Dixon administrators admit CSLR may be best bet for clients

Mike Taylor

Managing Editor/Publisher, Financial Newswire

2 December 2022

The administrators of Dixon Advisory have significantly narrowed the number of clients of the firm who may be treated as creditors of the company.

For others, they are suggesting that clients of Dixon Advisory have may have the ability to “submit a clam with the Australian Government’s proposed Scheme of Last Resort (CSLR)”.

“If the proposed CSLR is established and is found to apply to the Company, former DASS clients would likely receive compensation from the Australian Government for certain losses incurred that is significantly higher than the return expected (if any) from the Company under either the proposed Deed or liquidation,” the administrator’s report said.

The administrators, PWC, have determined that only investors in the Dixon investment product, URF Equities (US Masters Residential Property Fund) will be treated as creditors because it is the only product which significantly underperformed the against relevant benchmarks.

The administrators said that they “therefore consider that only investors in URF Equities should be treated as creditors of the Company.

Further, it acknowledged that this position had been reached notwithstanding the complaints lodged by investors with the Australian Financial Complaints Authority (AFCA) with the vast majority covering the US Masters Residential Property Fund (URF).

The administrators suggested that, to do otherwise, would be “cost prohibitive”.

“Whilst the Administrators’ preferred approach would be to assess all Loss Claims of Investors on an individual basis, this would be cost prohibitive,” it said.

“Using the AFCA fee model for example, the administrators estimate that to individually assess all Loss Claims would likely cost approximately $37.5 million and possibly take two years to complete. Consequently, the Administrators believe there is no reasonable alternative other than to adopt a methodology to quantify Loss Claims that is pragmatic and commercially sound in the context of the modest pool of funds that will likely be available to Investors, relative to the potential Loss Claims.”

The Administrators are of the view that the Actual Loss approach (which considers the actual loss of invested capital) in respect of the URF Equities is fair and equitable to all Investors, fit for purpose, economical (particularly given the modest funds that are likely to be available for a distribution to creditors) and capable of being endorsed by the Court.

The Actual Loss approach quantified the total claims of 4,606 Investors who invested in the URF Equities to be $367,928,537 (the Quantified Claims).