Re MF Global UK Ltd [2013] EWHC 1655 (Ch)

Analysis

MF Global UK (MFG UK) went into administration and, as a result, all client funds were pooled and needed to be rateably returned to MFG UK’s clients. This had to be done in a timely fashion. There were a significant number of client claims which the administrators had rejected either in full or partially. There were also likely to be a significant number of clients whose details did not appear among MFG UK’s records but who would also have a valid claim. These difficulties meant that any distributions from the pooled trust monies could result in an over-distribution and the administrators and trustees would then become liable. In the absence of industry or statutory guidance the administrators sought directions from the court as to how to proceed.

The administrators annexed a suggested procedure for dealing with such claims to their application. This involved claims being made to them in writing and written reasons being given in respect of rejected claims. Prior to any distributions being made there would also be further advertisements placed in national papers. If approved and followed this procedure would prevent the administrators and trustees being liable for any subsequent claims.

Prior to making any order for directions the court had to satisfy itself that it had jurisdiction to make an order of this nature in the absence of any statutory authority.

Held:

1. (1) Schmidt v Rosewood Trust Ltd [2003] WTLR 565 and Finers v Miro [1991] 1 WLR 35 provided the court with authority to give directions to trustees. The court has no right to vary the beneficial interests under a trust but directions on distributions from the trust are permitted where beneficiaries are not known to the trustees, Re Benjamin [1902] 1 Ch 723.
2. (2) The draft order was consistent with, and an extension of, the precedent set in Re Benjamin and reference to Lewin on Trusts supported the extension of this principle to provide protection for the administrators and trustees against known creditors where their claim had been rejected in part or full.
3. (3) The administrators’ procedure was approved and the order made.

JUDGMENT MR JUSTICE DAVID RICHARDS: [1] This is an application by the administrators of MF Global UK Ltd (MFG UK) and by MFG UK in its capacity as trustee of a client money trust established by rules made by the Financial Services Authority (now the Financial Conduct Authority) pursuant to statute, for directions as regards …

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