Corporations – financial services and markets – liquidation – whether the primary judge erred…

…in holding that the date for valuation of client entitlements should be the date of administration

Halifax Investment Services Pty Ltd (in liquidation) (Halifax AU) held 70% of the issued shares in Halifax New Zealand Limited (in liquidation) (Halifax NZ).

Halifax AU held an ‘Australian financial services licence’. It was not a licensed broker but facilitated the acquisition of shares by clients through an online broker and made a range of financial products available to clients.

Halifax NZ held a ‘financial service provider’s licence’ granted by the Financial Markets Authority in New Zealand. Halifax NZ also acted as a broker for its clients in respect of various exchange-traded products including shares and warrants.

Prior to the administration and subsequent liquidation of both companies and in breach of applicable statutory requirements, there was commingling between Halifax AU accounts, between Halifax NZ accounts, and between accounts of Halifax AU and Halifax NZ. There was also a deficiency in the funds held by Halifax AU and Halifax NZ to meet client entitlements.

The monies paid to Halifax AU and Halifax NZ by clients were held on trust for the clients’ benefit. As at the date of the companies’ administration, there was, relevantly, a single deficient mixed fund.

The issue

The primary issue in the proceedings was whether the primary judge erred in holding that the date for valuation of the proportionate entitlements of clients or investors, in respect of a single deficient mixed fund, was the date of administration of the relevant companies.


The applicant on behalf of a certain category of investors contended that the primary judge erred and that her Honour should have adopted a date as close as possible to the date for final distribution.

The date of valuation issue arose in circumstances where the administrators/liquidators had taken the unusual step of permitting investors to maintain open positions after their appointment. Some investors had maintained open positions and the value of some of those positions had increased.

A further interesting aspect of the proceedings is that the issue was, at the request of the parties, heard jointly by the Court of Appeal of New Zealand and the Full Court of the Federal Court of Australia, sitting in joint session with the two courts deliberating jointly, but each court issuing its own decision.


In dismissing the appeal, the Full Court of the Federal Court:

(a) noted that the primary judge’s decision with respect to the date of valuation issue was discretionary and that appellate intervention requires satisfaction of the well-established grounds of appeal identified in House v The King (1936) 55 CLR 499

(b) stated that the fact the liquidators permitted investors to maintain open positions, and investors had a choice whether or not to do so, does not support the appellants’ contention regarding the adoption of a date as close as possible to the date for final distribution (rather than the date of administration) as the date for valuation of clients’ proportionate entitlements. This is because:

  • (i) having regard to the statutory framework and the nature of the trust, the date of administration provides a logical starting point for the purposes of valuing the proportionate entitlements of clients. To the extent that the trust arose by force of regulation 7.8.03, the date of administration triggered the operation of that regulation in the circumstances of this case. To the extent that the trust arose pursuant to s981H of the Corporations Act, while the trust already existed before the date of administration, the administrators became the trustees of the trust on their appointment as administrators
  • (ii) the deficiency in the mixed fund existed at the date of administration and the fund was first constituted for the purposes of pari passu distribution on that date. In those circumstances, there is logic in valuing the proportionate entitlements of investors as at the date of administration
  • (iii) the adoption of the date of administration in this case is consistent with authorities that have adopted, in the context of the pari passu distribution of a deficient trust or other fund in shortfall, the date when the fund was first constituted for the purposes of pari passu distribution (see, for example, Re MF Global Australia Ltd (in liq) (2012) 267 FLR 27 and Re Lehman Brothers International (Europe) (in administration) [2009] EWHC 3228 (Ch)).

The Court of Appeal of New Zealand delivered its own judgment (Loo v Quinlan and Kelly (in their capacity as liquidators) [2021] NZCA 561 (Kós P, Cooper and Goddard JJ)) on the same date, and to the same effect, as that of the Full Federal Court.

Anthony Lo Surdo SC is a barrister, arbitrator and mediator at 12 Wentworth Selborne Chambers, Sydney, Lonsdale Chambers, Melbourne, William Forster Chambers, Darwin and Outer Temple Chambers, London and Dubai.

Dr David J Townsend is a barrister at 3rd Floor Wentworth Chambers, Sydney.

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