Travel Compensation Fund v Classic International Cruises Pty Ltd

Judgment 1By Summons filed on 19 December 2012, the Plaintiff, the Travel Compensation Fund ("TCF"), sought a declaration that funds paid by customers of Classic International Cruises Pty Ltd (in liq) ("Company") into its client accounts in respect of deposits and payments for future travel and travel related services to be provided to those customers were held by the Company on trust for those customers and other declarations and relief. 2The proceedings were listed for hearing on 14 February 2014. By that time, matters had developed to the point that the liquidators of the Company ("Liquidators") accepted that the relevant funds were held in trust but sought a declaration to confirm that position. The Liquidators also seek an order under s 477(2B) of the Corporations Act 2001 (Cth) approving their entry into a Deed of Settlement and Release with TCF in a specified form and directions under s 511 of the Corporations Act that they are justified in distributing and may distribute amounts totalling $3,140,133.54 as at 23 August 2013, together with any interest accrued on those monies ("Monies") in a specified order of priority. Factual background 3I have drawn on the helpful submissions of Mr Pritchard, who appeared for TCF, in outlining the relevant facts which are drawn from the parties' affidavits and are ultimately not contested. 4TCF is a trust established to provide a compensation scheme contemplated by the Travel Agents Act 1986 (NSW) and corresponding legislation in other participating States. The trustees of that compensation scheme may sue and be sued in the name of the "Travel Compensation Fund", in which name these proceedings were commenced, under s 52 of the Travel Agents Act. The compensation scheme provides, broadly, for TCF to provide compensation to eligible travellers who have suffered loss as a result of the financial failure of a participating travel agency business. 5The Company was incorporated on 19 April 2004 as a wholly owned subsidiary of a Panamanian company, and was a licensed travel agent and a participant in TCF. The Company offered cruises to the public, which were provided under a charter agreement with First Quality Cruises Incorporated ("FQC"), which operated a cruise ship "MV Athena", and had taken bookings for cruises in the Australian summer in 2012/2013. The first cruise of the season was scheduled to depart from Marseille, France, on 12 November 2012 although most of the cruises would depart from Western Australian ports. That cruise and subsequent cruises did not proceed because the ship was arrested in Marseille and the Company was subsequently unable to obtain a substitute ship to provide the cruises. The proposal to use a replacement ship failed no later than 30 October 2012 and, on 31 October 2012, administrators were appointed to the Company by its sole director under s 436A of the Corporations Act. The administrators were subsequently appointed as liquidators of the Company. 6At the time of the administrators' appointment, on 31 October 2013, the Company maintained an operating account and two accounts styled "client account" with Westpac Banking Corporation ("Westpac") holding approximately $100,000. The Company also maintained two operating accounts and a client account with Australia & New Zealand Banking Corporation ("ANZ"). TCF contends, and the Liquidators now accept, that each of the client accounts held with Westpac and the client account held with ANZ were held in trust for the Company's customers. Expert accounting evidence led by TCF indicates that the total amount of money paid by passengers and received by the Company was in excess of the amount held in the client accounts, being $3,839,961.66, referable to 5335 passengers and 2658 booking identifications. The declaration sought 7TCF and the Liquidators contend that there should be a declaration that the Monies are held on trust for the Company's passengers, including persons who have made claims on and have been compensated by TCF, and the orders for distribution of the Monies reflect those made by Campbell J in a somewhat similar case in Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 at 368 ("French Caledonia"). In that case, Campbell J described the matters relevant to determining whether monies held by a travel agent were held in trust as follows: "All relevant circumstances must be examined in order to determine whether the Company really intended to create a trust ... opening an account entitled 'Trust Account', and paying into that account money received from customers in payment for services which they have not received at the time of payment, is a powerful indication that a trust is intended." His Honour also drew attention to the need to identify any relevant countervailing factors. 8In the present case, there is compelling evidence of the Company's intention to hold the Monies on trust. The evidence of one of the Liquidators, Mr Tonks, in his affidavit sworn 23 August 2013, is that the Company was required to operate a "client travel account" or "trust account" in respect of its participation in TCF and TCF's evidence is that that, if not a requirement, was at least a strong recommendation. The evidence of the Company's sole director describes the Company's client accounts as trust accounts (Moss [31]). By his further affidavit sworn 14 February 2014, Mr Tonks refers to the evidence filed by TCF in the proceedings and indicates that he is satisfied that all of the monies in the client accounts are held on trust by the Company for the intending passengers of the cancelled cruises. 9The reference to "client accounts" in the title of those accounts is consistent with a characterisation of the Monies as held on trust, distinguishing them from the operating accounts maintained for the Company's general purposes and described as "operating accounts" in their titles. The notes to the Company's financial accounts for the year ended 30 June 2012 refer to cash at bank held in a "trust account", and the number of that account corresponds to one of the Westpac client accounts, and also refer to cash at bank held in a "high interest trust account", the number of which corresponds to the Company's "high interest client account" held at Westpac. The Company's balance sheet as at June 2012 identifies cash on hand as including monies held in a "trust account" and "high int[erest] trust" with corresponding account numbers. Extracts from the Company's MYOB records also record the deposit of monies for customer deposits into a "trust account" with a corresponding account number. 10This characterisation of the Monies as held on trust is also consistent with the accounting policies adopted and implemented by the Company, which did not recognise sales in respect of the 2012 and 2013 cruises at the end of the 2012 financial year on the basis that the cruises had not been completed and the services not commenced. The treatment of the relevant accounts as trust accounts is also consistent with the statement made by the Company's auditor in its annual financial review statements provided to TCF, to the effect that the Company: "has properly maintained a full funded Client Travel or Trust Account in accordance with criteria TRAVEL AGENT OR TRUST ACCOUNT at the CTA (Client Travel Account) worksheet of this computer file." 11TCF and the Liquidators contend, and I accept, that the opening of the ANZ client account, as distinct from the two ANZ operating accounts, and the transfer of a substantial amount from the Westpac client accounts to the ANZ client account, is consistent with the treatment of the accounts as trust accounts. The evidence of the Company's sole director was that he transferred that money to the ANZ client account to ensure that FQC could not take the money from the Westpac accounts. That conduct is consistent with, rather than inconsistent with, a finding that the Monies in those accounts were held on trust for the relevant clients. The accounting expert retained by TCF, Mr Rossetto, also gives evidence as to the steps and transactions which occurred between the point at which a customer made a payment and money was banked into one of the "client accounts", although that evidence was based on a very narrow sample of 4 bookings among the 1200 customer bookings for which a claim had been made against TCF, and the small sample size limits the weight that can be given to this evidence. 12The evidence does not disclose any countervailing factors of any significance to those which indicate that the Company intended to create a trust over the Monies held in the relevant accounts, consistent with the title of those accounts as "client accounts" and its practice in paying money into those accounts received from customers referable to services which had not yet been provided. Mr Tonks gives evidence of several payments out of the relevant client accounts, some of which may not have been consistent with their character as trust accounts. It does not seem to me that those transactions undermine the conclusion that follows from the other evidence to which I have referred, that the relevant client accounts had that character, although potential claims may arise in respect of the application of those funds. 13Accordingly, I am satisfied that a declaration can properly be made confirming that the Monies were held on trust for the Company's customers in the form sought by the Liquidators. Orders sought under ss 477(2B) and 511 of the Corporations Act 14As I noted above, the Liquidators seek an order under s 477(2B) of the Corporations Act approving their entry into a Deed of Settlement and Release with TCF in a specified form and a direction under s 511 of the Corporations Act that they are justified in distributing and may distribute the Monies in a specified order of priority. It is convenient to deal with these matters together since each involves scrutiny of the terms of the proposed settlement. 15Section 477(2B) of the Corporations Act provides that, except with the Court's approval or the approval of a committee of inspection or a resolution of creditors, a liquidator must not enter into an agreement on a company's behalf if the term of that agreement may end, or obligations of a party to the agreement may be discharged by performance, more than 3 months after entry to the agreement. The Court is not concerned, in granting approval to such an agreement, with matters of commercial judgment but is concerned to be satisfied that the entry into that agreement is a proper exercise of power and is not ill-advised or improper on the part of the liquidator: Re McGrath (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 78 ACSR 405 at [28]. 16Section 511 of the Corporations Act 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 that the Court could exercise if the company was being wound up by the Court, if it is "just and beneficial" to do so. That section in turn allows a liquidator in a voluntary winding up to seek a direction from the Court of the kind that could be given under s 479(3) of the Corporations Act on the application of a court-appointed liquidator. 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 ss 479(3) and 511 and he or she made full disclosure to the Court in the relevant application. I summarised the relevant principles in Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 (at [7]) as follows: "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 above 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 above 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]." 17In 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 under s 511 of the Corporations Act, where her Honour was satisfied that the making of that direction was just and beneficial in advancing the liquidation. Similarly, 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, which concerned an application for directions under s 511 of the Corporations Act in respect of complex litigation, Warren CJ noted (at [22]) that the Court would act with restraint in approving a compromise of liquidation, 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." 18In Re MF Global Australia Ltd (in liq) above (at [8]), 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]." 19The Deed of Settlement and Release between TCF, the administrators and the Company provides, relevantly, that the parties will be bound by the Procedural Matrix set out in Schedule 2 to that Deed, in respect of the distribution of the Monies and, upon the Court making the orders sought in these proceedings, the liquidators will distribute the Monies to TCF and other persons so entitled in accordance with the Payment Orders (as defined) that form part of the Procedural Matrix. The Procedural Matrix in turn contemplates that the Liquidators will, as contemplated by the orders sought from the Court, issue a notice in respect of s 60 of the Trustee Act 1925 (NSW); the steps that will be taken by the Liquidators before filing any interlocutory process seeking an order for approval of their remuneration; and the orders to be sought from the Court in respect of the distribution of funds in these proceedings. Section 60 of the Trustee Act in turn provides protection for a trustee when paying amounts out of the trust following an advertisement for claims. That section provides that the trustee may give notice of the intention to convey or distribute the property and, at the expiration of the time fixed by that notice, may convey or distribute the property or any part of it among the persons entitled to it, having regard only to the claims of which the trustee then had notice, and is not liable to any person of whose claim the trustee has not had notice at the time of the distribution, although the section preserves the rights of any person to follow the relevant property into the hands of any recipient of it. 20By his affidavit sworn 14 February 2014, Mr Tonks gives evidence that he has reviewed Mr Rossetto's affidavit dated 7 February 2014 which deals with claims made on TCF and compensation paid by it and is satisfied that TCF is entitled to recover the total compensation paid from the Monies, and he accepts that the amount of TCF's claim is properly quantified as $2,738,698.97, to be met on a pari passu basis as contemplated by the Procedural Matrix in the proposed Deed of Settlement and Release. Mr Tonks expresses the view that the proposed Deed of Settlement and Release and Procedural Matrix will result in a better distribution of the Monies than would otherwise occur if the Liquidators or TCF were required to perform the work and conduct the calculations in respect of the claims on the Monies on an individual basis. He notes that the obligations of the Liquidators and the Company under the Deed will be discharged more than 3 months after the Deed is entered into, requiring the necessary approval under s 477(2)(b) of the Corporations Act. 21The order of priority contemplated by the direction sought by the Liquidators under s 511 of the Corporations Act provides for payment, first, of the Liquidators' costs and expenses in connection with the proceedings as agreed or as assessed and next, in payment of TCF's costs and expenses in connection with the proceedings as agreed or as assessed. There is no suggestion that the Liquidators' costs of these proceedings were not properly incurred by them so as to be a cost of the winding up and, given the conclusions reached above, the Company or the Liquidators would very likely have been ordered to pay TCF's costs of the proceedings. However, I propose to amend this order to make clear that the Liquidators are only entitled to recover costs from the trust fund to the extent that the Court may determine, since the Liquidators have deferred a determination of the issue noted in paragraph 22 below. So far as TCF's costs of this application is concerned, it is well established that, when a trustee reasonably seeks advice from the Court as to the proper administration of a trust, all parties properly joined will in the ordinary course have their appropriate costs out of the fund: Re MF Global Australia Ltd (in liq) (No 2) [2012] NSWSC 1426 at [27]). The priority given to these costs is consistent with that permitted under ss 556(1)(a) or 556(1)(dd) of the Corporations Act and with the form of order made by Campbell J in French Caledonia above. 22The proposed order of priority provides for payment, next in order of priority, of the Liquidators' and administrators' remuneration, costs, charges and expenses in respect of specified matters as may be approved by the Court. Mr Katekar, who appeared for the Liquidators, made clear in submissions that the Liquidators accepted that such approval would need to be directed both to whether such remuneration, costs and expenses was properly chargeable against the trust funds, and also to the amount of that remuneration, costs and expenses. The priority given to remuneration under this item is consistent with that permitted under s 556(1) of the Corporations Act since it constitutes "deferred expenses" as defined in s 556(2) of the Corporations Act (which include remuneration of both a liquidator and an administrator) ranking under s 556(1)(de) of the Corporations Act and also with the form of order made by Campbell J in French Caledonia above. The Liquidators made clear in submissions that they accept that both the questions of whether the Liquidators were entitled to such payments from the Monies, so far as they are held in trust, and the amount of such payments, would need to be determined by the Court in such an application. It is therefore not necessary for me to address, in this judgment, the issues which were considered in decisions such as Re Berkeley Applegate (Investment Consultants) Ltd (in liq); [1989] Ch 32, 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) [1999] FCA 144; (1999) 30 ACSR 377, French Caledonia above and Re National Buildplan Group Pty Ltd (subject to deed of company arrangement) [2014] NSWSC 146. The form of orders proposed by the Liquidators makes clear those issues have yet to be determined. 23The proposed order of priority provides for payment, next, to TCF in respect of individuals who had made a claim on it and had been compensated by it for loss of their monies held by the Company in the relevant accounts, whose claims totalled $2,738,698.97, and individuals other than TCF who now made claims in response to a notice published pursuant to the Trustee Act, with those claims to be treated equally in ranking and pro-rated to the extent that they may exceed the amount of the Monies. This provision requires consideration of the nature of TCF's claim, the nature of other possible claims and whether it is appropriate that such claims be pro-rated. 24It is common ground that the Company's customers have made claims, which TCF has paid, totalling $2,966,488, referable to 2702 passengers and 1347 booking identifications. TCF claims the smaller amount of $2,738,698.97 in respect of funds held in the accounts, the difference being referable to other compensation paid by TCF to passengers. TCF relies on evidence from its Claims Manager, Mr Rex Carroll, by affidavit dated 4 October 2013 which sets out the process for claims processing adopted by TCF. The evidence of an accounting expert retained by TCF, Mr Rossetto, is that he has matched all claims paid by TCF to passengers in the Company's data and he has quantified the amount paid by passengers in respect of those claims as an amount slightly in excess of that paid by TCF to those passengers. Section 40(3) of the Travel Agents Act and the terms of deeds of releases entered into between TCF and the Company's customers to whom it has paid compensation in turn provide for TCF to be subrogated to the rights of those customers against the Company. The relevant Deeds of Releases signed by claimants whose claims were accepted by TCF provided for the claimants to assign their rights to TCF as follows: "The Claimant(s) assigns to [TCF] all and any rights whatsoever which the Claimant(s) has/have or may have at any time in the future have against the Agent, or any other person, in respect to the failure, including the right to commence and fully prosecute legal proceedings against the Agent or any other person, and to cover and retain all money owing at any time by the Agent or any other person, to the Claimant(s) in respect of the failure." 25It appears that some 2309 passengers with potential claims of approximately $833,533 have not yet claimed on TCF or the Company. The evidence led by TCF explains why there may be other persons who have not yet made claims against the Company and may be entitled to do so. Mr Carroll's evidence is that claims made on TCF are not paid where credit card charges in respect of the services are reversed by a credit card provider, since the customer will not then have suffered any loss. Such claims may also have been met by travel insurance taken out by the Company's clients rather than by TCF. TCF's explanatory notes provided to customers also indicate that claims with it must be lodged within 12 months of the travel agent ceasing business, a period which has now elapsed in respect of the Company. Other persons with claims will have the opportunity to bring them by reason of the notice that the Liquidators propose to give under s 60 of the Trustee Act. 26I am also satisfied that the pro-rata distribution proposed by the Liquidators is justified. The relevant principles were comprehensively considered by Campbell J in French Caledonia above, where a liquidator approached the Court for directions under s 479(3) of the Corporations Act and sought an order that he would be justified in distributing the balance of funds in a trust account maintained by a travel agent pro-rata between all persons who had a claim on those accounts which had previously been made to the liquidator or was made following the giving of notice. Campbell J there addressed the question whether the money in the trust account should be divided among the people who claimed to be the beneficiaries of it in accordance with the rule in Clayton's case (1816) 1 Mer 572; 35 ER 781 or in accordance with some form of rateable division. His Honour undertook a detailed review of the decision in Clayton's case and subsequent decisions including that of the House of Lords in Sinclair v Brougham [1914] AC 398 (supporting a rateable distribution) and that in Re Diplock's Estate [1948] Ch 465 (applying the rule in Clayton's case) to determine the rights of claimants to the balance of a mixed fund. His Honour observed (at [169]) that the principles upon which tracing operated and the proper scope of the rule in Clayton's case favoured the result that that rule not be used to allocate losses suffered by beneficiaries whose funds were mixed, regardless of whether there was sufficient information to enable an allocation of withdrawals to deposits. His Honour also distinguished Clayton's case, where the trust account maintained by a travel agent was contributed by numerous travellers, each intending to pay for their own travel, and any misappropriation of funds from that account would involve taking money of all the people whose money was in it. 27His Honour also noted the complexities involved in an approach of "pari passu distribution" and noted that there was a preliminary question, prior to adopting a rateable abatement of claims to a fund whether all claimants had equal claims upon it. His Honour reviewed the tracing principles applicable where claimants fell within particular classes, and noted (at [187]) the possible relevance of a "lowest intermediate balance" rule, such that: "If the account in which the mixing occurred at any time reached a particularly low level, it may be that those people whose money was paid into the account before that low level was reached ought be accorded a smaller dividend on the amount of their claim than people whose money was paid in after the low level was reached. In carrying out such calculations, estimation and inference can be appropriate if precise evidence is not available." His Honour did not accept that an approach based on the "lowest intermediate balance" rule could never have a part to play in deciding how a mixed fund of several beneficiaries should be distributed, but observed that in that case, no facts were before the Court which led to a conclusion that the various claimants ought to be divided into various classes which were given different dividends; there was no reason to believe that there were assets purchased from the accounts, into which some beneficiaries could trace but others could not; and that the funds involved would be substantially depleted by the liquidator's costs of a more extensive analysis of the accounts. 28Mr Tonks' evidence deals with the time and costs which would be taken to conduct a review of the bank statements for the relevant client accounts to determine whether funds in those accounts should be distributed on a pro-rata basis to all clients who had deposited money into those accounts, or whether there was a "low intermediate balance" at some earlier point that might support a distribution to earlier clients at a lower rate than later clients, on the basis that the funds of earlier clients had been dissipated by the Company and the funds of later clients had not. Mr Tonks' evidence is that the task of identifying possible low intermediate balances would take over 700 hours and cost nearly $200,000 and he expresses the view that, based on his knowledge of the Company's affairs and the contents of the relevant bank statements: "[E]ven if the task were undertaken it may not lead to any informative result - there may be several low intermediate balances and it may be very difficult to work out what rates of distribution should apply to different classes of claimants." 29In this case, the amounts in issue are larger than were in issue in French Caledonia and would not be completely or substantially depleted by the additional costs of such an analysis. However, it seems to me that the Liquidators' evidence that the outcome of such an analysis is uncertain and that the substantial costs and time involved in it may well be wasted, and the factors to which Campbell J referred in French Caledonia and the facts to which I have referred above, support a distribution among TCF and claimants pursuant to the notice published by the Liquidators proportionately to their claims. 30The directions proposed by the Liquidators initially included provision for any remaining Monies to be paid to TCF, at a date no later than 3 months after the closing date of the time permitted under the notice under the Trustee Act. The Liquidators had indicated that they were prepared to accept that position as a matter of their commercial judgment in order to achieve a settlement of the proceedings. That provision would have raised questions of some difficulty, where the Monies would arguably otherwise have been available to unsecured creditors of the Company and was ultimately not pressed. The proposed orders now provide, appropriately, for any remaining monies to be treated as an asset of the Company, potentially available for distribution to other unsecured creditors of the Company. 31In summary, it seems to me that there is nothing to suggest that the proposed settlement and the entry into the proposed Deed of Settlement and Release including the Procedural Matrix is not a proper exercise of power or ill-advised or improper on the part of the Liquidators. Accordingly, I will make the order sought under s 477(2B) of the Corporations Act. I am also satisfied that this is a proper case in which to make a direction in the form proposed by the Liquidators under s 511 of the Corporations Act, having regard to findings which I have made above as to the status of the client accounts; the fact that the entry into the Deed of Settlement and Release involves an assessment of several legal issues; and the fact that the giving of the relevant direction would, in my view, be just and beneficial to advance the winding up by placing the Liquidators in a position where they have, subject to the adequacy of the information put before the Court, protection in respect of the entry into the Deed of Settlement and Release. 32The Liquidators also seek a direction under s 511 of the Corporations Act that they are justified in making an interim payment to TCF in the sum of $1,500,000, in anticipation of its entitlements under the settlement, on its undertaking to repay any amount less than $1,500,000 that may ultimately be calculated to be payable to TCF in accordance with the Court's orders. The intent of this undertaking is presumably that TCF repay any amount by which the interim payment exceeds its ultimate entitlement, and allow credit for the amount of the interim payment against its ultimate entitlement, although the terms of the undertaking offered may have needed to be amended to achieve that result, and I have amended the draft order accordingly. It seems to me that the proposed interim payment has sufficient connection with the settlement to warrant the Court making a direction is this regard, by reference to the principles that warrant such a direction in respect of the wider settlement. I consider that such a direction may properly be made since the amounts of the claims of TCF and other potential claimants to which I have referred above suggest that TCF is likely to recover in excess of this amount on a final distribution; there is no reason why it should be deprived of the use of the monies it has paid by way of compensation pending such a final distribution; and there is no suggestion that TCF would not or could not comply with the proposed undertaking, if it is ultimately entitled to less than it is paid on an interim payment. 33The Liquidators also sought an order that their costs and expenses of this application be costs and expenses of the liquidation of the Company to be paid from the trust monies. I cannot make an order in that form at this point, since it would require determination of the issue as to whether such costs are properly paid from the Company's assets generally or the trust funds, to which I referred in paragraph 22 above, which the Liquidators have deferred to be considered in a further application to the Court. Orders 34I propose, subject to any further submissions by the parties sent to my Associate within 7 days, to make the following orders: 1 The Second and Third Defendants' Notice of Motion filed 14 February 2014 and Amended Notice of Motion be returnable instanter. 2 Declare that the monies held by First Defendant, Classic International Cruises Pty Ltd (In Liquidation) ACN 108 757 722 ("Company") in the three bank accounts identified at paragraph 50(b), (c) and (f) of the affidavit of Bradley John Tonks sworn 23 August 2013 and at that time totalling $3,140,133.54 together with any interest accrued on those monies ("Trust Monies") are monies held on trust for the passengers of the Company including all persons who have made claims on and been compensated by the Plaintiff, Travel Compensation Fund ("TCF"). 3 Pursuant to section 477(2B) of the Corporations Act 2001 (Cth), approve the Second and Third Defendants, Bradley Tonks and John Vouris in their capacity as joint and several liquidators of the Company ("Liquidators") entering into on behalf of the Company, the Deed of Settlement and Release with TCF as set out in or similar terms to that as set out in Annexure A to the affidavit of Bradley Tonks sworn 14 February 2014. 4 Directs, pursuant to section 511 of the Corporations Act 2001 (Cth), that the Liquidators, in their capacity as liquidators of the Company are justified in distributing and may distribute Trust Monies which total, as at 12 February 2014, $3,286,145.53 together with any further interest accrued on the Trust Monies held by them in the following order of priority: (a) First, in payment of the Liquidators' reasonable costs and expenses in connection with these proceedings so far as the Court may determine that such costs and expenses are properly paid from the Trust Monies; (b) Next, in payment of TCF's reasonable costs and expenses in connection with these proceedings as agreed between the parties to these proceedings or as assessed; (c) Next, in payment of the Liquidators' and administrators' remuneration, costs, charges and expenses as may be approved by the Court (as to whether such costs are allowed as against the Trust Monies and, if so, their amount), including the Liquidators' and administrators' fees in: (i) Identifying the trust accounts and any other accounts; (ii) Obtaining control of the trust funds in the trust accounts; (iii) Dealing with Westpac Banking Corporation Ltd in relation to the trust accounts; (iv) Dealing with persons who claimed to have deposited monies to the trust accounts; (v) Dealing with persons who claimed to have paid monies, or caused monies to be paid, to the Company; (vi) Convening meetings of creditors of the Company, including all those who claimed to have paid monies to the Company and/or deposited monies to the trust accounts; (vii) Reviewing the claims of persons and organisations to the monies held in the trust accounts including: (a) JTG Services Pty Ltd; (b) Flight Centre Pty Ltd; (c) TCF; (d) The director of the Company; and (e) Other claimants. (viii) Instructing solicitors to advise in relation to the various claims in relation to the trust accounts; (ix) Instructing solicitors to commence these proceedings to seek directions in relation to the trust accounts and assisting solicitors in the preparation of evidence to be used in that application; (x) Causing a notice pursuant to section 60 of the Trustee Act 1925 (NSW) ("Trustee Act Notice") to be issued, advertised and published seeking claims to the monies in the trust accounts; (xi) Reviewing all claims received in response to the advertisement and publication of the Trustee Act Notice inviting claims; and (xii) Reading and considering the judgments of this Court, or (xiii) Otherwise in payment of such further remuneration of the Liquidators and administrators as the Court might subsequently approve; (d) Next, in respect of: (i) TCF in relation to all individuals who have made a claim on TCF and been compensated by TCF for loss of their monies held by the Company on trust on their behalf in the trust accounts, being those claims on and compensation paid by TCF totalling $2,738,698.97 (as identified at Tab 1 of Exhibit DBG-1 to the affidavit of David Benjamin Goldman sworn 19 February 2014) ("TCF Compensation Amount"); and (ii) all those individuals other than the TCF who have made claims in response to the Trustee Act Notice and who are identified at Tab 2 of Exhibit DBG-2 to the affidavit of David Benjamin Goldman sworn 19 February 2014 and, within the time allowed pursuant to the Trustee Act Notice who have within a reasonable time after responding to the Trustee Act Notice, produced evidence adjudged by the Liquidators to be corroborative of the existence of a proprietary claim against the trust accounts, their claims will be paid at a percentage rate (R), which percentage rate cannot exceed 100% and is calculated in accordance with the following formula: R = A / B Where A = Total amount of Trust Monies after taking into account paragraphs (a) to (d) above. B = Total of the TCF Compensation Amount and the claims adjudged by the Liquidators pursuant to (i) and (ii) above, but B cannot exceed $3,839,961.66. This calculation is to be made at the closing date of the time permitted under the Trustee Act Notice. (e) The remainder (if any) will be available to the Liquidators as an asset of the Company. 5 Direct pursuant to section 511 of the Corporations Act 2001 (Cth) that the Liquidators in their capacity as liquidators of the Company are justified in making and may make an interim payment to TCF pursuant to order 4 above in the sum of $1,500,000.00 upon the undertaking of TCF to the Court to repay to the Liquidators on 7 days' notice the difference between the interim payment and any lesser amount that may be due to them under order 4 above. 6 The Court notes that the parties have given mutual releases. 7 The parties have leave to apply on 3 days' notice specifying the relief sought. I will also relist the matter in the Registrar's list on a date to be agreed between the parties.