Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2) [2020] NSWCA 117

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2) [2020] NSWCA 117 Hearing dates: 21 April 2020 Date of orders: 18 June 2020 Decision date: 18 June 2020 Before: Bathurst CJ at [1]; Bell P at [7]; Macfarlan JA at [185] Decision: 1. Appeal allowed.

2. Set aside the orders of the primary judge and, in lieu thereof, direct that subject to application of principles of hotchpot, the Liquidators are justified in determining the amounts to be distributed to the Post 21 April 2017 Westpac Investors on the basis that:

(a) the $60,000 withdrawn from Westpac 2 on 21 April 2017 be deducted pro-rata across all investors with claims in respect of deposits made on or before 21 April 2017;

(b) the Category E investors are entitled to the amount of the relevant investment, less

(i) a pro-rata share of the $60,000 deduction; and

(ii) costs in accordance with the general law and the orders of the court below;

(c) the Category F investors are entitled to the amount of the relevant investment, less costs in accordance with the general law and the orders of the court below. Catchwords: CORPORATIONS – unregistered managed investment scheme – two companies operating a Ponzi scheme – freezing order on companies' bank accounts – deposits made to companies' bank accounts on day of and in days after freezing order by unsuspecting investors – liquidators appointed – Court directions sought as to method of distribution of limited funds in bank accounts – mixed and co-mingled accounts – whether rule in Clayton's Case, simple pari passu approach or lowest intermediate balance rule to be applied – tracing – role of "hotchpot".