iNova Pharmaceuticals (Australia) Pty Ltd v Vrkic

[2024] FedCFamC2G 721

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

iNova Pharmaceuticals (Australia) Pty Ltd v Vrkic [2024] FedCFamC2G 721  

File number(s):

SYG 2102 of 2023
SYG 3343 of 2019

Judgment of:

JUDGE MANOUSARIDIS

Date of judgment:

9 August 2024  

Catchwords:

BANKRUPTCY – where freezing and ancillary disclosure orders are made in favour of judgment creditors against judgment debtor in relation to the proceeds of sale of a property owned by judgment debtor – where before freezing orders are made judgment debtor transferred proceeds of sale to C and directed C to transfer money to JK and LY – where judgment debtor presented debtor’s petition after directing C to receive and transfer money to JK and LY – where before judgment debtor presents debtor’s petition to Official Receiver judgment debtor arranged XL and JL to transfer $30,000 (DVDO Client Trust Fund) to the firm of which the prospective trustee in bankruptcy is a principal – where debtor’s petition is accepted by the Official Receiver – where trustee recovers from JK and LY funds (Fund) that C at the direction of the judgment debtor had paid to JK and LY – whether at the time the debtor presented the debtor’s petition or the time at which the Official Receiver accepted the debtor’s petition the debtor did not satisfy the requirements of s 55(2A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and, for that reason, the debtor’s petition ought not to have been accepted by the Official Receiver – requirements not satisfied and order annulling bankruptcy made under s 153B(1) of the Bankruptcy Act – whether the judgment creditors are entitled to an order under s 154(3) of the Bankruptcy Act that the Fund be paid to them – not entitled because as judgment creditors they have no property interest in the Fund – whether judgment creditors could otherwise secure payment to them of the Fund – held judgment creditors could do so on the basis that on the making of an order annulling the bankruptcy the trustee would hold the Fund as trustee for the judgment debtor and it was open to the judgment creditors to apply for a charging order in relation to the Fund – orders made to give effect to that holding – whether judgment creditors had any similar claim to the DVDO Client Trust Fund – orders made granting judgment creditors liberty to apply to make such claim after giving notice to judgment debtor and to XL and JL – whether the trustee in bankruptcy engaged in any conduct which merited an order under s 90-15(3)(f) of Schedule 2 to the Bankruptcy Act denying him his remuneration and right to reimbursement – trustee engaged in such conduct, namely, being aware that his employee advised and assisted the judgment debtor to prepare and present the debtor’s petition but failing to exercise reasonable care to ensure that the judgment debtor’s circumstances met the requirements provided for by s 55(2A) of the Bankruptcy Act with the consequence that the work the trustee carried out as trustee was of no value and, moreover, interfered with the judgment creditors’ ability to enforce their rights.

Legislation:

Bankruptcy Act 1966 (Cth) ss 19, 43(1)(b), 55(1), 55(2A), 55(3), 55(3AA), 55(4), 55(4A), 58(1), 153B(1), 153B(2), 154(1), 154(3), 303, Sch 2, ss 90-15(1), 90-15(3)(f), 90-15(4), 90-10(1), 90-20

Corporations Act 2001 (Cth) s 601AA

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 213(2)

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 25.11

Civil Procedure Act 2005 (NSW) s 106(1)(c)

Uniform Civil Procedure Rules 2005 (NSW) rr 39.44, 39.45(1), Pt 39, Div 5

Bankruptcy Act 1869 (UK) s 81

Cases cited:

ANZ Banking Group Ltd v Greig [1980] 1 NSWLR 112

Bailey v Johnson (1872) LR 7 Ex 263

Burdick v. Garrick (1870) L.R. 5 Ch. App 233

Croton v The Queen (1967) 117 CLR 326

Dovey v Bank of New Zealand [1999] NZCA 328

iNova Pharmaceuticals (Australia) Pty Ltd v Letos Group Pty Ltd [2022] FedCFamC2G 1052

iNova Pharmaceuticals (Australia) Pty Ltd v Letos Group Pty Ltd (No 3) [2023] FedCFamC2G 801

JSC BTA Bank v Ablyazov (No 10) [2015] UKSC 64

Mathai v Kwee [2005] FCA 932

Mercedes Benz A.G. v Leiduck [1996] AC 284

Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No 7) [2011] FCA 1322

Re Abbas; Ex parte Official Trustee in Bankruptcy (1995) 57 FCR 140

Re Almassy [1999] FCA 1004

Re Mottee; Ex parte Mottee and Official Receiver (1977) 29 FLR 406

Scott, (The Trustee of the Property of Hurst, a Bankrupt) v Hurst (No 2) [2021] FedCFamC2G 166

Thompson v Lane (Trustee) (No 3) [2022] FCA 128

Division:

General

Number of paragraphs:

103

Date of hearing:

5 March 2024

Place:

Sydney

In SYG 2102 of 2023

Counsel for the Applicants:

Mr C McMeniman

Solicitor for the Applicants:

Gilbert + Tobin

Solicitor for the Respondent:

Ms A Johnstone of Connor & Co Lawyers

In SYG 3343 of 2019

Applicants:

No appearance by, or on behalf of, the applicants

Fourth, Fifth, Sixth, Seventh, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Twentieth Respondents:

No appearance by, or on behalf of, the Fourth, Fifth, Sixth, Seventh, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Twentieth Respondents

ORDERS

SYG 2102 of 2023

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

IN THE MATTER OF LIYAN LIANG, BANKRUPT

BETWEEN:

INOVA PHARMACEUTICALS (AUSTRALIA) PTY LTD (ACN 617 871 539)

First Applicant

INOVA PHARMACEUTICALS (SINGAPORE) PTE. LIMITED (UEN 200617543H)

Second Applicant

AND:

DANNY TONY VRKIC

Respondent

ORDER MADE BY:	JUDGE MANOUSARIDIS
DATE OF ORDER:	9 AUGUST 2024

THE COURT ORDERS THAT:

1.Pursuant to s 153B(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) the bankruptcy of Liyan Liang is annulled.

2.Pursuant to s 90-15(3)(f) of Schedule 2 to the Bankruptcy Act, the respondent is not entitled to remuneration for work he or his employees or agents carried out, or to any indemnification for any expenses he incurred, as trustee in bankruptcy of the bankrupt estate of Liyan Liang.

3.Each party bear its or his own costs.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

ORDERS

SYG 3343 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

INOVA PHARMACEUTICALS (AUSTRALIA) PTY LTD ACN 617 871 539

First Applicant

INOVA PHARMACEUTICALS (SINGAPORE) PTE. LIMITED UEN 200617543H

Second Applicant

AND:

LETOS GROUP PTY LTD ACN 623 106 561

Fourth Respondent

LIYAN LIANG

Fifth Respondent

C&J AUS GROUP PTY LTD ACN 617 599 961 (and others named in the Schedule)

Sixth Respondent

ORDER MADE BY:	JUDGE MANOUSARIDIS
DATE OF ORDER:	9 AUGUST 2024

THE COURT ORDERS THAT:

1.The evidence that was read and adduced in proceeding SYG2102/2023 is also to be taken to have been read and adduced in proceeding SYG3343/2019.

THE COURT DECLARES THAT:

2.Danny Tony Vrkic (Mr Vrkic) holds on trust for the fifth respondent, Liyan Liang, the amounts totalling $96,315.68 that were paid by Jianhua Kuai and Ye Liu from 22 December 2023 to 8 January 2024 into Mr Vrkic’s Bankruptcy Administration Account together with interest that has accrued on those amounts (the Fund).

THE COURT ORDERS THAT:

3.Up to and including the time at which the applicants or either of them serve a charging order or charging orders pursuant to order 4, or until further order of the Court, whichever occurs first, Mr Vrkic, by himself, his employees or his agents, is restrained from transferring, disposing, or otherwise dealing with all or any part of the Fund.

4.The applicants or either of them have leave to have issued to them forthwith a charging order or charging orders in relation to the Fund substantially in the form of Form 74 of the Uniform Civil Procedure Rules 2005 (NSW), such charging orders to be issued by Judge Manousaridis in chambers after the applicants or either of them provide or provides a draft or drafts of the charging order or orders.

5.Subject to order 6, the applicants have liberty to apply for the following declaration and orders:

(a)A declaration that the amounts totalling $30,000 paid by Mr Xiaoda Liu and Ms Lijing Jiang to Mr Vrkic on 12, 13, and 19 December 2023 that are currently held by Mr Vrkic in an account styled “DVDO Client Trust Fund” are held by Mr Vrkic as trustee for the fifth respondent.

(b)Up to and including the time at which the applicants or either of them serve a charging order or charging orders pursuant to order (c), or until further order of the Court, whichever occurs first, Mr Vrkic, by himself, his employees or his agents, is restrained from transferring, disposing, or otherwise dealing with all or any part of the DVDO Client Trust Fund.

(c)The applicants or either one of them have leave to have issued to them forthwith a charging order or charging orders in relation to the DVDO Client Trust Fund substantially in the form of Form 74 of the Uniform Civil Procedure Rules 2005 (NSW), such charging order or orders to be issued by Judge Manousaridis in chambers after the applicants or either of them provide or provides a draft or drafts of the charging order or orders.

(d)Such other orders as may be relevant.

6.The applicants may exercise the liberty to apply provided for in order 5 35 days after:

(a)the applicants serve a sealed copy of these orders on the fifth respondent (in the manner in which they have been authorised in this proceeding to serve documents on her), and on Mr Xiaoda Liu and Ms Lijing Jiang; and

(b)the applicants give notice to the fifth respondent, and to Mr Xiaoda Liu and Ms Lijing Jiang, of their intention to exercise the liberty to apply provided for by order 5.

7.The notice to Mr Xiaoda Liu and Ms Lijing Jiang provided for by order 6(b) may be given through the fifth respondent if the applicants have no other details concerning the identity of Mr Xiaoda Liu and Ms Lijing Jiang, or the means by which they may be notified.

8.The fifth respondent pay the applicants’ costs of and incidental to their obtaining these orders.

9.The applicants have liberty to apply in relation to any question concerning the construction or implementation of these orders.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

INTRODUCTION	[1]
BACKGROUND	[7]
Course of Substantive Proceeding up to 15 December 2023	[7]
Ms Liang’s bankruptcy	[11]
Course of Substantive Proceeding from 15 to 27 December 2023	[18]
Mr Vrkic’s administration of the bankrupt estate	[26]
Ms Liang’s unsworn affidavit	[33]
APPLICATION FOR ANNULMENT	[35]
Power and principles	[35]
Standing	[36]
“Petition . . . ought not to have been accepted by the Official Receiver”	[38]
“Petition ought not to have presented . . . . to the Official Receiver”	[44]
Discretion	[45]
Effect of annulment	[47]
Determination	[49]
Standing	[49]
Ought the Official Receiver have accepted the Bankruptcy Form?	[51]
Personally present or ordinarily resident in Australia as at 12 December 2023	[52]
Dwelling house, place of business, or carrying on business in Australia	[56]
Conclusion	[59]
Ought the Bankruptcy Form not been presented?	[59]
Discretion	[59]
Conclusion	[61]
APPLICATION FOR ORDER UNDER S 154(3)	[62]
Are iNova entitled to an order under s 154(3) of the Bankruptcy Act?	[67]
Is the Fund an asset in relation to which iNova may exercise enforcement rights?	[68]
The Fund as property	[69]
Who has property in the Fund?	[71]
What enforcements rights does iNova have in relation to the Fund?	[77]
APPLICATION THAT MR VRKIC BE DENIED REMUNERATION	[84]
Power and principles	[84]
Parties’ submissions	[86]
Determination	[88]
Is pre appointment conduct relevant to making an order in relation to remuneration?	[90]
Does Mr Vrkic’s pre appointment conduct merit denial of remuneration?	[93]
THE $30,000 PAID TO MR VRKIC BY MR LIU AND MS JIANG	[98]
COSTS	[100]
OTHER MATTERS	[101]
DISPOSITION	[103]

REASONS FOR JUDGMENT

INTRODUCTION

1. On 1 September 2023, in a proceeding the applicants (collectively iNova) commenced in this Court (Substantive Proceeding), I made orders that Ms Liyan Liang, the fifth respondent in the Substantive Proceeding, pay to iNova compensation, interest, and costs in amounts totalling $274,953.89 (Judgment Debt).[1] I made these orders on the basis of declarations I pronounced on 16 December 2022 that Ms Liang was liable as a joint tortfeasor for wrongs I found the fourth respondent in the Substantive Proceeding (Letos Group) committed, and that Ms Liang was involved in Letos Group’s contraventions of a number of provisions of the Australian Consumer Law.[2]

   [1] iNova Pharmaceuticals (Australia) Pty Ltd v Letos Group Pty Ltd (No 3) [2023] FedCFamC2G 801

   [2] iNova Pharmaceuticals (Australia) Pty Ltd v Letos Group Pty Ltd [2022] FedCFamC2G 1052. The Australian Consumer Law is Schedule 2 to the Competition and Consumer Act 2010 (Cth)

2. On 8 December 2023, on the application of iNova, I granted ex parte freezing and ancillary disclosure orders in the Substantive Proceeding against Ms Liang, and against lawyers and a real estate agent who appeared to have been involved in the sale by Ms Liang of land (Property) of which she had been the registered proprietor. The freezing and disclosure orders were directed to identifying the person or persons to whom the net proceeds of sale of the Property (or their traceable equivalent) (Proceeds of Sale) had been transferred, and, once identified, to restrain that person or those persons from dealing with the Proceeds of Sale. The information that was disclosed in response to these orders led iNova, on 15 and 22 December 2023, to apply for, and to my granting, freezing and ancillary disclosure orders against additional persons to whom all or part of the Proceeds of Sale appeared to have been transferred.

3. By 9 January 2024 the following had been revealed.

   (a)On 14 December 2023 Ms Liang became bankrupt by her own petition, and the respondent, Mr Vrkic, was appointed as trustee in bankruptcy of her estate. Mr Vrkic appears to be the principal of a firm called “DV Recovery Management Corporate + Personal Insolvency Management” (DVR).

   (b)Ms Liang became bankrupt on the basis of a “Bankruptcy Form” she signed on 11 December 2023, and which, shortly after 3:59 pm on 12 December 2023, an employee of DVR, Ms Li Yan or Ms Leanne Li (Ms Li), arranged to submit to the Official Receiver on behalf of Ms Liang. Ms Li had provided bankruptcy advice to Ms Liang, and she had assisted Ms Liang to complete the Bankruptcy Form. Further, it appears that Ms Li arranged to present the Bankruptcy Form to the Official Receiver after DVR received $30,000 from persons associated with Ms Liang.

   (c)At the time she consulted Ms Li and signed the Bankruptcy Form, and the Bankruptcy Form was submitted to the Official Receiver, Ms Liang may not have been personally present in Australia; and she otherwise may not have had any of the other connections with Australia that s 55(2A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) requires a debtor have before the Official Receiver can accept a debtor’s petition under s 55(1) of the Bankruptcy Act.

   (d)Amounts totalling $96,315.68 had been paid to Mr Vrkic in his capacity as trustee in bankruptcy of Ms Liang’s estate, and those amounts are held in a bank account of which Mr Vrkic is the account holder (Trustee’s Bank Account). The evidence suggests that the amounts totalling $96,315.68 are traceable from the Proceeds of Sale. (I will refer to the amounts totalling $96,315.68 that have been paid into the Trustee’s Bank Account, together with interest that has accrued on that amount, as the Fund.)

4. In these circumstances iNova, in their further amended application, apply for an order under s 153B(1) of the Bankruptcy Act that Ms Liang’s bankruptcy be annulled; an order under s 154(3) of the Bankruptcy Act that Mr Vrkic pay the Fund to iNova; an order under s 90-15(3)(f) of Schedule 2 to the Bankruptcy Act (Schedule 2) that Mr Vrkic is not entitled to his remuneration or, in the alternative, an order under s 90-10(1) of Schedule 2 that the Court inquire into the administration of the bankrupt estate of Ms Liang; and an order that the $30,000 that had been paid to DVR before Ms Li submitted the Bankruptcy Form to the Official Receiver be paid into Court pending the Court determining to whom the $30,000 should be paid.

5. iNova apply for the first two orders on the ground that Ms Liang ought not to have been made bankrupt because, at the time she petitioned for her bankruptcy, Ms Liang did not meet the requirements of s 55(2A) of the Bankruptcy Act. iNova apply for the third set of orders on the ground that Mr Vrkic, through his employee Ms Li, was on notice at the time Ms Li assisted Ms Liang to petition for her bankruptcy that Ms Liang had no presence in Australia; and, for that reason, Ms Liang did not meet the requirements of s 55(2A) of the Bankruptcy Act. iNova apply for the fourth order on the ground that Mr Vrkic has given conflicting information about the identity of the person or persons who provided the $30,000, leaving open the possibility that the $30,000 may have been paid by Ms Liang, potentially in breach of the freezing orders I made on, and have continued since, 8 December 2023.

6. To be in a position to determine iNova’s claims, it will be necessary to describe the course of the Substantive Proceeding from 8 December 2023, the circumstances in which Ms Liang became a bankrupt, and the communications between iNova’s lawyers and Mr Vrkic’s lawyer.

   BACKGROUND

   Course of Substantive Proceeding up to 15 December 2023

7. On 8 December 2023, on the application of iNova, I made ex parte freezing and ancillary disclosure orders against Ms Liang, lawyers, and a real estate agent. The freezing orders were expressed to continue until 11:59 pm on 12 December 2023. I made the orders on the basis of evidence that showed that Ms Liang had sold the Property, and that the lawyers and a real estate agent were involved in the sale of the Property; and I ordered that Ms Liang and the other persons provide information about the sale of the Property and, in particular, about the Proceeds of Sale. I also ordered that the matter be listed at 2:15 pm on 12 December 2023 for the purpose (among other things) of hearing an application to extend the freezing order. Ms Liang and the other persons were required to comply with the disclosure orders by 5 pm on 11 December 2023.

1. When the matter came before me on 12 December 2023, I made a further orders, including an order that the freezing order I made on 8 December 2023 against Ms Liang be extended up to and including 11:59 pm on Friday 15 December 2023. I also ordered, with the consent of the Commonwealth Bank of Australia (CBA), that CBA provide to iNova’s solicitors information in relation to a particular account number and accounts held by Ms Liang or Letos Group, and by 5 pm on 20 December 2023, after iNova identified to CBA particular transactions, that CBA produce details of those transactions.

2. On 13 December 2023 Ms Liang sent to iNova’s lawyer an email to which she attached a document she described as “ORDER REPLY”, and a number of “other/supporting documents”.[3] Among those documents was a letter in which Ms Liang stated, among other things, that she could not access her bank account with CBA because CBA informed her that it “cannot identify my identification”.[4] Ms Liang also produced a text message from Mr Leon Wang, Ms Liang’s solicitor, which stated that “Balance amounts $104,181.87 has been transferred to your account”.[5]

   [3] Affidavit M J Williams 05.02.2024, [20]; Exhibit MJW-1, pages 330-343

   [4] Affidavit M J Williams 05.02.2024, [20]; Exhibit MJW-1, page 333

   [5] Affidavit M J Williams 05.02.2024, [20]; Exhibit MJW-1, page 339

3. Documents produced by CBA in response to the orders I made on 12 December 2023 revealed that Ms Liang holds an account with CBA (Liang CBA Account) and that, on 29 November 2023, Endeavour Partner Pty Ltd (being the owner of Endeavour Realty, Ms Liang’s real estate agent) transferred $104,181.87 into the Liang CBA Account; and from 30 November to 5 December 2023, eight amounts totalling $107,415.68 were transferred from the Liang CBA Account to a person named “Bin Chen” (later identified as Ms Bin Chen).[6] On the basis of those documents, on 15 December 2023 iNova applied for, and were granted, freezing and disclosure orders against Ms Bin Chen.[7] The freezing order against Ms Chen was expressed to have effect up to 11:59 pm on 19 December 2023; and I ordered that the matter be listed at 10:00 am on 19 December 2023 for the purpose of hearing an application to extend the freezing order against Ms Chen.

   [6] Affidavit M J Williams 05.02.2024, [22]; Exhibit MJW-1, page 353

   [7] Affidavit M J Williams 05.02.2024, [23]

   Ms Liang’s bankruptcy

4. In the meantime, on 11 December 2023 Ms Liang signed a form (being the “Bankruptcy Form” I identify above), purportedly pursuant to s 55 of the Bankruptcy Act, that incorporated both a debtor’s petition and a statement of affairs.[8] Ms Liang’s signature appears to have been witnessed by a person named “Yan Li”, who is described in the Bankruptcy Form as a “CPA” with an address in Sussex Street Sydney. No date is included in the box after the printed word “date” which appears after the box in which the witness is required to sign, and where it appears Ms Li did sign.[9]

   [8] Exhibit MJW-1, pages 477-499

   [9] Exhibit MJW-1, page 499

5. In the Bankruptcy Form, Ms Liang provided a street address in Ryde, New South Wales, as her home address; and she ticked the boxes next to the printed words “I have a residence or place of business in Australia”, and “I usually live in Australia”.[10] Ms Liang provided the name of Ms Chen as “someone who knows [Ms Liang] but does not live with [Ms Liang]”.[11] In her statement of affairs Ms Liang identified debts she said she owes. These totalled $1,127,953, which included a debt of $350,000 Ms Liang claimed she owed to Ms Chen. In the section asking whether, over the last 12 months, Ms Liang had paid any creditor, Ms Liang stated she made payments to Ms Chen, including a payment of $44,800 on 30 November 2022, and $39,650 on 1 December 2022.

   [10] Exhibit MJW-1, pages 477-478

   [11] Exhibit MJW-1, page 481

6. There is in evidence a document titled “Declaration of Independence, Relevant Relationships and Indemnities” (12 January DIRRI) which Mr Vrkic appears to have signed on 12 January 2024, and which is annexure G to the “Report to Creditors” dated 12 January 2024 that Mr Vrkic prepared.[12] In the DIRRI Mr Vrkic sets out the circumstances in which he was appointed trustee. Mr Vrkic says as follows:

   (a)Ms Liang was referred to Ms Li, an employee of Mr Vrkic’s firm, by Mr Martin Tse from GWH & Associates, on 6 June 2023. During an 18 minute telephone call Ms Li obtained “preliminary information about” Ms Liang’s financial situation and finances; Ms Li also “provided general information and advice as to the options available to” her.

   (b)On each of 26 and 29 June 2023 Ms Li had a 5 minute telephone conversation with Ms Liang during which Mr Liang said she intended to “sell her property”, asked what will happen to her property, and asked about travel restrictions on a bankrupt.

   (c)On 11 December 2023 “Mr [sic] Li” and Ms Liang had a telephone conversation that lasted 30 minutes during which “the following issues were discussed”, namely, the “status of the proceeding”, the “freezing order iNova were seeking in Court”, and the “timeframe AFSA process bankruptcy application”. “Mr [sic] Li” provided the “Bankruptcy form to the Bankrupt on 11 December 2023” and the “Bankrupt provided the Bankruptcy Form for us to review on 12 December 2023”. The “key communications were for the purposes of: obtaining sufficient information about the Bankrupt to advise the Bankrupt on the Bankruptcy process; to clarify and explain to the Bankrupt the options available to the Company [sic] and the nature and consequences of Bankruptcy”; and for Mr Vrkic to provide a consent to act as trustee. Mr Vrkic received no remuneration for that advice.

   [12] Exhibit MJW-1, pages 547-549

7. There is in evidence communications between Ms Liang and Ms Li by use of the “WeChat” platform, and English translations of those communications.[13] The English translations include the following:

   [13] Affidavit B He 26.02.2024, [11], Exhibit BH-1. Pursuant to s 144(1) of the Evidence Act 1995 (Cth) on 13 July 2024 I accessed the eSafety Commissioner website (WeChat | eSafety Commissioner> which provides the following description of “WeChat”: “WeChat is a Chinese social media service that is used worldwide. It combines social media posting (moments), online messaging, voice chat, video calling and payment services in a single platform. It is accessed via mobile app, a web browser or PC application. . . . WeChat lets you send voice messages within chat. This functionality is useful when communicating in languages that don’t use a Roman alphabet keyboard. If you have a bank account registered on WeChat you can exchange funds with other members. Australian bank accounts cannot be registered, but some Australian businesses do accept WeChat payments.” I did not invite submissions from the parties before accessing the eSafety Commissioner website because there would be no possibility of any prejudice, given that the WeChat communications are in evidence.

   (a)On 26 June 2023 Ms Liang said to Ms Li “[w]e are starting to sell our house. The other side’s lawyers have reached out to my lawyers”.[14]

   [14] Exhibit BH-1, page 183

   (b)On 29 June 2023 Ms Liang enquired when it would be a good time to talk. Ms Li said: “I need to send my kid to school at 9 am Sydney time. We can talk after 9”.[15]

   [15] Exhibit BH-1, page 184

   (c)At 12:26 pm on 11 December 2023 Ms Liang asked how a company could apply for bankruptcy. After Ms Liang confirmed she was the sole director and shareholder, Ms Li said: “you can just throw away the company. Since companies are normally liquidated to protect the individual, if you’re about to become personally bankrupt, there is no need to bother with the company. After you declare bankruptcy, they will automatically take things away starting with the director of the company”. Ms Liang said she had “already closed the company”.[16]

   [16] Exhibit BH-1, pages 184-185

   (d)At 8:44 pm on 11 December 2023 Ms Liang asked: “What do I need to write on the transfer of money?” Ms Li replied: “Just write your name”.[17]

   [17] Exhibit BH-1, page 187

   (e)At 1:40 am on 12 December 2023 Ms Liang sent screenshots of receipts showing she made two separate payments of $5,000 to “DV Recovery Management Client”, and Ms Liang stated: “I first transferred you $10,000”. “There’s a limit . . . His card has a limit. Afterwards he will first transfer you $10,000, and then he will transfer the rest tomorrow . . . . And afterwards can you see if you can complete this form and submit it?”[18] Ms Li responded she will “get the forms ready today”, noting that she had “looked at your answers and there is still some information missing”.[19]

   [18] Exhibit BH-1, page 188

   [19] Exhibit BH-1, page 188

   (f)At 9:49 am on 12 December 2023 Ms Li “sends BankruptcyForm_SOA”, after which Ms Li said: “This is what I understand based on what you filled out”, and requested Ms Liang to have a look and see if anything needs to be changed. Ms Li sent a “screen of a photo which reads as follows”:

   9.        Do you have an Australian telephone number?

   26.      Sophie Chen’s email

   34:      Please state which creditors are a related party

   54.      Lastly, you need to fill out the accountant’s details

   after which Ms Li said: “You still need to provide this information, please have a look”.[20]

   [20] Exhibit BH-1, pages 188-189

   (g)At 10:50 am on 12 December 2023 Ms Liang said she has “[n]o Australian phone number”.[21]

   [21] Exhibit BH-1, page 189

   (h)At 1:35 pm on 12 December 2023 Ms Liang “Sends affidavit and application”, following which there are two calls, one at 2:37 pm on 12 December 2023 for 8 minutes 44 seconds, and another at 2:52 pm on 12 December 2023 for 10 minutes 17 seconds.[22]

   [22] Exhibit BH-1, page 189

   (i)At 2:57 pm on 12 December 2023 Ms Liang “sends a screenshot showing a transfer of $15,000 to DV Recovery Management Client”.[23]

   [23] Exhibit BH-1, page 190

   (j)At 3:02 pm on 12 December 2023 the following is recorded:[24]

   [24] Exhibit BH-1, page 190

   Li Yan: I received it. Normally it wouldn’t transfer it to my account this quickly, and I will tell you when I receive it

   Liyan Liang: Ok

   Liyan Liang: I’m in China so I won’t transfer

   Li Yan: sends 2 second voice memo

   Liyan Liang: sends 7 second voice memo

   Liyan Liang: No, it’s that my friend found another friend to transfer to you. It’s not my account

   Liyan Liang: sends 7 second voice memo

   Liyan Liang: It’s that his notes are these notes. I also don’t know what bank this is. I don’t have an account. In Australia I only have an account with Commonwealth Bank.

   Li Yan: sends 1 second voice memo

   Li Yan: Oh, ok.

   Li Yan: sends 8 second voice memo

   Li Yan: I’m also thinking, didn’t you say you don’t have a bank account? Does this account still have your name written on it? I’m thinking we don’t want to fill out the form incorrectly when it comes to it, and then to have it seized upon and checked by someone else

   Liyan Liang: sends 4 second voice memo

   Liyan Liang: Ah, no. “Reference” is written on this one. There is no account anymore.

   (k)At 3:59 pm on 12 December 2023 Ms Li sent “bankruptcy Form – Liyan Liang” stating: “This is the final draft. Have a look. If you can, I sent it to the head office to lodge”.[25]

   (l)At 3:27 pm on 13 December 2023 Ms Li told Ms Liang that “the money has all been received, and we have submitted all your documents. Now we are waiting for the government to handle it”.[26]

   [25] Exhibit BH-1, page 190

   [26] Exhibit BH-1, page 191

8. The 12 January 2024 DIRRI contains a section headed “Indemnities and up-front payments”. Under that heading Mr Vrkic sates that he had been provided “with the voluntary contribution” as follows:

   Ms [Qingjing] Jian provided $25,0000 as an upfront payment in respect of my remuneration and disbursements. The funds are currently held in our firm’s NAB trust account.

9. On 26 February 2024 Ms Qiu from DVR sent an email to Ms Cottier (one of iNova’s lawyers) attaching what Ms Qiu described as an “updated DIRRI”.[27] The updated information consists of the following:

   Ms [Lijing] Jiang has provided $5,000 as an indemnity. The fund is currently held in our firm’s NAB trust account.

   [27] Exhibit I

10. Further details about the payments of $25,000 and $5,000 referred to in the 12 January DIRRI and the updated DIRRI are referred to in the letter dated 28 February 2024 from Ms Johnstone to Mr Williams and Ms Cottier.[28] In that letter Ms Johnstone, who is the solicitor for Mr Vrkic, stated she was instructed as follows:

    [28] Exhibit G

    (a)The reference to “Qingjing Jiang” in the 12 January DIRRI “is an error”. The “funds were provided by Mr Xiaoda Liu and Ms Lijing Jiang, who are husband and wife”, Ms Jiang being “a friend of the bankrupt”.

    (b)Mr Vrkic received total payments of $30,000, as follows:

    (i)$15,000 on 12 December 2023 from Xiaoda Liu;

    (ii)$5,000 on 12 December 2023 from Lijing Jiang;

    (iii)$5,000 on 13 December 2023 from Lijing Jiang; and

    (iv)$5,000 on 19 December 2023 from Lijing Jiang.

    (c)The purpose of the payments “is to allocate $25,000 for the Trustee’s fees and expenses, including the payment of a realisation charge, and $5,000 for the Trustee’s legal expenses”; and the money is “currently held in the DVDO Client Trust Fund” (DVDO Client Trust Fund).

    Course of Substantive Proceeding from 15 to 27 December 2023

11. On 15 December 2023 Mr Vrkic sent an email to Mr Williams, iNova’s solicitor, attaching a letter stating that on 14 December 2023 Mr Vrkic had been appointed Ms Liang’s trustee in bankruptcy. Mr Vrkic said he had been provided with the application iNova filed on 8 December 2023 and an affidavit made by Mr Williams in support of that application. Mr Vrkic said he would be writing to Ms Liang’s former solicitor, Mr Tse, to obtain documents relating to Ms Liang, and he requested that Mr Williams confirm that iNova would not be proceeding to seek orders against Ms Liang, as sought in the application filed on 8 December 2023.

12. The matter was relisted before me at 4 pm on 15 December 2023 on the application of iNova. Counsel for iNova informed me that his instructing solicitors had been contacted by a bankruptcy trustee who had been appointed “voluntarily”. I ordered that the freezing orders I had made against Ms Liang be extended up to 11:50 pm on 19 December 2023, and that the matter be listed before me at 9:30 am on 19 December 2023 for the purpose of hearing an application for the extension of the freezing orders I made on 8 December 2023 against Ms Liang. I also ordered that, to the extent it were necessary, leave be given under s 58(3) of the Bankruptcy Act to extend the freezing orders.

13. At the hearing on 19 December 2023 Ms Johnstone appeared for Mr Vrkic. Ms Johnstone handed up a copy of the Bankruptcy Form, a copy of the certificate of appointment of Mr Vrkic as Ms Liang’s trustee in bankruptcy, and what Ms Johnstone described as “some identification documents” which, Ms Johnstone said, shows that Ms Liang holds an Australian passport, has an Australian Medicare card, and has an expired Australian driver’s licence. Ms Johnstone further said that Mr Vrkic was not in a position to decide what, if any role, he would take in the proceeding. I adjourned the hearing to enable copies to be made of the documents Ms Johnstone handed up to me.

14. During the adjournment Mr Williams telephoned a person named Yan (Leann) Li of CrossRoads Insolvency. On the resumption of the hearing counsel for iNova informed me that Mr Williams asked Ms Yan (Leann) Li if she recalled witnessing a Bankruptcy Form for Liyan Liang on 14 December 2023, in response to which Ms Yan (Leann) Li said she did. Mr Williams then asked Ms Yan (Leann) Li where Ms Liang was located when Ms Yan (Leann) Li witnessed Ms Liang’s signature, in response to which Ms Yan (Leann) Li said Ms Liang was in China. Ms Yan (Leann) Li said “ I spoke to her over the phone. I relied on the forms of identification she provided to me”.[29] Counsel for iNova relayed to me the effect of Mr Williams’s conversation with Ms Yan (Leann) Li after the hearing resumed.[30] Counsel then referred to matters to which Mr Williams deposed in an affidavit he made on 19 December 2023, after which counsel for iNova said:[31]

    And in paragraph 18, there is a record of Letos Group Pty Ltd having been deregistered on 8 November.  And that was a voluntary deregistration.  Now, Mr Williams has made an observation with respect to the validity of that, but what it is, is evidence that Ms Liang has sought to wrap up all of her affairs in Australia in November to ensure that she is out of the reach of her creditors.  So that’s evidence going to the validity of the appointment of the trustee insofar as it stands today, which gives rise to a real question that ought be dealt with fulsomely and at the appropriate time in the New Year. 

    [29] Affidavit M J Williams 05.02.2024, [39]

    [30] T100.35, 19.12.2023

    [31] T102.10, 19.12.2023

15. At the conclusion of the hearing, I made a number of orders, including an order that the freezing order I made on 8 December 2023 against Ms Liang be extended until 11:59 pm on 29 January 2024, and that the matter be listed for hearing on 29 January 2024 for the purpose of hearing an application for the extension of that freezing order.

16. On 21 December 2023, in response to the orders I made on 15 December 2023, Ms Bin Chen affirmed an affidavit in which she deposed to the following matters:[32]

    (a)On about 28 November 2023 Ms Chen was approached by her friend, Ms Liang, whom Ms Chen had known since 2013, and who was then living in China. Ms Liang requested whether she could deposit an undisclosed amount of money to Ms Chen’s CBA account because she needed to pay creditors and various people, but she was unable to do so while she was overseas as she did not possess an Australian mobile telephone to receive the 2-step verification code which the bank required when setting up new payees.

    (b)Pursuant to Ms Liang’s request, from 30 November to 5 December 2023 Ms Chen received 8 amounts into her CBA bank account totalling $107,415.68.

    (c)Ms Liang then directed Ms Chen to make, and, from 30 November to 4 December 2023, Ms Chen made payments totalling $60,988.38 to Ye Liu, and payments totalling $35,327.50 to Jianhua Kuai.

    (d)Ms Chen was shown the Bankruptcy Form; and in relation to that form Ms Chen deposed as follows:

    I had never previously seen this document, but it appears to be a debtor’s petition relating to Liyan Liang. I say that (a) Liyan’s address is false. . . . is my address; (b) My contact details at question 26 is false. This was my old address when I first met Liyan in 2013 and she would visit me occasionally. I was not the owner of this house but rented it with a flatmate; (c) I say that the entry at question 34 is false in that at no time was I owed the sum of $350,000 by Liyan and nor did I lend that amount to her on or about June 2019 . . . . (d) I say that the details at paragraph 35 are false as I have never been a creditor of Liyan . . . [33]

    [32] Affidavit M J Williams 05.02.2024, [24]; Exhibit MJW-1, pages 360-396

    [33] Exhibit MJW-1, page 363-364

17. On the basis of the matters to which Ms Chen deposed, on 22 December 2023 iNova applied for, and were granted, freezing and disclosure orders against Ye Liu and Jianhua Kuai. The freezing orders were made until further order; and I ordered that Ye Liu and Jianhua Kuai comply with the disclosure orders within three working days after being served with the orders. The matter was listed at 9:30 am on 27 December 2023 for the purpose of hearing an application to extend the freezing orders and for such other relief as any person may apply for. Ms Cottier, a solicitor in Mr Williams’ office, served the orders on Jianhua Kuai by email sent at 6:43 pm on 22 December 2023.[34]

    [34] Exhibit MJW-1, page 501

1. On 27 December 2023 I made a number of further orders, including an order extending the freezing and ancillary orders I made on 22 December 2023 to 11:59 pm on 10 January 2024, and listed the matter at 10:15 am on 10 January 2024.

   Mr Vrkic’s administration of the bankrupt estate

2. On 20 December 2023 Mr Vrkic sent an email to Jianhua Kuai in which Mr Vrkic stated as follows:

   I advise that I was appointed Trustee of the abovenamed Bankrupt estate on 14 December 2023 . . .

   The Bankrupt advised that three payments were made to your bank accounts recently of $1,417.30, 4,260 [sic] and $29,650 prior to my appointment.

   I now request that you repay the sum of $35,327.30 pursuant to section 122 of [the] Bankruptcy Act 1966, to the bank account detailed below . . .

3. At 4:25 pm on 27 December 2023 Jianhua Kuai sent an email to Ms Cottier (one of iNova’s lawyers) which included the following:[35]

   On December 20 I received an email from Kelly Qiu asking me to return the three sums of money transferred to me by Ms. Liang to the Trustee Account, which are $1,417.30, $4,260.00 and $29,650.00.

   I have transferred $29,650.00 to the Trustee Account . . . on 20th December and $1,417.30 and $4,260.00 to the Trustee Account . . . on 21st December. I also sent the transfer records to [email protected]

   [35] Affidavit M J Williams 05.02.2024, [41]; Exhibit MJW-1, page 500

4. On 11 January 2024 Mr Vrkic issued a report to creditors (Report to Creditors).[36]

   [36] Affidavit M J Williams 05.02.2024, [44]; Exhibit MJW-1, pages 513-549

   (a)Under the heading “History and Background Information” the Report to Creditors stated that Ms Liang is an Australian citizen; she holds an Australian passport that expires “in 2033” (sic); she holds a current Medicare card in her name; and she has a temporary Chinese visa issued by the Chinese Government for two years expiring on 29 June 2025. Further, Ms Liang “advised that she needed to go back to China as her father had passed away and her mother was unwell and needed her assistance to help her with her medical issues”.

   (b)The Report to Creditors stated that “[s]ince the commencement of the Bankruptcy, I have received a written request for permission to remain in China”. That is a reference to a document headed “Request for Consent to Travel Overseas while Bankrupt”.[37] The document appears to be signed by Ms Liang, and is dated 18 December 2023. The document gives an address in Fuxhou, China, as Mr Liang’s residential address, and identifies “07/07/2023” as the “Proposed Travel Date”. Further, in the box where Ms Liang is required to provide details concerning “Proposed Return Date”, the document contains the following:

   [37] Exhibit B

   To Be Determined

   I had surgery to remove tumour in October last year. I will have another one schedule for late December early January, depending on the results of the physical check. Besides, I also have to take care of my 4-year son who lives in China because he has bronchitis.

   My father died in a car accident a few years ago and the driver choose [sic] to flee. My mom has yet to accept reality, so I was unable to leave her alone in china [sic] and I believe that they need my help at this time.

   (c)The Report to Creditors identified six creditors, one of which was iNova; and each of the other creditors is described as a “family/friend”, and the debt that is owed to each is described as “money owned”(sic). Ms Chen is among the friends the Report to Creditors lists, and Ms Liang is said to owe her $350,000.

   (d)Under the heading “Transferred Assets”, the Report to Creditors notes that Ms Liang “made the following loan repayments to her friend, Ms. Bin Chen”. The Report to Creditors lists six payments from 30 November 2023 to 5 December 2023 totalling $106,315.68. The Report to Creditors states Mr Vrkic had written to Ms Chen seeking the repayment of these funds; and that he had “also written to other parties seeking repayment of the funds received” and Mr Vrkic had “recovered $96,315.68 to date”.

   (e)Under the heading “Income Contributions” the Report to Creditors states that Ms Liang “currently is in China on a 2-year family visit visa caring for her seriously ill mother”.

5. On 12 January 2023 Mr Williams sent a letter to Ms Johnstone in which he made a number of statements, which included the following: [38]

   (a)Mr Vrkic had demanded that Jianhua Kuai pay money that had been transferred to Jianhua Kuai on behalf of Ms Liang; and that similar demands were made to Ye Liu and Ms Chen.

   (b)Mr Vrkic had not given iNova notice that he intended to make these demands, even though at the hearing on 19 December 2023 counsel for iNova informed the Court, in the presence of Ms Johnstone, that the matter ought to be adjourned until the new year when a date can be set to deal with the appointment of the bankruptcy trustee.

   (c)By 19 December 2023 Mr Vrkic was aware that Ms Liang was not present in Australia at the time she presented the debtor’s petition, she was not ordinarily resident in Australia, and was not carrying on any business in Australia.

   (d)Mr Vrkic was aware that iNova had obtained freezing orders in relation to Ms Chen and was therefore seeking to ensure that any money paid to her “such as to Ye Liu and Jianhua Kuai)” were not put beyond the reach of iNova.

   (e)On 22 December 2023 iNova filed an application seeking an order annulling Ms Liang’s bankruptcy.

   (f)Mr Vrkic’s actions could be seen as an attempt to circumvent iNova’s rights and usurp the jurisdiction of the Court to manage the dispute, including the validity of Mr Vrkic’s appointment as trustee.

   (g)The identities of Jianhua Kuai and Ye Liu were revealed in documents produced by the CBA under compulsion, and recorded in an affidavit made by Mr Williams; Ms Liang did not record these names in the Bankruptcy Form.

   [38] Affidavit M J Williams 05.02.2024, [43]; Exhibit MJW-1, page 510-512

6. Mr Williams demanded that by 5 pm on 15 January 2024 Mr Vrkic:

   (a)disclose the amounts Mr Vrkic received from Jianhua Kuai and Ye Liu and any other persons alleged to have received funds transferred by Ms Liang;

   (b)confirm that the funds referred to in (a) are being held securely in an account that is not an operating account from which Mr Vrkic can draw down to pay his costs; and

   (c)provide an undertaking that Mr Vrkic will not, pending the determination of iNova’s application for annulment, apply, disperse, or otherwise deal with any of the funds referred to in (b).

7. Mr Vrkic responded by Ms Johnstone’s letter dated 19 January 2024,[39] in which Mr Johnstone denied a number of the matters asserted in Mr Williams’s letter dated 12 January 2024. Ms Johnstone, however, stated that Mr Vrkic had “recovered the following funds”:

   22 December 2023                 $1,417.30        From    Jianhua Kuai   

   22 December 2023                 $4,260.00        From    Jianhua Kuai

   22 December 2023                $29,650.00      From    Jianhua Kuai

   8 January 2024  $16,188.38      From    Ye Liu

   8 January 2024  $44,800.00      From    Ye Liu

   Total  $96,315.68

   [39] Exhibit MJW-1, pages 550-551

8. Ms Johnstone further stated that “[t]hese funds are being held in our client’s Bankruptcy Administration Bank account for this bankruptcy for the benefit of all creditors and will not be used to pay the Trustee’s fees and disbursements”.

   Ms Liang’s unsworn affidavit

9. On 2 February 2024 Ms Liang sent an email to my Associate’s inbox and also to Ms Cottier to which she attached “my affidavit to comply with the Orders made on 8 December 2023”.[40] Ms Liang attached an unsworn form of affidavit (Unsworn Affidavit); and, in her email, stated that she was “currently in China” and was “unable to find a lawyer or a JP in China to witness my signature”. The Unsworn Affidavit includes the following statements (errors in original):[41]

   I am an Australian citizen and I regard Australia as my normal residence place.

   In early 2019, my father passed away in a car accident, and my mother has been since diagnosed with depression and anxiety.

   I have since stayed in China to look after my mother … I am currently in China on a temporary Chinese family visit visa, expiring on 29 June 2025.

   . . . .

   I understand that [iNova] have applied to the Court in the Proceedings SYG2102/2023 to annul my bankruptcy. I say that I am insolvent as a matter of fact. In the event my bankruptcy was annulled, I was still insolvent and unable to make full payment to all my creditors. It is best that a bankrupt trustee deal with my estate to properly arrange for the repayment to my creditors.

   APPLICATION FOR ANNULMENT

   [40] Affidavit M J Williams 05.02.2024, [47]; Exhibit MJW-1, page 560

   [41] Exhibit MJW-1, page 565-566

   Power and principles

10. iNova applies for an order for annulment pursuant to s 153B of the Bankruptcy Act, which relevantly provides:

    (1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.

    (2) In the case of a debtor’s petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented.

    Standing

11. Section 153B of the Bankruptcy Act does not identify the persons who may apply for an order under s 153B(1). What persons may apply for such order, therefore, is to be determined by the application of s 303 of the Bankruptcy Act, which provides:

    Where in respect of any matter this Act provides that:

    (a)       an application may be made to the Court; or

    (b)       the Court or the Registrar may exercise a power;

    and does not specify the person by whom the application may be made or the person on whose application the power may be exercised, as the case may be, the application may be made by, or the power may be exercised on the application of, any person aggrieved by or interested in that matter.

12. In Re Mottee; Ex parte Mottee and Official Receiver, Riley J considered the meaning “person aggrieved” as it appeared in the predecessor provision of s 153B of the Bankruptcy Act:[42]

    There have been judicial decisions on each of the expressions “a person aggrieved” and “a person interested”, and the intention in using both expressions in s 303 was obviously to allow resort to all those decisions. The words “in that matter” help to explain the nature of the aggrievedness or interest: cf. Re Roehampton Swimming Pool Ltd. They refer to the matter “in respect of” which “this Act provides that … the Court may exercise a power”. The power which s 154 provides that the court may exercise is a power to “make an order annulling the bankruptcy”. The matter in respect of which the power of annulment may be exercised is “the bankruptcy”. The applicant, then, must be aggrieved by or interested in the bankruptcy.

    . . . .

    “The words ‘person aggrieved’ are of wide import and should not be subjected to a restrictive interpretation. They … do include a person who has a genuine grievance because an order has been made which prejudicially affects his interests”: Attorney-General (Gambia) v. N’Jie per Lord Denning. Though technically a bankruptcy under s 55 of the Bankruptcy Act does not come about by an order of the court, the applicant here in my opinion is in the same position as the person described by Lord Denning, and is a person aggrieved by the bankruptcy.

    [42] Re Mottee; Ex parte Mottee and Official Receiver (1977) 29 FLR 406, at page 411 (references omitted)

    “Petition . . . ought not to have been accepted by the Official Receiver”

13. Moore J considered the expression “Petition . . . ought not to have been accepted by Registrar” in Re Abbas; Ex parte Official Trustee in Bankruptcy, when s 55 of the Bankruptcy Act, as it stood in 1995, vested in a Registrar of the Federal Court the power to accept a debtor’s petition. After reviewing the authorities, his Honour said:[43]

    If the Registrar is positively satisfied that the petition and statement of affairs complies with subs (2) he or she is obliged to accept the petition. In other cases it may be rejected or referred to the Court. Thus the expression “ought not to have been accepted by the Registrar” has application to circumstances where a debtors petition was accepted notwithstanding that the conditions precedent in s 55(3)(a) to its acceptance were not satisfied.

    [43] Re Abbas; Ex parte Official Trustee in Bankruptcy (1995) 57 FCR 140, at page 144

14. Thus, “ought not to have been accepted by the Official Receiver” applies to where the Official Receiver has accepted a debtor’s petition notwithstanding that the conditions precedent provided for in s 55 of the Bankruptcy Act have not been satisfied. That requires me to identify what those conditions precedent are.

15. Subsection 55(4) of the Bankruptcy Act confers on the Official Receiver the power to “accept” a debtor’s petition, by providing that the Official Receiver “must accept a debtor’s petition, unless the Official Receiver rejects it under this section or is directed by the Court to reject it”. Section 55 of the Bankruptcy Act differentiates between circumstances in which the Official Receiver must reject a debtor’s petition, and circumstances in which the Official receiver may reject a debtor's petition. The circumstances in which the Official Receiver must reject a debtor’s petition are those provided for in s 55(2A) of the Bankruptcy Act, which provides that the Official Receiver must reject a debtor’s petition unless, at the time when the petition is presented, the debtor:

    (a)was personally present or ordinarily resident in Australia; or

    (b)had a dwelling-house or place of business in Australia; or

    (c)was carrying on business in Australia, either personally or by means of an agent or manager; or

    (d)was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager.

16. The requirements of s 55(2A) of the Bankruptcy Act mirror the jurisdictional requirements provided for in s 43(1)(b) of the Bankruptcy Act in relation to the making of a sequestration order.

17. The circumstances in which the Official Receiver may reject a debtor’s petition are set out in s 55(3) and s 55(3AA) of the Bankruptcy Act; but these are not relevant to any question in this proceeding.

18. Where the Official Receiver accepts a petition presented under s 55, s 55(4A) requires the Official Receiver to “endorse the petition accordingly”; and “upon the Official Receiver endorsing the petition, the debtor who presented the petition becomes a bankrupt by virtue of presentation of the petition”.

    “Petition ought not to have presented . . . . to the Official Receiver”

19. This is a separate, and broader ground, for annulling a bankruptcy on the presentation of a debtor’s petition. This will include a debtor’s presenting a debtor’s petition for a predominant purpose foreign to the purposes of bankruptcy, or where the debtor was solvent at the time he or she presented the debtor’s petition.[44]

    [44] Re Almassy [1999] FCA 1004, at [22], [23] (Mansfield J)

    Discretion

20. Subsection 153B(1) of the Bankruptcy Act confers on the Court a discretion to annul a bankruptcy; and the authorities have identified factors that may be relevant to the exercise of that discretion. It would be convenient to refer to the following passage from the judgment of Logan J in Thompson v Lane (Trustee) (No 3):[45]

    In Zaghloul v Jewellery and Gift Buying Service Pty Ltd t/as Nationwide Jewellers [2020] FCA 1045, which was an annulment case where the bankruptcy had resulted from a sequestration order, Banks-Smith J, at [12], offered, by reference to earlier authority, a helpful summary of discretionary factors. Based on that summary but taking into account the differences arising from a bankruptcy sourced in the acceptance of a debtor's petition, factors relevant to the exercise of a discretion to annul such a bankruptcy are, without being exhaustive:

    (a)       whether the applicant is presently solvent;

    (b)      whether the applicant has made full disclosure of his or her financial affairs;

    (c)       unexplained delay in any application;

    (d)      the reason why the bankrupt presented the debtor's petition, including whether the bankrupt had earlier been served with a bankruptcy notice, whether the bankrupt had failed to comply with any such notice and whether there was then pending a creditor's petition;

    (e)       why it was that the bankrupt lodged with the debtor's petition a statement of affairs apparently disclosing insolvency and what the true position then was as to his or her ability to pay their debts as and when they fell due; and

    (f)       whether the applicant has made any proposal for the payment of the fees and disbursements of his or her trustee in bankruptcy and, if not, why not.

    [45] Thompson v Lane (Trustee) (No 3) [2022] FCA 128, at [11]

21. Usually the most important factor in the exercise of a discretion under s 153B(1) is whether the bankrupt is solvent. That factor, however, must be read having regard to s 153B(2) of the Bankruptcy Act, which, as I have already set out, provides that in the case of a debtor’s petition, an order under s 153B(1) “may be made whether or not the bankrupt was insolvent when the petition was presented”. Further, the weight that should be accorded to whether the debtor is solvent depends on whether the ground for annulment is that the matters specified in s 55(2A) of the Bankruptcy Act were not satisfied at the time the Official Receiver accepted the debtor’s petition. That is so because the requirements specified in s 55(2A) of the Bankruptcy Act are mandatory, and are conditions precedent to the Official Receiver accepting the debtor’s petition. Further, the requirements specified in s 55(2A) are mandatory because they mirror the jurisdictional requirements s 43(1)(b) of the Bankruptcy Act requires for the making of a sequestration order.

    Effect of annulment

22. The consequences of an order for annulment being made are provided for by s 154 of the Bankruptcy Act, which states as follows:

    (1)If the bankruptcy of a person (in this section called the former bankrupt) is annulled under this Division:

    (a)all sales and dispositions of property and payments duly made, and all acts done, by the trustee or any person acting under the authority of the trustee or the Court before the annulment are taken to have been validly made or done; and

    (b)the trustee may apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee; and

    (c)subject to subsections (3), (6) and (7), the remainder (if any) of the property of the former bankrupt still vested in the trustee reverts to the bankrupt.

    (2)If the property of the former bankrupt referred to in paragraph (1)(b) is insufficient to meet the costs, charges and expenses referred to in that paragraph, the amount of the deficiency is a debt due by the former bankrupt to the trustee and is recoverable by the trustee by action against the former bankrupt in a court of competent jurisdiction.

    (3)      If an application is made to the Court by a person claiming an interest in property referred to in paragraph (1)(c), the Court, after hearing such persons as it thinks fit, may make an order, either unconditionally or on such conditions as the Court considers just and equitable, for the vesting of the property in, or delivery of the property to, a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or to a trustee for that person.

    (4)Subject to subsection (5), if an order vesting property in a person is made under subsection (3), the property vests immediately in the person without any conveyance, transfer or assignment.

1. What Cockburn CJ said in Bailey v Johnson about s 81 of the Bankruptcy Act 1869 (UK) applies to s 154 of the Bankruptcy Act:[46]

   The effect of s 81 is, subject to any bona-fide disposition lawfully made by the trustee prior to the annulling of the bankruptcy, and subject to any condition which the Court annulling the bankruptcy may by its order impose, to remit the party whose bankruptcy is set aside to his original situation.

   Determination

   [46] Bailey v Johnson (1872) LR 7 Ex 263, at page 265

   Standing

2. The first question is whether each of iNova is a “person aggrieved” within the meaning of s 303 of the Bankruptcy Act. That is, the question is whether iNova have an interest in Ms Liang’s having become a bankrupt purportedly pursuant to s 55(4) of the Bankruptcy Act and, if so, whether they have a genuine grievance because Ms Liang was made bankrupt under that subsection. Those questions are to be answered in the affirmative.

3. iNova are creditors of Ms Liang for separate amounts that total $274,953.89 (being the “Judgment Debt” I identified earlier in these reasons); and Ms Liang’s having been made bankrupt has had two consequences to iNova’s rights as creditors. The first is that Mr Vrkic’s appointment as trustee in bankruptcy potentially interfered with the operation of the freezing orders I made on 22 December 2023 against Ye Liu and Jianhua Kuai. Mr Vrkic caused Ye Liu and Jianhua Kuai to pay to Mr Vrkic amounts totalling $96,315.68, in circumstances where the freezing orders required Ye Liu and Jianhua Kuai not to dispose of money they had received from Ms Chen pending further order by the Court. Ms Liang’s bankruptcy led to money that was potentially available to be applied towards the discharge of the Judgment Debt by means of a garnishee order or other means of execution to be paid instead to Mr Vrkic. Second, unless Ms Liang’s bankruptcy is annulled, the amount that would be available to be paid to iNova as judgment creditors would be reduced in an amount that would cover Mr Vrkic’s remuneration, and the costs of the bankruptcy. In the Report of Creditors, Mr Vrkic estimated his remuneration and costs would be $47,000.

   Ought the Official Receiver have accepted the Bankruptcy Form?

4. The determination of this question turns on whether iNova has proved that, on 12 December 2023, being the date on which Ms Liang, through Ms Li, presented the Bankruptcy Form, Ms Liang was not “personally present or ordinarily resident in Australia”; Ms Liang did not have “a dwelling-house or place of business in Australia”; Ms Liang was not “carrying on business in Australia, either personally or by means of an agent or manager”; and Ms Liang was not “a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager”.

   Personally present or ordinarily resident in Australia as at 12 December 2023

5. Foster J reviewed the authorities on the meaning of the expression “ordinarily resident” in Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No 7).[47]

   The expressions “resident” and “ordinarily resident” are not technical terms and have their ordinary English meaning (Re Taylor; Ex parte Natwest Australia Bank Limited [1992] FCA 296; (1992) 37 FCR 194 at 197 per Lockhart J). Whether a debtor is ordinarily resident in Australia is a question of fact and degree (Re Taylor at 197).  It is the debtor’s settled and usual place of abode (Re Taylor at 198) – the place where he or she regularly or customarily lives (Re Taylor at 198). As Lockhart J went on to say in Re Taylor (at 158): 

   There must be some element of permanence, to be contrasted with a place where he stays only casually or intermittently. The expression “ordinarily resident in” connotes some habit of life, and is to be contrasted with temporary or occasional residence: see Levene (supra) and Lysaght (supra). As Lord Warrington said in Levene (at 232): “‘Ordinarily resident’ means according to the way a man’s life is actually ordered.” The concept of ordinarily resident cannot be stated in definite terms; each case must be determined on its facts and after taking into account all relevant matters: see the Canadian case of Thomson v Minister of National Revenue [1946] SCR 209 per Estey J at 231.

   Where the debtor views himself or herself as living at the relevant time is an important factor in assessing his or her “ordinary residency” (Restom v Battenberg 4 ABC(NS) 474 at [47] per Stone J).

   Whether a temporary absence from Australia prevents a debtor from being “ordinarily resident” here is a question of fact and degree (Re Vassis; Ex parte Leung [1986] FCA 21; (1986) 9 FCR 518 at 525 per Burchett J). Whether, at the time of departure and during the temporary absence, the debtor intends to return to live in Australia after the temporary absence is relevant to determining whether he or she is “ordinarily resident” in Australia during the absence (Re Vassis at 525). 

   [47] Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No 7) [2011] FCA 1322, at [73]-[75]

6. That a person ordinarily resides outside Australia does not necessarily prevent a finding that the person may also ordinarily reside in Australia. Graham J made that point in Mathai v Kwee:[48]

   In the era of wide bodied jet aircraft it is not quite so unusual for people to be ordinarily resident in more than one country. One only has to contemplate the position of tennis and golf professionals who travel away from the place or places where they are ordinarily resident so as to pursue their livelihoods and earn their incomes. Much the same can be said in respect of (say) concert pianists on the world stage who may ordinarily reside in Australia but travel extensively overseas to earn their incomes. Much the same could be said in relation to a taxation consultant ordinarily resident in Australia whose business or employment takes him to places such as Hong Kong, Singapore, Kuala Lumpur, India and England so that he may exploit his expertise. One might say of them that they “still call Australia home”.

   [48] Mathai v Kwee [2005] FCA 932, at [125]

7. The evidence that is relevant to determining whether Ms Liang was not present in Australia on 14 December 2023 when, through Ms Li, she presented the Bankruptcy Form to the Official Receiver is as follows:

   (a)On about 29 November 2023 Ms Liang settled on the sale of the Property.[49]

   (b)Ms Liang stated in the Bankruptcy Form a home address in Ryde which Ms Chen, in her affidavit, says is Ms Chen’s, not Ms Liang’s, address.

   (c)Although signed on 18 December 2023, the “Request for Consent to Travel Overseas While Bankrupt” identified 7 July 2023 as the “Proposed Travel Date” and, moreover, indicated that the “Proposed Return date” was “to be determined”.[50] That suggests that Ms Liang was absent from Australia since at least 7 July 2023 and had not returned to Australia by 18 December 2023.

   (d)A number of WeChat communications suggest that Ms Liang was communicating from China. On 29 June 2023 Ms Li referred to “9 am Sydney time”, implying Ms Li understood that Ms Liang was not in Sydney which, in turn is a basis for inferring that Ms Chen was not in Sydney, but was in China; at 10:50 am Ms Liang informed Ms Li she does not have an Australian phone number; and, at 3:03 pm on 12 December 2023 Ms Liang said “In Australia I only have an account with Commonwealth bank”, which implies Ms Liang is not in Australia because, if she were in Australia, she would not have needed to qualify her statement that she had an account by reference to the country in which the account was located.

   (e)Yan (Leanne) Li confirmed to Mr Williams that she did not witness Ms Liang’s signing the Bankruptcy Form, but instead spoke to Ms Liang on the phone, and relied on the forms of identification with which she was presented. [51]

   (f)At 12:34 pm on 11 December 2023 Ms Liang informed Ms Li that she had “already closed the company”.[52] I find that is a reference to Letos Group, a company of which Ms Liang was the sole director and shareholder. On 8 September 2023 ASIC gave notice that it had received an application to deregister Letos Group pursuant to s 601AA of the Corporations Act 2001 (Cth); and on 28 November 2023 Letos Group was deregistered.[53]

   (g)In the Unsworn Affidavit Ms Liang stated that she has “since then” (namely, early 2019, being the year Ms Liang states her father passed away) stayed in China on a temporary Chinese family visit visa expiring on 29 June 2025.[54]

   (h)There is in evidence a transcript of a telephone conversation between Ms Liang and an officer of the CBA about the CBA’s inability to send any information to Ms Liang without her providing identification. An officer of the CBA stated to Ms Liang that “the only option you’ve got at this stage, is to come back to Australia and go to the branch”. The CBA officer asked whether Ms Liang said she might be coming back to Australia, in response to which Ms Liang said “Ah, yeah maybe later”.[55]

   (i)The Report to Creditors states that Ms Liang “is in China on a 2-year family visit caring for her seriously ill mother”.

   [49] Affidavit M J Williams 05.02.2024, [15]

   [50] Exhibit B

   [51] Affidavit M J Williams 05.02.2024, [39]

   [52] Exhibit BH-1, pages 184-185

   [53] Exhibit MJW-1, pages 426, 427

   [54] Exhibit MJW-1, page 565

   [55] Exhibit MJW-1, page 423

8. I am satisfied that as at 12 December 2023, when Ms Liang through Ms Li presented the Bankruptcy Form, Ms Liang was not personally present in Australia, and she was not ordinarily resident in Australia. It is likely that, at some time before 2023, as stated in the Unsworn Affidavit, Ms Liang returned to China and, perhaps, occasionally visited Australia. The single most significant item of evidence that supports the finding that Ms Liang was not ordinarily resident in Australia as at 12 December 2023 is her having recorded in the Bankruptcy Form a home address that was not her home address. It is reasonable to infer, and I find, that the reason Ms Liang recorded a false address as her home address in Australia is that she did not have a home address in Australia.

   Dwelling house, place of business, or carrying on business in Australia

9. I am also satisfied, on the basis of the evidence I identified as being relevant to whether Ms Liang was not personally present or ordinarily resident in Australia on 12 December 2023, that Ms Liang did not as at 12 December 2023 have a dwelling house or place of business in Australia, or Ms Liang was not carrying on business in Australia, either personally, or by means of an agent or manager, or Ms Liang was not a member of a firm or partnership carrying on business in Australia.

   Conclusion

10. The Official Receiver ought not to have accepted Ms Liang’s debtor petition that formed part of the Bankruptcy Form Ms Liang presented on 12 December 2023, but should have instead rejected it, because, as at 12 December 2023, Ms Liang was not personally present or ordinarily resident in Australia; she did not have a dwelling-house or place of business in Australia; she was not carrying on business in Australia, either personally or by means of an agent or manager; and she was not a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager.

    Ought the Bankruptcy Form not been presented?

11. Given I have found the Official Receiver ought not to have accepted the Bankruptcy Form, it necessarily follows that the Bankruptcy Form ought not to have been presented.

    Discretion

12. The evidence is incapable of showing that, as at 12 December 2023, Ms Liang was able to pay the Judgment Debt and, therefore, that she is solvent. On the other hand, the evidence does not satisfy me that Ms Liang is insolvent; and that is because the Bankruptcy Form contains incorrect statements casting doubt on every other statement Ms Liang makes in the Bankruptcy Form that is not corroborated by other evidence. I have already noted two incorrect statements, one being the address Ms Liang stated as her home address; and Ms Liang’s statement that she owes $350,000 to Ms Chen. Further, by 19 December 2023 Ms Liang arranged for $30,000 to be paid to DVR, which suggests she has more assets than she disclosed in the Bankruptcy Form.

13. In any event, even if I were satisfied that Ms Liang was insolvent, that consideration would not lead me to exercise the discretion against making an order annulling Ms Liang’s bankruptcy. First, as I have already noted, s 153B(2) of the Bankruptcy Act provides that, in the case of a debtor’s petition, an order annulling the bankruptcy may be made whether or not the bankrupt was insolvent when the petition was presented. Second, and as I have already noted, s 55(2A) of the Bankruptcy Act sets out a mandatory condition precedent to an Official Receiver’s accepting a debtor’s petition. In the absence of any other relevant matter such as delay, the non-satisfaction of the condition precedent mandated by s 55(2A) strongly weighs in favour of my making an order under s 153B(1) annulling Ms Liang’s bankruptcy.

    Conclusion

14. I conclude that it is appropriate that I make an order under s 153B(1) of the Bankruptcy Act that Ms Liang’s becoming a bankrupt by virtue of the presentation on 12 December 2023 by her of a debtor’s petition be annulled.

    APPLICATION FOR ORDER UNDER S 154(3)

15. In their written submissions iNova assume that iNova, “as a creditor in the position of [iNova]”,[56] have an interest in the Fund (being the amounts totalling $96,315.68 Jianhua Kuai and Ye Liu paid to Mr Vrkic, together with interest). iNova do not, however, articulate the nature of the interest they claim they have in the Fund.

    [56] Applicants’ Submissions in Support of Application of Invalidating the Bankruptcy of Liyan Liang and Other Orders (Applicants’ Submissions), [19]

16. iNova are judgment creditors of Ms Liang. They applied for, and were granted, freezing orders and ancillary disclosure orders. iNova could only have obtained, and I could only have granted, such orders for the purpose for which freezing and ancillary disclosure orders may be granted; and the purpose for which freezing orders may be granted has been explained in many cases. In his dissenting speech in Mercedes Benz A.G. v Leiduk, Lord Nichols gave a particularly clear statement of the purpose for which freezing orders (previously known as “Mareva injunctions”) may be granted (emphasis added):[57]

    Ordinarily a plaintiff seeks a Mareva injunction in the same proceedings as those in which he is seeking his judgment. This should not be permitted to obscure the fact that Mareva relief differs from other interim relief in an important respect. Like other injunctions, a Mareva injunction operates in personam. It does not create a proprietary interest in the affected property, even where it relates to a specifically identified asset. And like other interim relief, a Mareva injunction is concerned to provide protection pending a future stage in the judicial process. . . . An unsecured creditor, or a claimant for damages, has no legal or equitable interest in any of the assets of the defendant, nor will the judgment itself give him such an interest. The judgment will comprise an order of the court that the defendant pay the plaintiff an amount of money.

    . . . .  Mareva relief is . . . granted to facilitate the process of execution or enforcement which will arise when, but only when, the judgment for payment of an amount of money has been obtained. The court is looking ahead to that stage, and taking steps designed to ensure that the defendant cannot defeat the purpose of the judgment by thwarting in advance the efficacy of the process by which the court will enforce compliance. He is not to be permitted to steal a march on the court's own enforcement process. If a prospective judgment debtor can look and plan ahead, so can the court. He is not at liberty deliberately to take steps to prevent enforcement. This is so, irrespective of the nature of the underlying cause of action. Mareva relief is granted in aid of the underlying cause of action only in the sense that the whole enforcement process can be said to be in aid of that cause of action.

    [57] Mercedes Benz A.G. v Leiduck [1996] AC 284, at pages 306

17. In short, the purpose of a freezing order is to provide “a fund from which the applicant’s claim may ultimately be paid in competition with other unsecured creditors of the respondent”.[58]

    [58] Biscoe on Freezing and Search Orders: Mareva and Anton Piller Orders, 2nd ed (2008), [1.12], quoted with approval in JSC BTA Bank v Ablyazov (No 10) [2015] UKSC 64, at [29]

18. Thus, I granted the freezing and ancillary disclosure orders as an aid to the rights (enforcement rights) iNova have as (unsecured) judgment creditors of Ms Liang to enforce the Judgment Debt against assets that Ms Liang owns, including against assets in the form of choses in action. The ancillary disclosure and freezing orders compelled Ms Liang and others to provide information that identified the person or persons who hold the Proceeds of Sale or any part of the Proceeds of Sale, and to restrain such person or persons from disposing of the Proceeds of Sale. In short, the purpose of my granting the freezing and disclosure orders was to ensure that the Proceeds of Sale be available as a fund from which the Judgment Debt may be paid to iNova, at least in part, in competition with any other unsecured creditors of Ms Liang.

19. The Fund is constituted by amounts totalling $96,315.68 (together with interest on that amount), that were and remain credited to an account Mr Vrkic holds with a bank, and which Ms Johnstone, in her letter to Mr Williams and Ms Cottier dated 19 January 2024, described as the “Bankruptcy Administration Bank account for this bankruptcy” (this being the Trustee’s Bank Account I defined at the beginning of these reasons). Three questions arise. Are iNova entitled to an order under s 154(3) of the Bankruptcy Act that the Fund be paid to them? (I will assume in this part of my reasons that Mr Vrkic will be entitled to be paid his remuneration and costs.) If the first question is answered in the negative, is the Fund nevertheless available as an asset against which iNova may enforce any one or more enforcement rights in relation to the Judgment Debt? If so, what enforcement right or rights is or are available to iNova?

    Are iNova entitled to an order under s 154(3) of the Bankruptcy Act?

20. That question is to be answered in the negative. Subsection 154(3) of the Bankruptcy Act applies where a person claims “an interest in” the property of the former bankrupt that is held by the bankrupt’s trustee in bankruptcy. As I have already noted, iNova, as judgment creditors of the Judgement Debt, are unsecured creditors of Ms Liang; and their having been granted freezing orders does not give them any interest in any property Ms Liang owned. The freezing and ancillary disclosure orders I made resulted in the identification of a potential fund, namely, the $96,315.68 (together with interest on that amount) that currently remains credited to an account Mr Vrkic holds with a bank, from which the Judgment Debt may be paid in competition with any other unsecured creditors of Ms Liang.

    Is the Fund an asset in relation to which iNova may exercise enforcement rights?

    The Fund as property

21. As I have noted, the Fund is constituted by amounts totalling $96,315.68 (together with interest on that amount) that were and remain credited to the Trustee’s Bank Account. If the Fund, and nothing more, stands to the credit of the Trustee’s Bank Account, the amount of the Fund is a “chose in action represented by [the] credit balance”. [59] The chose in action is a debt, namely, a promise by the bank to pay the account holder cash on demand; and Mr Vrkic, being the account holder of the Trustee’s Bank Account, has “a right to recover from the bank the balance standing to his credit” in the Trustee’s Bank Account.[60] If the Fund forms part of a larger amount that stands to the credit of the Trustee’s Bank Account, the chose in action would be represented by that credit balance; but there is no evidence that the Trustee’s Bank Account contains amounts other than the amounts that represent the Fund.

    [59] Dovey v Bank of New Zealand [1999] NZCA 328, at [22]

    [60] Croton v The Queen (1967) 117 CLR 326, at page 330

1. The Fund, therefore, is property in the form of a chose of action; and is an object in relation to which a person can hold a proprietary interest.

   Who has property in the Fund?

2. Mr Vrkic, being the account holder of the Trustee’s bank Account, holds the legal title to the chose in action. Mr Vrkic, however, holds the legal title in his capacity as trustee in bankruptcy of the estate of Ms Liang. That means he holds his legal title in the Fund subject to the provisions of the Bankruptcy Act, and solely for the purposes of discharging the duties under the Bankruptcy Act Mr Vrkic assumed on his being appointed as Ms Liang’s trustee in bankruptcy.[61]

   [61] See, for example, s 19 of the Bankruptcy Act

3. Relevant to the application before me is s 154(1) of the Bankruptcy Act which, as I have noted, provides that, subject to all dispositions the trustee in bankruptcy made before a bankruptcy is annulled being treated to have been validly made, and subject further to the trustee in bankruptcy being entitled to apply property of the former bankrupt that is still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee, the “remainder (if any) of the property of the former bankrupt still vested in the trustee reverts to the bankrupt”. The question that arises, therefore, is whether the Fund constitutes “property of” Ms Liang who, if her bankruptcy is annulled pursuant to s 153B of the Bankruptcy Act, will become the “former bankrupt”, for the purpose of s 154(3) of the Bankruptcy Act and to whom, therefore, the property in the Fund would “revert”.

4. The determination of that question turns on the source of the amounts that constitute the Fund; and in that regard, the evidence I have set out earlier in these reasons, support, and I make, the following findings:

   (a)Immediately before 29 November 2023 Ms Liang was the registered proprietor of the Property.

   (b)On 29 November 2023 Endeavour Partner Pty Ltd, being the real estate agent who acted on the sale of the Property, transferred $104,181.96 into the Liang CBA Account. This represented the net proceeds of sale of Ms Liang’s interest as registered proprietor of the Property.

   (c)From 30 November 2023 to 5 December 2023 eight amounts totalling $107,415.68 were transferred from the Liang CBA Account to Ms Chen’s account. Ms Liang arranged to make these payments after she had requested Ms Chen, and Ms Chen accepted, that Ms Chen would receive payments from Ms Liang and arrange for the amounts that would be paid to her to be paid to persons whom Ms Liang would nominate.

   (d)From 30 November 2023 to 8 December 2023, using the $107,415.68 that was transferred from the Liang CBA Account to Ms Chen’s account, Ms Chen made payments totalling $60,988.38 to Ye Liu, and payments totalling $35,327.50 to Jianhua Kuai. It is open to infer, and I find, the payments were made into bank accounts of each of Ye Liu or Jianhua Kuai, and, once made, were credited to each of their accounts.

   (e)On 22 December 2023 Jianhua Kuai made three payments totalling $35,372 to the Trustee’s Bank Account; and on 8 January 2024 Ye Liu made two payments totalling $60,988.38. It is open to infer, and I find, that they made those payments by utilising the $35,372 and the $60,988.38 previously transferred to them by Ms Chen.

   (f)On the basis of Ms Chen’s affidavit, I am satisfied that Ms Chen received from Ms Liang the payments totalling $107,415.68 on terms that she hold and deal with the amounts when credited to her account for the benefit and at the direction of Ms Liang; and, to that extent, Ms Chen held the $107,415.68 in her account as trustee for Ms Liang. That means that, on Ms Chen receiving the amounts totalling $107,415.68, Ms Chen held the money on trust for Ms Liang, which further means that Ms Liang retained a beneficial interest in the amount of $107,415.68.

5. Although there is no direct evidence of any communications between Ms Liang and Ye Liu or Jianhua Kuai, it is open to infer, and I find, that before Ms Liang instructed Ms Chen to make the payments using the $107,415.68 to Ye Liu or Jianhua Kuai, Ms Liang arranged for Ye Liu or Jianhua Kuai to receive amounts into bank accounts they control, to be held and dealt with by them for the benefit and on the instructions of Ms Liang; and, for that reason, on their being credited with the amounts of $35,372 and $60,988.38 respectively, they each became trustees for Ms Liang of the amounts standing to the credit of their bank accounts to the extent those amounts represented the money Ms Chen paid to them. I so find because, first, that is the nature of the arrangement Ms Liang made with Ms Chen, and it is likely she made similar arrangements with Ye Liu or Jianhua Kuai; second, Ms Liang did not in the Bankruptcy Form list Ye Liu or Jianhua Kuai as her creditors; and, third, Ye Liu or Jianhua Kuai, on receiving a demand from Mr Vrkic, promptly paid to Mr Vrkic the amounts they received from Ms Liang and which had been credited to their accounts. That indicates that Ye Liu or Jianhua Kuai did not consider they had any interest in the amounts they received from Ms Liang other than to hold and deal with the amounts as instructed by Ms Liang or, as events occurred, as demanded by Mr Vrkic, Ms Liang’s trustee in bankruptcy.

6. Ye Liu and Jianhua Kuai remained trustees for Ms Liang of the amounts standing to the credit of their bank accounts to the extent those amounts represented the money Ms Chen transferred to them until Ms Liang became bankrupt, and on Ms Liang’s becoming bankrupt, by operation of s 58(1) of the Bankruptcy Act, Ms Liang’s interest in those amounts vested in Mr Vrkic, her trustee in bankruptcy, and Ye Liu and Jianhua Kuai held the amounts as trustees for Mr Vrkic. If, therefore, an order for annulment of Ms Liang’s bankruptcy is made under s 153B(1), the beneficial interest Ms Liang had in the amounts totalling $96,315.68 that Ye Liu and Jianhua Kuai held as trustees, and which they had paid to the Trustee’s Bank Account, will revert to Ms Liang; and Mr Vrkic will remain trustee of the Fund until such time as he transfers the Fund to the person who is entitled to it. Mr Vrkic will be a bare trustee of the Fund; and his duty would be to convey the Fund to Ms Liang.[62]

   [62] See Burdick v Garrick (1870) L.R. 5 Ch App 233, at page 243: “[W]here the duty of persons is to receive property, and to hold it for another, and to keep it until it is called for, they . . . can only discharge themselves by handing over that property to somebody entitled to it.”

7. Thus, the property right in the Fund that will revert to Ms Liang if an order for annulment is made under s 153B of the Bankruptcy Act is her right to demand that Mr Vrkic pay to her the balance of the amounts standing to the credit of the Trustee’s Bank Account, less such amount to which he may be entitled to apply to the payment of his costs, charges and expenses of the administration of Ms Liang’s bankruptcy, including his remuneration and expenses.

   What enforcements rights does iNova have in relation to the Fund?

8. I have described elsewhere the means by which judgments and orders of this Court may be enforced,[63] and I need only refer to two provisions. The first is s 213(2) Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act), which provides:

   A person in whose favour a judgment of the Federal Circuit and Family Court of Australia (Division 2) is given is entitled to the same remedies for enforcement of the judgment in a State or Territory, by execution or otherwise, as are allowed in like cases by the laws of that State or Territory to persons in whose favour a judgment of the Supreme Court of that State or Territory is given.

   [63] Scott, (The Trustee of the Property of Hurst, a Bankrupt) v Hurst (No 2) [2021] FedCFamC2G 166, at [11]-[40]

9. The second provision is r 25.11 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021  (GFL Rules), which provides:

   (1)A party may apply to the Court to issue a writ, order or any other means of enforcement of a judgment or order that can be issued or taken in the Supreme Court of the State or Territory in which the judgment or order was made, as if it were a judgment or order of that Supreme Court.

   (2)An order made under subrule (1) authorises the Sheriff, when executing the orders of the Court, to act in the same manner as a similar officer of the Supreme Court of the State or Territory in which the order is being executed is entitled to act.

   (3)A party who wants to enforce an order in more than one State or Territory may adopt the procedures and forms of process of the Supreme Court of the State or Territory in which the judgment or order was made.

10. Given the proceeding before me has been conducted in the Sydney Registry of this Court, and given that Mr Vrkic is situated in New South Wales, the range of remedies that are available to iNova in this Court to enforce the Judgment Debt is the same as the range of remedies that are available to judgment creditors in the Supreme Court of New South Wales to enforce judgments and orders of that Court. The most likely, and perhaps the only, enforcement right that could be available to iNova to enforce the Judgment Debt against Ms Yiang’s interest in the Fund is a “charging order”.

11. Paragraph (c) of s 106(1) of the Civil Procedure Act 2005 (NSW) (CP Act) provides that a “judgment debt may be enforced by means of . . . a charging order”. The nature and effect of a charging order is described in s 126 of the CP Act as follows:

    (1)This section applies to the following kinds of property in relation to a judgment debtor (referred to in this Division as security interests)

    (a)       stock and shares in a public company,

    (b)       money on deposit in a financial institution, being—

    (i)money held in the judgment debtor’s name in the judgment debtor’s own right, or

    (ii)money held in the name of some other person in trust for the judgment debtor,

    (c)       any equitable interest in property.

    (2) Subject to the uniform rules, a charging order operates, in relation to each security interest specified in the order—

    (a)to charge the security interest in favour of the judgment creditor to the extent necessary to satisfy the judgment, and

    (b)to restrain the chargee from dealing with the security interest otherwise than in accordance with the directions of the judgment creditor.

    (3)      A charging order takes effect when it is made.

    (4)Despite subsection (3), the judgment creditor may not commence proceedings to take the benefit of a charge arising under a charging order until after the expiration of 3 months from the date of the order.

    (5)  A charging order entitles the judgment creditor, in relation to the security interests charged by the order, to any relief to which the judgment creditor would have been entitled had the charge been made in the judgment creditor’s favour by the judgment debtor.

12. The nature of a charging order has been described in a number of cases; but Master Allen has given the most extensive description in ANZ Banking Group Ltd v Greig.[64]

    A charging order is a hypothecation. It does not involve any passing, from the owner of the property to the holder of the charge, of any of the rights of ownership. In this respect, a charging order, or other true hypothecation, stands in sharp contrast to a mortgage of land under Old System title whereby the mortgagor conveys his interest in the land to the mortgagee.

    The law, in my opinion, is accurately stated in Sykes, op cit, at pp 15, 16, as follows: … whilst … mortgage stricto sensu … deal(s) with existing rights by assigning them, the hypothecation creates rights. … (the) rights only arise on default; they are new creations coming into existence on that contingency … what are created are mere potentially exercisable rights which automatically cease on repayment.

    [64] ANZ Banking Group Ltd v Greig [1980] 1 NSWLR 112, at [18]-[19]

13. The procedure for applying for a charging order is contained in Part 39 Div 5 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Rule 39.44 provides that an application for a charging order in respect of a judgment is to be made by way of notice of motion and, unless otherwise ordered, the notice of motion may be dealt with in the absence of the parties, and need not be served on the judgment debtor or the proposed chargee. Subrule 39.45(1) of the UCPR provides that, unless otherwise ordered, an applicant for a charging order must file an affidavit in support of the application, being an affidavit sworn not more than 14 days before the date of filing.

14. There is a prescribed form of charging order (Form 74), which requires the insertion of the names of the judgment debtor, the judgment creditor, the charge, the amount outstanding under the judgment, and details of the security interest. The charging order otherwise directs as follows:

    1.The security interests listed above are charged in favour of the judgment creditor to the extent necessary to satisfy the judgment in these proceedings.

    2.The chargee is restrained from dealing with the security interests otherwise than in accordance with the directions of the judgment creditor, until further order of the court or until the judgment against the judgment debtor is satisfied in full.

    APPLICATION THAT MR VRKIC BE DENIED REMUNERATION

    Power and principles

15. Under s 90-15(1) of Schedule 2 of the Bankruptcy Act, the Court “may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate”. The Court may make such orders either on its own initiative, or on application made under s 90-20 of Schedule 2. Subsection 90-15(3) specifies the types of orders the Court may make; and these include the order specified in s 90-15(3)(f), namely:

    an order in relation to remuneration, including an order requiring a person to repay to the estate of a regulated debtor, or the creditors of a regulated debtor, remuneration paid to the person as trustee.

16. Subsection 90-15(4) identifies (a non-exhaustive) list of matters the Court may take into account when making orders, these being:

    (a)whether the trustee has faithfully performed, or is faithfully performing, the trustee’s duties; and

    (b)whether an action or failure to act by the trustee is in compliance with this Act and the Insolvency Practice Rules; and

    (c)whether an action or failure to act by the trustee is in compliance with an order of the Court; and

    (d)whether the regulated debtor’s estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and

    (e)the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group.

    Parties’ submissions

17. iNova submits that Mr Vrkic should be denied remuneration because; (a) “in accepting the debtor’s petition” Mr Vrkic “was in breach of” s 55(2A) of the Bankruptcy Act, which is a matter relevant to s 90-15(4)(b) of Schedule 2;[65] (b) by “accepting the debtor’s petition . . . in breach of” s 55(2A) of the Bankruptcy Act, Mr Vrkic undertook work which duplicated the work iNova had undertaken in seeking to identify and recover the Proceeds of Sale; and (c) iNova would suffer loss if Mr Vrkic were allowed to apply the assets of Ms Liang’s estate towards his remuneration and expenses because that would diminish the amount iNova would be able to recover.

    [65] Applicants’ Submissions, [33(a)]

18. Ms Johnstone, who appeared for Mr Vrkic, says nothing more than “the trustee says that, up until the time this application was filed, he was doing his job and that he should be paid for that”.[66]

    [66] T26.45

    Determination

19. It is the case that, after his appointment, Mr Vrkic appears to have undertaken tasks that a trustee in bankruptcy is expected to undertake; and, to that extent, it appears that Mr Vrkic, as Ms Johnstone submitted, “was doing his job”. But Mr Vrkic, or at least his employee, Ms Li, had undertaken tasks that preceded Mr Vrkic being appointed Ms Liang’s trustee in bankruptcy. More particularly, Ms Li advised Ms Liang about bankruptcy; Ms Li helped Ms Liang prepare the Bankruptcy Form; and, after Ms Liang signed the Bankruptcy Form, Ms Li arranged for the Bankruptcy Form to be presented to the Official Receiver. Further, Mr Vrkic’s description in the 12 January 2024 DIRRI of the circumstances in which he was appointed Ms Liang’s trustee in bankruptcy indicates Mr Vrkic was aware that the “key communications” with Ms Liang “were for the purposes of . . . obtaining sufficient information about [Ms Liang] to advise [Ms Liang] on the process; to clarify and explain to [Ms Liang] the options available to [Ms Liang] and the nature and consequences of Bankruptcy”, and for Mr Vrkic to provide consent to act as trustee. The end result of these activities is that the Bankruptcy Form as presented to the Official Receiver contained material misrepresentations. In particular, it misrepresented that Ms Liang had a residence or place of business in Australia. Had the Bankruptcy Form not made this misrepresentation, the Official Receiver would not have accepted the Bankruptcy Form; Mr Vrkic would not have been appointed Ms Liang’s trustee in bankruptcy; and he would not have undertaken work for which he would be entitled to any remuneration.

20. Two sets of questions arise. The first is whether conduct which a trustee in bankruptcy engaged in or has failed to engage in leading up to his or her appointment as trustee (pre appointment conduct) is conduct on the basis of which the Court may make an order under s 90-15(3)(f) of Schedule 2 about a trustee’s remuneration, and, if so, what type of pre appointment conduct may be relevant to making an order in relation to a trustee’s remuneration. The second question is, assuming pre appointment conduct is relevant to making an order under s 90-15(3)(f) of Schedule 2, does Mr Vrkic’s pre appointment conduct merit an order denying him remuneration?

    Is pre appointment conduct relevant to making an order in relation to remuneration?

21. As I have noted, iNova submits that Mr Vrkic should be denied remuneration because, “in accepting the debtor’s petition” Mr Vrkic “was in breach” of s 55(2A) of the Bankruptcy Act, which is a matter relevant to s 90-15(4)(b) of Schedule 2. There are two difficulties with this submission. First, the bankruptcy of a debtor who presents his or her own petition arises on the Official Receiver’s, not on a trustee’s, accepting the debtor’s petition.[67] Second, s 55(2A) of the Bankruptcy Act is directed to the Official Receiver; it requires the Official Receiver to reject a debtor’s petition unless the matters specified in that subsection are satisfied. Thus, the fact that Mr Vrkic may or ought to have been aware that Ms Li participated in presenting to the Official Receiver a debtor’s petition which contained a material misrepresentation would not support a finding that Mr Vrkic breached s 55(2A), or that his conduct otherwise did not comply with the Bankruptcy Act, within the meaning of s 90-15(4)(b) of Schedule 2.

    [67] Bankruptcy Act, s 55(4), s 55(4A)

22. The matters listed in s 90-15(4) of Schedule 2, however, are not exhaustive; and the fact that pre appointment conduct is not listed in s 90-15(4) of Schedule 2 does not mean it is not relevant to the power under s 90-15(3)(f) of Schedule 2 to make an order in relation to a trustee’s remuneration. On the contrary, such conduct could be highly relevant where the conduct is causally connected to the Official Receiver’s accepting a debtor’s petition which the Official Receiver ought not to have accepted. That would be the case where a trustee has engaged in conduct or has authorised others to engage in conduct that leads to the Official Receiver’s accepting a debtor’s petition, and the trustee’s being appointed trustee in bankruptcy, in circumstances where the trustee knew, or ought reasonably to have known, of facts and matters which show that the debtor’s petition ought not to have been presented to, or accepted by the Official Receiver. A trustee’s having engaged in such conduct would be a significant reason for denying the trustee any remuneration to which he or she would otherwise be entitled in relation to work the trustee performed in purported performance of his or her duties as trustee in bankruptcy. To permit a trustee in bankruptcy remuneration in these circumstances would be an invitation to persons who are qualified to act as trustees in bankruptcy not to exercise reasonable care at the time they consider whether to act as trustee in bankruptcy to ensure that the preconditions provided by s 55(2A) of the Bankruptcy Act have been satisfied, and that, on the Official Receiver’s accepting a debtor’s petition, the trustee will acquire a secure title as trustee in bankruptcy of the estate of the person who presents the bankruptcy petition.

1. Thus, a trustee’s pre appointment conduct will be a reason for denying the remuneration and expenses of a trustee in bankruptcy if the trustee engaged in pre appointment conduct that is causally connected to a debtor presenting, and the Official Receiver accepting, a debtor’s petition which ought not to have been presented to, or accepted by, the Official Receiver, where such conduct is dishonest, reckless, or negligent.

   Does Mr Vrkic’s pre appointment conduct merit denial of remuneration?

2. Mr Vrkic has elected to adduce no evidence, either by himself, or by Ms Li. In those circumstances, Mr Vrkic has not addressed, and therefore has left unexplained matters that include the following:

   (a)When, and in what circumstances Mr Vrkic or Ms Li or any other person in DVR became aware that, as stated in the Report to Creditors, Ms Liang “currently is in China on a 2-year visit visa caring for her seriously ill mother”; the time for which Mr Vrkic or Ms Li knew or believed Ms Liang has been in China; and whether Mr Vrkic or Ms Li expected Ms Liang to return to Australia and, if so, by when.

   (b)Whether Mr Vrkic or Ms Li or some other person within DVR provided Ms Liang with the “Request for Consent to Travel Overseas While Bankrupt”; if so when, and the circumstances in which that occurred; and when, to whom, and in what circumstances did Ms Liang provide that document as signed by her.

   (c)How Ms Li could have assisted Ms Liang to prepare the Bankruptcy Form, and have arranged to present on behalf of Ms Liang a debtor’s petition, which represented that Ms Liang has a home address in Ryde Sydney, and that Ms Liang has “a residence or place of business in Australia”, and that she was living “rent free with her parents and other family member”, in circumstances where:

   (i)on 6 June 2023 Ms Liang informed Ms Li that she was starting to sell her house;

   (ii)on 29 June 2023 Ms Li informed Ms Liang she would be available at 9 am Sydney time, thus suggesting Ms Li knew Ms Liang was not in Sydney;

   (iii)the Bankruptcy Form represented that Ms Liang had sold the Property on 29 November 2023, and the Property was identified as one of Ms Liang’s two previous residential addresses;

   (iv)on 11 December 2023 Ms Liang informed Ms Li that “she had already closed the company”;

   (v)as at 11 January 2024, when Mr Vrkic issued the Report to Creditors, Mr Vrkic knew that Ms Liang was “currently in China”;

   (vi)as at 18 December 2023 Ms Liang had signed the “Request for Consent to Travel Overseas While bankrupt” which suggested that she had proposed to travel to China on 7 July 2023, with a proposed return date “to be determined” and which, moreover, stated that Ms Liang’s “family members are in China”.

   (d)How Ms Li could have assisted Ms Liang to prepare the Bankruptcy Form, and have arranged to present on behalf of Ms Liang a debtor’s petition which represented that the only “bankruptcy information or advice” Ms Liang received “before completing this form” was from “AFSA”, and not from any of the other specified options (which included “Insolvency/Debt advisor”) in circumstances where Mr Vrkic, in the Report to Creditors, stated there were communications between Ms Li and Ms Liang in which the “key communications were for the purposes of . . . obtaining sufficient information about the Bankrupt to advise the Bankrupt on the process; to clarify and explain to the Bankrupt the options available to the Company [sic] and the nature and consequences of Bankruptcy”; and for Mr Vrkic to provide consent to act as trustee. 

   (e)Explain how in the Report to Creditors Mr Vrkic stated that “currently [Ms Liang] is in China on a 2-year visit visa caring for her seriously ill mother” in circumstances where in the “Request for Consent to Travel Overseas While Bankrupt” Ms Liang does not refer to her mother being seriously ill.

3. Unexplained, these matters are capable of giving rise to a number of inferences, including inferences that, by the time she assisted Ms Liang to complete the Bankruptcy Form, and arranged to present it to the Official Receiver, Ms Li knew that Ms Liang did not have a residence or place of business in Australia; Ms Liang was in China; and Ms Liang had not determined if and if so when she would return to Australia. If such inferences are drawn, the necessary consequence would be that Ms Li assisted Ms Liang to prepare and to present to the Official Receiver a debtor’s petition that Ms Li knew falsely represented Ms Liang had a place of residence and a place of business in Australia.

4. It is not necessary to draw any of these inferences; and that is because, in the absence of any evidence from Ms Li or Mr Vrkic, the evidence comfortably supports a finding, and I find, that Ms Li and Mr Vrkic failed to take reasonable care to ensure that the statements contained in the Bankruptcy Form, and in particular, the statements that Ms Liang has a residence or a place of business in Australia, were true; and that, had they taken reasonable care, Ms Li and Mr Vrkic would have become aware of the fact that Ms Liang did not have a residence or business in Australia and, therefore, they would not have assisted Ms Liang to present a debtor’s petition that falsely represented that she did have a residence or business in Australia. That, in turn, would mean that, had Mr Vrkic exercised reasonable care, he would not have been appointed trustee in bankruptcy, and he would not have undertaken any work purportedly pursuant to his obligations as a trustee in bankruptcy in relation to Ms Liang’s estate. In those circumstances, Mr Vrkic should not be entitled to remuneration and reimbursement of expenses he incurred and purported to earn.

5. There would be a case for Mr Vrkic to be paid his remuneration if, in the course of his acting as a trustee in bankruptcy, he recovered some assets; and it is the case that Mr Vrkic recovered $96,315.68 which currently forms part of the Fund. I am satisfied, however, that iNova would have recovered those same amounts because iNova became aware of the payments Ms Chen made to Jianhua Kuai and Ye Liu; and they did so through having applied for, and having been granted, freezing and ancillary disclosure orders. If anything, Ms Liang’s bankruptcy has had the consequence of delaying, and adding to the cost, of iNova recovering from Jianhua Kuai and Ye Liu the amounts totalling $96,315.68.

6. For these reasons, I am satisfied that it is appropriate to make an order under s 90-15(3)(f) of Schedule 2 that Mr Vrkic not be paid any remuneration for the work he did as trustee in bankruptcy of Ms Liang’s estate, and that Mr Vrkic not be reimbursed for any expenses he incurred in connection with his acting as trustee in bankruptcy of Ms Liang’s estate.

   THE $30,000 PAID TO MR VRKIC BY MR LIU AND MS JIANG

7. iNova claim that an order should be made that the $30,000 that Ms Johnstone, on instructions, stated was paid by Mr Xiaoda Liu and Ms Lijing Jiang to Mr Vrkic, which is currently held in the DVDO Client Trust Fund, be paid into Court pending the outcome of an inquiry and determination by the Court as to whom the money should be released.

8. The payments totalling $30,000 that Mr Xiaoda Liu and Ms Lijing Jiang made share the features of the payments Ms Chen made to Jianhua Kuai and Ye Liu. There is therefore a basis for inferring that Ms Liang provided the money to Mr Xiaoda Liu and Ms Lijing Jiang for them to pay to Mr Vrkic, and that Mr Xiaoda Liu and Ms Lijing Jiang held the money on trust for Ms Liang. In those circumstances, I do not propose to order that Mr Vrkic pay the $30,000 into Court. Instead, I propose to make an order granting iNova liberty to apply after 35 days from the date I pronounce orders for a declaration that Mr Vrkic holds the $30,000 (together with interest) on trust for iNova, and an order granting iNova leave to have issued to them a charging order in relation to the $30,000 (together with interest). I propose to order that iNova give notice to Jianhua Kuai and Ye Liu of their intention to apply for such orders, and that such notice may be given through Ms Liang if iNova have no other details concerning the identity of Jianhua Kuai and Ye Liu, or the means by which they may be notified.

   COSTS

9. iNova also seeks an order that Mr Vrkic pay their cost of the proceeding. I do not propose to make any order because from the outset Mr Vrkic indicated he would abide by the orders the Court might make in relation to iNova’s application to annul Ms Liang’s bankruptcy.

   OTHER MATTERS

10. There are two matters I need to address before I consider how the proceeding is to be finally disposed. The first is that Ms Liang has not been joined as a party; and it may be that she is a necessary party, given that the effect of making an order under s 153B(1) of the Bankruptcy Act is to revest property in Ms Liang. There are, however, two things to be said about this. First, Ms Liang had notice of the application for an order annulling her bankruptcy; and she submitted the Unsworn Affidavit, in which she deposed to being insolvent. I find that this represents the extent to which Ms Liang intends to participate in the proceeding. Second, the orders I propose to make in relation to the Fund and the $30,000 in the DVDO Client Trust Fund are orders in execution of the Judgment Debt; and Ms Liang is not entitled to any notice of iNova’s intention to exercise its rights as a judgment creditor. In any event, Ms Liang has notice that iNova intends to have the Fund paid to them.

11. The second thing to note is that my conclusions about the rights iNova have in relation to the to the Fund and the $30,000 in the DVDO Client Trust Fund properly arise only in the Substantive Proceeding. I propose, therefore, to make orders in relation to the Judgment Debt in the Substantive Proceeding. To that end, I will also make an order in the Substantive Proceeding that the evidence that was read and adduced in this proceeding also be treated as evidence in the Substantive Proceeding.

    DISPOSITION

12. I propose to make two sets of orders, one in this proceeding, and the other in the Substantive Proceeding. In this proceeding I will make an order under s 153B(1) of the Bankruptcy Act annulling the bankruptcy of Ms Liang, an order denying Mr Vrkic’s remuneration and expenses, and an order that each party bear its or his own costs.

13. In the Substantive Proceeding I propose to make the following orders.

14. I will order that the evidence that was read and tendered in this proceeding will also be evidence in the Substantive Proceeding.

    (a)In relation to the Fund:

    (i)I will declare that Mr Vrkic holds the Fund on trust for Ms Liang.

    (ii) I will order that, up to and including the time at which iNova or either of them serve a charging order or charging orders pursuant to (iii), or until further order of the Court, whichever occurs first, Mr Vrkic, by himself, his employees or his agents, be restrained from transferring, disposing, or otherwise dealing with all or any part of the Fund.

    (iii) I will order that iNova or either of them have leave to have issued to them forthwith a charging order or orders in relation to the Fund, such charging order or orders to be issued by me in chambers after iNova provide a draft or drafts of the charging order or orders.

    (b)In relation to the $30,000 in the DVDO Client Trust Fund:

    (i)Subject to (ii), iNova have liberty to apply for:

    (A)a declaration that Mr Vrkic holds the $30,000 in the DVDO Client Trust Fund as trustee for Ms Liang;

    (B)an order that iNova or either of them have leave to have issued to them forthwith a charging order or orders in relation to the $30,000 in the DVDO Client Trust Fund, such charging order or orders to be issued by me in chambers after iNova provides a draft or drafts of the charging order or orders; and

    (C)such other orders as may be relevant.

    (ii)iNova may exercise the liberty to apply referred to in (i) 35 days after they have given notice to Ms Liang, and, through Ms Liang, to Mr Xiaoda Liu and Ms Lijing Jiang of the orders I propose to make, and of iNova’s intention to exercise the liberty to apply referred to in (i).

    (d) Ms Liang pay iNova’s costs.

I certify that the preceding one hundred and three (103) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis.

Associate:

Dated:       9 August 2024

SCHEDULE OF PARTIES

SYG 3343 of 2019
Respondents
Seventh Respondent:	TAIYI CHANG
Eleventh Respondent:	JUN WEI PTY LTD ACN 616 977 096
Twelfth Respondent:	NINGNING WEI
Thirteenth Respondent:	LI BIN
Fourteenth Respondent:	FY HEALTH PTY LTD ACN 629 197 315
Fifteenth Respondent:	XIPING HE
Sixteenth Respondent:	MINGFANG XUE
Twentieth Respondent:	YUAN HE