Georges v Seaborn International Pty Ltd (Trustee), in the matter of Sonray Capital Markets Pty Ltd (in liq) [2012] FCAFC 140 (5 October 2012): section 511 Corporations Act, whether shares to included in pooling of assets.

November 1, 2012

The Full Bench of the Federal Court in Georges v Seaborn International Pty Ltd (Trustee), in the matter of Sonray Capital Markets Pty Ltd (in liq) [2012] FCAFC 140 considered the right of the liquidator to recover proceeds of shares the purposes of pooling and distribution to creditors.


Sonray was the holder of the Australian financial services licence from 4 May 2005 until it went into administration on 22 June 2010 [87]. It provided access to trading platforms made available by third parties. Clients deposited money with Sonray, which was held in accounts and subject to statutory trust under the Corporations Act [88]. It had 18 segregated accounts which were used to receive deposits in respect of margin calls, proposed trades and the return of funds. In these accounts clients’ funds were co-mingled with funds from other clients [90] to the point where the trial judge found that the funds were so thoroughly mixed as to be almost impossible to ascertain entitlements to each of the segregated accounts [93]. Efax, the trustee of a family trust, entered into a written agreement in 2009 with Sonray regarding its trading activities.  In April 2010 Efax instructed Sonray to purchase 78,000 shares in BHP Billiton Ltd (“BHP”) [5] for $3 million [6], which it did through Saxo Bank (“Saxo”), one of its trading platforms. Efax’s funding for the purchase was deposited into a Sonray accounted which was subject to numerous defalcations.  The purchase price for the shares however was not paid out of a tainted account but rather by Saxo using its own money or by way of credit arrangements.  Sonray debited Efax’s ledger account with the purchase price of the BHP shares.

The Liquidators seek a direction to allow them to pool shares purchased on instructions by Efax with proceeds attributable to all other Sonray clients which would then be distributed amongst all of the clients [8].

 The trial judge held that Efax is entitled to resist the claim for pooling on the ground that it is entitled to the BHP shares in specie [9].


The Majority upheld the appeal by a 2-1 majority.


Jacobsen J

His Honour commenced his analysis by Read the rest of this entry »