The Court Makes Interesting Use of s90–15 of the IPS

The Federal Court has made innovative use of its powers under Section 90–15 of the Insolvency Practice Schedule (“IPS”) to amend various provisions around calling for and adjudicating on Proofs of Debt in Woodhouse (Liquidator), in the matter of Forex Capital Trading Pty Ltd (in liq) [2022] FCA 600.

The innovative approach was in response to a fairly unique set of circumstances. The Company in Liquidation was a seller of over-the-counter derivatives and the Liquidation was faced by approximate 8,600 clients with potential claims against the Company totalling approximately $69.5 million.

The Company had been provided with a letter of comfort by its Ultimate Holding Company (“UHC”) whereby the UHC undertook that, upon request, it would provide financial support to meet any debts incurred by the Company. However, the undertaking was to be terminated on 30 June 2022. Accordingly, there was pressure on the Liquidators to urgently quantify the debts of the Company so that they could make a claim against the UHC before the undertaking expired.

The Liquidators approached the Court and sought Orders that would permit them to conduct an abridged process for the adjudication and admission of claims, that would allow “customers the option to accept a 15% discount on the value of their claims as calculated by the Liquidators by a certain deadline, in exchange for exempting them from providing further detailed evidence as to each element of their alleged claims.”

The expedited process would allow the Liquidators to quantify the Company’s debts and make a claim under the undertaking before it expired, maximising the potential return to creditors.

Given the obvious commercial logic behind the application, the Court sensibly made Orders, amending the process for calling for and adjudicating on proofs of debt set out in Corporations Regulations 5.6.48, 5.6.49, and 5.6.54. In particular, the Orders set out the form of the notices to be sent to creditors to satisfy the Liquidators’ obligations and the notices are well worth a read.

It’s great to see the Court sensibly utilise its powers under s90–15 of the IPS to assist Liquidators to maximise the likely outcome for creditors. It’s for situations like this one that these powers exist.

Link to the Judgement: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2022/2022fca0600