Key Point

  • The High Court approved a settlement to compromise claims between MF Global UK Limited (as trustee of a client money trust, "MFG")) and the special administration estate of MFG.
  • Nothing in the CASS rules restricted the trustee of client monies from using the statutory power of compromise contained in the Trustee Act 1925.
  • The Court's review of the decision to compromise will be limited to ensuring that the trustee's proposed actions are lawful, reasonable and honest.

The facts

MFG had failed to segregate monies received as trustee of a client money trust and they had been mixed with monies held beneficially on its own account. Upon administration there was a shortfall in the client money pool ("CMP"). The CMP Trustee and the special administrators of MFG proposed a settlement agreement to compromise claims between the trust and general estate of the special administration. This would, amongst other things, avoid the substantial costs of complex litigation.

The Decision

The Court approved the settlement, considering it to be in the best interest of both the CMP trust and the general estate of the special administration. In doing so, the Court confirmed that the CASS rules (contained in the FSA handbook) do not exclude the powers of compromise arising under Section 15 of the Trustee Act 1925. Further, the court's enquiry was limited to ensuring that the decision taken was within the trustee's powers, reasonable and honest. The Court would not withhold approval merely because it would not have exercised the trustee's power in the manner proposed.


A pragmatic, and welcome, decision which avoided substantial costs. As the CMP Trustee and special administrators were partners of the same firm of accountants, seeking the Court's approval was a prudent step.

In the matter of MF Global UK Limited (In Special Administration) [2014] EWHC 2222 (Ch)