New South Wales Supreme Court CITATION : Australian Securities and Investments Commission v PJCB International Ltd [2009] NSWSC 1200 HEARING DATE(S) : 9 November 2009 JURISDICTION : Equity JUDGMENT OF : Austin J EX TEMPORE JUDGMENT DATE : 9 November 2009 DECISION : Order for payment of fund into court, after deduction of liquidator's costs of investigation CATCHWORDS : Managed investment schemes - winding up of unregistered scheme - liquidator forms opinion that money held by him is not scheme money - application by liquidator to pay money into court - court's power to give directions under s 601EE(2) - whether liquidator justified in deducting costs of investigation from fund to be paid into court LEGISLATION CITED : Corporations Act 2001 (Cth), ss 601ED, 601EE IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9; 253 ALR 240 CASES CITED : Re Universal Distributing Company Limited (in liq) (1932) 48 CLR 171 Shirlaw v Taylor (1991) 31 FCR 222 PARTIES : Barry Anthony Taylor as liquidator of the Integrity Plus Unit Trust (Applicant) James Qin and Christine Li (appearing by leave)(Respondents) FILE NUMBER(S) : SC 6021/07 COUNSEL : K J Williams (Applicant) SOLICITORS : Deacons (Applicant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST AUSTIN J MONDAY 9 NOVEMBER 2009 6021/07 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V PJCB INTERNATIONAL LTD & ORS AS TRUSTEE FOR THE INTEGRITY PLUS UNIT TRUST SUPERANNUATION FUND & ORS JUDGMENT (ex tempore; revised 9 November 2009) 1 HIS HONOUR: The first defendant, PJCB International Limited, acted as the administrator (i.e. manager) of the Integrity Plus Unit Trust ("Integrity Scheme") an unregistered managed investment scheme. PJCB operated a multi-currency account with a company called Technocash Pty Limited for the purposes of the Integrity Scheme ("PJCB Technocash account"). 2 On 20 June 2008 this court made orders for the winding up of the Integrity Scheme and the appointment of Barry Anthony Taylor as liquidator. The Integrity Scheme was found to be an unregistered managed investment scheme being operated in contravention of s 601ED(5), and consequently the court exercised its jurisdiction to make the winding up order under s 601EE(1). In those circumstances the court has the power to make any orders it considers appropriate for the winding up of the scheme: s 601EE(2). 3 By an interlocutory process filed on 15 October 2009, Mr Taylor as liquidator of the Integrity Scheme seeks various orders under s 601EE(2). I shall deal first with the question of notice of the application to affected persons. 4 The application seeks in substance an order for payment of money into court, which is currently held by the liquidator of the Integrity Scheme in that capacity. The liquidator has sent a letter to each member of the Integrity Scheme and to the parties to these proceedings, notifying them of the application now before the court, and the return date of the application, and has told them how to view supporting evidence electronically. He seeks orders validating those steps, nunc pro tunc. 5 Given the number of people to be notified of the application, I am satisfied that the method of notification adopted by the liquidator was suitable and in the interests of efficiency and the saving of costs. The recipients of the letter had been given access to all of the information they would obtain is served with the application and the supporting evidence. The plaintiff, ASIC, has not appeared on the application, nor even provided a letter, but counsel for the liquidator informed the court that ASIC has told her client that it neither consents to nor opposes the orders with respect to service. 6 I shall therefore make the order dispensing with service of the affidavit in para 1 of the interlocutory process, and make the orders, nunc pro tunc, requiring the giving of written notice to the investors in the Integrity Scheme and to the parties to the proceedings in para 2 and 3 of the interlocutory process. 7 As I have said, the substantive order sought in the application is an order authorising the liquidator, in his capacity of liquidator of the Integrity Scheme, to pay into court an amount of $337,175.35 ("the received amount"), adjusted by adding an amount for accruing interest and deducting an amount for the liquidator's specified fees, costs and disbursements. 8 The only persons who have responded to the notice of the application to which I have referred are Mr Jim Qin and Ms Christine Li. They have come to court today, not for the purpose of opposing the payment of the received amount into court, but rather to foreshadow that they will apply for that money to be paid out to them on the ground that they are respectively the beneficial owners of the two components of the received amount. They told the court today that they do not object to the deduction of the liquidator's fees, costs and disbursements from the money to be paid into court, as proposed by the liquidator. 9 Ms Li informed the court of the hardship she is suffering by virtue of having made the payment that is now part of the received amount. As I understood her submission, it went to the urgency of her foreshadowed application for payment of the money out to her once it has been paid into court, rather than to any ground of opposition to what the liquidator proposes in today's application. 10 The evidence before me today indicates that in the period from October 2005 to 28 November 2007, three amounts were transferred from the PJCB Technocash account to an account held with Technocash Pty Limited in the name of Destiny Holdings Pty Limited ("Destiny Technocash account"). In the period from 8 March 2007 to 28 November 2007, payments were made from the Destiny Technocash account to various third parties. Evidently the liquidator is pursuing claims for recovery in at least some of those cases, on the basis that the Destiny can take the cash account was at that time composed of Integrity Scheme funds. 11 On 27 November 2007, an amount of $181,046 was deposited into the Destiny Technocash account by Christine Li. On 28 November 2007 an amount of $(NZ)100,000 was transferred out of the account but that amount has been recovered in full, with interest, by the liquidator. On 29 November 2007 an amount of $(US)147,261.20, which the liquidator has converted to $156,129.35 in Australian dollars, was paid into the account by Cho Ling Chan. Since that payment into the account, there has been no further operation on the Destiny Technocash account except in connection with the proceedings (and a small debit for bank charges). 12 What has happened in the proceedings is as follows. As at 22 February 2008 the balance standing to the credit of the Destiny Technocash account, which went converted into Australian dollars was $1,143,095.42, was transferred to the trust account of the Supreme Court of New South Wales. Shortly after the appointment of the liquidator of the Integrity Scheme in June 2008, a total amount of over $10,000,000 was transferred from the Supreme Court trust account to the liquidator. This included the amount of $1,143,000 that I have mentioned. Thus, the liquidator received, as part of a larger sum, the amount of $1,143,000 which had its origin in the Destiny Technocash account. In turn, the amounts deposited into the Destiny Technocash account were the amounts transferred from the PJCB Technocash account to which I have referred, plus the two other payments from Christine Li and Cho Ling Chan respectively. 13 The liquidator has made another interlocutory application in these proceedings, seeking directions in the winding up of the Integrity Scheme including directions as to the distribution of funds to investors in that scheme. The application for those directions was heard on 1 September 2009 and judgment has been reserved. That judgment will not affect the amount paid to the liquidator representing the Destiny Technocash account deposits by Christine Li and Cho Ling Chan, as that amount was excluded from the funds available for distribution for the purposes of the application. 14 The liquidator was informed about the source of the two deposits only in about August 2009. He and his staff have engaged in a substantial amount of work to ascertain the nature of the claims made by Ms Li and Ms Chan, and he has taken advice as to the appropriate course to follow in the circumstances. He has formed the view, on the information available to him, that though he is unable to determine who is beneficially entitled to the funds deposited, it appears that the money does not belong to the Integrity Scheme. This is because the evidence indicates that the two deposits were made by Ms Li and Ms Chan respectively, and that Ms Li and Ms Chan (and her husband Mr Qin) believed that the amounts they paid into the Destiny Technocash account were an investment in another scheme, the "Procash Scheme", and they have evidently had no dealings with PJCB and have not purported to invest in the Integrity Scheme. It appears that ASIC is investigating the Procash Scheme but has not indicated to the liquidator what it intends to do. 15 The liquidator has received some evidence indicating that there may be another claimant to beneficial ownership of the two deposits into the Destiny Technocash account. I refer to the evidence in Mr Taylor's affidavit of 15 October 2009 in relation to a company called Legend of Bathurst Limited (paras 34 to 44). The liquidator takes the position that he is not in a position to determine beneficial entitlement at this stage. 16 In those circumstances he has taken the view that the appropriate course is to pay into court the amount calculated as the Australian dollar amount of the two payments into the Destiny Technocash account to which I have referred, plus a proportionate part of the total interest earned on the moneys in his hands, less years fees, costs and disbursements incurred in investigating the ownership of those deposits and the appropriate manner of dealing with those claims. 17 I agree with the liquidator's view that the appropriate course in the circumstances is to pay into court the amount calculated as the two deposits converted to Australian dollars, and I agree with him as to his calculation of the amount of interest to be paid into court in relation to those deposits. It therefore seems to me appropriate for the court to make orders authorising the payment into court under s 601EE(2). 18 The only remaining issue relates to the liquidator's fees, costs and disbursements. The orders sought in the interlocutory process are, first, an order authorising deduction of the fees, costs and disbursements from the money to be paid into court, and second, an order that he is justified in deducting his fees, costs and disbursements accordingly. I think it is appropriate to adopt, in respect of that order, the language that the court uses in providing directions to a liquidator of a company under s 479(3). The liquidator has undertaken to the court that the costs thrown against the amount of the two deposits will not be included in any application by him for remuneration as liquidator of the Integrity Scheme, and the order is to be made subject to undertaking. That is an appropriate course. 19 As a matter of general principle, an officer of the court such as a court-appointed receiver, liquidator or provisional liquidator, working for the benefit of all who have legitimate interests in the assets under administration, is entitled to look to those assets to meet his or her remuneration, liabilities and outgoings: Shirlaw v Taylor (1991) 31 FCR 222, at 230 per Sheppard, Burchett and Gummow JJ. The court in that case described the claim for reimbursement of an officer under a court appointed administration as in the nature of "salvage", and said that those taking the benefit of the administration should not escape bearing the burden of the appropriate cost (at 230). 20 An application of that principle was explored in the High Court in Re Universal Distributing Company Limited (in liq) (1932) 48 CLR 171, especially at 174 per Dixon J. That was a case where a liquidator had incurred costs in recovery of assets for the benefit of secured debenture-holders. Dixon J observed that the debenture-holders were creditors who had a specific proprietary right to the assets realised by the liquidator, for the purpose of receiving payment of their debts, and he continued: "… if it is realized in the winding up, a proceeding to which they are thus parties, the proceeds must bear the cost of the realization just as if they had begun a suit for its realization or had themselves realized it without suit." However: "In applying this principle, only those expenses appear to have been thrown against the fund belonging to the debenture-holders which have been reasonably incurred in the care, preservation and realisation of the property." (See also IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9; 253 ALR 240.) 21 Here the costs were incurred by a court appointed officer, namely the liquidator of an unregistered managed investment scheme, and so in my view the principles in Shirlaw v Taylor and Re Universal Distributing Company Limited are applicable. It follows that, to the extent that the liquidator has incurred costs for the benefit of the persons who deposited moneys into the Destiny Technocash account, rather than for the benefit of the investors in the Integrity Scheme, it is appropriate that those costs be thrown against the fund established for the benefit of those persons. 22 The liquidator has given evidence of the work that he and his staff have done, and the disbursements they have incurred, which he proposes to deduct from the money to be paid into court. I am satisfied by his evidence that the costs are appropriately thrown against that fund, and therefore that an order should be made to the effect that the liquidator is justified in deducting those costs from that fund and paying into court the balance of the deposits and interest after that deduction. I was informed from the bar table that the total amount of fees, costs and disbursements to be so deducted, including the costs of today's hearing, amount to $55,375.23. 23 I make the orders in the short minutes of orders, which I now initial and date for identification. ********** 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. 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