The Proceedings
An application was made to the Federal Court under s 90-15 of the Insolvency Practice Schedule (Corporations) and judicial advice under s 63 of the Trustee Act 1925 (NSW) for directions in relation to the distribution of funds held by Halifax Investment Services Pty Ltd (in liquidation) (Halifax AU). In addition, an application was made to the High Court of New Zealand for directions in relation to the distribution of funds held by Halifax New Zealand (Halifax NZ) (together with ancillary and related orders). In both jurisdictions issues of pooling funds and the appropriate method of distribution of funds to creditors were raised.
Among the issues for determination in both matters were the following:
1. the appropriate date of calculation of value of investments for purposes of distribution;
2. whether a pari passu distribution of funds was justified;
3. whether conversion of funds held in foreign currency to Australian dollars and New Zealand dollars was justified;
4. whether the liquidators were justified in setting off positive and negative net account balances for the same creditor;
5. whether exclusion of clients with low account credit balances was justified.
The above issues arose where:
1. funds held by Halifax AU and Halifax NZ were insufficient to satisfy all creditors’ entitlements;
2. where funds of Halifax AU and Halifax NZ were commingled;
3. where tracing of individual creditors’ entitlements was not practically feasible;
4. where foreign currency value fluctuations may cause difficulty with valuation;
5. where set-off of positive and negative net account balances was required to avoid unnecessary expense;
6. where the costs of distribution to low account credit balance clients would considerably exceed those account balances.
The Results
The applications were granted. Appeals to the Full Federal Court and to the New Zealand Court of Appeal were dismissed.
