the applicant was represented by Piper Alderman; (b) 10 of the Company's clients (Ardent Clients) participated in "Ardent Class Action" being the clients listed in column A of the table in Spring 27.11.24, Annexure B; (c) Piper Alderman confirmed the settlement amounts paid in respect of each client who participated in the Ardent Class Action as listed in column E of the table in Spring 27.11.24 Annexure B. 14 Each of the Ardent Clients had entered into a client agreement (as listed in columns B of the table in Spring 27.11.24, Annexure B); 15 Each of the Ardent Clients entered into a Power of Attorney with the Company (as listed in column C of the table in Spring 27.11.24, Annexure B) 16 The Liquidators have calculated each Ardent Client's net entitlement (Ardent Funds Entitlement) at column I of the table in Spring 27.11.24, Annexure B which totals $1,592,124.12. The net entitlement includes a deduction on account of commission, calculated according to the percentage set out in the relevant client agreement and identified in columns G and H of Annexure B.

Entitlement to Net Sims Funds and Net Ardent Funds: paras 2 and 3 17 The Liquidators consider that: (a) the amount of each of the Sims Funds Entitlements in the Administration Account No 2 is held on express trust for each Sims Client respectively; and (b) the amount of each of the Ardent Funds Entitlements in the Administration Account No 2 is held on express trust for each Ardent Client respectively. 18 The Liquidators submit, and I accept, that this result follows for the same reasons as in the decision in Spring, in the matter of Goal Group Australia Pty Ltd (Administrators Appointed) [2024] FCA 1043. In this regard: (a) The client agreements contemplate the clients being "entitled" to the settlement monies and require those monies be paid to them directly. A typical clause is as follows: all settlement monies to which the Client may be entitled will be paid and payable to the Client directly without any withholding from GGA (except for fees properly due to GGA) unless agreed by the parties in advance in writing. That language suggests that any money received by the Company is regarded as the relevant client's money and not the Company's money (see Reasons at [18(a)]). One client agreement, for Auscoal Superannuation, does not contain this typical clause, but nonetheless appears to contemplate that net proceeds are "actually received" by the Client. (b) The terms of the client agreements and powers of attorney contemplate that the Company acts on the clients' behalf. Here, a typical clause in the client agreements provides: Where the Client participates in a Case as a Class Member, GGA will request the Client to sign or arrange the signature of the proof of claim forms under guidance from and as per timelines notified to the Client by GGA…GGA will then file all claim forms on the Client's behalf in a timely manner. Further, many of the powers of attorney expressly refer to the Company receiving money on the client's behalf. Thus, three powers of attorney authorise the Company's "receipt of any amounts from any party related to the Services…in respect of payments made to the Client, or through the Attorney on behalf of the Client". Three others refer to the Company "reclaiming from any paying agent and/or administrator or any authority in any jurisdiction (as appropriate) amounts in respect of payments made to the [Client], or through GGA on behalf of the [Client]"; and the language of a fourth is similar. Another form of power of attorney refers to "…securing an entitlement from, an Action". (See Reasons at [18(b)]). (c) In the case of one client, QSuper Limited (QSuper), the client agreement expressly provided that the Company must ensure that monies it receives on behalf of QSuper are kept in a separate account. That is a strong indication that a trust is intended. (See Reasons at [18(c)]. (d) There does not appear to be any basis on which the Company (which was not a participant in the Sims Class Action or the Ardent Class Action in its own right) was legally entitled to receive the fruits of any settlement. Those fruits could only have been payable to it as the agent of the respective clients. As has been seen, under the terms of the client agreements, the Company had no entitlement to those monies (beyond the right to deduct its fees). In those circumstances, the following statement from Registrar of Accident Compensation Tribunal v Federal Commissioner of Taxation [1993] HCA 3; (1993) 178 CLR 145 at 165-6 (quoted by Bell, Gageler and Keane JJ in Legal Services Board v Gillespie-Jones [2013] HCA 35; (2013) 249 CLR 493 at [113]) is in point: [U]nless there is something in the circumstances of the case to indicate otherwise, a person who has 'the custody and administration of property on behalf of others' or who 'has received, as and for the beneficial property of another, something which he is to hold, apply or account for specifically for his benefit' is a trustee in the ordinary sense. (See Reasons at [18(d)]). 19 Further, it appears that the Company directed payment of settlement monies from litigation claims into the Westpac Account 2, which was regarded as the Company's main Australian based Client Account (Spring 1 at 63) and had the account name "Goal Group Australia Pty Ltd AUD Client" (Exhibit AJS-20, p 222-223). The payment of funds into a separate account entitled "Trust Account" has been treated as a powerful indication that a trust is intended: Re French Caledonia Travel Service Pty Ltd (in liquidation) [2003] NSWSC 1008; (2003) 59 NSWLR 361 at [19] (Campbell J). The Liquidators submit, and I accept, that the same would follow where the relevant account is described as a "Client" account and a practice is followed of directing monies payable to clients into that account: see Reasons at [19]. The Ardent settlement funds were paid into the Westpac Account 2. The Sims settlement funds, whilst originally directed to be paid into the Westpac Account 2, were subsequently requested (as a post-appointment receipt) to be paid into the Administration Account, and then transferred by the Administrators to the Administration Account No 2 (being an account which the Administrators intended that funds to which clients may be beneficially entitled would be paid into to keep them separate from the Company's own funds, pending the ascertainment as to the entitlement of clients to those funds). 20 Finally, I note that correspondence received by the Administrators from two clients, New South Wales Treasury Corporation and Colonial First State Investments Limited, records their position that settlement monies received by the Company are held by the Company on trust for them and are not assets of the Company available to be distributed to its creditors: see Reasons at [20]; Exhibits AJS-38 to 41, pp 467-474.

Commission: para 4 21 The Liquidators also seek a direction that they are entitled to treat commission which is payable to the Company in respect of the Sims Class Action and the Ardent Class Action as money to which the Company is beneficially entitled. 22 The total amount of the commission is $210,176.59 and has been ascertained by the process described in Spring 27.11.24 at [19]-[23] and [29]-[33] and is accordingly money to which the Company is entitled.

Notice to Creditors and ASIC 23 A copy of the Interlocutory Process and supporting affidavit (Spring 27.11.24) has been served on ASIC: Affidavit of Gerard Martin John Kane affirmed 16 December 2024 at [18] to [19] (Kane 2). 24 The Liquidators have also given notice to the Company's creditors in accordance with the order made on 29 November 2024, by various emails sent on 4 and 11 December 2024: see Kane 2 at [8] to 11 and [14(c)]. Conclusion 25 Accordingly, I make the orders sought in the Interlocutory Process. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.