Our Capabilities - Liquidation

The Issue

The Company was a licensed finance broker pursuant to the Finance Brokers Control Act 1975 (Western Australia) and conducted a finance broking business in which it sourced funds from investors to lend by way of generally pooled mortgages to borrowers for various purposes. The business operations also included the management of loans brokered by the Company and at the date of appointment the loan book was valued at approximately $65 million.

The Company was found to have breached its fiduciary duties as trustee and misapplied and lost trust funds. The director of the Company was found guilty of stealing by direction and sentenced to 10 years jail.

Many of the 1000 investor clients were unsophisticated retirees who had invested much of their life savings with the Company (as trustee). The shortfall to investor clients was approximately $25 million.       

Scope of the Assignment

Realisation of trust assets, litigation for losses and damages suffered by the Company, determining entitlement to various securities and providing a return to unsecured investors.

The Solution

Through a combination of successful litigation, commercial settlements against defendants in litigation and recovery of trust assets, approximately $23 million has been recovered or is likely to be recovered for the benefit of unsecured investors.

It is estimated that, after expenses of the administration, unsecured investors will recover almost 80 cents in the dollar of their principal investment over time.

Value Added

Many complex legal issues arose from the conduct of the Company’s business and there were competing claims to assets acquired with trust funds.

Our team of forensic specialists with extensive finance skills were deployed to trace assets acquired with trust funds and identify recovery avenues. 

The Company had no funds and the trust account was overdrawn.   Funding was negotiated with the State Government of Western Australia on a non-recourse basis to enable the assets, including choses in action, to be recovered to generate a maximum return to unsecured investors.

To preserve the value of the assets an injunction was obtained to prevent dealings in mortgages which were derived from the application of trust funds.