FEDERAL COURT OF AUSTRALIA Georges v Seaborn International Pty Ltd (Trustee) [2012] FCA 294 Citation: Georges v Seaborn International Pty Ltd (Trustee) [2012] FCA 294 Parties: GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993, JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 and SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 v SEABORN INTERNATIONAL PTY LTD ABN 24 114 085 090 AS TRUSTEE FOR THE SEABORN FAMILY TRUST, MARYLAND PTY LTD ACN 150 886 427 AS TRUSTEE FOR THE NORWEGIAN TRUST, ALISTANTE PTY LTD ACN 067 268 802, BON RIVER PTY LTD ACN 059 666 750, ROLAND MARK WARD AS TRUSTEE FOR THE AWARD SUPERANNUATION FUND ABN 66 473 078 418 EFAX PTY LTD ACN 001 886 120, EAGLE SECURITIES LIMITED and ROBERT JOSEPH SCOLARO File numbers: VID 160 of 2012 VID 250 of 2012 VID 193 of 2012 Judges: MURPHY J Date of judgment: 26 March 2012 Catchwords: APPEAL – Application for leave to appeal – whether order for directions was final or interlocutory - application for leave to appeal by non party – refusal of application to be appointed as a representative in the proceedings Legislation: Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Trustee Act 1958 (Vic) Cases cited: Bishopsgate Investment Management Ltd (In Liquidation) v Homan [1995] Ch 211 at 217 Brady v Stapleton [1952] 88 CLR 322 Carr v Finance Corp of Australia (No 1) (1981) 147 CLR 246 Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 Cuthbertson v Hobart Corporation (1921) 30 CLR 16 Décor Corporation Pty Limited v Dart Industries Inc (1991) 33 FCR 397 Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher & Ors (2011) 281 ALR 38 Georges v Seaborn International (Trustee) in the matter of Sonray Capital Markets Pty Ltd (in liquidation) [2012] FCA 75 In Re Buckton [1907] 2 Ch 406 In Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74 (PC) In Re Securities Insurance Company [1894] 2 Ch 410 In Re The Earl of Radnor's Will Trusts (1890) LR 45 Ch D 402 Johnston v Cameron (2002) 124 FCR 160 Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd (2007) 25 ACLC 1,433 Primary Securities Ltd (recs & mgrs apptd) (in liq) v Saker (2010) 191 FCR 277 Re G.B. Nathan & Co Pty Ltd (In liq) (1991) 24 NSWLR 674 Re The Black Stump Enterprises Pty Ltd and Associated Companies (2005) 228 ALR 591 Sons of Gwalia v Margaretic (2006) 232 ALR 119; [2006] FCAFC 92 Warburton v Altson (1889) 15 VLR 94 Wills v Australian Broadcasting Corporation (2009) 173 FCR 284 Date of hearing: 21 March 2012 Date of last submissions: 21 March 2012 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 86 In VID 160 of 2012: Counsel for the Applicants: Mr I Martindale QC, Dr P Vout and Ms T Spencer Bruce Solicitor for the Applicants: Norton Rose Australia Counsel for the First, Second, Third, Fourth and Fifth Respondents: The First, Second, Third, Fourth and Fifth Respondents did not appear Counsel for the Sixth Respondent: Mr N Cotman SC and Mr D Forbes Solicitor for the Sixth Respondent: Hall & Wilcox In VID 250 of 2012: Counsel for the Applicant: Mr O Bigos Solicitor for the Applicant: Arnold Bloch Leibler Counsel for the First Respondent: Mr N Cotman SC and Mr D Forbes Solicitor for the First Respondent: Hall & Wilcox Counsel for the Second, Third and Fourth Respondents: Mr I Martindale QC, Dr P Vout and Ms T Spencer Bruce Solicitor for the Second, Third and Fourth Respondents: Norton Rose Australia In VID 193 of 2012: Counsel for the Applicant: The Applicant appeared in person Counsel for the First, Second and Third Respondents: Mr I Martindale QC, Dr P Vout and Ms T Spencer Bruce Solicitor for the First, Second and Third Respondents: Norton Rose Australia Counsel for the Fourth, Fifth, Sixth, Seventh and Eighth Respondents: The Fourth, Fifth, Sixth, Seventh, Eighth and Ninth Respondents did not appear Counsel for the Ninth Respondent: Mr N Cotman SC and Mr D Forbes Solicitor for the Ninth Respondent: Hall & Wilcox IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 160 of 2012 BETWEEN: GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 First Applicant JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Second Applicant SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Third Applicant AND: SEABORN INTERNATIONAL PTY LTD ABN 24 114 085 090 AS TRUSTEE FOR THE SEABORN FAMILY TRUST First Respondent MARYLAND PTY LTD ACN 150 886 427 AS TRUSTEE FOR THE NORWEGIAN TRUST Second Respondent ALISTANTE PTY LTD ACN 067 268 802 Third Respondent BON RIVER PTY LTD ACN 059 666 750 Fourth Respondent ROLAND MARK WARD AS TRUSTEE FOR THE AWARD SUPERANNUATION FUND ABN 66 473 078 418 Fifth Respondent EFAX PTY LTD ACN 001 886 120 Sixth Respondent JUDGE: MURPHY J DATE OF ORDER: 26 MARCH 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicants be granted leave to appeal from the directions of the Court on 10 February 2012 in proceeding VID 562 of 2010 insofar as they relate to Part E6 paragraphs 249-285 of the Reasons for Judgment in respect of Efax Pty Ltd and like Sonray Client accounts. 2. The appeal be expedited to be heard on a date as soon as possible together with the appeal in VID 250 of 2012 – Eagle Securities Limited v Efax Pty Ltd & Ors. 3. Liberty to apply. THE COURT DIRECTS THAT: 4. The liquidators are justified and are acting reasonably in appealing the directions of the Court on 10 February 2012 in proceeding VID 562 of 2010 insofar as they relate to Part E6 paragraphs 249-285 of the Reasons for Judgment in respect of Efax Pty Ltd and like Sonray Client accounts. 5. The liquidators are entitled to be indemnified out of the property and funds they hold on trust in respect of their remuneration and expenses of this application and the appeal. 6. The sixth respondent Efax Pty Ltd is entitled to be indemnified out of the Segregated Accounts for its expenses reasonably incurred in respect of this application and the appeal, in accordance with the Indemnity Costs Protocol filed by the liquidators in proceeding VID 562 of 2010. Capitalised terms in this Order are as defined in the Reasons for Judgment in proceeding VID 562 of 2010. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 250 of 2012 BETWEEN: EAGLE SECURITIES LIMITED Applicant AND: EFAX PTY LTD ACN 001 886 120 First Respondent GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Second Respondent JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Third Respondent SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Fourth Respondent JUDGE: MURPHY J DATE OF ORDER: 22 MARCH 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The time for service of the application for extension of time and leave to appeal be abridged to 1 day. 2. The time for filing the application for leave to appeal be extended until 20 March 2012. 3. The applicant be granted leave to appeal from the directions of the Court on 10 February 2012 in proceeding VID 562 of 2010 insofar as they relate to Part E6 paragraphs 249-285 of the Reasons for Judgment in respect of Efax Pty Ltd and like Sonray Client accounts. 4. The appeal be expedited to be heard on a date as soon as possible and together with the appeal in VID 160 of 2012 – George Georges (in his capacity as joint and several liquidator of Sonray Capital Markets Pty Ltd (in liquidation) and Ors v Seaborn International Pty Ltd (as trustee for the Seaborn Family Trust) & Ors. 5. The application to be appointed as a party in a representative capacity is dismissed. 6. Liberty to apply. THE COURT DIRECTS THAT: 7. The applicant is entitled to be indemnified out of the Segregated Accounts for its expenses reasonably incurred in respect of the appeal from the date that it is filed, and in accordance with the Indemnity Costs Protocol filed by the liquidators in proceeding VID 562 of 2010. 8. The first respondent is entitled to be indemnified out of the Segregated Accounts for its expenses reasonably incurred in respect this application and the appeal, in accordance with the Indemnity Costs Protocol filed by the liquidators in proceeding VID 562 of 2010. 9. The liquidators are entitled to be indemnified out of the property and funds they hold on trust in respect of their remuneration and expenses of this application and the appeal. THE COURT NOTES THAT: The applicant's submissions in the appeal are to be restricted to; (i) those matters not dealt with by the liquidators, and (ii) the contention that Sonray Clients (including the applicant and Efax) who paid monies into Tainted Segregated Accounts have a beneficial interest which may be traced or followed into the BHP Shares. Capitalised terms in this Order are as defined in the Reasons for Judgment in proceeding VID 562 of 2010. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 193 of 2012 BETWEEN: ROBERT JOSEPH SCOLARO Applicant AND: GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 First Respondent JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Second Respondent SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Third Respondent SEABORN INTERNATIONAL PTY LTD ABN 24 114 085 090 AS TRUSTEE FOR THE SEABORN FAMILY TRUST Fourth Respondent MARYLAND PTY LTD ACN 150 886 427 AS TRUSTEE FOR THE NORWEGIAN TRUST Fifth Respondent ALISTANTE PTY LTD ACN 067 268 802 Sixth Respondent BON RIVER PTY LTD ACN 059 666 750 Seventh Respondent ROLAND MARK WARD AS TRUSTEE FOR THE AWARD SUPERANNUATION FUND ABN 66 473 078 418 Eighth Respondent EFAX PTY LTD ACN 001 886 120 Ninth Respondent JUDGE: MURPHY J DATE OF ORDER: 26 MARCH 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application for leave to appeal be dismissed. 2. There be no order for costs against the applicant. 3. The liquidators are entitled to be indemnified out of the property and funds they hold on trust in respect of their remuneration and expenses of this application. 4. The ninth respondent Efax Pty Ltd is entitled to be indemnified out of the Segregated Accounts for its expenses reasonably incurred in respect of this application, in accordance with the Indemnity Costs Protocol filed by the liquidators in proceeding VID 562 of 2010. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 160 of 2012 BETWEEN: GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 First Applicant JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Second Applicant SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Third Applicant AND: SEABORN INTERNATIONAL PTY LTD ABN 24 114 085 090 AS TRUSTEE FOR THE SEABORN FAMILY TRUST First Respondent MARYLAND PTY LTD ACN 150 886 427 AS TRUSTEE FOR THE NORWEGIAN TRUST Second Respondent ALISTANTE PTY LTD ACN 067 268 802 Third Respondent BON RIVER PTY LTD ACN 059 666 750 Fourth Respondent ROLAND MARK WARD AS TRUSTEE FOR THE AWARD SUPERANNUATION FUND ABN 66 473 078 418 Fifth Respondent EFAX PTY LTD ACN 001 886 120 Sixth Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 250 of 2012 BETWEEN: EAGLE SECURITIES LIMITED Applicant AND: EFAX PTY LTD ACN 001 886 120 First Respondent GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Second Respondent JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Third Respondent SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Fourth Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 193 of 2012 BETWEEN: ROBERT JOSEPH SCOLARO Applicant AND: GEORGE GEORGES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 First Respondent JOHN ROSS LINDHOLM IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Second Respondent SONRAY CAPITAL MARKETS PTY LTD (IN LIQUIDATION) ACN 104 482 993 Third Respondent SEABORN INTERNATIONAL PTY LTD ABN 24 114 085 090 AS TRUSTEE FOR THE SEABORN FAMILY TRUST Fourth Respondent MARYLAND PTY LTD ACN 150 886 427 AS TRUSTEE FOR THE NORWEGIAN TRUST Fifth Respondent ALISTANTE PTY LTD ACN 067 268 802 Sixth Respondent BON RIVER PTY LTD ACN 059 666 750 Seventh Respondent ROLAND MARK WARD AS TRUSTEE FOR THE AWARD SUPERANNUATION FUND ABN 66 473 078 418 Eighth Respondent EFAX PTY LTD ACN 001 886 120 Ninth Respondent JUDGE: MURPHY J DATE: 26 MARCH 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT INTRODUCTION 1 These reasons deal with three applications for leave to appeal from the directions of the Court made on 10 February 2012 in VID 562 of 2010: Georges v Seaborn International (Trustee) in the matter of Sonray Capital Markets Pty Ltd (in liquidation) [2012] FCA 75. The two applications are: (a) An application for leave to appeal by George Georges and John Ross Lindholm in their capacities as joint and several liquidators of Sonray Capital Markets Pty Ltd (in liquidation) seeking leave to appeal insofar as the directions relate to part E6 paragraphs 249-285 of the judgment in respect of Efax Pty Ltd and like Sonray Client accounts (as defined in [3] of the judgment) ("the liquidators application"). The liquidators were the applicants for directions in the proceeding at first instance. (b) An application by Eagle Securities Limited seeking an extension of time and leave to appeal insofar as the directions relate to part E6 paragraphs 249-285 of the judgment in respect of Efax Pty Ltd and like Sonray Client accounts. Eagle also seeks appointment as a representative applicant to bring the appeal on behalf of itself and all Sonray Clients who paid money into Tainted Segregated Accounts (as defined in [12] of the judgment) other than Efax Pty Ltd and like Sonray Clients ("the Eagle application"). Eagle was not a party to the proceeding at first instance, although it is a Sonray Client. (c) An application by Robert John Scolaro seeking an extension of time and leave to appeal the directions. Mr Scolaro and his company Travel Arcade Pty Ltd were granted leave in the proceeding at first instance to be heard by way of written submissions. There is a dispute as to whether he is a party to the proceeding, but it is uncontroversial that he and Travel Arcade are Sonray Clients ("the Scolaro application"). In these reasons the capitalised terms are as defined in the judgment in the proceeding at first instance. General background 2 The proceeding arose out of the collapse of Sonray Capital Markets Pty Ltd which had a business providing access to online trading platforms for its clients to trade in shares, futures, options, foreign currency contracts for difference and other financial products. Persons that transacted in financial products through Sonray on the online trading platforms Sonray Trader, Sonray Global and Web Trader are defined in the judgment as Sonray Clients. There are approximately 4,000 Sonray Clients. 3 The funds and assets of the Sonray Clients, most of which are or were the subject of a statutory trust or trusts (s 981B of the Corporations Act 2001 (Cth) ("the Corporations Act")) of which Sonray is trustee were spread over a number of Segregated Accounts with various financial institutions (as defined in the judgment), nominated in various currencies with numerous shareholdings and open trading positions held by or with a range of third party institutions and custodians. 4 The investor's funds and assets held on trust (save for Distinguishable Accounts as defined in the judgment) were mixed from the outset and the subject of thousands of authorised deposits, withdrawals and transfers and other dealings. Unfortunately for the Sonray Clients, the trust funds and assets were subject to substantial unauthorised withdrawals, dealings and tradings over some years, resulting in a deficiency of $45.6m. 5 The liquidators were appointed administrators of Sonray on 22 June 2010 and became the liquidators on 27 October 2010. They achieved recoveries from various parties, including the principal recovery from Saxo Bank A/S) ("Saxo") and the HLB Mann Judd (Vic) Partnership. Under this settlement reached in October 2011, those two parties agreed to pay Sonray $18.5 million, to release all shares (and dividends relating to those shares) held on account by Saxo, having been purchased by Sonray on instructions from its clients ("Saxo Shares"), and agreed not to prove in the liquidation in respect of any claims they had. These recoveries together with the other trust funds and assets are for distribution in the administration. 6 There were a number of different agreements between Sonray and Sonray Clients, and between Sonray and third party providers. Sonray Clients had conflicting characterisations of the legal relationship between the parties arising from the terms and conditions of the agreements. The funds and assets of Sonray had been subject to unauthorised trading and dealing by Sonray which its clients considered affected their funds and assets differently. 7 This led to conflicting views and claims amongst the Sonray Clients as to their respective entitlements to the trust funds and assets or parts of those funds and assets. Some Sonray Clients assert an entitlement to trace or claim directly against a particular fund or asset which they contend should not be included in any pool. Other Sonray Clients accept that the available funds and assets should be pooled and any distribution made to them rateably. 8 In an attempt to deal with these competing claims the liquidators applied to the Court pursuant to s 511 of the Corporations Act and s 63 of the Trustee Act 1958 (Vic) ("the Trustee Act") for directions and other relief. The directions sought included directions for pooling of various funds and assets. The Court joined five Sonray Clients as defendants to provide the necessary contradictors to the course proposed by the Liquidators. It also heard submissions from Mr Robert Scolaro and Travel Arcade Pty Ltd pursuant to r 2.13 of the Federal Court Corporations Rules 2000. Facts relevant to the three applications Eagle Securities 9 Eagle is a Sonray Client having traded in financial products through Sonray on the Sonray Trader trading platform used to direct the execution of trading in financial instruments by Saxo. It is uncontroversial that it has a claim in the administration, and that it is one of the investors that stands to receive less in any distribution if the directions are given effect to. It asserts that the position of it and the sub-class it seeks to represent is different to that of any of the contradictors. It says that Efax Pty Ltd represents persons who had claims for shares but no one (other than the liquidators) represents the interests of persons who paid money into a Tainted Segregated Account and who wish to make a claim on the BHP shares. Efax and the Efax Sub-class 10 Efax Pty Ltd is one of the defendants. It and 766 similar Sonray Clients ("the Efax sub-class") had trading accounts with Sonray which showed them as having purchased shares through the Sonray Trader trading platform operated by Saxo. Those trading accounts have account balances comprising shares presently held by Saxo with a value as at 22 June 2010 of almost $20.5m. 11 It is too time consuming, and in any event unnecessary, to set out all of the intricacies of the arrangements regarding the purchase of the Saxo Shares held for the Efax sub-class. In summary I note that Sonray was not a market participant on the ASX or any other exchange. It contracted with other entities including Saxo ("the Providers") to arrange to do so at the direction of Sonray or a Sonray Client. The different contracts with Providers had different terms and conditions. Sonray's contract with Saxo was named a White Label Agreement. 12 Relevantly, the White Label Agreement with Saxo did not require Sonray to transfer funds to Saxo on a trade-by-trade basis. Instead Sonray was required to maintain an Omnibus Account which was sufficient to satisfy Saxo's overall requirement to cover Sonray's open margin position. Saxo also had arrangements with UBS AG ("UBS") to purchase shares to fulfil orders from Sonray, which had different payment arrangements again. 13 In the majority of cases Sonray Clients deposited funds into one or more Segregated Accounts operated by Sonray, where they were commingled with the funds of other Sonray Clients. However, some of the Segregated Accounts were deficient because of various unauthorised withdrawals and defalcations. The task of disentangling this mess was further complicated because Sonray's records are materially incomplete. The Court noted at [12]: … as a result of the deficiencies, transactions between Segregated Accounts and other transactions, the funds in the Deficient Segregated Accounts at least three other accounts… (collectively, the Tainted Segregated Accounts) have been so thoroughly mixed that it is now practically impossible to ascertain entitlements to each of the Segregated Accounts. …. 14 The trading accounts of clients too did not always reflect the true position. The Court found that Sonray made entries in these accounts on its own behalf so as to reduce or avoid having to respond to margin calls made by Saxo on the Omnibus Account. 15 The operation of the system in place between Sonray, Saxo and UBS as it applied to the shares of Efax is of relevance. By way of example the judgment refers to the purchase of BHP shares on 16 April 2010: see judgment at [255]. The facts on my necessarily quick survey appear to be that: (a) In January 2010 Efax deposited funds into a Tainted Segregated Account in the sum of $3.176m. (b) On 16 April 2010 Efax placed an order with Sonray to purchase 23,041 BHP shares. (c) The order was placed by Sonray with Saxo on the same day. (d) Saxo then placed the order with UBS. UBS records that it was settled on 21 April 2010 but records it only in relation to Sonray rather than Efax. (e) UBS executed the order through its Australian counterpart UBS Securities Australia Pty Ltd (UBS Securities"). Saxo did not enquire as to the identity of Sonray Clients giving instructions to acquire shares listed on the ASX. The instructions were automatically routed to UBS Securities and recorded in the UBS Omnibus Account in Sonray's rather than an individual trader's sub account. (f) Citicorp Nominees Pty Ltd received a settlement instruction from UBS in relation to the shares. The instruction did not refer to Efax. (g) Sonray debited Efax's trading account in the sum of just over $1m and recorded the purchase of 23,041 BHP shares in that account. (h) Sonray sent Efax a form titled "Transfer of CHESS sponsored Holdings Out" for completion. Efax completed the form so as to require the shares (which were then held in a UBS Securities custodial account) to a HIN in the name of Efax. The transfer form was not received by Sonray until after it was in administration. 16 In funding the share order, the judgment records at [256] that: (a) No funds were received by Saxo from Sonray with respect to those BHP shares. Although the money deposited by Efax in January 2010 was placed in a Tainted Segregated Account, no monies were actually sent from that account for the specific purpose of purchasing those shares. (b) The funds used to purchase the BHP shares came from the UBS Omnibus Account. Saxo did not deposit any money in that account for the specific purpose of purchasing those BHP shares. The arrangements between Saxo and UBS meant that if there was insufficient funds in the account Saxo would deposit funds from one or more of 400 different accounts held with more than 20 different banks: see judgment at [29]. Saxo made the purchase using its own money, or that of UBS, and "on credit" at the instance of Sonray: see [15]-[30], [255] and [268] of the judgement. Similar facts apparently relate to other BHP shares ordered by Efax. 17 Based on these facts, the Court made directions that the Efax shares were not within the administration, and therefore should be delivered to Efax in specie instead of being placed into the pooled fund to be rateably distributed to all relevant Sonray Clients. Background relevant to Scolaro application 18 It is uncontroversial that Mr Scolaro and his company Travel Arcade Pty Ltd are Sonray Clients. The Court received written submissions from them at first instance. 19 Mr Scolaro and Travel Arcade traded through Sonray on the Interactive Brokers trading platform. He contends that Travel Arcade was the only investor who transferred shorted exchange traded options to Interactive Brokers at the same time that shares were transferred. He says that the funds were transferred directly to Interactive Brokers and did not go through a Tainted Segregated Account. Accordingly he argues that this investment should be treated in an identified manner and not be put into the pooled fund. 20 Mr Scolaro contends that his and Travel Arcade's position is unique but the Court found that the position of Mr Scolaro and Travel Arcade was appropriately represented by the contradictors appointed as defendants. It did find one unusual feature of Travel Arcade's claim but considered that the factual differences could be dealt with at the adjudication stage provided for by the orders. 21 Mr Scolaro argues that he is a party and he is described as a party in the judgment. If he is not a party he now seeks to be made one, and seeks leave to appeal. The results in the applications 22 The proposed appeals by the liquidators and Eagle seek to overturn only the discrete part of the judgment which relates to the Efax shares. For the reasons I set out I have determined to grant an extension of time within which Eagle may apply for leave to appeal. I have determined to grant leave to appeal to the liquidators and Eagle. I have refused Eagle's application to be appointed in a representative capacity. 23 I have found that Mr Scolaro is not a party. I have determined to refuse his application for leave to appeal. Despite his lack of success I have made no costs order against him. The respondents did not seek that I do so. IS LEAVE TO APPEAL REQUIRED The liquidators' position 24 The liquidators consider that leave to appeal is necessary because s 24(1A) of the Federal Court of Australia Act 1976 (Cth) ("FCA") requires leave before an appeal can be brought from an interlocutory judgment. 25 There is some question as to whether directions by a court to a liquidator or to a trustee under s 511 of the Corporations Act or s 63 of the Trustee Act constitute final or interlocutory relief, and accordingly whether leave is required. In Re The Black Stump Enterprises Pty Ltd and Associated Companies (2005) 228 ALR 591 an appeal against directions to a liquidator was heard with no mention of a requirement for leave to appeal. In the trustee case In Re The Earl of Radnor's Will Trusts (1890) LR 45 Ch D 402 that appeal too was heard without reference to leave having been sought or granted. 26 A judgment is interlocutory unless it finally determines the rights of the parties in a principal cause pending between them. It is plain that the present judgment will have the practical effect of determining the rights of the parties, as the distribution to claimants would be made based upon those directions. However, the authorities provide that whether a judgment finally determines the rights of parties is decided by its legal rather than practical effect: Carr v Finance Corp of Australia (No 1) (1981) 147 CLR 246. 27 All parties submit that, on balance, the better view is that directions under s 511 or s 63 operate to offer protection for the liquidator or trustee who complies with such directions, but do not affect or in any way finally determine the substantive rights of creditors and beneficiaries: Re G.B. Nathan & Co Pty Ltd (In liq) (1991) 24 NSWLR 674 at 677-679 per McLelland CJ in Eq; Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd (2007) 25 ACLC 1,433 at [48] per French J; and Primary Securities Ltd (recs & mgrs apptd) (in liq) v Saker (2010) 191 FCR 277. I agree. The decision is therefore interlocutory and leave to appeal is required. Eagle's position 28 Eagle is required to seek leave to appeal as it was not a party to the proceeding at first instance. It is clear that a person who is not a party but who is bound by an order or aggrieved by it can appeal it, but only with leave: Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher & Ors (2011) 281 ALR 38 ("Fortress") at [32] per Emmett, Nicholas and Robertson JJ. Scolaro's position 29 At [4] the judgment states that the Court "joined the following parties as defendants to the application to provide necessary contradictors". It then lists the parties in a list which includes Travel Arcade and Mr Scolaro, although noting that those two were to be heard by way of written submission. At [5] the judgement states that "[t]hese persons and entities (collectively the Contradictors) were joined as defendants…" In reliance on these paragraphs of the judgment Mr Scolaro contends that he is a party to the proceeding. 30 I do not agree. On 5 September 2011 the Court made orders adding a number of parties to the proceeding as contradictors and defendants. Order 5 made on that date states: Pursuant to r 2.13(1) of the Federal Court Corporations Rules 2000… Travel Arcade Pty Ltd and Mr Scolaro be granted leave to be heard by way of written submissions by Mr Scolaro dated 1 August 2011. Subrule 2.13(1) provides for the Court to grant leave to a creditor to be heard in a proceeding without becoming a party to it. It was only pursuant to that sub-rule that Mr Scolaro was given leave to make submissions on behalf of himself and Travel Arcade. 31 I note that on 5 September 2011 the Court also made an order pursuant to subrr 2.13(3) and (5) which provided for the five parties now listed as parties to be added as defendants to the proceeding. Subrule 2.13(3) provides for the Court to order that a creditor be added as a defendant to a proceeding. 32 Had the Court intended to make Mr Scolaro and Travel Arcade parties to the proceeding it could have made an order to that effect under subr 2.13 (3). It did not do so. Instead, it made an order under the sub-rule that allows creditors to make submissions without being made a party. Insofar as the paragraphs in the judgment relied on by Mr Scolaro indicate otherwise they are a mere slip and of no significance. 33 Mr Scolaro may appeal as a non-party, but he is required to obtain leave to do so. THE TEST FOR LEAVE The liquidators' position 34 The Court's discretion to grant leave to appeal from an interlocutory judgment is unfettered. However, the exercise of the discretion is to be guided by well recognised principles, as set out in Décor Corporation Pty Limited v Dart Industries Inc (1991) 33 FCR 397 ("Décor"). The Court will usually consider at least the following questions: (a) whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its been reconsidered; and (b) whether substantial injustice would result if leave were refused supposing the decision to be wrong. Leave is more readily granted where the decision, if allowed to stand, will have the practical effect of determining the claim of a party to relief: Johnston v Cameron (2002) 124 FCR 160 ("Johnston") at [8] per Branson J. Eagle and Mr Scolaros' positions 35 It is established that not much is required for leave to be granted to a non party: In Re Securities Insurance Company [1894] 2 Ch 410 at 413. Further, leave to appeal is given as a rule if the person applying might properly have been made a party at first instance: Cuthbertson v Hobart Corporation (1921) 30 CLR 16 at 25. 36 In Fortress the Full Court held at [35]: On an application for leave to appeal by a non-party, bearing in mind the widely different circumstances in which an application by a non-party for leave to appeal may be made, several matters are likely to be relevant to the exercise of the discretion, as follows: first, the nature and subject matter of the proceeding, including whether it concerns public rights or private rights and, if the latter, whether only personal remedies or proprietary remedies are involved; secondly, whether at first instance the applicant could have but did not seek to be made a party or to be heard, and whether the applicant could or should have been made a party; thirdly, the rights, interests, liabilities and duties of the applicant that would be affected, and the nature and extent of the effect on the applicant of the orders appealed from; fourthly, whether the applicant could commence a separate proceeding for the relief claimed and, if so, whether there would or might be a procedural or substantive difficulty arising from the existence of the judgment in respect of which leave to appeal is sought; and fifthly, whether the proposed grounds of appeal are at least arguable, in the sense that there is a reasonable prospect of success. 37 In Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 at [20] the Full Court comprised of Black CJ, Tamberlin and Sundberg JJ noted: In a case where a non-party seeks leave to appeal from an interlocutory judgment or order, the matters to be taken into account will include those that are customarily considered on an application for leave by a party. Eagle and Mr Scolaro must meet the test set out in Fortress as well as the test in Décor, although there is an overlap insofar as the appeal must be at least arguable. CONSIDERATION Application of the test in Fortress to Eagle and Mr Scolaros' applications 38 Leaving aside for the moment the question as to whether the proposed appeal is arguable, I consider that Eagle sufficiently meets the various factors in Fortress to justify the exercise of my discretion to grant leave to appeal to a non-party. I consider that Mr Scolaro does not. 39 First, the nature of the proceeding is an application for directions by the liquidators and does not directly concern remedies. However if the liquidators act as directed they will have practical consequences on the claim that each of Eagle and Mr Scolaro make in the administration. 40 Eagle's claim, while personal to itself, could be of benefit to a large number of Sonray Clients within the same sub-class. Its claims therefore have a public flavour. This is so, even though I refuse its application to be appointed in a representative capacity, because the orders made in its and the liquidators' appeal will inevitably apply to the claims of all like Sonray Clients. 41 The same is not true in relation to Mr Scolaro's claims. His claims have no public flavour whatsoever. Mr Scolaro does not contend that he represents a sub-class of other Sonray Clients. Instead, he says his claims are unique. They are of little assistance in dealing with the broad principles relevant to the distribution which is the liquidators' aim in seeking directions. 42 Second, in my view Eagle could have been made a party at first instance. In fact it should have been made a party at first instance if, as it contends, none of the other contradictors properly represent its interests. Eagle's solicitor deposes that Eagle did not seek to be joined as a defendant on its understanding that the liquidators would advance the case against Efax that shares to be transferred from Saxo to Sonray pursuant to the settlement should be pooled and distributed rateably. Efax contends in response that, as Eagle would have been advancing the same position as the liquidators, it could not have been a contradictor. This is not necessarily so as Eagle's solicitor deposes that it is now clear that none of the parties who were joined as contradictors represent Eagle's interest or the interests of like Sonray Clients who paid funds into Tainted Segregated Accounts. If Eagle had understood this at the time of appointment of the contradictors it could have applied to represent the interests of this sub-class, in the same way it now seeks to prosecute an appeal on behalf of itself and like Sonray Clients. 43 The same is not true in Mr Scolaro's case. The Court determined not to appoint Mr Scolaro as a party at the time the defendants were added to the proceeding. This militates against the view that it could have been added. In my view, the Court's determination at that time was vindicated when it later considered the written submissions made by him. The Court found that there was nothing about the claims of Mr Scolaro and Travel Arcade that was significantly different to the claims addressed by the defendants appointed. Insofar as his claim has an unusual feature the Court considered that it should be dealt with in the adjudication stage of the administration. 44 Third, Eagle's rights are plainly affected by the directions, and the effect is of some significance. When Sonray went into administration and Eagle's trading positions were closed out, it was due $6.79m under its trading account with Sonray. The effect of the judgment is that Eagle stands to receive a distribution under the administration of 51% of its $6.79m loss, or $3.46m. If the appeal it proposes is successful it will receive about 62% of its loss which is $747,000 more. I have no information about the losses of the Eagle sub-class. 45 The same is not as clear in relation the claims of Mr Scolaro and Travel Arcade, as the claim that he makes is capable of being dealt with in the adjudication stage of the administration. It amounts to a claim that, because of the unique circumstances of the transfer of shorted exchange traded options to Interactive Brokers at the same time that shares were transferred, no funds from a Tainted Segregated Account were sent to Interactive Brokers. In fact, it is more efficient and less expensive for this issue to be dealt with at the adjudication stage rather than have another appellant in the proceeding. I am required by s 37M of the FCA to take comparative efficiency and cost into account. 46 Fourth, while in theory Eagle could commence a separate proceeding it is likely that there would be difficulties with it doing so. For example, it is likely that Efax would point to the judgment and contend that Eagle was estopped from bringing its claim. There are also significant practical difficulties as unless the entire administration is held up, the available monies would have been distributed before Eagle's individual claim is heard. 47 Mr Scolaro would have similar difficulties in commencing a separate proceeding. However Mr Scolaro does not need to appeal to preserve his rights because the judgment specifically contemplates at [289] that his main concern can be resolved in the adjudication phase of the administration. The liquidators accept that he is free to pursue the proof of debt process and, as contemplated in the judgement at [239], conduct an appeal if dissatisfied. Whether substantial injustice would result if leave were refused The liquidators and Eagles' applications 48 Supposing the judgment to be wrong in relation to the Efax shares, I consider that a substantial injustice results to the affected Sonray Clients. The liquidators informed the Court that should the shares of the Efax sub-class be included in the administration the fund available for rateable distribution will be increased by more than $18m. As I have already set out, the percentage recovery for relevant Sonray Clients increases from about 51% to 62% if the Efax shares are included in the pooled fund. This is plainly of significance and is sufficient to meet the test of substantial injustice in Décor. It is not contended otherwise by Efax. Mr Scolaro's application 49 A table at [286] of the judgement records that Mr Scolaro and Travel Arcade are substantial claimants, with their trading account balances with Sonray providing a total claim of $783,219.57. I was provided with no information as to the effect of the directions on the quantum of any entitlement, although the directions do not apparently affect the whole claim. If I presume for the purposes of this application that the whole of the claim is affected by the directions, then the applicants stand to receive about $399,442 or 51% of that amount if the directions stand, and about $485,596 or 62% if the directions are successfully appealed. For an individual claimant such as Mr Scolaro the difference would amount to a substantial injustice if the judgment is wrong, but I have insufficient information to decide this question. Nothing turns on this because, as I set out, I have determined to reject Mr Scolaro's application for leave on the other discretionary grounds. Is the decision in regard to the Efax sub-class attended with sufficient doubt 50 This case is one where, while the Court's decision is interlocutory in form, it is final in substance. In such circumstances, the threshold for a grant of leave is not high: Johnston at [8]; Wills v Australian Broadcasting Corporation (2009) 173 FCR 284 per Rares J at [31] with whom North and Emmett JJ agreed. 51 I do not presume to form a view as to the probability of success of the proposed appeals by the liquidators and Eagle with regard to the shares of the Efax Sub-class. The matter is complex, the Court's judgment at first instance is detailed and considered, and the arguments for the liquidators and Eagle on the one hand and Efax on the other each have some force. However, in my view the appeal grounds are arguable and leave should be granted. Liquidators and Eagles' proposed appeal ground 1 52 The liquidators and Eagle contend that the learned primary judge treated the application for directions, in relation to the BHP shares ordered by Efax, as a claim by Sonray to a legal or beneficial interest in or right to those shares in its own right in competition with Efax. They point to the transcript at [T-182] and [T-211] to show that their application was for a direction that the shares be pooled for the benefit of investors. They contend that at all times the contest was between Sonray Clients who had all contributed to a mixed fund such as the relevant Tainted Segregated Account (or any common pool that might include that Tainted Segregated Account) as against those of that class who believe that they had purchased shares. As at the date of administration the liquidators and Eagle argue there is a pool of investors that claim beneficial ownership of these assets in common, and that their claim is not about who has a better title. 53 They argue that the Court did not determine the real question raised by the liquidators, or at least misunderstood their submissions on a core issue, and therefore erred: Warburton v Altson (1889) 15 VLR 94. 54 Efax contends that Sonray did make a claim of a proprietary interest in the BHP shares paramount to Efax's. It seems clear that the learned primary judge rejected any such proposition primarily on an "agency" analysis. The Court held at [266]: Only Sonray, the agent, asserted any rights over the BHP Shares in competition with Efax. Given the legal relationship between the parties, Sonray has no right or title to those shares. At paragraph [276] the Court found: …the proposition that Sonray has a better title to the BHP shares than Efax and Efax is left with a mere claim as a contributor of funds to the assets of Sonray is also incorrect legally and factually. Sonray did not purchase the BHP shares in its own right. It purchased the BHP shares on Efax's instructions. Similarly at [285] the Court held: Sonray holds the shares not in its own right but as agent for Efax. It does not and cannot hold them on any other basis. 55 However, Efax disputes the characterisation of these paragraphs that the applicants urge. It contends that the issue which the Court was dealing with is whether Sonray could establish a better title to the BHP shares by reason of the circumstances of the purchase than Efax could, so as to enable it to assert title on behalf of anyone. In my view it is arguable that the Court did not deal with the primary contention advanced by the liquidators and in not doing so fell into error. The liquidators' proposed appeal ground 2 56 The liquidators complain that the judgement allows Efax to claim 100% of the BHP shares. It allows Efax to avoid the common misfortune to that extent where those shares have been paid for by Efax with tainted funds but, due to a quirk in Sonray's dealings with Saxo and as a result of the settlement between Sonray and Saxo, Sonray has not been required to pay or reimburse Saxo for their purchase. 57 The liquidators note that had Sonray been required to pay or reimburse Saxo for their purchase it could only have done so from a Tainted Segregated Account. It notes that contrary to the finding at [266] that "only Sonray asserted any rights over the BHP shares", in fact Saxo made a claim of USD $9.12m on Sonray and asserted an interest in the shares as security for that amount. 58 At [111] the Court held that shares purchased by Sonray Clients using the Interactive Brokers trading platform, where funds were transferred from a Tainted Segregated Account, should be pooled. In contrast to this finding, the liquidators complain that the Court held that shares purchased by Sonray Clients using the Saxo trading platform, but where no funds earmarked for the purchase price of the shares were transferred from a Tainted Segregated Account, should not be pooled. The liquidators contend that on the facts found the distinction made between the two circumstances has no proper basis, as in both instances Sonray made an appropriation equal to the purchase price of the shares in the client's ledger. 59 The liquidators rely on the finding at [270] that once Efax placed the order for the shares it became obliged to pay Sonray or its agent the purchase price, so that Sonray became entitled to appropriate the cost of the shares from the monies it had received from Efax. They also rely on the finding at [271] that in debiting Efax's ledger in relation to the BHP shares, Sonray's obligation to account to Efax for the monies deposited in January 2012 into the Tainted Segregated Account was reduced by that amount. They note the finding at [272] that by carrying out its obligation to order the BHP shares and to settle or cause the settlement of those orders, Sonray discharged its obligation to account to Efax for the monies deposited into the Tainted Segregated Account. 60 It is simplistic to treat the difference between the parties on this issue as being about whether "tainted" funds were actually transferred in the purchase of the Efax shares or not, but this difference is at the base of the dispute. While none of Efax's funds were transferred from a Tainted Segregated Account to Saxo to purchase the BHP shares, the liquidators argue that the facts found do not support the different approach taken by the Court. The liquidators point to the fact that: (a) the relevant Tainted Segregated Account had been deficient since February 2005; (b) defalcations from the Tainted Segregated Account had occurred between the deposits by Efax in January 2010 and the placement of orders to purchase the BHP shares in April 2010; and (c) Efax had traded in its account between January and the April orders. (This last point was put only to show that with each trade similar appropriations were made by Sonray against Efax's trading ledger account, which shows in which the way the deficient and mixed fund was dealt with by numerous appropriations prior to the BHP share purchases.) 61 As a result the liquidators argue that Sonray could not account to Efax for money it deposited into the Tainted Segregated Account because any appropriation by Sonray would be an appropriation of "tainted" mixed funds. If Efax paid Sonray for the shares (which the liquidators deny) it did so by Sonray appropriating some portion of the deficient tainted account. 62 Efax disputes this and says that shares ordered by Sonray Clients using the Interactive Brokers trading platform did involve the transfer of funds from a Tainted Segregated Account, whereas the Efax purchasers were not funded by any relevant payment to Saxo from Sonray. It says there was therefore no incongruity of result. Even if the results are incongruous, Efax argues that its title to the BHP shares is such that the outcome reached is the correct one. 63 In my view the liquidators' contention is arguable. There is a reasonable basis upon which it can put that the purchase of the Efax shares is affected by the Tainted Segregated Account, even though no money was transferred from it to Sonray. Liquidators' proposed appeal ground 3 64 Nothing turns on proposed appeal ground 3 by itself. In effect it is part of the second error argued to have been made by the Court which I have already dealt with. Liquidators' proposed appeal ground 4 65 The liquidators complain that at [284] the learned primary judge concluded that the beneficial ownership of the BHP shares was to be determined solely by the law of agency. They contend that issues of property law, tracing and joint tenancy in property purchased with money from a deficient joint fund, are also material, and may be determinative of title to the BHP shares. It submits that the reliance of the learned primary judge on the law of agency meant that the Court did not properly determine the effect of using a deficient and mixed fund as the consideration for the purchase. 66 The Court finds at [274] that "Sonray's claim contradicts a fundamental principle of agency that an agent is estopped from seeking to deny his principal's title in property acquired as agent." The liquidators do not quibble with this proposition but say that it is beside the point. As put in relation to appeal ground 1, the liquidators argue that those Sonray Clients who contributed to a pool of assets that are identifiably available should not be precluded from asserting the same claim in relation to the Saxo Shares as they assert against the Interactive Broker shares - that is that the shares were paid for out of the mixed value fund contributed to by all. 67 Efax argues that this misstates the basis of the Court's finding. It says that while agency was a part of the process of reasoning, the other part was the reasons at [268]-[270] which relate to the payment for the purchase of the shares not being made by Sonray or from any tainted source. It argues that [284] must be read in the context of [279]-[282] where the Court held that Efax acquired full legal title to the BHP shares. However, in my view the liquidators' contention is arguable. Liquidators' proposed appeal ground 5 68 The liquidators contend that there is a further narrow error in the judgment. The learned primary judge rejected the liquidators' submission that the BHP shares were not identifiable property in the hands of Saxo's custodian, Citibank, and therefore could not be claimed by Efax. They contend that the BHP shares in question were not properly identified in the fungible mass of the electronically recorded shareholdings: see In Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74 (PC) ("Goldcorp") at 90-91. 69 While the Court found at [274] that "Sonray's business records identify that the purchase of BHP Shares were referrable only to Efax", Sonray argues that this does not dispose of the issue as to how the shares are identifiable within Citibank . It also contests this finding as it says that Sonray's records show that the purchase of one tranche of BHP shares coincided with the purchase of BHP shares by another client of Sonray. 70 Efax contends that the finding as to whether the shares were identifiable is one of fact and therefore more difficult to disturb on appeal. It says that in the settlement between Sonray, Saxo and HLB Mann Judd the parties had no difficulty in identifying the BHP shares. In its view the Court cannot follow Goldcorp and is bound to follow Brady v Stapleton [1952] 88 CLR 322. 71 I consider that this proposed ground of appeal is more difficult for the liquidators to make out. However, little turns on this given my views as to the other proposed grounds. Eagle's proposed ground of appeal 2 72 Eagle asserts a proposed ground of appeal different to the grounds proposed by the liquidators. It starts with the contention, in common with the liquidators, that the learned primary judge should have found that Sonray Clients who paid money into a Segregated Account are beneficially entitled to the BHP shares. It relies on a chain of reasoning, which starts with the following uncontroversial findings. First, that Sonray Clients paid money into a Tainted Segregated Account. Second, that this account was irretrievably deficient and mixed, and could not be the subject of the cash tracing exercise: see [91]-[92] of the judgment. Third, that as a result, after appropriate adjustments the accounts must be pooled and distributed rateably between Sonray Clients whose money went into those accounts: see [94] of the judgment. Finally, not only the funds of the accounts must be distributed in this matter, but also the traceable proceeds of those funds: see [83] of the judgment. 73 Eagle then contends that the BHP shares are part of the traceable proceeds because: (a) No part of the purchase price came from Efax: see [258] of the judgment. (b) When Saxo arranged for the purchase of the BHP shares on Sonray's instructions it extended credit to Sonray in order to do so. (c) Sonray discharged its debt to Saxo in two ways using the money in the Tainted Segregated Account which had been deposited by Efax (and other Sonray Clients) namely; (i) by paying for margin calls made by Saxo from time to time: see [26] of the judgment, and Exhibit GG-7 to the seventh affidavit of George Georges; and (ii) by using 'unrealised profits' from trades undertaken for Sonray Clients and the value of interests in financial products held by Saxo in respect of Sonray to reduce the balance in the Omnibus Account: see [19] of the judgment. 74 Eagle argues that when money is used to pay a debt it is traceable into what was acquired in exchange for the incurring of the debt: see Lionel Smith, The Law of Tracing, (1997) 146. It says that the connection between the misappropriation of Sonray Clients' funds held in the Tainted Segregated Account and the acquisition by Sonray of the BHP shares, is sufficiently close to give rise to an equitable proprietary right - that is a constructive trust, charge or lien -in favour of the Sonray Clients: Bishopsgate Investment Management Ltd (In Liquidation) v Homan [1995] Ch 211 at 217. Because it says the BHP shares are traceable in this way, Eagle contends that the practical solution is to pool the BHP shares into the client fund to be distributed rateably in the same way as the liquidators contend. 75 Efax contends that this is a new argument which should not be allowed on appeal, not having been advanced in the primary proceeding. In my view, although it is a new twist on the submissions made by the liquidators, they too argued that the Sonray Clients have a beneficial interest in the BHP shares in the same way that Eagle does. The difference is only that Eagle argues "backward tracing" as another basis for pooling these shares into the client fund. 76 Efax also contends that because this argument was not advanced below, the evidence it can rely on in the appeal may be deficient. In particular it submits that no party put on necessary evidence as to when margin call payments were made, and what shareholdings existed at the time particular margin calls were made. In my view it is unlikely that the Court will require to descend to this level of detail in the proposed appeal. Being an appeal relating to directions, the role the Court should take is to deal with matters of principle at a relatively general level. Matters of factual intricacy of the type identified may be dealt with at the adjudication stage provided the issues of principle have been resolved in the appeal. 77 Senior Counsel for Efax also submits that this proposed ground is destructive of the Efax sub-class that he represents because different sub-class members will be affected in different ways. I do not accept this. Efax's stated position is that the proposed ground is without merit. This position is in the interests of all members of the sub-class. If Efax's argument on appeal is successful then there is no change in the position of those members. If Eagle's argument on appeal is successful, and if it creates a conflict of interest between Efax sub-class members which is not otherwise manageable, then it may then be necessary to appoint other counsel to represent any divergent interests. I consider it quite unlikely that this will become necessary, but if it does it can be dealt with after the appeal. Eagle's proposed ground is arguable in my view. Is the decision in regard to Mr Scolaro attended with sufficient doubt. 78 Mr Scolaro contends that the learned primary judge did not consider the position of shares purchased using funds "loaned" (or margin provided) by Interactive Brokers, or money that did not pass through a Tainted Segregated Account. I do not agree. These circumstances were considered by the Court at [187], [189], [202], [214], [220], [221] and [237] of the judgment and this ground is not arguable. 79 I also note that insofar as it can be said that this factual circumstance was not considered, an appeal is not required to address Mr Scolaro's concerns. The judgment contemplates, and the liquidators accept, that these issues can be dealt with in the adjudication phase of the administration. EAGLES APPLICATION TO BE A REPRESENTATIVE 80 Eagle applies is to be appointed in a representative capacity for itself and all Sonray Clients who paid money into a Tainted Segregated Account other than Efax and like Sonray Clients. It proposes that it be appointed in substitution for the liquidators. It says that such an order is appropriate in the circumstances of this matter, and relies on the remarks of Finkelstein J in Sons of Gwalia v Margaretic (2006) 232 ALR 119; [2006] FCAFC 92 ("Sons of Gwalia") at [5] to [7] and the authorities there cited. Eagle argues that the matter is a "trust dispute" because there is a dispute between beneficiaries concerning their respective rights under the trust. It argues that the liquidators, in their capacity as trustees, should remain neutral and bring the dispute into court but must not favour one party over another in it. 81 I do not argue with these principles, but consider nevertheless that the representative order sought should be refused. First, I do so because the overarching principle in s 37M of the FCA requires that I do so. It will not facilitate the quick, inexpensive and efficient resolution of this dispute to now transfer its conduct from the liquidators. The proceeding is complex and factually dense and I expect that the liquidators and their legal team have expended a substantial amount of Sonray Client funds in becoming versed in its intricacies in the hearing below. It is inappropriate to now transfer its conduct to a new party and have it expend further resources in recreating the wheel. 82 Second, there is no need to substitute Eagle in a representative capacity for the liquidators. Because the appeal relates to directions any orders made in the appeal will inevitably be applied by the liquidators to all like Sonray Clients. 83 Third, this dispute can be characterised as being outside the principles set out in Sons of Gwalia. This is so because the Court at first instance found that the BHP shares are the property of Efax and outside the administration. Efax is therefore not a co-beneficiary of the same trust. On this argument, the liquidators are acting appropriately as trustee in seeking to bring back into the pool, assets that they say are properly trust property. CONCLUSION 84 For the reasons I have set out above, I consider that leave to appeal should be granted to the liquidators and to Eagle. I also consider that Eagle should have an extension of time within which to bring its application as it advanced a sufficient explanation for its delay. I consider that pursuant to well established principles the costs of these two parties in their applications and the appeal should be met from the trust funds: In Re Buckton [1907] 2 Ch 406. 85 I have determined to limit the grant of leave to Eagle having regard to the overarching principles in s 37M of the FCA aimed at facilitating quick, inexpensive and efficient resolution of disputes. I have determined to limit its submissions to those matters not dealt with by the liquidators, and to the contention that Sonray Clients (including the applicant and Efax) who paid monies into Tainted Segregated Accounts have a beneficial interest which may be traced or followed into the BHP Shares. This will ensure that there is no duplication between its and the liquidators' appeal and keep costs to a minimum, while still allowing Eagle to run the contention that the liquidators do not propose to run. 86 I consider that Mr Scolaro should not be granted leave to appeal. His concerns may be dealt with later in the adjudication phase of the administration, which includes a right of appeal to the Court under s 1321 of the Corporations Act. I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate: Dated: 26 March 2012