Court refuses liquidators standing to bury Ponzi

Getting court approval for remuneration and guidance on how to distribute trust monies to unit holders is one thing.

Getting the court to approve your application for orders winding up an unregistered managed investment scheme is something else again, as two Deloitte insolvency and restructuring partners recently discovered.

“In my view, the plaintiffs do not have standing under s 601EE(1) of the Act to bring the application. On this basis, I decline to make orders winding up the Scheme.” Justice Jennifer Hill.

The court’s refusal is contained In the Matter of Noon Management (AUST) Pty Ltd (in liq); Ex Party Sean Holmes as joint and several liquidator of Noon Management (AUST) Pty Ltd (in liq) [2023] WASC 310, delivered on August 11, 2023 by Supreme Court of Western Australia judge Jenni Hill.

Over the course of a two day ex-parte hearing her honour was asked to consider a wide ranging application brought by Deloitte partners Sean Holmes and Matthew Donnelly in their capacity as joint and several liquidators of Noon Management (Aust) Pty Ltd (Noon Management) and as receivers and managers of the NG Unit Trust.

The architects and operators of Noon Management promised investors high returns generated by tireless automated algorithms, that would dip in and out of foreign exchange markets 24/7.

Noon Management’s reward for the implementation and maintenance of these algorithms comprised of a performance fee of 30 per cent of all profits generated, calculated every three months in arrears and paid annually.

Holmes and Donnelly and their team have done a ton of labour trying to identify and categorise the different groups of investors.

Some came in late and were clearly mislead by the information memorandum used to entice them.

Certain earlier birds however managed to get a few bucks out before reality at last intervened.

Working outage fairest way to distribute what monies remains ha clearly been a challenge, though not an unusual one as her honour pointed out.

“The issues raised in the application concern the ‘classic insolvency conundrum’, namely how extremely limited funds should be divided between groups of investors.

“On the evidence before me, it is clear that many investors have lost almost the entirety of the capital contributions they made to the Scheme. While approximately $10 million was invested in the Scheme, assets of only $1,024,928 remain.”

Despite the complexities and conundrums, the judge approved the proposed measures for distributing the trust monies and made the orders sought in respect of remuneration.

But when it came to the application for an order that the scheme be wound up Holmes and Donnelly were disappointed.

“The evidence before me is that Noon Management was the operator of the Scheme, as well as a member,” the judge said.

“On this basis, I accept that Noon Management can apply to wind up the Scheme. However, Noon Management is not the applicant in this proceeding; it is the individuals who have been appointed receivers and liquidators of Noon Management.

“In my view, the plaintiffs do not have standing under s 601EE(1) of the Act to bring the application. On this basis, I decline to make orders winding up the Scheme.”

According to s 601EE of the Corporations Act only ASIC, the scheme operator and a scheme member have standing to apply to have a scheme wound up so despite the court agreeing with the liquidators’ finding that the scheme was a Ponzi they are unable to bring the application necessary to hasten the scheme’s rightful end.

iNO emailed Holmes asking what options were available to the liquidators and receivers in light of the judge’s refusal but received no response by our deadline. At least they got their fees.