Goal Group Australia - Case Update

The Federal Court of Australia has ruled that certain funds received by a now defunct securities class actions recovery firm were held on trust for the firm’s clients. The Court also directed the voluntary administrators appointed to the firm to pay those funds out to clients, finding there would be no basis on which the firm (which was not a participant in the class action in its own right) would be legally entitled to keep the funds.

Goal Group, which was founded in 1989, provided withholding tax reclaims and securities class actions recovery services to clients including financial institutions and investment firms. It managed potential recoveries by administering clients’ participation in the class actions, which included accepting receipt of settlement funds.

Goal Group opened its Melbourne office and 2013 and subsequently expanded into Sydney in 2021. It entered voluntary administration on 28 June 2024, and Andrew Spring, Trent Devine and Bradd Morelli of Jirsch Sutherland were appointed voluntary administrators. According to the company’s books and records, there are creditor claims of almost $44 million, of which over 99% represent client claims in respect of unpaid litigation recoveries. The administrators are still in the process of reviewing client claims, but it’s clear that there will be a significant shortfall between the amount of settlement proceeds which have been received on behalf of Goal Group’s clients and the amount of cash under the control of the administrators.

On 16 May 2024, 14 deposits totalling over $16 million were deposited into the company’s main Australian-based client account on account of the “AMP Shareholder Class Action”, a successfully resolved class action claim which was brought in the Supreme Court of New South Wales. 14 of Goal Group’s clients (the “AMP Clients”) participated in the AMP Shareholder Class Action.

The administrators sought an order causing Goal Group to pay $15,681,793.42 to the AMP Clients. The Administrators calculated each AMP Client’s entitlement, including a deduction for a commission provided for in the client agreement, and argued this amount was held on trust for each AMP Client respectively.

Neither the client agreements nor the powers of attorney expressly indicated that the fruits of any class action settlement were held by the company on trust. Nevertheless, the Court concluded that a trust existed based on the following factors:

• the client agreements contemplated the clients being “entitled” to the settlement monies and required those monies be paid to them directly;

• the terms of the client agreements and powers of attorney contemplated that the company acted on the clients’ behalf, language indicating the existence of a trust;

• in the case of one client, the client agreement expressly required the company to ensure that client monies be kept in a separate account;

• there was no basis on which the company (which was not a participant in the AMP class action in its own right) would be legally entitled to receive the fruits of any settlement; and

• the company directed payment of the AMP settlement funds into its main Australian-based client account. The practice of paying funds into a separate account called a “client account” — as with the payment of funds into a separate account called a “trust account” — was a powerful indication that a trust was intended.

Accordingly, the Court directed the administrators to cause the company to pay the AMP Clients’ Net AMP Fund Entitlement to each respective AMP Client.

Read the decision HERE.

Professionals involved:

• Counsel for the voluntary administrators: Michael Izzo SC of Eleven Wentworth

• Solicitor for the voluntary administrators: McCullough Robertson