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Judgment 1By Originating Process, the Plaintiffs as Liquidators of MF Global Australia Limited (in liquidation) ("MFGA") apply for orders and/or directions under s 479(3) and/or s 511 of the Corporations Act 2001 (Cth) and MFGA applies for judicial advice and/or directions under s 63 of the Trustee Act 1925 (NSW) that the Liquidators and MFGA are justified in compromising the claims made in a Cross-Claim brought against MF Global UK Limited (in special administration) ("MFGUK") in proceedings in the Federal Court of Australia and are justified in making certain balancing payments to give effect to the settlement. The application is supported by an affidavit of one of the Liquidators, Mr Christopher Campbell, dated 3 December 2012 ("Mr Campbell's affidavit") and a Statement of Facts filed in support of the application. Factual background 2MFGA was the holder of an Australian Financial Services Licence and provided financial products and services, primarily as a futures broker and as the issuer of over-the-counter ("OTC") derivative products, to a large number of clients in Australia and overseas. After its holding company and related entities in various jurisdictions were placed in various forms of insolvency administration, MFGA was placed in voluntary administration and subsequently in liquidation by resolution of its creditors under s 439C of the Corporations Act. 3MFGUK was a clearing participant for MFGA with respect to contracts executed by MFGA on the ASX 24 market and the New Zealand Futures Exchange, both on behalf of MFGA's clients and on its own account. MFGUK held monies in client clearing accounts with ASX Clear (Futures) Pty Limited ("ASXCF") and in bank accounts of MFGUK described as Client Segregated Accounts ("Westpac Client Accounts") or in accounts held on behalf of MFGA ("Westpac House Accounts"). The monies held by MFGUK with ASXCF or the Westpac Client Accounts were approximately $34.4 million in total on the date the administrators were appointed to MFGA, 1 November 2011. A further amount of approximately $3.2 million was held by MFGUK with ASXCF ("House Clearing Accounts") and the Westpac House Accounts that was attributable to MFGA's trading in its own account. 4Following the appointment of the Liquidators to MFGA and special administrators ("Special Administrators") to MFGUK, a dispute arose as to the entitlement to funds held by ASXCF, with both MFGA and MFGUK asserting an entitlement to the funds, and ASXCF indicating that it would only remit the amount which it held in respect of client clearing accounts for MFGUK as clearing participant on the joint payment instructions of both the Liquidators and the Special Administrators. 5The Special Administrators brought proceedings in the Federal Court of Australia for recognition of their appointment as a foreign main proceeding under the Cross-Border Insolvency Act 2008 (Cth) and the Liquidators brought a Cross-Claim in those proceedings seeking to establish their entitlement to the funds held by ASXCF. The issue raised by the Cross-Claim was whether relevant funds held by MFGUK with ASXCF or in its own bank accounts were held for the benefit of MFGA alone rather than forming part of the general assets of MFGUK or whether the relationship between MFGUK and MFGA was only that of debtor and creditor. 6The Liquidators and Special Administrators have now reached, in principle, an agreement to settle the dispute the subject of the Cross-Claim. The terms of the proposed Settlement Deed provide for MFGA to be paid the balance of the Client Clearing Accounts, House Clearing Accounts, Westpac Client Accounts and Westpac House Accounts (as defined), less costs of GB£400,000 ("Agreed Costs") to be paid to MFGUK, which it is proposed would be borne proportionately across the respective funds on a pro-rata basis. Mr Campbell's affidavit indicates that the payment of the Agreed Costs to the Special Administrators reflects the result of negotiation between the Liquidators and Special Administrators in order to achieve a settlement. 7Pursuant to the proposed Settlement Deed, MFGUK will also receive monies described as the "Commitment Funds" which include an amount lodged with ASXCF in MFGUK's capacity as a clearing participant of ASXCF for a commitment period ending 15 December 2003, totalling approximately AUD$2.89 million plus interest. MFGA paid that amount to ASXCF on behalf of MFGUK, and it was recorded in MFGA's records as an inter-company loan from MFGA to MFGUK. Pursuant to the proposed Settlement Deed, MFGUK will also receive the amount constituting the "Foreign Currency Westpac Accounts" totalling approximately AUD$2,015 as at 31 October 2011. Mr Campbell's affidavit indicates that the treatment of the Foreign Currency Westpac Accounts reflects the fact that the Liquidators do not believe, after investigation, that MFGA has a proprietary or trust claim to those accounts. The Liquidators and MFGA indicate that no directions are sought in relation to the compromise of these two classes of funds brought about by the Settlement Deed. I have, however, had regard to this compromise in making directions as to the proposed Settlement Deed generally. Applicable legal principles 8Section 479(3) of the Corporations Act allows a liquidator to apply to the Court for directions in relation to a matter arising under a winding up. I summarised the relevant principles in my earlier judgment in Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 ("the earlier judgment"): "Section 479(3) of the Corporations Act allows a liquidator to apply to the Court for directions in relation to a matter arising under a winding up. The function of a liquidator's application for directions under this section is to give the liquidator advice as to the proper course of action for him or her to take in the liquidation: Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 at 117; (1986) 4 ACLC 114; Re Ansett Australia Ltd (admins apptd) and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433 at [46]. The Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will typically not do so where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision: Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 at 117; (1986) 4 ACLC 114] at 117; Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-7; 5 ACSR 673; 9 ACLC 1291; Re Ansett Australia Ltd [[2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433] at [65]; Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83 at [32]. A direction can be made under 479(3) in a voluntary liquidation, by reason of ss 506(1)(b) and 511: Warne v GDK Financial Solutions Pty Ltd [2006] NSWSC 464; (2006) 57 ACSR 525 at [63]-[64], [82]." 9The Court will typically not give directions where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision, but may do so where a legal issue or attack on the propriety of the decision is raised: Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115; (1986) 4 ACLC 114 at 117; GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-7; 5 ACSR 673; 9 ACLC 1291; Re Ansett Australia Ltd and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433 at [65]. For example, the Court gave a direction to a liquidator that he would be acting appropriately in discontinuing appeals in Re Addstone Pty Ltd (in liq) (1997) 25 ACSR 357, where Mansfield J observed (at 363) that: "While the court may be reluctant to give directions where purely commercial considerations are relevant to the liquidator's decision, even in relation to the conduct of litigation, there will be circumstances where it is or may be appropriate to do so. One of those circumstances may be where the liquidator's proposed decision is the subject of criticism by a particular creditor or creditors as being unreasonable or mala fides." A liquidator is protected against a claim for breach of duty if he or she acts in accordance with a direction given by the court under s 479(3) and he or she made full disclosure to the court in the relevant application. 10Section 511 of the Corporations Act in turn allows a liquidator in a voluntary winding up to apply to the Court to determine any question arising in that winding up and exercise any power the Court could exercise if the company was being wound up by the Court, if it is "just and beneficial" to do so. In the earlier judgment I noted that: "The principles applicable to an application under that section were recently reviewed by Ward J in Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) [2011] NSWSC 91 and I gratefully adopt her Honour's summary of the relevant principles. Applications made under this section in a voluntary winding up are determined in a similar manner to applications in a Court ordered winding up under s 479(3) of the Corporations Act notwithstanding that section does not expressly require that it be "just and beneficial" to give the relevant direction. The Court may give such a direction where it will be "of advantage in the liquidation": Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212; Handberg (in his capacity as liquidator of S&D International Pty Ltd) v MIG Property Services Pty Ltd [2010] VSC 336; (2010) 79 ACSR 373 at [7]. The effect of a determination under the section is to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from the risk of personal liability for breach of duty: S&D International at [7]." 11Directions under s 511 of the Corporations Act may be made in respect of the settlement of litigation in an appropriate case. In Re Bauhaus Pyrmont Pty Ltd (in liq) [2007] NSWSC 936; (2007) 64 ACSR 646, Bergin J (as her Honour then was) reviewed the authorities and gave such a direction where her Honour was satisfied that the making of that direction was just and beneficial in advancing the liquidation. Similarly, in Re 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, which concerned an application for directions under s 511 of the Corporations Act in respect of complex litigation, Warren CJ noted that the Court would act with restraint in approving a compromise of litigation, but nonetheless observed that the liquidator in that case was: "... not seeking commercial advice from the court. He has already made what he regards as the appropriate and reasonable commercial decision. It is contained in the settlement deed. Having made that decision, he now asks the court to protect him from the potentially unreasonable behaviour of other parties involved in these proceedings. He is seeking the protection which the court is able to provide him in light of the difficult and litigious circumstances in which he finds himself, and the risk that they pose to his continuing ability to effectively and equitably wind up the second plaintiff." I similarly gave a direction in respect of a liquidator's decision to settle liquidation, where that settlement was opposed by a contributory, in Re PM Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 689. 12This application is alternatively brought under s 63 of the Trustee Act. That section authorises the Court to give an "opinion advice or direction on any question respecting the management or administration of the trust property" and permits relief aimed at resolving legitimate doubts held by a trustee as to the proper course of action and protecting the trust and those entitled to it. In Re Australian Pipeline Ltd [2006] NSWSC 1316; (2006) 60 ACSR 625 at [17], Barrett J emphasised the role of such advice in providing guidance for the future and referred to Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198 at 201 where Lord Oliver of Aylmerton observed that: "A trustee who is in genuine doubt about the propriety of any contemplated course of action in the exercise of his fiduciary duties and discretions is always entitled to seek proper professional advice and, if so advised, to protect his position by seeking the guidance of the court." His Honour also pointed to several cases in which the Court had given advice concerning the trustee's participation in legal proceedings related to protection, recovery or management of the trust estate and noted that "[t]he function of the court in affording guidance to trustees clearly extends to giving advice as to whether litigious measures in relation to such matters should be taken", although he declined to give such advice in the case before him which concerned the trustee's personal position rather than the administration of the trust. 13In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, the High Court observed (at [56-59]) that there were no implied limitations on the power to give advice or on the discretionary factors relevant to the giving of advice and the power is confined only by the subject matter, scope and purpose of the legislation and may be exercised whenever a question arises as to "the management or administration of the trust property" or "the interpretation of the trust instrument". The Court also noted (at [64]) that the procedure operates as "an exception to the Court's ordinary function of deciding disputes between competing litigants" and affords a facility for providing "private advice" to trustees although the Court is not bound to give such advice. The application of the section has also recently been considered in this Court in Re Purchas (as liquidator of Astarra Asset Management Pty Ltd (in liq)) [2011] NSWSC 91 at [39] and Re Application by Perpetual Trust Services Ltd (as responsible entity of the Momentum AllWeather (A$) Absolute Return Fund) [2012] NSWSC 758 at [35]-[38]. 14I consider that the jurisdiction to provide judicial advice is established, since the proposed settlement of the Cross-Claim against MFGUK will deal with recoveries that will be, no later than their receipt by the Liquidators or MFGA, and in the case of recoveries relating to futures trading may already be, trust property under the statutory trust in Pt 7.8 Div 2 of the Corporations Act for the reasons set out in my earlier judgment, and the Liquidators are dealing with potentially competing claims of futures clients, CFD clients and unsecured creditors. Approval of the Settlement 15As I noted above, the proposed settlement involves the payment of the Agreed Costs as part of a settlement by which the Liquidators and MFGA will recover approximately AUD$37.6 million (on current estimates) plus accrued interest, reflecting a recovery rate of more than 98.5% of the monies in dispute. Mr Campbell indicates that the Liquidators are of the view that the proposed settlement is acceptable, having regard to several matters, including the complicated character of the dispute; the finality and certainty in now receiving a payment; the Liquidators' assessment that MFGA may only have an unsecured claim in the special administration of MFGUK in respect of the Commitment Funds and that they have not identified a proprietary trust claim to the funds in the Foreign Currency Westpac Accounts; the likely costs of the hearing and the extent to which those costs would be recoverable; and the costs and risks of enforcing an order for costs against MFGUK where it is in special administration and incorporated in the UK. The Committee of Inspection has approved the Liquidators' entry into the proposed settlement. 16I have considered whether this may be a case where the Liquidators do not require a direction under ss 479 or 511 of the Corporations Act, on the basis that there is little room for dispute as to the merits of a proposed settlement that recovers in excess of 98.5% of the amount claimed, avoids the costs and risks of contested litigation and has already been approved by the Committee of Inspection. However, I am conscious that this is a very complex liquidation, involving client claims on client funds and unsecured creditors with claims on house funds; the settlement involves the Liquidators reaching a judgment that they should meet a portion of the Special Administrators' costs notwithstanding the otherwise favourable result achieved by MFGA; and part of those costs are proposed to be funded by client funds that, as I noted above, will be, no later than their receipt by MFGA, and in the case of recoveries relating to futures trading may already be, subject to the statutory trust arising under Pt 7.8 Div 2 Subdiv A of the Corporations Act for the reasons noted in the earlier judgment. 17I consider that, in these circumstances, it is appropriate to make directions under ss 479 and 511 of the Corporations Act and also to make directions under s 63 of the Trustee Act so far as the Liquidators are dealing with trust assets, in respect of the approval of the settlement. It does not seem to me that the Liquidators are acting unreasonably or in bad faith in entering the proposed Settlement Deed or agreeing to make the payment of the Agreed Costs, given the relatively small amount involved compared with the quantum of the recoveries by MFGA; the fact that any litigation, however strong MFGA's case, involves inherent litigation risk and delay; and the value of MFGA achieving certainty as to its access to the funds presently held by ASXCF at an earlier date. 18In some circumstances, it may be necessary for the Court to have regard to an opinion of Counsel before it is in a position to give the judicial advice or directions sought: Re Vickers; Re York Street Mezzanine Pty Ltd (in liq) [2011] FCA 1028; (2011) 196 FCR 479 at [48]. The Liquidators indicated that they were prepared to tender legal advice that they had obtained in respect of the proposed settlement in support of this application. I did not consider that it was necessary for the Court to be provided with that advice, having regard to the views that I had formed by reference to the other evidence before me in respect of the proposed settlement. 19I am satisfied that I should therefore make the first direction sought by the Liquidators and MFGA in respect of entry into the proposed Settlement Deed. Approval of the manner in which Agreed Costs are borne 20The Liquidators point out that, subject to the payment of the Agreed Costs to MFGUK, the amount of approximately AUD$37 million plus interest to be received by MFGA will be distributed such that funds received in respect of the Client Clearing Accounts and Westpac Client Accounts will be paid into the Futures Pool; the portion of funds received in respect of House Clearing Accounts and Westpac House Accounts referable to MFGA's hedging of CFDs entered into between MFGA and CFD clients will be paid into the CFD Pool; the balance of funds received in respect of the House Clearing Funds and Westpac House Accounts will be paid into the general funds of MFGA; and the Liquidators will pay their remuneration, costs and expenses incurred in recovering the relevant funds from the Futures Pool, CFD Pool and the General Funds of MFGA in proportion to the amounts to be paid into those funds. 21The proposed settlement provides for part of the Agreed Costs to be met from funds already withdrawn by the Special Administrators from Westpac House Accounts and the Liquidators are to pay MFGUK the balance from MFGA's general funds in the first instance, and then propose to make balancing payments between client and house funds required to reflect the pro rata apportionment of costs between those funds. The Liquidators and MFGA also seek orders, judicial advice or directions that they are justified in making those "balancing payments" to give effect to the settlement. In substance, that application raises a question as to whether the Agreed Costs should be borne proportionately across the relevant Client and House Clearing Accounts and Westpac Client Accounts and Westpac House Accounts on a pro rata basis. 22Mr Campbell's affidavit indicates that there does not seem to be any basis for apportioning particular costs to specific funds on the basis of the work involved and that he considers that the proposed pro rata apportionment of costs across the relevant funds receiving the proceeds of settlement is appropriate, in the absence of any other basis to apportion the costs to specific work undertaken. That approach also seems to be consistent, in principle, with a view that the payment of the Agreed Costs reflects an element of compromise which is necessary to obtain the benefits of the settlement as a whole, including the very substantial recoveries for the benefit of the relevant accounts (including both house and client accounts) and the advantage of earlier payment and avoidance of litigation risk to which I have referred above. 23There appears to be reason for the Liquidators to anticipate that there may be controversy in respect of whether the Agreed Costs are funded from client funds, house funds or a pro-rata basis since a question was raised as to that matter by a representative of a futures client at the meeting of the Committee of Inspection which approved entry into the proposed Settlement Deed. As the Liquidators point out, that approval is effective in respect of creditors of MFGA, but does not involve approval of beneficiaries of the statutory trusts to which I referred in my earlier Judgment. 24On the evidence presently before me, I am satisfied that I should also make the second direction sought by the Liquidators and MFGA in respect of this matter. However, I am conscious that persons with claims against client accounts (namely the Futures and OTC clients of MFGA) and claims against House Accounts (namely MFGA's unsecured creditors) may wish to put arguments to the contrary of the position advanced by the Liquidators before me. I therefore propose to make the directions sought in this regard, while reserving liberty to the parties affected by those directions to apply to vary them within a short time. The Liquidators indicated that they did not oppose that course. 25I make orders in accordance with the Short Minutes of Order initialled by me and placed in the file.