A Federal Court judge has denied a request by the liquidators of Sonray Capital Markets (Sonray) to take fees from funds in trust in the event the recoverable assets of the collapsed broker are insufficient to pay their costs.
Earlier this month, Justice Finkelstein declined a petition by Ferrier Hodgson representatives George Georges and John Lindholm to have their costs and expenses paid out of ex-Sonray clients' segregated accounts.
At present, the liquidators hold more than $10.4 million in trust and there is about another $28.3 million which is held by third parties that may also be trust money when it is received, court documents said.
"The liquidators seek orders that to the extent Sonray's assets are insufficient to meet the liquidators' costs ... they be taken from those accounts on a pro rata basis according to the assets of the relevant account," the documents said.
Finkelstein said such a request could not be permitted as there are too many issues to contend with, including whether or not all clients would want the liquidator to use their money to pursue potential claims.
He said as an interim solution, the liquidators could use client funds as part of their fund recovery activities and not for general expenses only if they repay the amount, including all interest.
"The interim orders will make clear the precise work for which the liquidators are to be paid," Finkelstein said.
"The liquidators will not be permitted to recover any general liquidation expenses from the trust money."
The liquidators also sought approval to enter into a mediation funding deed and a mediation agreement.
Due to a number of mitigating factors, the judge agreed to approve the mediation agreements, but only on the condition that the non-use clause is removed or substantially rewritten.
The liquidators have identified a number of potential claims against Saxo Bank A/S, Interactive Brokers LLP, HLB Mann Judd and their insurers, PricewaterhouseCoopers, and Sonray executives Russell Johnson and Scott Murray, documents said.
As a result of significant mishandling of clients' funds by Sonray representatives, there is a deficiency in funds of around $46.7 million, court documents said.
Sonray was placed in voluntary administration on 22 June this year.
