The High Court has rejected William and Irene Thomson’s claim to receive £107,907.38 from the liquidation of Money Markets International Stockbrokers Limited, ruling that their position was not equivalent to that of an investor who had previously obtained relief from the court.
The decision, delivered by Miss Justice Laffoy on 20 October 2006, resolved a preliminary issue in the Thomsons’ application. It did not determine their ultimate entitlement to the company’s client funds. The judge said that entitlement could not be assessed in isolation from all claims on those funds, including any recourse available to the liquidator under section 52(5)(b) of the Stock Exchange Act 1995.
The Thomsons invested £145,000 in July 1998 in a Hansard International personal portfolio fund. Hansard appointed the stockbroking company as discretionary manager, and the couple brought their application with Hansard’s consent. Hansard confirmed that the Thomsons were the beneficial owners of the money placed with the company and that any payment to them would discharge the company’s corresponding liability to Hansard.
The company recorded the fund’s dealings in a client account, which showed a credit balance of £107,907.38 when the company went into liquidation in March 1999. The account included share purchases and sales, dividends, and a £21,513.50 refund to Hansard. The couple argued that part of the balance represented money that had not been invested before the company was suspended from trading in February 1999. They said this made their case analogous to that of Gill Hess, who had secured a court order in 1999 concerning money reflected in a company bank account.
Justice Laffoy distinguished the cases. The Thomsons’ money had entered the company’s NatWest account and left it on the same day in August 1998. The balance they relied on was instead recorded in the company’s books as a client account balance. The judge said such a balance measured a client’s claim against the company and client funds; it did not give one client a stronger equitable interest because part of the balance represented unspent investment money.
The applicants also relied on a decision concerning investors in Shanahan Stamp Auctions Limited. The judge found that case did not establish an equitable principle elevating their claim above those of other clients.
The court held that the Thomsons were not entitled, by analogy with the Hess decision, to an order for either £107,907.38 or the £76,268.88 they said remained uninvested at the time of suspension. The ruling addressed that asserted priority and left their wider entitlement against the company in liquidation and its client funds to be considered with the total claims.