TRUSTS - express trust - intention - certainty - where documentation contains statement that funds "held in trust" - resulting trust - Quistclose trust - contrastive trust - Black v Freedman trust arising from fraudulent scheme

Judgment

1. The plaintiffs are the Court-appointed liquidators of Courtenay House Pty Limited and Courtenay House Capital Trading Group Pty Ltd, pursuant to orders made on 16 May 2017 ("the appointment date") on the application of the Australian Securities and Investments Commission (ASIC).
2. Since 2010, Courtenay House Pty Limited and Courtenay House Capital Trading Group Pty Ltd have accepted funds from investors for the ostensible purpose of investment in foreign exchange trading. The two companies appear to have been operated as a single enterprise and for convenience I shall refer to them together as Courtenay House. Courtenay House offered investors a number of "standard products", by which funds were to be invested for general foreign exchange trading. In addition, in 2016, Courtenay House began to offer one-off "special products" for the stated purpose of exploiting foreign exchange movements associated with significant world events. The first of these was the "US Election Special", associated with the November 2016 United States presidential election; the second was the "Inauguration Day Special", associated with the inauguration of the President of the United States in January 2017; and the third was the "Brexit Special", associated with the exit of the United Kingdom from the European Union in May 2017.
3. Courtenay House provided prospective investors with a client information booklet and an investor pack. While these did not specify how investor funds were to be held in the companies' bank accounts, the investor pack included the following statement (emphasis added): Throughout the year we have little losses each month and then instead of taking these from clients' accounts, we pool the losses and every 6 months or twice a year in February and October we send out an email advising investors that the losses will be paid out of the trust account, to clear this amount and then start with a clean slate.
4. Once an investor decided to proceed, they were provided with an investor application form, to be completed and returned. The investment did not proceed until the form was returned and the funds were deposited.
5. The US Election Special was marketed by email to existing clients in about September 2016. Between 6 September and 31 October 2016, investors deposited approximately $20.87 million into an account in the name of Courtenay House with the National Australia Bank ("the US Election NAB Account"). Of this, approximately $4.38 million was paid in returns to investors, $12.6 million was later rolled over into another account in the name of Courtenay House with the National Australia Bank numbered 6250 ("the NAB-1 Account"), and other amounts were paid to various other bank accounts, leaving a nil balance as at the appointment date.
6. The Inauguration Day Special was marketed in December 2016. Between December 2016 and January 2017, investors deposited approximately $27.5 million into the NAB-1 Account. On 13 January 2017, $25 million was transferred from the NAB-1 Account to the US Election NAB Account and paid as returns to investors in the Inauguration Day Special, rolled over into standard products, or paid into other bank accounts. This left a balance of $4,945 in the NAB-1 Account, which was ultimately withdrawn on 16 March 2017.
7. In about March 2017, Courtenay House emailed material promoting the Brexit Special to its clients. It was a condition that capital invested in the Brexit Special be new, and not drawn - or "rolled-over" - from funds already invested in standard products. The application form - entitled "Trading Agreement: Extreme 3 New Account Form - Brexit" - included the following (emphasis added): Courtenay House Pty Ltd has an agreement in place with whereby he/she has deposited an amount of into our trading account held in trust. The parties agree to invest capital on live trading in the Forex & Futures markets, with CHCTG placing and managing trades on behalf of the investor. The agreement will commence on the 1st of May 2017 when the deposited monies have been cleared in full and all documents have been returned. Please note that this is a One Month Only Trading Agreement and the initial capital plus returns will be returned to the clients approx 15-06-2017. Our Conditions: A) You agree to all Courtenay House Capital Trading terms and conditions previously signed with your existing account and are aware that this is a once off agreement whereby you invest an additional new amount of capital. No Account shuffles are available. Your full amount plus any profit will be returned to your account by approx 15-06-2017. … Extreme 3 Trading Agreement (May Product) - BREXIT G) It is very important to understand the following trading strategy. Please let me know if you do not. This is how we trade every $100,000 of your capital. … I) Extreme 3 is traded on Live news and we need to use a different software package and platform to gain returns. This also means we do not mix up funds with your other account. If a client has multiple accounts they are treated separately.
8. The form identified the NAB-1 account as the account into which deposits were to be made.
9. Between 15 March and 26 April 2017, clients invested approximately $28.95 million in the "Brexit Special", all of which was deposited into the NAB-1 Account ("the Brexit Funds"). The Liquidators have been able to trace the entirety of the Brexit Funds to the investors who deposited them, with the exception only of $15,000 which was deposited in cash. The Brexit Funds remained in the NAB-1 Account on the appointment date, and have since been transferred by the Liquidators to a term deposit in their name.
10. It appears that, despite what was represented to clients, Courtenay House undertook very little foreign exchange trading and generated minimal returns from it; in fact, they operated a Ponzi scheme, using capital deposited by more recent investors to repay earlier investors. Neither the US Election Special nor the Inauguration Day Special funds were ever traded. After returns were paid to investors (22.87% on the US Election Special, and 13% on the Inauguration Day Special) most investors would roll-over the invested funds into standard products.
11. On 21 April 2017, at 3.11pm, following an investigation, ASIC obtained freezing orders over Courtenay House's bank accounts; the orders were served shortly after 4.00pm the same day. A number of deposits were made by investors to the NAB-1 Account on 21 April, both before and after the making and service of the freezing orders.
12. As at the appointment date, the Companies appear to have held six bank accounts: 1. The "Westpac 1" account, used to pay returns and to return capital to investors, fund some limited trading services, and pay individuals and expenses. It had a nil balance. 2. The "Westpac 2" account, used to receive capital deposits from investors for standard products, which had a balance of $21.02 million. 3. The "Westpac 3" account, which had been used for an international telegraphic transfer of $134,800, and had a nil balance. 4. The "US Election NAB Account", which had been used to receive investor funds for the US Election Special, and had a nil balance. 5. The "NAB-1 Account", which had originally been used to receive investor funds for the Inauguration Day Special, and subsequently for the Brexit Special, which had a balance of approximately $29 million. 6. The "Business Cash Maximiser" NAB Account, which was used as a conduit for certain transfers of funds between other accounts, and had virtually a nil balance.
13. The total investor funds which the liquidators have been able to identify, and the claims on them, are approximately summarised in the following table: [1] Funds ($) Claims ($) Surplus/Deficiency ($) Non-Brexit 28,999,978 -29,150,000 -150,022 Brexit 22,318,367 -164,036,000 -141,717,633 Other 690 -0 690 Total 51,319,035 -193,186,000 -141,866,965

1. Thus, if the Brexit funds are treated as exclusively the beneficial property of the Brexit investors, they will receive a return of 100 cents in the dollar, or close to it (subject, perhaps, to the impact of liquidation costs and expenses), while the non-Brexit investors would receive a dividend in the order of 13 cents in the dollar; whereas, if all funds are "pooled", all investors would receive a dividend in the order of 26 cents in the dollar.
2. By originating process filed on 5 September 2017, the Liquidators applied pursuant to (CTH) Corporations Act 2001, Sch 2, s 90-15, and ss 579E, 579G and 601EE, (NSW) Trustee Act 1925, s 63, (NSW) Uniform Civil Procedure Rules 2005, r 28.2, and (NSW) Supreme Court (Corporations) Rules 1999, r 2.13(5), for advice and directions as to the manner in which they should distribute the funds in those accounts, for the winding up of the unregistered managed investment scheme under Corporations Act, s 601EE, and for the joinder of representative defendants to represent various classes of defendants. On their interlocutory process filed on 4 December 2017, an order was made that the following questions be determined separately and before the other issues in the proceedings: (a) whether the Pre-21 April 2017 Brexit Investors are the beneficial owners of the funds deposited by the Pre-21 April 2017 Brexit Investors into the NAB-1 Account; (b) if the Court determines question (a) in the affirmative: (i) whether the Liquidators are justified in distributing the funds deposited by the Pre-21 April 2017 Brexit Investors to the Pre-21 April 2017 Investors only and not to other creditors of the Companies; or (ii) alternatively, whether the Liquidators should set off any funds received by the Pre-21 April 2017 Brexit Investors from the Companies prior to the Liquidations, against distributions to be made arising from the determination of question (a) above. (c) whether the Post-21 April 2017 Brexit Investors are the beneficial owners of the funds deposited by the Post-21 April 2017 Brexit Investors into the NAB-1 Account; (b) if the Court determines question (c) in the affirmative: (i) whether the Liquidators are justified in distributing the funds deposited by the Post-21 April 2017 Brexit Investors to the post 21 April 2017 Investors only and not to other creditors of the Companies; or (ii) alternatively, whether the liquidators should set off any funds received by the Post 21 April 2017 Brexit Investors from the Companies prior to the Liquidations, against distributions to be made arising from the determination of question (d) above.
3. Although in their report the Liquidators, for whom Ms Whittaker and Ms Hulmes appeared, expressed some opinions as to what they consider fair or equitable, on the hearing they adopted a neutral position, leaving the representative defendants to advance the interests of the respective classes. [2] The first defendant J.P. Melocco Pty Ltd, for whom Mr Izzo appeared, represents the class of investors who invested in the Brexit Special whose investment funds were deposited into the NAB-1 Account on or before 21 April 2017, the date on which the freezing orders were made ("the Pre-21 April 2017 Brexit Investors"). The second defendant Alamaidan Investments Pty Ltd (as trustee for the Del Vecchio Family Trust), for whom Mr Newlinds SC and Mr Strickland appeared, represents the class of investors who invested in the Brexit Special whose investment funds were deposited into the NAB-1 Account after 21 April 2017 ("the Post-21 April 2017 Brexit Investors"). The third defendant Lifesmart Trading Pty Ltd, for whom Mr Pike SC appeared, represents other investors - that is, the class who invested in products other than the Brexit Special. In separate proceedings, Lord Kyle Lester Sheridan has at various times sought orders for the return to him of funds invested with the Companies. [3] He is a non-Brexit investor as to $2.8 million, and a post-21 April Brexit investor as to $7.8 million. In the light of the quantum of his interest, and the pendency of his separate proceedings, he was granted leave pursuant to Corporations Rules, r 2.13(1), to be heard as a creditor, without being joined as a party.
4. The Brexit Investors advanced three bases on which the Brexit funds were said to be held on trust for them. The first was an express trust, arising from the language of the documentation. The second was a resulting "Quistclose" trust, arising from the failure of the purpose for which the funds were advanced to the companies. The third was a constructive Black v Freedman [4] trust, arising from what was said to be the fraudulent Ponzi scheme. [5]

Express trust

1. The non-Brexit Investors argued that there was insufficient certainty of intention to create a trust, there being various textual and contextual reasons, some blowing in different directions. [6]
2. In this context, references to "intention" are to be understood, in the same way as in the law of contract, as references to the intention imputed to the parties by the objective manifestations of the words they use in their context. [7] Where the indicia are finely balanced, the necessary certainty of intention will not likely be found. [8] This is particularly so in a "commercial" context, where the imposition of trust relationships may defeat the interests and expectations of creditors, as explained by Keane J in Korda v Australian Executor Trustee (SA) Limited (citations omitted): [9] [204] In Kauter v Hilton [(1953) 90 CLR 86 at 97; [1953] HCA 95. See also Associated Alloys at [29]], Dixon CJ, Williams and Fullagar JJ referred to: … the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries. [205] The need for clarity as to the intention to create a trust and its subject matter is of particular importance in a commercial context where acceptance of an assertion that assets are held in trust is apt to defeat the interests of creditors of the putative trustee. The traditional inclination of the courts is to protect creditors against the use of a straw company as a trading trustee [Re Exhall Coal Co Ltd (1866) 35 Beav 449; 55 ER 970; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 and 372; 27 ALR 129 at 134 and 139; [1979] HCA 61 (Octavo)]. [206] AET placed considerable reliance upon the following observations of Bell, Gageler and Keane JJ in Legal Services Board v Gillespie-Jones [(2013) 249 CLR 493; 300 ALR 430; [2013] HCA 35 (at [113]): "[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" [Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 165-6; 117 ALR 27 at 39; [1993] HCA 1 (Registrar of the Accident Compensation Tribunal), quoting Taylor v Davies [1920] AC 636 at 651 and Cohen v Cohen (1929) 42 CLR 91 at 100; [1929] ALR 204 at 207-8; [1929] HCA 15. See also Mann v Hulme (1961) 106 CLR 136 at 141; [1962] ALR 75 at 77-8; [1961] HCA 45] (footnotes omitted). A legal practitioner who receives money from a client to be held for and on behalf of the client or another person archetypally answers that description. [207] This passage identifies the nature of the inquiry which must occur in order to determine whether a person is a trustee; it does not suggest an affirmative answer to the critical questions in this case, namely whether the Forest Company or the Milling Company had "the custody and administration of property on behalf of" the covenantholders, or had "received, as and for the beneficial property of [the covenantholders], something which [they were] to hold, apply or account for specifically for [their] benefit". Indeed, the contrast between the receipt of moneys by a legal practitioner to be held specifically for the benefit of a client or a third party and the receipt of investment funds by the Forest Company tells against an affirmative answer. [208] The language of the relevant documents is not to be strained to discover an intention to create a trust of the broad scope for which AET contends. In Byrnes [Byrnes at [49]], Gummow and Hayne JJ noted the approval by Mason CJ and Dawson J in Bahr v Nicolay (No 2) [(1988) 164 CLR 604 at 618; 78 ALR 1 at 9; [1988] HCA 16] of the proposition stated earlier by Du Parcq LJ [Re Schebsman [1944] Ch 83 at 104; [1943] 2 All ER 768 at 779 (Re Schebsman)] that: … unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention.
3. However, it is important to observe that this restraint in finding that a trust was intended applies "unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case". [10] As Gummow and Hayne JJ pointed out in Byrnes v Kendle, use of such words as "upon trust" will manifest such an intention: [11] [49] In Bahr v Nicolay (No 2) [(1988) 164 CLR 604 at 618; 78 ALR 1 at 9; [1988] HCA 16] Mason CJ and Dawson J approved of the expression of the "traditional attitude" by du Parcq LJ [Re Schebsman; Ex parte Official Receiver v Cargo Superintendents (London) Ltd [1944] Ch 83 at 104; [1943] 2 All ER 768 at 779] that "unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention". In the present case there was no degree of informality, the trust being manifested and proved by deed using the technical term "upon trust". Accordingly, to adopt what was said in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In liq) (at [34] )[ (2000) 202 CLR 588; 171 ALR 568; [2000] HCA 25 at [34]]: This is not one of those cases where the language employed by the parties for the transaction is inexplicit so that the court is left to infer the relevant intention from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties. [Footnote omitted.]
4. Likewise, Heydon and Crennan JJ: [12] [117] ... Did the 1997 acknowledgment of trust create a trust? The opening language twice described it as a trust. Clause 1, a key operative provision, used the language of trust. These indications, not countered by any other aspect of the document, are more than sufficient to support the conclusion that it was a trust.
5. To similar effect, French CJ said: [13] [18] … In the Full Court, Doyle CJ said (at [28]): … The terms of the Acknowledgement are clear. So are the terms of the earlier Acknowledgement. Mr Kendle might not have fully understood what he was doing, but that is neither here nor there. His Honour was correct in so holding. Mr Kendle's challenge to the finding that he had created a trust cannot succeed.
6. In the present case, the formal document by which the parties agreed to the terms of the investment described it as being held in trust. Other aspects of the document were less explicit, but favour the same view: 1. Courtenay House were to place and manage trades on behalf of the investor; 2. it was said that the initial capital plus returns will be returned to the clients, and that your full amount plus any profit will be returned to your account; 3. the investment was described as your capital; and 4. it was explained that we do not mix up funds with your other account, and that if a client has multiple accounts they are treated separately.
7. Absent the express reference to "in trust" there may arguably have been insufficient certainty, but the presence of those unambiguous and explicit words is decisive.
8. The possibility that there were also oral communications between investors and the companies does not detract from the force of the documentation. First, there is no evidence of any particular communication inconsistent with an intention that the funds invested be held on trust for the client. Secondly, the terms of an express trust are decisive, in the absence of any fraud, undue influence or duress; what needs to be ascertained is the intention as revealed by the words used by the parties, and further inquiry into the subjective or real intention of the settlor is unnecessary. [14]
9. Nor is the reference to a "trading account", or the notion that funds deposited would be pooled with those of other investors to "live trade", inconsistent with an intention to create a trust. Receipt of funds from multiple beneficiaries into a single account is not inconsistent with a trust; the paradigm case is a solicitor's trust account. Segregation of funds, while an indicium of a trust, is not essential, and a trustee is not always obliged to keep the trust funds separate. [15] An agreement that money be paid into a general account does not defeat a trust that would otherwise exist. [16] Particularly in the context of managed investment schemes, the idea of trust money being "pooled" for the purposes of trading, and even being used to meet certain obligations of the trustee, even in connection with other clients, is established. [17] Moreover, a trust may be recognised over the funds when first received, and over any returns from trading in them. [18]
10. In my judgment, funds deposited by Brexit Investors were plainly to be held on trust by Courtenay House for the relevant Brexit Investor, who remained beneficially entitled to the funds.

Quistclose trust

1. Where funds are transferred from one party to another with the intention that they not become part of the general assets of the transferee and are to be used by the transferee for a specific purpose, then - absent contrary stipulation - it is implied that if the purpose cannot be effectuated, the money is held upon trust for the transferor. [19] This involves the application of established trust principles to particular facts. [20]
2. In the present case, it is abundantly clear that the funds were not intended to become part of the general assets of Courtenay House, but were to be used by the companies to trade on behalf of investors. They were never used for that purpose, and the freezing orders made it impossible that they be so used. This provides an alternative basis for the conclusion that they are held on trust for the Brexit Investors.

Black v Freedman trust

1. Where money has been stolen, or obtained by fraud, it is held on trust by the recipient. [21] Here, contrary to what was represented to investors, funds were procured by the companies, not for the purpose of undertaking foreign exchange trading, but to return capital and return on investment to earlier investors, in the course of a Ponzi scheme. While the non-Brexit investors submitted that whether a trust arose must depend on the facts of each individual case, and that - as the Brexit Investors were all existing clients with an established relationship with the companies - there may well be more to the relationship, in my view it is inconceivable that any would have invested had they understood that their funds were to be used not for foreign exchange trading, but to pay out earlier investors, and that repayment to them would be dependent upon the survival of the scheme. Accordingly, this is a further alternative basis for concluding that the funds invested with Courtenay House were held on trust for the investors.

Pooling and set-off

1. The non-Brexit investors submitted that if the Court were to conclude that the funds invested by the Brexit Investors were held on trust for those investors, then the funds invested by non-Brexit Investors were also held on trust, and that the funds should be "pooled", or at least returns derived by Brexit Investors from their investments in non-Brexit products should be set off against their entitlement to recover their Brexit investments.
2. The first limb of this proposition is in my judgment correct. The documentation for the other special products was relevantly indistinguishable from that used for the Brexit Special, and the documentation for standard products in more recent times was to similar effect. Although it is conceivable that Courtenay House still held some funds which had been invested under the earlier documentation which did not contain the explicit reference to being "held in trust", it is likely that the overwhelming proportion of the funds held as at the appointment date had been subscribed under documentation which did contain those words. Accordingly, I accept that Courtenay House held the funds subscribed by non-Brexit investors on trust for the clients who invested them.
3. Mr Pike SC submitted that a direction should be made (under Corporations Act, s 601EE(2)) for pooling, in order to avoid a situation in which one trust (the Brexit Investments) benefits at the expense of another (the non-Brexit Investments). This submission was founded on a passage in BBY No 2, [22] which - when the context is examined - was directed to a situation in which trust funds had been mixed. In BBY No 2, I endeavoured to explain that pooling was a pragmatic remedy which a liquidator might be directed to adopt where the identification and tracing of the interests of individual clients is not in the circumstances of the particular case reasonably and economically practical, on the basis that it is reasonable in the circumstances that the funds be regarded as irreversibly deficient and mixed. The theoretical basis for pooling is the principle that all contributors to a deficient mixed fund hold an equitable charge over the entire fund and its traceable proceeds to the value of their contributions, subject to any dealings and costs, or are equitable tenants in common of the mixed fund as a whole, including its traceable proceeds, subject to such deductions, so that each contributor has an "entitlement" in each fund, although the pragmatic nature of the jurisdiction to give advice and directions to a liquidator means that neither strict proof of mixing such as would entitle a beneficiary to an equitable proprietary remedy, nor absolute impossibility of tracing, is required. However, because the effect of pooling two or more accounts is to treat each client's entitlement to one as identical to its entitlement to the other(s), and so to treat each client as having a rateably equal interest in each fund, it will be warranted only when the funds have become so intertwined that each client's entitlement to one account may reasonably be regarded as identical to its entitlement to the other(s), and this will be so when it is reasonable in all the circumstances to regard each as having a rateably equal interest in the mixed fund. [23]
4. Generally, the Court's power (under Corporations Act, s 601EE(2)), to make any orders it considers appropriate for the winding up of an unregistered managed investment scheme does not authorise a distribution of surplus assets other than to those entitled to the assets in proportion to their entitlements, [24] although that general principle yields in cases where it is not pragmatic to ascertain the proprietary rights. [25] As Black J observed in MF Global, "the case law has recognised that, where there are relatively clear property interests in particular property, this cannot "be altered by reference to some notion of common misfortune", [26] and that "accounts should only be pooled … if mixing or another proper basis for pooling is established". [27]
5. This is not a case in which it is not pragmatic to ascertain entitlements to the Brexit funds: the Liquidators have (with the insignificant exception already mentioned) traced every contribution to the Brexit funds. Whether it is possible to trace the deposits of the non-Brexit investors remains under inquiry but appears improbable, not only due to the number of transactions, but also because the fund is manifestly deficient. But it has been possible to trace the deposits of each Brexit Investor, and to establish that the trust property is still in existence, in the NAB-1 account, and that there is no deficiency.
6. There has been no mixing of the Brexit funds with other funds, and the fund is sufficient to meet the claims of all those who contributed to it. Just because all the deposits from all investors were received on trust for the relevant depositor does not mean that somehow there was a single trust fund; to the contrary, the capital deposited by each investor was held on trust for that investor. The money deposited by the Brexit Investors remained a separate extant fund, which was always segregated from other non-Brexit funds, was not mixed, and was not deficient. There has been no mixture into them of non-Brexit funds which might give non-Brexit investors a claim on the Brexit funds.
7. The non-Brexit Investors submitted that but for the freezing orders made on 21 April 2017, the Brexit money would have been used to repay other investments. There are two answers to that proposition: the first is that they were not so used; and the second is that, had they been so used, that would have represented a mixture of the Brexit funds into the other funds, giving the Brexit investors a claim to trace into the other funds, and if (as appears to be the case) the other funds were deficient, to a charge over the other funds to the extent of the contributions made to them by the Brexit funds. On no basis would it give non-Brexit Investors a claim to the Brexit funds.
8. Where there is no difficulty in identifying the beneficial entitlements to the Brexit funds, no deficiency in them, and they have not been mixed with any other money, there is no warrant for pooling, which would amount to no more than disregarding clear property interests in particular property on account of some notion of common misfortune.
9. The "set-off" argument, which was also mentioned in the Liquidators' report, says that it would be unfair for Brexit Investors to receive back their Brexit Investment and also to retain such return as they may already have received in respect of any other investment. It was argued that this would somehow confer an unfair windfall on the Brexit Investors.
10. An endeavour was made to illustrate this by reference to the amount which a selected Brexit investor had already received by way of return from investment in non-Brexit products, as well the amount which would be received from a 100c in the dollar return from the Brexit investment. However, I did not find this persuasive. It might have been otherwise if Brexit funds had been used to repay earlier investments, but they were not. Moreover, a beneficiary's entitlement to recover its property from one fund is not affected by what the same beneficiary has received from another fund. Insofar as the argument is analogous to the rule in Cherry v Boultbee, [28] that rule concerns set-off of claims and liabilities in respect of a single fund. And while, in the context of a deficient mixed fund, it may be appropriate that returns received by some beneficial owners be taken into account in order to do equity in distribution of what remains in the fund, [29] the Brexit Investment fund is, as has been explained above, neither deficient, nor mixed with non-Brexit funds.
11. There is no proper basis for setting off returns derived by Brexit Investors from their investments in non-Brexit products against their entitlement to recover their Brexit investments.

Conclusion and orders

1. For the foregoing reasons, I have concluded that: 1. the Pre-21 April 2017 Brexit Investors are the beneficial owners of the funds deposited by them into the NAB-1 Account, and the liquidators are justified in distributing the funds deposited by the Pre-21 April 2017 Brexit Investors to them only, and not to other creditors of the Companies; and 2. the Post-21 April 2017 Brexit Investors are the beneficial owners of the funds deposited by them into the NAB-1 Account, and the liquidators are justified in distributing the funds deposited by the Post 21 April 2017 Brexit Investors to them only, and not to other creditors of the Companies.
2. The Court orders that the preliminary questions be answered as follows: 1. whether the Pre-21 April 2017 Brexit Investors are the beneficial owners of the funds deposited by the Pre-21 April 2017 Brexit Investors into the NAB-1 Account. Answer: Yes 1. if the Court determines question (1)(a) in the affirmative: 1. whether the liquidators are justified in distributing the funds deposited by the Pre-21 April 2017 investors to the Pre-21 April 2017 Investors only and not to other creditors of the Companies; or Answer: Yes 1. alternatively, whether the liquidators should set off any funds received by the Pre-21 April 2017 Investors from the Companies prior to the liquidations against distributions made arising from the determination of question 1(a) above. Answer: Does not arise. 1. whether the Post-21 April 2017 Brexit Investors are the beneficial owners of the funds deposited by the Post-21 April 2017 Brexit Investors into the NAB-1 Account. Answer: Yes 1. if the Court determines question (1)(c) in the affirmative: 1. whether the liquidators are justified in distributing the funds deposited by the Post-21 April 2017 investors to the Post-21 April 2017 Investors only and not to other creditors of the Companies; or Answer: Yes 1. alternatively, whether the liquidators should set off any funds received by the Post-21 April 2017 Investors from the Companies prior to the liquidations against distributions made arising from the determination of question 1(d) above. Answer: Does not arise.

Endnotes

1. These figures are taken from the Liquidators' report at [337] and [409]. There is a small discrepancy between the Liquidators' advice that all the Brexit funds are accounted for, and the apparent deficiency according to these figures of $150,000; however the point of the table is to indicate the impact of pooling, and the slight discrepancy does not materially affect this.
2. Cf Sons of Gwalia Ltd (subject to deed of company arrangement) v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119 at 121 [6] (Finkelstein J); Re MF Global Australia Ltd (in Liq) [2012] NSWSC 994 at [2]; (2012) 267 FLR 27 (Black J).
3. See In the matter of Courtenay House Trading Group Pty Ltd [2017] NSWSC 1792; In the matter of Courtenay House Trading Group Pty Ltd [2017] NSWSC 1834; In the matter of Courtenay House Trading Group Pty Ltd & Courtenay House Pty Ltd [2018] NSWSC 55.
4. Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105; 17 ALR 541
5. The same arguments were advanced by the Pre-21 April Brexit Investors and the Post-21 April Brexit Investors. There is no material difference in their position, although the Post-21 April Investors argued that their position was somewhat stronger, especially on the Quistclose trust argument, given that the freezing order made on 21 April rendered the implementation of the purpose of the investment impossible.
6. Cf Korda v Australian Executor Trustee (SA) Limited [2015] HCA 6; (2015) 255 CLR 62 at [5], [49]; 317 ALR 225; 145 ALD 495; 89 AJLR 340 (French CJ).
7. Byrnes v Kendle [2011] HCA 26 at [13]-[18], [46]-[66], [98]-[118]; (2011) 243 CLR 253; (2011) 279 ALR 212; 85 ALJR 798.
8. Korda v Australian Executor Trustee (SA) Limited [2015] HCA 6; (2015) 255 CLR 62 at 72 [10]; 317 ALR 225; 145 ALD 495; 89 AJLR 340 (French CJ).
9. Korda v Australian Executor Trustee (SA) Limited [2015] HCA 6; (2015) 255 CLR 62 at 123-124 [204]-[208]; 317 ALR 225; 145 ALD 495; 89 AJLR 340 (Keane J).
10. Re Schebsman [1944] Ch 83 at 104; 2 All ER 768 (Du Parcq LJ).
11. (2011) 243 CLR 253; (2011) 279 ALR 212; [2011] HCA 26 at [49].
12. Byrnes v Kendle [2011] HCA 26 at [117]; (2011) 243 CLR 253; (2011) 279 ALR 212; 85 ALJR 798.
13. Byrnes v Kendle [2011] HCA 26 at [18]; (2011) 243 CLR 253; (2011) 279 ALR 212; 85 ALJR 798.
14. Byrnes v Kendle [2011] HCA 26 at [17]-[18] (French CJ), [94], [102], [104]-[105], [113]-[116] (Heydon and Crennan JJ); (2011) 243 CLR 253; (2011) 279 ALR 212; 85 ALJR 798.
15. Freelance Global Ltd (in Liq) v Bensted [2016] VSC 181 at [32] (Riordan J); Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588 at 605-6 [34] (Gaudron, McHugh, Gummow and Hayne JJ); Stephens Travel Service International Pty Ltd (Receivers and Managers Appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 349 (Hope JA); Re Kayford Ltd (in Liquidation) [1975] 1 All ER 604 [1975] 1 WLR 279 at 282 (Megarry J); Grocers of Wyong Pty Ltd v Retech Global Pty Ltd [2004] NSWSC 488 at [27] (Campbell J).
16. Stephens Travel Service International Pty Ltd (Receivers and Managers Appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 344-9 (Hope JA).
17. (CTH) Corporations Act 2001, s 981D; Australian Securities and Investments Commission v Idylic Solutions Ltd [2009] NSWSC 1306; (2009) 76 ACSR 129 at 136 [45]-[46] (Barrett J); and see In the matter of BBY Limited (Receivers and Managers appointed) (in liquidation) [2016] NSWSC 1366 at [91]-[93]; In the matter of BBY Ltd (No 2) [2018] NSWSC 346 at [23]-[25].
18. Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588 at 605-6 [34] (Gaudron, McHugh, Gummow and Hayne JJ).
19. Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd [1978] HCA 45; (1978) 141 CLR 335 at 353; 22 ALR 1; 53 ALJR 66 (Gibbs ACJ); Compass Resources Ltd v Sherman [2010] WASC 41; (2010) 42 WAR 1 at 9-12 [57]-[78] (Beech J).
20. Re Australian Elizabethan Theatre Trust Ltd [1991] FCA 344; (1991) 30 FCR 491 at 503-4; 102 ALR 681; 5 ASCR 587 (Gummow J); Legal Services Board v Gillespie-Jones [2013] HCA 35; (2013) 249 CLR 493 at 523 [112]; 300 ALR 430; 87 ALJR 985 (Bell, Gageler and Keane JJ).
21. Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105; 17 ALR 541; Orix Australia Corporation Ltd v Moody Kiddell and Partners P/L [2005] NSWSC 1209 at [155] (White J); MBF Australia Limited v Malouf [2008] NSWCA 214 at [31]-[32] (Hodgson JA).
22. In the matter of BBY Limited (Receivers and Managers appointed) (in liquidation) (No 2) [2018] NSWSC 346 at [52].
23. In the matter of BBY Limited (Receivers and Managers appointed) (in liquidation) (No 2) [2018] NSWSC 346 at [38]-[83].
24. Australian Securities and Investments Commission (ASIC) v Letten (No 7) [2010] FCA 1231; (2010) 190 FCR 59; (2010) 80 ACSR 401; [2010] FCA 1231 at [268] (Gordon J).
25. Australian Securities and Investments Commission (ASIC) v Letten (No 7) [2010] FCA 1231; (2010) 190 FCR 59; (2010) 80 ACSR 401; [2010] FCA 1231 at [259], [332] (Gordon J).
26. In the matter of MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [78]; (2012) 267 FLR 27; citing Russell-Cooke Trust Co v Prentis [2002] EWHC 2227; [2003] 2 All ER 478 at [44]; Australian Securities Commission v Buckley (1996) 7 BPR 15,024; Re Magarey Farlam Lawyers Trust Accounts (No 3) [2007] SASC 9; (2007) 96 SASR 337 at [123], [145]; S B Thomas, "Clayton's Case and the 'Common Pool' Exception (2004) 15 JBFLP 177 at 183.
27. In the matter of MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [78]; (2012) 267 FLR 27; (Black J).
28. [1839] EngR 1099; 41 ER 171
29. Australian Securities and Invesment Commision v Idylic Solutions Ltd [2009] NSWSC 1306; (2009) 76 ACSR 129 at [77].

Amendments 11 April 2018 - Counsel added to cover page 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: 11 April 2018