Preston, in the matter of the Forum Group of Companies Pty Ltd (in liq)
[2025] FCA 883
•1 August 2025
FEDERAL COURT OF AUSTRALIA
Preston, in the matter of the Forum Group of Companies Pty Ltd (in liq) [2025] FCA 883
File number(s): NSD 747 of 2021 Judgment of: CHEESEMAN J Date of judgment: 1 August 2025 Catchwords: CORPORATIONS – application for judicial advice or direction – distribution of assets realised of various companies affected by large scale fraud – where competing legal and equitable interests in the discrete assets (including proceeds of assets sold) of multiple companies – whether applicants, in their capacity as liquidators and or receivers, are justified in the proposed distribution – Held: orders made by way of judicial advice Legislation: Corporations Act 2001 (Cth) ss 9, 424, 433, 443A-443F, 556, 560, 561, Sch 2 Insolvency Practice Schedule (Corporations) ss 5-15, 90-15
Fair Entitlements Guarantee Act 2012 (Cth)
Federal Court of Australia Act 1976 (Cth) ss 19, 37M, 57
Judiciary Act 1903 (Cth) ss 39B(1A)(c), 79(1)
Personal Property Securities Act 2009 (Cth) ss 3, 8(1)(c), 10, 12, 73, 254
Federal Court Rules 2011 (Cth) rr 9.05, 14.23
Federal Court (Corporations) Rules 2000 (Cth) r 2.8
Trustee Act 1925 (NSW) s 63
Law Reform (Miscellaneous Provisions) Act 1965 (NSW) s 3
Supreme Court Act 1986 (Vic) s 52
Supreme Court (General Civil Procedure) Rules 2015 (Vic) rr 54.02, 54.03, 54.04
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Agip (Africa) Ltd v Jackson [1990] Ch 265
Akers v Samba Financial Group [2017] AC 424
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Australian Postal Corporation v Lutak (1991) 21 NSWLR 584
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Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd [2002] NSWSC 576; 42 ACSR 240
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Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3
Black v S Freedman & Co [1910] HCA 58; 12 CLR 105
Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269
Boscawen v Bajwa [1996] 1 WLR 328; [1995] 4 All ER 769
Butler v Fairclough [1917] HCA 9; 23 CLR 78
Calabretta v Redpen Developments Pty Ltd (in liq) [2010] FCA 81; 183 FCR 47
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; 268 CLR 524
Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677
Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291
Coad v Wellness Pursuit Pty Ltd [2009] WASCA 68; 40 WAR 53
Cochrane v Cochrane (1985) 3 NSWLR 403
Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64
Commonwealth v Tonks [2023] NSWCA 285; 383 FLR 297
Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; 132 CLR 373
Cook (Liquidator), in the matter of Italiano Family Fruit Company Pty Ltd (in liq) v Italiano Family Fruit Company Pty Ltd (in liq) [2010] FCA 1355; 190 FCR 474
Craythorne v Swinburne (1807) 14 Ves 160 at 162; 33 ER 482
Diversa Pty Ltd v Taiping Trustees Ltd [2022] FCA 316; 401 ALR 161
Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; 49 VR 86
El Ajou v Dollar Land Holdings Plc [1993] 3 All ER 717
Evans v European Bank Ltd [2004] NSWCA 82; 61 NSWLR 75
Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; 91 NSWLR 732
Fletcher, in the matter of Starrit Pty Ltd (in liq) [2012] FCA 803
Foskett v McKeown [2001] 1 AC 102
Francis (Trustee), in the matter of Fotios (Bankrupt) v Helios Corporation Pty Ltd [2022] FCA 199
Francis v Gross [2024] NZCA 528
Frontier Touring Co Pty Ltd v Rodgers [2005] NSWSC 668; 223 ALR 433
Fung Ping Shan v Tong Shun [1918] AC 403
Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2) [2020] FCA 633
Ghana Commercial Bank v Chandiram [1960] AC 732
Giumelli v Giumelli [1999] HCA 10; 196 CLR 101
Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296
Hamilton v Donovan Oates Hannaford Mortgage Corp Ltd [2007] NSWSC 10; 207 FLR 163
Harford v Lloyd (1855) 52 ER 622
Heid v Reliance Finance Corporation Pty Ltd [1983] HCA 30; 154 CLR 326
Heperu Pty Ltd v Belle [2009] NSWCA 252; 76 NSWLR 230
Hodges v Waters (No 7) [2015] FCA 264; 232 FCR 97
In the matter of Anglican Development Fund Diocese of Bathurst (receivers & managers appointed) [2015] NSWSC 440
Independent Trustee Services Ltd v GP Noble Trustees Ltd [2013] Ch 91; 3 All ER 210
International Art Holdings Pty Ltd (administrator appointed) v Adams [2011] NSWSC 164; 85 ACSR 1
iTrade Finance Inc v Bank of Montreal [2011] 2 SCR 360
Kelly (Liquidator), Halifax Investment Services Pty Ltd (In Liq) v Loo [2021] FCA 531; 390 ALR 669
Langdon; Forge Group Ltd (Recs and Mgrs Apptd) (In Liq) [2017] FCA 170; 118 ACSR 434
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17; 113 CLR 265
Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank Plc [2001] Lloyd’s Rep Bank 224
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; 237 CLR 66
Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 3 All ER 747
Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1; 421 ALR 227
Octavo Investments Pty Ltd v Knight [1979] HCA 61; 144 CLR 360
Paul A Davies (Aust) Pty Ltd (in liq) v Davies (No 2) [1983] 1 NSWLR 440
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Pilcher v Rawlins (1872) 7 Ch App 259
Powell, in the matter of Arafura Pearls Holdings Limited (in liq) [2017] FCA 1159
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Meagher RP, Gummow WMC and Lehane JRF, Equity: Doctrines and Remedies (3rd ed, Butterworths, Sydney, 1992)Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 548 Date of last submission/s: 19 June 2025 Date of hearing: 22 and 23 May 2025 Counsel for Applicants: Mr N Kidd SC and Mr P Kucharski Solicitor for Applicants: Allens Counsel for Westpac Banking Corporation (Interested Person): Ms C Hamilton-Jewell Solicitor for Westpac Banking Corporation (Interested Person): MinterEllison Counsel for SMBC Leasing and Finance, Inc. (Interested Person): Ms E L Beechey Solicitor for SMBC Leasing and Finance, Inc. (Interested Person): Jones Day Counsel for Societe Generale (Interested Person): Ms C Brett of Ashurst (22 May 2025), Mr S E Gray and Mr M Youssef (23 May 2025) Solicitor for Societe Generale (Interested Person): Ashurst ORDERS
NSD 747 of 2021 IN THE MATTER OF THE FORUM GROUP OF COMPANIES PTY LIMITED (IN LIQUIDATION) (ACN 151 964 626)
JASON PRESTON AND JASON IRELAND IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF THE FORUM GROUP OF COMPANIES LIMITED (IN LIQUIDATION) (ACN 151 964 626) and others named in the schedule
Plaintiffs
ORDER MADE BY:
CHEESEMAN J
DATE OF ORDER:
1 AUGUST 2025
THE COURT ORDERS THAT:
Joinder
1.Tesoriero Investment Group Pty Ltd ACN 161 088 115 (in liquidation) be joined to the proceeding as Thirty First Plaintiff.
2.Palante Pty Ltd ACN 135 344 151 (in liquidation) be joined to the proceeding as Thirty Second Plaintiff.
3.The Applicants be joined to the proceeding as plaintiffs in their capacities as:
(a)Joint and several liquidators of the First, Second, Third, Fourth, Fifth, Tenth, Fourteenth, Sixteenth, Seventeenth, Eighteenth, Twenty Third, Twenty Fifth, Twenty Sixth, Twenty Seventh, Twenty Ninth, Thirtieth, Thirty First and Thirty Second Plaintiffs; and
(b)Receivers and managers of the properties named in Annexure A to these orders.
Judicial advice
4.The Plaintiffs are justified, and would otherwise be acting reasonably, in distributing the assets (including monies) which they hold in the manner set out in Annexure B to these orders.
Costs
5.The Applicants’ costs of and incidental to this application be costs in the winding up or the receivership (as applicable) of the Plaintiffs.
6.Order 5 is to operate on a several basis, with the costs divided in proportion to the amount of money of each Plaintiff available for distribution.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure A: List of properties to which the applicants have been appointed as receivers and managers
Row No. Property description (including contents to the extent owned by the entity referred to in this column) Property details 1. Properties held by 14 James Street Pty Limited (In Liquidation) as trustee of the 14 James Street Unit Trust 16 James St
Clayton South VIC 3169
Vol: 12170 Folio: 467Warehouse 1, 9 Parsons St
Clayton South VIC 3169
Vol: 12170 Folio: 465Warehouse 2, 9 Parsons St
Clayton South VIC 3169
Vol: 12170 Folio: 468Warehouse 3, 9 Parsons St
Clayton South VIC 3169
Vol: 12170 Folio: 46910 James Street
Clayton South VIC 3169
Vol: 12170 Folio: 47214 James Street
Clayton South VIC 3169
Vol: 12170 Folio: 47018 James Street
Clayton South VIC 3169
Vol: 12170 Folio: 4668 Olive Street
Clayton South VIC 3169
Vol: 12170 Folio: 4742. Property held by 26 Edmonstone Road Pty Ltd (In Liquidation) as trustee of the 26 Edmonstone Road Unit Trust 26 Edmondstone Road
Bowen Hills QLD 4006
Title Ref: 121341863. Property held by 5 Bulkara Street Pty Ltd (In Liquidation) as trustee of the 5 Bulkara Street Unit Trust 5 Bulkara Street
Wagstaffe NSW 2257
Folio: 2/11412604. Property held by 6 Bulkara Street Pty Ltd (In Liquidation) as trustee of the 6 Bulkara Street Unit Trust 6 Bulkara Street
Wagstaffe NSW 2257
Folio: 3/11412605. Property formerly owned by Intrashield Pty Limited (In Liquidation) "XOXO" Motor Yacht Cayman Islands Official Number 734587 6. Property held by 64-66 Berkeley Street Hawthorn Pty Ltd (In Liquidation) ACN 643 838 662 as trustee of the 64-66 Berkeley St Hawthorn Unit Trust 64-66 Berkeley Street
Hawthorn Victoria 3122
Vol: 12160 Folio: 0167. Property held by 9 Gregory Street Ouyen Pty Ltd (In Liquidation) ACN 641 392 707 as trustee of the 9 Gregory Street Ouyen Unit Trust 9 Gregory Street
Ouyen Victoria 3490
Vol: 06684 Folio: 757Annexure B: Order of distribution
Table 1: FG Summary of Proposed Distribution
Asset Pool Proposed order of distribution The 2934 Account First, to the FG Receiver and/or the Former Administrators and/or Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the fund in accordance with the Universal Distributing lien;
Second, the sum of $1,036,715.28 to 5 Bulkara Street as a subrogated secured creditor (on the basis that NAB’s security is first ranking);
Third, to Octet (or any other entity subrogated to its security) pursuant to its security under the Octet Facility (which is second ranking to NAB’s security); and
Fourth, on the basis that the earlier distributions are taken to be made first from funds not traced to the Financiers, to the Financiers in the following proportions:
· WBC: 4.17%;
· WNZL: 93.49%;
· SMBC: 1.88%; and
· Societe Generale: 0.45%.
Funds received from Our Kloud for the sale of intellectual property and goodwill First, to the FG Receiver and/or the Former Administrators and/or Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the intellectual property and goodwill sold to Our Kloud, in accordance with the Universal Distributing lien;
Second, to Octet and the FG Receiver or any other entity subrogated to Octet’s security on the basis that the FG Receiver was appointed prior to the Former Administrators and Octet has priority to any statutory indemnity and lien of the Former Administrators pursuant to s 443E(2) of the Corporations Act;
Third, to the Former Administrators for any costs and remuneration incurred in the administration of FG that are not otherwise paid to them, on the basis that the Former Administrators have the benefit of a statutory indemnity and lien attaching to the funds held by them under ss 443D and 443F of the Corporations Act; and
Fourth, pursuant to s 556 of the Corporations Act.
Proceeds of receivables and stock realised by the FG Receiver and the funds in the 4527 Account First, to the FG Receiver and/or the Former Administrators and/or Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of those assets of FG, in accordance with the Universal Distributing lien;
Second, to the Commonwealth in respect of advances made under the FEG, pursuant to ss 433 and/or 561 of the Corporations Act, and to other priority creditors for employee entitlements;
Third, to Octet and the FG Receiver or any other entity subrogated to Octet’s security on the basis that the FG Receiver was appointed prior to the Former Administrators and Octet has priority to any statutory indemnity and lien of the Former Administrators pursuant to s 443E(2) of the Corporations Act; and
Fourth, pursuant to section 556 of the Corporations Act.
Any sale proceeds of the XOXO yacht that are received by FG In accordance with s 556 of the Corporations Act. Table 2: FGFS Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of the Atherton Road Property First, to the Former Administrators and/or liquidators for any costs and remuneration reasonably incurred in the care, preservation or realisation of the Atherton Road Property in accordance with the Universal Distributing principle; and
Second, to the Financiers in the following proportions:
· WBC: 81.21%;
· WNZL: 8.92%;
· SMBC: 9%; and
· Societe Generale: 0.87%.
Proceeds of the XOXO yacht received by FGFS as a distribution of another entity In accordance with s 556 of the Corporations Act Proceeds of the Audi vehicles (into which the Financiers are unable to trace) First, to the Former Administrators and/or liquidators for any costs and remuneration reasonably incurred in the care, preservation or realisation of that asset, in accordance with the principle in Universal Distributing; and
Second, in accordance with s 556 of the Corporations Act.
Remaining property of FGFS (including any distribution from 23 Margaret Street and any distribution from 26 Edmonstone Road), other than any distribution of the proceeds of the XOXO yacht First, to the Former Administrators and/or liquidators for any costs and remuneration reasonably incurred in the care, preservation or realisation of those assets, in accordance with the principle in Universal Distributing;
Second, to the Financiers in the following proportions, up to a maximum amount of $865,000 (being the total paid by the Financiers):
· WBC: 78.05%;
· WNZL: 5.34%;
· SMBC: 13.39%; and
· Societe Generale: 3.22%; and
Third, to the extent any funds remain, in accordance with s 556 of the Corporations Act.
Table 3: Forum Finance Summary of Proposed Distribution
Asset Pool Proposed order of distribution Funds First, to the receivers (appointed by Octet) and/or liquidators for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of Forum Finance, in accordance with the principle in Universal Distributing;
Second, to Octet (including to dVT Group in respect of the expenses and remuneration of the receivers appointed by Octet) (or any other entity subrogated to the Octet security) to the extent its claims have not been recovered from other sources;
Third, to other secured creditors holding a valid and enforceable PPSA security interest (to the extent any remaining funds are identified as proceeds of an asset to which that creditor's security attaches) in accordance with priorities determined under the PPSA; and
Fourth, to the Financiers in the following proportions:
· WBC: 57.75%;
· WNZL: 22.37%; and
· SMBC: 19.88%.
Table 4: FGOC Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of sale of the Toyota Corolla First, to the Former Administrators and liquidators for any costs and remuneration reasonably incurred in the care, preservation or realisation of the Toyota Corolla, in accordance with the principle in Universal Distributing; and
Second, to the secured creditors of FGOC holding a valid and enforceable PPSA security interest in accordance with priorities determined under the PPSA, which will exhaust the funds.
Funds held in
pre-appointment
bank
accounts and received as a GST refundFirst, to the Former Administrators and liquidators for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of FGOC (apart from the Toyota Corolla), in accordance with the principle in Universal Distributing;
Second, to the secured creditors of FGOC holding a valid and enforceable PPSA security interest in accordance with priorities determined under the PPSA; and
Third, to the Financiers in the following proportions:
· WBC: 60.03%;
· WNZL: 9.05%;
· SMBC: 30.77%; and
· Societe Generale: 0.14%.
Table 5: 14 James Street Summary of Proposed Distribution
Asset Pool Proposed order of distribution Funds First, to the Former Administrators and/or liquidators for any costs and remuneration reasonably incurred in the care, preservation of the James Street Properties, in accordance with the principle in Universal Distributing; and
Second, on the basis that the Financiers’ equitable interests arose before Aksara's equitable mortgage or equitable charge, the balance to the Financiers in the following proportions:
· WBC: 85.81%; and
· WNZL: 14.19%.
Table 6: 5 Bulkara Street Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of the sale of the 5 Bulkara Street Property, the SUMO proceeds and the remaining balances in the 5 Bulkara Street bank accounts First, to the Former Administrators and Mr Preston and Mr Ireland in their relevant capacities for any costs and remuneration reasonably incurred in the care, preservation or realisation of those assets, in accordance with the principle in Universal Distributing, including costs and remuneration which have been approved but not yet paid;
Second, to the Financiers in the following proportions:
· WBC: 77.7%;
· WNZL: 8.27%;
· SMBC: 13.65%; and
· Societe Generale: 0.38%
Any remaining proceeds of the contents of the 5 Bulkara Street Property First, to the Former Administrators and/or to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of those assets, in accordance with the principle in Universal Distributing, including costs and remuneration which have been approved but not yet paid; and
Second, to Westpac in the following proportions:
· WBC: 72.04%; and
· WNZL: 27.96%.
Table 7: 6 Bulkara Street Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of the 6 Bulkara Street Property and its contents First, to the Former Administrators and Mr Preston and Mr Ireland in their relevant capacities for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 6 Bulkara Street, in accordance with the principle in Universal Distributing.
Second, to the Financiers in the following proportions:
· WBC: 51.8%;
· WNZL: 12.82%;
· SMBC: 29.95%; and
· Societe Generale: 5.43%.
Table 8: 26 Edmonstone Road Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of the 26 Edmondstone Road Property First, to the Former Administrators and/or Mr Preston and Mr Ireland for costs and remuneration incurred in the care, preservation or realisation of the assets of 26 Edmonstone Road, in accordance with the principle in Universal Distributing;
Second, to FGFS as subrogated secured creditor in respect of the security held by ING, Perpetual, and JAF Nominees; and
Third, the balance in accordance with s 556 of the Corporations Act.
Proceeds of the XOXO yacht In accordance with s 556 of the Corporations Act. Table 9: Iugis Summary of Proposed Distribution
Asset Pool Proposed order of distribution Cash First, to the Former Administrators and/or Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of Iugis, in accordance with the principle in Universal Distributing; and
Second, in accordance with s 556 of the Corporations Act.
Table 10: Iugis Investments Summary of Proposed Distribution
Asset Pool Proposed order of distribution Cash First, to the Former Administrators and/or Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of Iugis Investments, in accordance with the principle in Universal Distributing; and
Second, to the Financiers in the following proportions:
· Westpac: 79.09%; and
· SMBC: 20.91%.
Table 11: Forum Enviro Summary of Proposed Distribution
Asset Pool Proposed order of distribution Funds in the NAB account First, to the Former Administrators and/or Mr Preston and Mr Ireland for costs and remuneration incurred in the care, preservation or realisation of the assets of Forum Enviro, in accordance with the principle in Universal Distributing;
Second, to Octet (to the extent it is not repaid by another entity); and
Third, to the Financiers in the following proportions:
· WBC: 93.21%; and
· WNZL: 6.79%
Proceeds of the vehicles First, to the Former Administrators and/or Mr Preston and Mr Ireland for costs and remuneration incurred in the care, preservation or realisation of the assets of Forum Enviro, in accordance with the principle in Universal Distributing;
Second, to Octet (to the extent it is not repaid by another entity); and
Third, to the extent any funds remain, in accordance with s 556 of the Corporations Act.
Table 12: Smartprint Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of Smartprint Business Sale First, to dVT Group, the Former Administrators and Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in their respective roles as receivers, administrators and liquidators in the care, preservation and/or realisation of the Smartprint business pursuant to the principle in Universal Distributing;
Second, to secured creditors (including Octet, or any other entity subrogated to Octet’s security) holding a valid and enforceable PPSA security interest in accordance with priorities determined under the PPSA; and
Third, to Westpac in the following proportions:
· WBC: 82.09%
· WNZL: 17.91%
Other assets First, to dVT Group, and Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in their respective roles as receivers, administrators and liquidators in the care, preservation or realisation of Smartprint’s assets pursuant to the principle in Universal Distributing;
Second, to secured creditors (including Octet, or any other entity subrogated to Octet’s security) holding a valid and enforceable PPSA security interest in accordance with priorities determined under the PPSA; and
Third, to the extent that any funds remain, in accordance with s 556 of the Corporations Act.
Table 13: Imagetec Solutions Summary of Proposed Distribution
Asset Pool Proposed order of distribution Cash First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the property of Imagetec Solutions, in accordance with the principle in Universal Distributing;
Second, to the secured creditors with valid and enforceable PPSA security interests, including Octet and Westlawn (and any subrogee to their respective securities); and
Third, to the extent that there are any funds remaining, in accordance with s 556 of the Corporations Act.
Table 14: Palante Summary of Proposed Distribution
Asset Pool Proposed order of distribution Cash First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of Palante in accordance with the principle in Universal Distributing; and
Second, to the Financiers in the following proportions:
· WBC: 73.26%;
· WNZL: 13.01%;
· SMBC: 12.57%; and
· Societe Generale: 1.16%.
Table 15: Intrashield Summary of Proposed Distribution
Asset Pool Proposed order of distribution Net proceeds of 2019 Lotus First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation and realisation of that property, in accordance with the principle in Universal Distributing; and
Second, to Westpac in the following proportions:
· WBC: 98.6%; and
· WNZL: 1.4%.
Distribution from Mangusta as former trustee of the Mangusta Trust To FGFS, 26 Edmonstone Road and FG, being trust creditors of the Mangusta Trust, in the following proportions:
· FGFS: 9.72%
· 26 Edmonstone Road: 84.02%; and
· FG: 6.26%.
Other assets First, to the Former Administrators and/or Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the property of Intrashield, in accordance with the principle in Universal Distributing;
Second, in accordance with section 556 of the Corporations Act.
Table 16: Mangusta Summary of Proposed Distribution
Asset Pool Proposed order of distribution Net proceeds of sale of XOXO yacht First, Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation and realisation of that property in accordance with the Universal Distributing lien.
Second, Intrashield pursuant to its right of indemnity as former trustee of the Mangusta Trust.
Table 17: 9 Gregory Street Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of the sale of the 9 Gregory Street Property First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 9 Gregory Street in accordance with the principle in Universal Distributing;
Second, to ANZ pursuant to its PPSA security interest; and
Third, to the extent of any remaining funds, to Aksara (or any subrogee of Aksara) and the Financiers in the following proportions:
· Aksara: 92.84%
· WBC: 5.59%;
· WNZL: 1.27%; and
· SMBC: 0.3%.
Other property (being the remaining balance of the deposit forfeited by the purchaser as a result of the earlier aborted sale of the 9 Gregory Street Property and some rental income) First, to Mr Preston and Mr Ireland for costs and remuneration reasonably incurred in the care, preservation and realisation of those assets, on the basis set out in Universal Distributing;
Second, to ANZ pursuant to its PPSA security interest; and
Third, in accordance with s 556 of the Corporations Act, on the basis that Aksara’s equitable charge or equitable mortgage does not extend to those amounts and the Financiers cannot trace into those amounts.
Table 18: 64-66 Berkeley Street Summary of Proposed Distribution
Asset Pool Proposed order of distribution Proceeds of the Berkeley Street Property First, to Mr Preston and Mr Ireland for costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 64-66 Berkeley Street, in accordance with the principle in Universal Distributing; and
Second, to the Financiers in the following proportions:
· WBC: 33.38%;
· WNZL: 9.01%;
· SMBC: 57%; and
· Societe Generale: 0.61%.
Table 19: TIG Summary of Proposed Distribution
Asset Pool Proposed order of distribution Pre-appointment funds First, to CBA pursuant to its registered security interest; and
Second, to the extent that any funds remain, to the Financiers in the following proportions:
· WBC: 81.4%;
· WNZL: 11.13%; and
· SMBC: 7.47%.
Funds from settlement with Haidi First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in their role as liquidators in the care, preservation or realisation of the right of action resulting in the sum obtained from settlement with Haidi, pursuant to the principle in Universal Distributing. This includes Mr Preston and Mr Ireland’s costs incurred in issuing the statutory demand to Haidi, responding to the set aside application and negotiating a payment of the outstanding amounts owed;
Second, to CBA pursuant to its registered security interest; and
Third, to the extent any funds remain, in accordance with s 556 of the Corporations Act.
REASONS FOR JUDGMENT
CHEESEMAN J:
PART A – INTRODUCTION
In this Distribution Application Mr Jason Preston and Mr Jason Ireland, the applicants, seek judicial advice and directions in relation to the distribution of an array of assets realised following the collapse of various companies directly or indirectly involved in, affected by or benefitting from the Forum Finance fraud. That fraud is the subject of the liability judgment delivered in proceedings NSD616 of 2021, NSD681 of 2021 and NSD642 of 2021 (the Financier Proceedings): Westpac Banking Corporation v Forum Finance Pty Limited (in liq) (Liability) [2024] FCA 1176 (Liability Judgment or LJ).
These reasons assume familiarity, and should be read together, with the Liability Judgment. In the main I have adopted the defined terms used in the Liability Judgment.
In the Financier Proceedings, the Financiers established that Mr Basile Papadimitriou (also known as Bill Papas), Mr Vince Tesoriero, their respective and jointly owned related companies and others were involved in a fraud principally perpetrated against Westpac Banking Corporation (WBC), Westpac New Zealand Ltd (WNZL) (together, Westpac), SMBC Leasing and Finance Inc (SMBC) and Societe Generale (together, the Financiers). Final orders granting relief were made on 21 May 2025 with further orders being made on 23 May 2025 and 4 June 2025 with reasons being delivered contemporaneously with these reasons: Westpac Banking Corporation v Forum Finance Pty Limited (in liq) (Relief) [2025] FCA 882.
In the present proceeding, the applicants apply in their various capacities as either the joint and several liquidators of the relevant asset-holding corporate plaintiffs or as Court-appointed receivers and managers of trust property that is or has been affected in one way or another by the fraud. I will refer to Mr Preston and Mr Ireland as the applicants unless it is necessary to differentiate as to the particular capacity in which they are acting in a given context, in which case I will refer to them as either the liquidators or the receivers, as the context requires.
The applicants seek judicial advice, or direction, that they are justified in distributing the assets of each entity (which comprise mainly the net proceeds of the realisation of assets) in the order of priority which they have proposed. The application is supported by extensive evidence, some of which was addressed in the Liability Judgment, and expounded by written submissions which were further refined by the oral submissions made on this application.
In bringing the application, the applicants principally rely on s 90-15(1) of the Insolvency Practice Schedule (Corporations) (IPS) in Schedule 2 to the Corporations Act 2001 (Cth). They also rely as necessary on various other sources of power, which I will address in Part G of these reasons.
The function of a liquidator’s application for directions is to give the liquidator advice as to the proper course of action to take in the liquidation: Re Force Corp Pty Ltd (in liq) [2020] NSWSC 1842; 149 ACSR 451 at [18] (Gleeson J). Provided that the liquidator has made full and fair disclosure to the Court of the material facts, the liquidator will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him or her in accordance with the direction: Re Force Corp at [19].
The circumstances of each of the corporate plaintiffs differ. That said, the following broad observations may be made. First, the assets (including those in which the corporate plaintiffs’ claim derives from the right of indemnity of a corporate trustee) are subject to complex competing claims by various parties. Secondly, there are insufficient assets to meet all of the relevant claims. Thirdly, in relation to each of the corporate plaintiffs that acted as a corporate trustee, the claimants may include, among others, the Financiers (including in respect of claims of a proprietary nature and claims based on statutory priority arising in respect of funding arrangements), secured and unsecured creditor claims (including claims based on rights of subrogation), claims by former external administrators, and claims of the Commonwealth of Australia as a “subrogated” employee creditor in respect of advances made pursuant to the Fair Entitlements Guarantee Act 2012 (Cth) (FEG). Fourthly, the claims in relation to each of the corporate plaintiffs often involve discrete asset pools where the identified claimants and the order of distribution may differ depending on the circumstances relating to the asset pool from which the distribution will be made. Finally, the order of distribution in respect of each asset pool of each of the corporate plaintiffs will have a material effect on the amount received by the individual creditors.
The applicants seek directions in order to enable them to properly distribute the available assets having regard to the nature of the competing claims in respect of those assets. This application requires the identification and consideration of complicated factual and legal issues. The Court has been considerably assisted by the thorough and careful work undertaken by the applicants and their legal representatives in the preparation and presentation of this application.
The applicants have framed this application in a way that is both practical and efficient by limiting the scope of the advice sought to points of legal principle and the proper order of distribution. They do not attempt at this stage to quantify any distribution amounts because the precise amounts will be contingent on the advice given and will necessarily be updated to take into account changes since the plaintiffs’ evidence was finalised to account for things such as interest accruing on cash at bank. Upon receiving and considering the advice given in these reasons, the applicants will undertake further work to calculate the precise amounts to be distributed to claimants, and will then proceed to make payments (unless at that point it becomes apparent that further directions of the Court are necessary).
The applicants’ approach is considered. It is consistent with the overarching purpose embodied in s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA Act).
In a similar vein, the issues which the Court is asked to consider in this application have been considerably refined as a result of the substantial engagement between the applicants, the creditors and potential claimants. The focus of that engagement has been to arrive at a distribution that is proper in all the circumstances, and which is appropriately focussed on the imperative of maximising the return to creditors. An aspect of the advice sought by the applicants is to confirm that they would be justified to avoid incurring further costs in undertaking a more extensive tracing analysis in circumstances where the likelihood is that further investigation would take time and result in additional expense but would be unlikely to change the ultimate distribution of the net assets available. The applicants have thoroughly exposed the legal and factual premises on which they rely to justify their proposed order of distribution and have taken appropriate steps to ensure that notice of their application has been given to all interested parties that they have identified.
The present application has been timetabled to provide all interested parties adequate time to consider, interrogate and take advice on the proposed order of distribution advanced by the applicants. There has been active engagement in that process with the result that there was very little controversy about the proposed order of distribution as finally articulated by the applicants. The fruit borne of the substantial engagement that occurred prior to the hearing is that there was no substantive opposition to this application. Although each of the Financiers sought and obtained leave to appear on the application, their involvement ultimately proved to be limited.
Again, the approach taken by the applicants and those notified of the application, including the Financiers, was consistent with, and promoted the objects intended to be served by the proper conduct of litigation in this Court.
PART B – STRUCTURE OF THESE REASONS
These reasons broadly follow the structure of the applicants’ submissions:
(1)Part C addresses the issue of notice of the present application to all interested parties;
(2)Part D lists the evidence led on this application;
(3)Part E addresses the joinder of various parties to this application;
(4)Part F provides an overview of the factual background, including in relation to the related proceedings, the corporate plaintiffs (including those that were appointed as corporate trustees), the applicants’ evidence of the tracing analysis and relevant key findings in the Liability Judgment;
(5)Part G addresses the sources of power relied upon by the applicants;
(6)Part H sets out the legal principles generally applicable to the proposed distribution order of the assets of the entities. The principles examined include those relating to:
(a)the nature of the relief sought;
(b)the Universal Distributing principle;
(c)statutory indemnity and lien of an administrator and former administrator;
(d)a former trustee’s right of indemnity;
(e)claims made based on the interests arising under a Black v Freedman constructive trust;
(f)subrogation;
(g)claims of employee creditors under the Corporations Act;
(h)competing priorities; and
(i)tracing;
(7)Part I addresses the proposed order of distribution on an entity by entity, asset pool by asset pool basis and gives advice and direction in respect of:
(a)issues arising in respect of each corporate plaintiff and the asset pool(s) of each corporate plaintiff; and
(b)the proposed order of distribution of the assets of each corporate plaintiff broken down by reference to separate asset pools for each corporate plaintiff as relevant;
(8)Part J is a brief conclusion.
PART C – NOTICE OF APPLICATION
On 4 December 2024, the applicants served a copy of the Interlocutory Process and the supporting evidence on the solicitors for:
(1)each of the Financiers;
(2)the Commonwealth in respect of the FEG claim;
(3)Westlawn Finance Limited;
(4)Mr Tesoriero;
(5)Octet Finance Pty Ltd;
(6)Mr Antony Resnick and Mr Mark Robinson of dVT Group, the current and former receivers and managers of certain entities within the Forum Group (noting that Mr Robinson retired as receiver on 21 July 2023);
(7)Mr Domenic Calabretta, Mr Grahame Ward and Mr Thyge Trafford-Jones of Mackay Goodwin, as former administrators of certain entities within the Forum Group;
(8)Mr Paul Allen and Mr Glenn Franklin, as liquidators of the Tesoriero Entities (as defined at LJ [160]-[170]);
(9)the director of Aksara Holdings Pty Ltd; and
(10)the Commonwealth Bank of Australia (CBA).
On 5 December 2024, the applicants served a copy of the Interlocutory Process and the supporting evidence on the Australian Taxation Office (ATO).
On 6 May 2025, the applicants served a copy of the Interlocutory Process and the supporting evidence on the Australian Securities and Investments Commission (ASIC). Pursuant to r 2.8 of the Federal Court (Corporations) Rules 2000 (Cth), a person who makes an application for an order under s 90-15 of the IPS is required to serve on ASIC, a reasonable time before the hearing of the application, a copy of the initiating process, and supporting affidavit in respect of the application.
No response was received from the Financiers, Westlawn, Octet, Mr Tesoriero or the ATO.
Responses were received from Aksara, Mr Robinson (a former receiver of relevant property), CBA, Mackay Goodwin (former administrators of some of the Jointly Owned Entities, as defined at LJ [154]-[159]), some of the Consolidated Group Entities (as defined at LJ [147]‑[153]), some of the Other Papas-Related Entities (as defined at LJ [171]-[195]), Iugis Investments Pty Ltd ACN 647 627 745 (in liquidation), and Smartprint Fleet Management Pty Ltd ACN 132 807 080 (in liquidation) and ASIC. Each indicated that they did not wish to be heard in relation to this application.
Mr Resnick and the solicitors for Mr Allen and Mr Franklin initially indicated that they intended to seek leave to be heard in relation to this application, but neither of them ultimately pressed to be heard.
On 6 December 2024, Mr Resnick indicated to the applicants that he was considering whether he intended to be heard on this application. On 27 March 2025, Mr Resnick notified the Court that he intended to be heard on the application. No submissions or evidence were subsequently filed or served by Mr Resnick in accordance with the orders requiring any third party intervener to do so made on 9 December 2024. When the matter was called on for hearing, it was called outside. Mr Resnick did not appear. The hearing proceeded on the basis that Mr Resnick no longer intended to be heard.
A claim was made by the liquidators of the Tesoriero Entities in respect of funds held in relation to 64-66 Berkeley St Hawthorn Pty Ltd ACN 643 838 662 (in liquidation) (receivers and managers appointed) (64-66 Berkeley Street), a Jointly Owned Entity, which was one of the property SPVs: LJ [156]. In most cases, the only business of the property SPV was to hold real property located at the address for which the SPV was named: LJ [167] and [169]. The Tesoriero Entities’ claim was not ultimately pressed. That claim was predicated on an assertion that the relevant Tesoriero Entities had contributed to the maintenance of, or mortgage repayments in respect of, the Berkeley Street Property (as defined in paragraph [517] below). I infer that at the time it was pressed, this claim was advanced on the basis of an entitlement to be subrogated to the mortgagee. It appears that subrogation is the only available mechanism by which the liquidators of the Tesoriero Entities could potentially obtain priority over the Financiers’ equitable interests. That claim was first ventilated in correspondence dating from October 2023. The applicants requested additional information in relation to the claim, which was not provided. On 2 May 2025, the liquidators of the Tesoriero Entities informed the Court that they no longer sought to be heard on this application. On 19 May 2025, the liquidators of the Tesoriero Entities informed the applicants that they would not appear at the hearing of the application. The correspondence sent from the liquidators of the Tesoriero Entities was tendered on this application.
The Commonwealth, being interested as a result of the FEG claim, indicated that it would observe the application, but did not seek to be heard.
As mentioned, at the hearing of the application, each of the Financiers were granted leave to appear as an interested party in the proceeding. Apart from the Financiers, upon the matter being called outside the courtroom, no other persons came forward seeking leave to appear.
PART D – EVIDENCE
The applicants rely on a court book (marked as Exhibit B on this application) comprising 4,526 pages in which the following evidence in support of the Distribution Application is included:
(1)an affidavit of Mr Preston affirmed 3 December 2024 filed in this proceeding (Preston Affidavit), and its Exhibits JP-19, JP-20 and Confidential Exhibit JP-21, which was the primary affidavit relied on in support of the plaintiffs’ application;
(2)an affidavit of Mr Preston affirmed 7 February 2022 filed in proceeding NSD616 of 2021 (Westpac Proceeding) and its Exhibits JP-1 to JP-10;
(3)an affidavit of Mr Preston affirmed 10 June 2022 filed in the Westpac Proceeding and its Exhibits JP-11 to JP-18;
(4)an affidavit of Mr Preston affirmed 19 August 2021 filed in this proceeding and Exhibit JP-1 to that affidavit;
(5)an affidavit of Mr Ireland affirmed 28 August 2021 filed in this proceeding and Exhibit JI-3 to that affidavit; and
(6)an affidavit of Christoper Prestwich of Allens, solicitor for the applicants, sworn on 3 April 2025 filed in this proceeding and Exhibit CP-1 to that affidavit.
In addition, the applicants tendered a 9-page bundle of correspondence between 27 March 2025 and 19 May 2025 relating to the provision of notice (marked as Exhibit A on this application) and read an additional affidavit of Mr Prestwich sworn 16 May 2025 in relation to service on ASIC.
PART E – JOINDER
In light of the relief sought by the applicants, they also seek orders in relation to the joinder as plaintiffs in these proceedings the following entities and persons:
(1)TIG as thirty first plaintiff;
(2)Palante Pty Ltd ACN 135 344 151 (in liquidation) as thirty second plaintiff;
(3)23 Margaret Street Pty Ltd ACN 623 715 373 (in liquidation) as thirty third plaintiff;
(4)the applicants in their capacities as joint and several liquidators of the following subset of the existing corporate plaintiffs:
(a)The Forum Group of Companies Limited ACN 151 964 626 (in liquidation) (FGOC);
(b)14 James Street Pty Ltd ACN 638 449 206 (in liquidation);
(c)26 Edmonstone Road Pty Ltd ACN 622 944 129 (in liquidation);
(d)5 Bulkara Street Pty Ltd ACN 630 982 160 (in liquidation);
(e)6 Bulkara Street Pty Ltd ACN 639 734 473 (in liquidation);
(f)Forum Group Pty Ltd ACN 153 336 997 (in liquidation) (FG);
(g)Imagetec Solutions Australia Pty Ltd ACN 074 715 718 (in liquidation);
(h)Intrashield Pty Ltd ACN 133 426 534 (in liquidation);
(i)Iugis Investments;
(j)Iugis Pty Ltd ACN 632 882 243 (in liquidation);
(k)Iugis Waste Solutions Pty Ltd ACN 647 212 299 (in liquidation);
(l)Forum Finance Pty Ltd ACN 153 301 172 (in liquidation);
(m)Forum Group Financial Services Pty Ltd ACN 623 033 705 (in liquidation) (FGFS);
(n)Forum Enviro Pty Ltd ACN 168 709 840 (in liquidation); and
(o)Forum Enviro (Aust) Pty Ltd ACN 607 484 364 (in liquidation);
(5)the applicants in their capacities as joint and several liquidators of:
(a)TIG;
(b)Palante; and
(c)23 Margaret Street; and
(6)the applicants in their capacities as receivers and managers of the properties identified in Annexure A to the orders made on this application.
Taking into account the findings I have made in the Liability Judgment as to the entities’ respective participation in or receipt from the fraudulent scheme and the fact that the proposed additional plaintiffs are either in liquidation or under administration or the relevant external administrators of those entities, and are in the same interest as the parties seeking their joinder, I am satisfied that it is appropriate to make orders as sought under r 9.05 of the Federal Court Rules 2011 (Cth) to facilitate the form of relief now sought by the applicants in these orders.
Given that I will make the joinder orders sought by the applicants, references to the corporate plaintiffs in these reasons should be understood to include each of the companies joined as plaintiffs as a result of the orders I will make on this application. Similarly, although I have referred to Mr Preston and Mr Ireland as applicants, as a result of the orders I will make they are now also plaintiffs in their discrete capacities as liquidators of the corporate plaintiffs referred to in order 3 made on this application and as receivers of the properties identified in Annexure A to the orders made on this application.
PART F – OVERVIEW OF THE FACTUAL BACKGROUND
The related proceedings
As mentioned, this Distribution Application follows the Financier Proceedings. The Liability Judgment concerned the fraud perpetrated against the Financiers between September 2018 and June 2021 to obtain about half a billion dollars on the basis of falsified and fictitious equipment finance contracts: LJ [1]. The following findings made in the Liability Judgment are of present relevance.
The principal perpetrator and architect of the fraud was Mr Papas: LJ [4], [323], [1149], [1185].
An overview of the fraud is set out in Part C of the Liability Judgment. Relevantly, the fraud involved:
(1)Mr Papas creating, or causing the creation of, falsified equipment finance contracts and related documents, which were provided to the Financiers. Those contracts described fictional transactions and included forged signatures of counterparties and witnesses: LJ [327].
(2)On the basis of those documents, the Financers loaned funds to Forum Finance, Iugis NZ, Forum Enviro and Forum Enviro (Aust): LJ [41]-[45].
(3)The funds would then be transferred to FGFS which was used as the vehicle through which the fraudulently obtained funds were disbursed to a number of companies and persons associated with, and related to, Forum-related entities, Mr Papas and Mr Tesoriero. These funds were often disbursed by way of a loan as recorded on the FGFS balance sheet: LJ [43]-[48], [119], [327].
Mr Papas was found to be liable to the Financers for the fraud. From the time the funds were received from the Financiers, he held the money received on an imposed Black v Freedman trust: LJ [1149]. He was liable to account for those funds, and further liable to pay equitable compensation on the basis of breach of trust, knowing assistance and for knowing receipt: LJ [1150]-[1151], [1188], [1206].
Mr Tesoriero, Mr Papas’ business associate and very close friend, was found to have had actual knowledge of the fraud from the inception of the arrangements with Westpac and SMBC: LJ [437], [755], [918], [1155]. Accordingly, he held the money received on an imposed Black v Freedman trust: LJ [1156]. He was liable to pay equitable compensation on the basis of breach of trust, knowing assistance and for knowing receipt: LJ [1155]-[1158].
Capacity of applicants
The applicants are the joint and several liquidators of the corporate plaintiffs. The corporate plaintiffs (including those joined as a result of this application) are:
(1)FGOC;
(2)14 James Street;
(3)26 Edmonstone Road;
(4)5 Bulkara Street;
(5)6 Bulkara Street;
(6)Aramia Holdings Pty Ltd ACN 114 958 717 (in liquidation);
(7)Eros Management Pty Ltd ACN 622 298 346 (in liquidation);
(8)Forum Direct Pty Ltd ACN 054 890 710 (in liquidation);
(9)Forum Fleet Pty Ltd ACN 155 440 994 (in liquidation);
(10)FG;
(11)Forum Group (QLD) Pty Ltd ACN 103 609 678 (in liquidation);
(12)Forum Group (VIC) Pty Ltd ACN 153 062 018 (in liquidation)
(13)Imagetec Financial Services Pty Ltd ACN 111 978 182 (in liquidation) (Imagetec FS);
(14)Imagetec Solutions;
(15)Intrashield Investment Group Pty Ltd ACN 645 578 829 (in liquidation);
(16)Intrashield;
(17)Iugis Investments;
(18)Iugis;
(19)Iugis Waste;
(20)OneSource Australia Holdings Pty Ltd ACN 120 463 541 (in liquidation);
(21)Orca Enviro Solutions Pty Ltd ACN 626 552 645 (in liquidation);
(22)Orca Enviro Systems Pty Ltd ACN 627 597 782 (in liquidation);
(23)Smartprint;
(24)Spartan Consulting Group Pty Ltd ACN 168 989 544 (in liquidation);
(25)Forum Finance;
(26)FGFS;
(27)Forum Enviro;
(28)Forum Enviro (Aust);
(29)64-66 Berkeley Street;
(30)9 Gregory Street Ouyen Pty Ltd ACN 641 392 707 (in liquidation) (receivers and managers appointed);
(31)TIG;
(32)Palante; and
(33)23 Margaret Street.
The following subset of the corporate plaintiffs acted as trustees of trading trusts or otherwise held assets on trust:
(1)14 James Street;
(2)5 Bulkara Street;
(3)6 Bulkara Street;
(4)26 Edmonstone Road;
(5)Intrashield (noting that Intrashield was removed as trustee of the relevant trust on 14 February 2019 and was replaced by Mangusta);
(6)9 Gregory Street;
(7)64-66 Berkeley Street;
(8)TIG; and
(9)23 Margaret Street
(together, the trustee plaintiffs).
The deeds by which these trusts were established were tendered by the applicants. The governing law provided for in these deeds is either the law of New South Wales or the law of Victoria. For completeness, I note that although 26 Edmonstone Road’s primary asset was real estate situated in Queensland, the relevant trust deed nonetheless provided for the law of Victoria to be the governing law.
With the exception of TIG, upon the appointment of administrators or liquidators to the trustee plaintiffs, the relevant corporate plaintiff was removed as trustee by operation of the terms of the relevant trust deed. They each became bare trustees: Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 at [7] (Gordon J); Fletcher, in the matter of Starrit Pty Ltd (in liq) [2012] FCA 803 at [34] (Collier J); Re Neeeat Holdings (in liq) [2013] FCA 61; 299 ALR 744 at [19] (Kenny J). For this reason, the applicants sought and obtained orders from this Court in this proceeding on 3 September 2021 and 15 December 2022 whereby they were appointed as receivers and managers of the relevant trust assets under s 57 of the FCA Act. In that capacity, the applicants realised the trust assets and now hold the net proceeds of those sales.
For this reason, in addition to being joint and several liquidators of the corporate plaintiffs, the applicants also act in their capacity as Court-appointed receivers and managers of trust assets (or the proceeds of the sale of trust assets) where those assets were held by one or other of the trustee plaintiffs as the current or former (bare) trustees.
The corporate plaintiffs
The liquidators of the companies involved in (or otherwise, the beneficiaries of) the fraud have traced the distribution of the funds derived from the fraud and identified the property acquired and/or serviced using the stolen funds. The applicants’ evidence in relation to the specific tracing of the Financiers’ funds to the available asset pools is addressed in Part I of these reasons. The key findings in relation to the knowledge of each of the relevant entities is addressed in broad form below.
The corporate trustees
The liquidators of the corporate trustees involved in (or otherwise, the beneficiaries of) the fraud and/or receivers appointed to trust property or the proceeds of that property have traced the distribution of the funds derived from the fraud and identified the property acquired and/or serviced using the stolen funds. Again, the applicants’ evidence in relation to the specific tracing of the Financiers’ funds to the available asset pools is addressed in Part I of these reasons and the key findings in relation to the knowledge of each of the relevant entities is addressed in broad form below.
The tracing analysis
The factual evidence in relation to the tracing analysis provided by Mr Preston was essentially unchallenged: LJ [942]. The tracing analysis is addressed in Part I.25 of the Liability Judgment. Mr Ireland’s evidence regarding the SMBC arrangements is addressed in Part I.30 of the Liability Judgment. I accepted this evidence: LJ [1079]-[1080]. For convenience and given its importance to the issues that arise for consideration in the present application, I will briefly summarise the approach taken in the tracing analysis.
The liquidators identified two alternative methods for the tracing of funds through the Forum entities. In the Liability Judgment, I addressed the evidence in relation to tracing and the two tracing models in detail: LJ [937]-[965]. Both of the models used categories to identify the source of the funds identified in the tracing exercise. Funds sourced from the Financiers were categorised according to the Financier from which they were sourced. The category labelled as “Other” comprised funds which the liquidators were not able to attribute as having been sourced from any Financier. The “Other” category includes, for example, third party loans in respect of which there are no proprietary claims, such as constructive trust claims.
The First Tracing Model (as that term is used in the Liability Judgment: LJ [960]) analysed debits in the relevant accounts of Forum group entities by first expending funds in the Other category before allocating any payments as having been made from the funds traced from the Financiers (or any of them). Once the Other category was depleted, the analysis proceeded on the basis that funding from the Financiers was drawn down on a pro rata basis from the specific tracing categories according to the proportion of funds each of the Financiers had contributed to their designated tracing category: LJ [960(12)].
The Second Tracing Model (as that term is used in the Liability Judgment: LJ [960], referred to by the liquidators as the Alternate Tracing Model) adopted the inverse approach, by expending Financier funding first on a pro-rata basis according to the proportion of funds each Financier had contributed to their designated tracing category, prior to any payments being allocated to the Other category. Once Financier funding was depleted, the analysis proceeded on the basis that the Other category was then drawn down: LJ [960(13)].
In undertaking the tracing exercise, the liquidators have in respect of some of the entities identified that a proportion of the assets held by, or for, the particular entities may be attributable to funds traced from the Financiers (and in this respect, be supported by a proprietary claim) and also from the Other category.
Mr Preston deposes that in the majority of cases where he has identified funds falling within the Other category, the proportion of Other funds is very small (zero or less than 1% of the amounts traced to that particular entity with the result that the remaining 99% or more has been traced to the Financiers).
Mr Preston acknowledges that in some instances the proportion of Other funds is higher. He points to the following examples:
(1)Palante: 10.29%;
(2)TIG: 12.73%;
(3)23 Margaret Street: 3.71%;
(4)FG: for the “2934 Account” (as defined in paragraph [259(1)] below), 30.88%; and
(5)Iugis Investments: 9.56%.
In those cases where the proportion of Other funds is above about 1%, the amount of funds available for distribution to the Financiers is below the amount traced from them into the particular asset pool in the tracing exercise.
To presage the proposed approach to distribution in respect of which the applicants seek direction, the applicants seek to simplify the distribution process by treating the transactions deriving from the relevant bank accounts on the basis that Other funds have been spent before funds traceable to the Financiers. In this way the applicants seek to ensure that the relevant assets are distributed in a way that affords priority to the proprietary claims recognised in the Liability Judgment and which reduces the time and costs involved in the distribution process with a view to cauterising any unnecessary erosion of the distribution fund. I will address this further in Part I of these reasons.
Key knowledge findings
The key findings in respect of the knowledge of the corporate plaintiffs for present purposes include:
(1)Each entity within the Consolidated Group (which includes FGOC, Forum Finance, FG, Forum Enviro, and Forum Enviro (Aust)) was attributed Mr Papas’ knowledge of the fraud: LJ [1168]. Accordingly, a Black v Freedman trust was imposed on Financier funds that were received by the Consolidated Group entities: LJ [1148], [1169]-[1170], [1194], [1205].
(2)Each entity which fell within the description of the Jointly Owned Entities (which includes FGFS, 64-66 Berkeley Street, 14 James Street, 26 Edmonstone Road, 5 Bulkara Street and 6 Bulkara Street) was attributed Mr Papas’ knowledge of the fraud: LJ [1171]. Accordingly, a Black v Freedman trust was imposed on Financier funds that were received by the Jointly Owned Entities: LJ [1152], [1171]-[1172], [1197], [1207].
(3)Each entity which fell within the description of the Tesoriero Entities (which includes TIG, Mangusta, 23 Margaret Street and 9 Gregory Street: LJ [161])) was attributed Mr Tesoriero’s knowledge of the fraud: LJ [1174]. Accordingly, a Black v Freedman trust was imposed on Financier funds that were received by the Tesoriero Entities: LJ [1175], [1201]-[1202].
(4)Each entity which fell within the description of the Other Papas Entities (which includes Palante, Intrashield, Iugis – which was wholly owned by Iugis Holdings Limited – and Imagetec Solutions) was attributed Mr Papas’ knowledge of the fraud: LJ [172]-[174], [185]-[186], [1177] and Annexure M.
PART G – SOURCES OF POWER
The applicants originally framed the substantive relief they seek solely by reference to s 90‑15(1) of the IPS. At the hearing, the plaintiffs (as I will refer to them given the orders I will make as to joinder) relied on a more expansive list of sources of the Court’s power to grant the relief sought. That was done in some respects out of an abundance of caution but importantly it was done to ensure that the powers relied upon correlated to the various capacities in which the plaintiffs were acting in seeking the relief. Thus, at the hearing, the plaintiffs relied on the following additional heads of power:
(1)in so far as the plaintiffs are acting as liquidators, they continue to rely on s 90-15(1) of the IPS as they have from the outset; and
(2)in so far as the plaintiffs are acting as the Court-appointed receivers and managers of assets, including the proceeds of sale of trust assets, they rely on s 90-15(1) of the IPS, the Court’s general jurisdiction, s 19 of the FCA Act, r 14.23 of the Rules, s 63 of the Trustee Act 1925 (NSW) and rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Supreme Court of Victoria Rules).
For the reasons which follow, I am satisfied that it is appropriate and prudent for the relief sought to be granted to the extent that it is necessary to do so under these additional heads of power having regard to the various capacities in which the applicants act: see paragraphs [36] and [37] above.
Section 90-15(1) of the IPS
Section 90-15(1) of the IPS permits the Court to make such orders as it thinks fit “in relation to the external administration” of a company. While the words “in relation to” may arguably extend to the multiple capacities in which the applicants act in this case (since the receiverships were necessitated by the relevant plaintiffs entering administration and liquidation), that position is potentially uncertain where the definition of “external administration” in s 5-15 of the IPS lists administration and liquidation but does not list receivership.
In the present circumstances, I am satisfied that it is appropriate for the applicants to seek guidance or advice from the Court regarding the proposed order of distribution. The distribution raises issues of legal substance, as well as of propriety or reasonableness. The advice sought does not involve decision-making based on purely commercial value judgements. The Court’s task in providing directions in this proceeding arises in a setting where there are limitations on the available evidence and the relief must be fashioned in a way that takes into account what is reasonably and practically economical and likely to have utility.
Prudently, the applicants rely on the Court’s general jurisdiction and the additional heads of power which I have referred to above. In identifying the relevant additional heads of power upon which they rely, the applicants correctly note that s 424 of the Corporations Act, which permits the controller of property of a corporation to apply to the Court for directions relating to matters arising from the performance or exercise of their functions, does not apply in this case because the applicants were appointed as receivers by Court order and not “under a power contained in an instrument” as required by s 424(2).
The Court’s power to provide advice or directions to Court-appointed receivers
A court-appointed receiver is an officer of the court. As such, the receiver may resort to the court for necessary guidance concerning matters that are within the scope of their appointment: Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd [2002] NSWSC 576; 42 ACSR 240 at [11] (Barrett J). This Court has jurisdiction to provide judicial advice to the receivers that it has appointed: Francis (Trustee), in the matter of Fotios (Bankrupt) v Helios Corporation Pty Ltd [2022] FCA 199 at [16] (Colvin J).
Where receivers are appointed by the court, the court has jurisdiction to give its opinion, advice or direction to a receiver it has appointed. The jurisdiction to do so arises under s 39B(1A)(c) of the Judiciary Act 1903 (Cth) and is reflected in s 19(1) of the FCA Act. The power to do so is an incident of the statutory power to appoint a receiver under the Corporations Act. The power is one aspect of r 14.23 of the Rules. The relevant principles are canvassed in Australian Securities and Investments Commission v Caddick (No 2) [2023] FCA 1196 at [44]-[50] (Markovic J) and the authorities canvassed therein.
The principles relevant to determining whether the court should exercise this jurisdiction on an application by a court-appointed receiver are similar to those governing s 424 of the Corporations Act. In Re Sandalwood Properties Ltd; Ex parte Preston [2018] FCA 547 at [47] and [108], Colvin J set out the principles as to the nature and scope of available directions under s 424, as summarised by Vaughan J in Re Mirabela Nickel Ltd (receivers and managers appointed) (in liq); ex parte Madden [2018] WASC 335 at [89(1)] as follows:
The directions that may be provided are a form of personal guidance or advice; they articulate the approach the controller is justified in taking having regard to the known circumstances and relevant legal principles.
In Fotios at [17], Colvin J confirmed the Court’s jurisdiction to provide judicial advice to a private receiver in the manner that his Honour outlined in Sandalwood Properties and to a receiver appointed by Court order is relevantly co-extensive.
As with judicial advice given to a liquidator, there must be an issue calling for the exercise of legal judgment, that is, a legal issue of substance or procedure or an issue of power, propriety or reasonableness. The advice must relate to more than a business or commercial decision. However, the fact that a legal question may have significant commercial consequences does not make the giving of directions inappropriate. The Court does not give advice as to how the controller should act, but rather whether there is legal justification to so act having regard to known circumstances and applicable legal principles: Sandalwood Properties at [51]-[54] and [67].
The applicants have demonstrated that the issues they are confronted with as Court-appointed receivers in relation to distribution are complex and warrant the Court providing judicial advice under this head of power. The applicants, relevantly in their capacity as receivers, seek guidance or advice from the Court regarding the proposed order of distribution. As I have mentioned in the context of the part of the application that relies on the applicants’ status as liquidators, the distribution raises issues of legal substance, as well as propriety or reasonableness, and does not involve decision-making based upon purely commercial value judgements.
Section 63 of the Trustee Act and r 54.02 of the Supreme Court of Victoria Rules
To the extent that the applicants, in their capacity as Court-appointed receivers, propose to distribute monies that are the proceeds of sales of assets imprinted with trusts of which the corporate plaintiffs are bare trustees, s 63(1) of the Trustee Act and r 54.02(2) of the Supreme Court of Victoria Rules are enlivened. The applicants seek to invoke these provisions in the name of the relevant corporate trustees, now bare trustees, and not in their own capacity as Court-appointed receivers of trust property: cf. In the matter of Anglican Development Fund Diocese of Bathurst (receivers & managers appointed) [2015] NSWSC 440 at [11] (Brereton J, as his Honour then was).
Section 63(1) of the Trustee Act provides:
Advice
(1)A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.
Rule 54.02 of the Supreme Court of Victoria Rules relevantly provides:
Relief without general administration
(1)A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.
(2) Without limiting paragraph (1), a proceeding may be brought for—
(a)the determination of any question which could be determined in an administration proceeding, including any question—
(i)arising in the administration of an estate or in the execution of a trust;
…
(c) an order—
(i)approving any sale, purchase, compromise or other transaction by an executor, administrator or trustee; or
(ii)directing any act to be done in the administration of an estate or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed under the direction of the Court.
Rule 54.02 confers “very broad powers” on the court: Ballard v Attorney-General (Vic) [2010] VSC 525; 30 VR 413 at [41] (Kyrou J).
For completeness, I note that it is generally not necessary for an application under s 63 of the Trustee Act or under r 54.02 of the Supreme Court of Victoria Rules to be served on any person: Trustee Act, s 63(4); Supreme Court Victoria Rules, r 54.04(1).
The plaintiffs submit that the relief they seek on this application falls squarely within the ambit of these provisions. I agree.
This Court has jurisdiction to hear an application and make orders under s 63 of the Trustee Act in certain circumstances where the federal claim forms part of the entire litigious or justiciable controversy between the parties: Hodges v Waters (No 7) [2015] FCA 264; 232 FCR 97 at [40]-[48] (Perram J). Relevantly, where a party invokes federal jurisdiction under the Corporations Act, it is “a question of practical judgment and impression” as to whether the various claims all arise from a substantially similar common substratum of fact to accrue jurisdiction: Hodges at [43]. In Hodges, Perram J accepted that a claim for judicial advice necessarily arises from the same substratum of facts as its actual claim: [45].
Having regard to these principles, Perram J held that s 79(1) of the Judiciary Act was enlivened, with the effect that s 63 of the Trustee Act was made binding on the Court: Hodges at [49]-[51]. Rule 54.02 of the Supreme Court of Victoria Rules did not form part of the analysis in Hodges. The applicants submit, and I accept, that the same analysis as to the enlivening of s 79(1) of the Judiciary Act applies in this application.
While the present application before the Court does not involve litigious controversy between adversarial parties, similar considerations arise as were relevant in Hodges. The applicants, as liquidators and Court-appointed receivers, have invoked federal jurisdiction. The same substratum of facts gives rise to justiciable matters under the Trustee Act in so far as some of the applicants are bare trustees and relevant assets to be distributed by the applicants are imprinted with those trusts. I am satisfied that to the extent the relief sought by the applicants is predicated on the Court’s accrued jurisdiction they have established a sound basis upon which that accrued jurisdiction is enlivened.
Turning to whether the Court should exercise its jurisdiction, I am satisfied that it is appropriate to do so in circumstances where the applicants have established the utility in the Court providing directions under s 63 of the Trustee Act and r 54.02 of the Supreme Court of Victoria Rules, which if acted on, will afford them a degree of protection from suit: Trustee Act, s 63(2); Ballard at [41]. Granting relief in reliance on these additional heads of power will facilitate the closely interrelated matters arising in relation to the distribution of assets following the Liability Judgment being determined in a manner that is efficient and effective and which reduces the risk of longtail claims or controversies. I am satisfied that adopting this approach serves the overarching purpose of proceedings in this Court.
PART H – GENERAL PRINCIPLES RELEVANT TO DISTRIBUTION
I will address the applicable legal principles under the following headings:
(1)the nature of the relief sought;
(2)the principles in Re Universal Distributing Co Ltd (in liq) [1933] HCA 2; 48 CLR 171;
(3)statutory indemnity and lien of an administrator and former administrator;
(4)a former trustee’s right of indemnity
(5)the claims made based on interests arising under a Black v Freedman constructive trust;
(6)subrogation;
(7)claims of employee creditors under the Corporations Act;
(8)competing priorities; and
(9)tracing.
Nature of the relief sought
The applicants apply in their various capacities for advice, or direction, that they are justified in distributing the assets of the relevant entities. As mentioned, the function of a liquidator’s application for directions is to give the liquidator advice as to the proper course of action for him or her to take in the liquidation: Re Force Corp at [18] (Gleeson J). By analogy, so too in relation to the function of the applications for directions made by the applicants in their other relevant capacities.
The Court’s power to give directions under s 90-15 of the IPS includes the power to give a liquidator advice as to the proper course of action to take in a liquidation, and may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion, although it typically will not do so where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision: Re Force Corp at [19] (Gleeson J); Re Spitfire Corporation Ltd (in liq) and Aspirio Pty Ltd (in liq) [2022] NSWSC 340; 160 ACSR 394 at [16] (Black J), citing his Honour’s earlier decisions in Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 and Re RCR Tomlinson Ltd (admins apptd) [2020] NSWSC 735 at [6].
In Kelly (Liquidator), Halifax Investment Services Pty Ltd (In Liq) v Loo [2021] FCA 531; 390 ALR 669 at [15]-[20], Markovic J comprehensively reviewed the principles applicable to an application for directions pursuant to s 90-15 of the IPS and to an application for judicial advice pursuant to s 63 of the Trustee Act, citing in turn the summary given by Gleeson J in Re Kelly, in the matter of Halifax Investments Services Pty Ltd (in liq) (No 8) [2020] FCA 533; 144 ACSR 292 at [50]-[59]. I gratefully adopt and apply those principles in determining this application.
The following observations made by Markovic J in Halifax in relation to the nature of the liquidators’ application for directions are apposite (at [247]):
Such an application does not determine equitable proprietary rights; the effect of directions made by the Court is to immunise a liquidator from personal liability provided he or she acts in accordance with those directions: Courtenay House at [151]. As was recognised by Brereton J in Re BBY (No 2) [[2018] NSWSC 346; 363 ALR 492] (at [40]) in “a liquidator’s application for directions courts often have to do ‘rough justice’ because of the limitations of the available evidence” and in light of what is reasonably and practically economical.
The applicants’ proposed order of distribution of the net proceeds of sale of XOXO yacht is as follows:
Asset Pool Proposed order of distribution Net proceeds of sale of XOXO yacht First, Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation and realisation of that property in accordance with the Universal Distributing lien.
Second, Intrashield pursuant to its right of indemnity as former trustee of the Mangusta Trust.
Net proceeds of XOXO
The applicants’ proposed order of distribution of the proceeds of the XOXO yacht is in accordance with orthodox principle.
The first priority is the costs and remuneration of the receivers for any costs and remuneration reasonably incurred by them in the care, preservation and realisation of the XOXO yacht in accordance with the Universal Distributing lien.
The second priority is to Intrashield pursuant to its right of indemnity as former trustee of the Mangusta Trust: see paragraphs [107]-[109] and [199]-[201] above.
Conclusion
I am satisfied that the applicants are justified in distributing the remaining proceeds of the sale of the XOXO yacht in the manner in which they propose.
9 Gregory Street
Overview
9 Gregory Street purchased and leased the property at 9 Gregory Street, Ouyen, Victoria (the 9 Gregory Street Property) on 18 December 2020 for $900,000. The property was a non-operational petrol station site. It was acquired using:
(1)funds loaned by ANZ in the sum of $540,000, secured by a registered mortgage over the 9 Gregory Street Property and a PPSA security interest;
(2)vendor financing of $70,000 provided by Aksara, secured by an equitable charge or equitable mortgage over the 9 Gregory Street Property; and
(3)$5,400 from FGFS, traced to Financier funds.
9 Gregory Street was the trustee of the 9 Gregory Street Ouyen Unit Trust. It did not have had any employees or conduct any other business other than holding and leasing the 9 Gregory Street Property in its capacity as trustee of the 9 Gregory Street Ouyen Unit Trust. In December 2022, Mr Preston and Mr Ireland were appointed by this Court as receivers and managers of the 9 Gregory Street Property. They had been appointed as the liquidators of 9 Gregory Street in November 2022.
Mr Preston and Mr Ireland caused a sale process to be conducted with respect to the 9 Gregory Street Property. One proposed sale did not complete, and the purchaser, Master Maximus Holdings Pty Ltd, forfeited a deposit of $80,000, which was collected in a receivership account. On 2 September 2024, the 9 Gregory Street Property was sold for $500,000. Of that amount, amongst other amounts payable at settlement, approximately $334,744 was paid to ANZ and ANZ’s mortgage was discharged. The applicants’ evidence does not explain why ANZ’s mortgage was not fully discharged at this time. The applicants’ evidence is that approximately $283,427 remains outstanding to ANZ, which continues to be secured by a registered security interest under the PPSR over all present and after-acquired property of 9 Gregory Street.
9 Gregory Street assets available for distribution
The 9 Gregory Street assets available for distribution include:
(1)The remaining proceeds of sale of the 9 Gregory Street Property (approximately $152,966) held by the liquidators’ solicitors in a controlled money account; and
(2)The remaining funds of approximately $62,649 primarily derived from the deposit forfeited by Master Maximus Holdings Pty Ltd and from rental income.
Competing claims
Apart from the claims based on the equitable interests of those Financiers whose funds have been traced via FGFS to the purchase of the 9 Gregory Street Property, the applicants identify the following as creditor claimants of 9 Gregory Street: the liquidators and receivers; ANZ; Aksara (and potentially 14 James Street as subrogee); and FGFS.
Consideration of proposed order of distribution
Table 17: 9 Gregory Street Summary of Proposed Distribution
The applicants propose the following order of distribution for the assets of 9 Gregory Street:
Asset Pool Proposed order of distribution Proceeds of the sale of the 9 Gregory Street Property First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 9 Gregory Street in accordance with the principle in Universal Distributing;
Second, to ANZ pursuant to its PPSA security interest; and
Third, to the extent of any remaining funds, to Aksara (or any subrogee of Aksara) and the Financiers in the following proportions:
· Aksara: 92.84%
· WBC: 5.59%;
· WNZL: 1.27%; and
· SMBC: 0.3%.
Other property (being the remaining balance of the deposit forfeited by the purchaser as a result of the earlier aborted sale of the 9 Gregory Street Property and some rental income) First, to Mr Preston and Mr Ireland for costs and remuneration reasonably incurred in the care, preservation and realisation of those assets, on the basis set out in Universal Distributing;
Second, to ANZ pursuant to its PPSA security interest; and
Third, in accordance with s 556 of the Corporations Act, on the basis that Aksara’s equitable charge or equitable mortgage does not extend to those amounts and the Financiers cannot trace into those amounts.
Proceeds of the sale of the 9 Gregory Street Property
The applicants are justified in giving first priority to the payment of any costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 9 Gregory Street in accordance with the principle in Universal Distributing.
ANZ is a secured creditor that acquired its proprietary interest without being on notice of the conduct giving rise to the Financiers’ equitable interest. It therefore ranks in priority to equitable interests of the Financiers and of Aksara: see paragraph [180] above.
To the extent that funds remain available for distribution to the Financiers and Aksara, their respective equities are equal — they arose contemporaneously on purchase of the 9 Gregory Street Property.
The applicants’ evidence identified that in relative terms, $5,400 of Financier funds and $70,000 of Aksara’s funds were used in the purchase the 9 Gregory Street Property. Accordingly, their proportionate entitlement to any remaining funds will be shared as between them in the proportion 70,000 (Aksara):5,400 (the Financiers collectively). The Financiers’ individual entitlements will then be in the proportions identified by the applicants in the table above which reflects the respective amounts traced from each of them to the cumulative amount of $5,400.
In the event that Aksara is paid in full, 14 James Street as a secured creditor of 9 Gregory Street will by virtue of its subrogation to Aksara’s rights as against 9 Gregory Street be entitled to a distribution in Aksara’s place. As mentioned, 14 James Street paid Aksara approximately $366,188 as guarantor of 9 Gregory Street's obligations under the loan deed between Aksara and 9 Gregory Street and is thus entitled to be subrogated to Aksara’s equitable interest: see paragraphs [191]-[197] and [351].
Other property
The other property which is available for distribution is the remaining balance of the deposit forfeited by the would-be purchaser of the 9 Gregory Street Property as a result of the proposed sale which did not complete and some rental income. Aksara’s interest does not extend to that property and the Financiers are not able to trace into this property. In these circumstances, the proposed distribution of this property by the applicants is justified.
Conclusion
I am satisfied that the applicants are justified in distributing the assets of 9 Gregory Street in the manner in which they propose.
64-66 Berkeley Street
Overview
64-66 Berkeley Street is another of the Jointly Owned Entities. It owned the residential property at 64-66 Berkeley Street, Hawthorn, Victoria (the Berkeley Street Property) in its capacity as trustee for the 64-66 Berkeley St Hawthorn Unit Trust (the Berkeley Trust): LJ [156(1)]. The Berkeley Street Property was used by Mr Tesoriero as his primary residence: LJ [838].
64-66 Berkeley Street did not have any employees as at the date of the liquidators’ appointment and is not known to have had any employees or conducted any other business at any other time.
The Berkeley Trust was established on or around 26 August 2020, based on the date of the trust deed, shortly before the acquisition of the Berkeley Street Property on 23 November 2020. The Berkeley Street Property was recorded as an asset in the balance sheet of the Berkeley Trust. 64-66 Berkeley Street purchased the Berkeley Street Property for $7,950,000 using funds sourced from Judo Bank (which was later refinanced by Gemi) and FGFS (including from Financier Funds): LJ [838].
Judo Bank provided a $7.155 million loan to 64-66 Berkeley Street. The security for this facility included a registered mortgage over the Berkeley Street Property, a general security interest over all present and after-acquired property of 64-66 Berkeley Street, guarantees from Mr Tesoriero and FGOC, and a general security interest over all present and after-acquired property of FGOC.
FGFS provided the sum of $1,409,025 towards the purchase of the Berkeley Street Property.
The applicants’ evidence demonstrates that $1,774,931.12 of the Financiers’ funds were paid to or used to make payments on behalf of 64-66 Berkeley Street, including in the purchase of the Berkeley Street Property and in repaying the Judo Bank loan.
In or around 15 February 2023, Judo Bank assigned its loan and the mortgage over the Berkeley Street Property to Gemi. The applicants’ evidence details the various interactions between Mr Preston and Mr Ireland and the receivers and managers who were appointed to the Berkeley Street Property by Gemi in relation to taking possession of the property and in dealing with Mr Tesoriero and Samantha Pagano, who continued to occupy the property. The culmination so far as is presently relevant is that on 18 September 2023, Gemi sold the Berkeley Street Property as mortgagee-in-possession for the sum of $9,360,000. The net proceeds of the sale of the Berkeley Street Property were disbursed as follows:
(1)$7,851,359.84 was paid to Gemi as mortgagee;
(2)$45,500 was refunded to the purchasers after an apparent removal of fixtures.
(3)$1,009,794.86 was paid to the liquidators’ solicitors; and
(4)various other amounts were paid at completion to third parties.
64-66 Berkeley Street assets available for distribution
The 64-66 Berkeley Street assets available for distribution are the remaining net proceeds of the sale of the Berkeley Street Property, totalling approximately $1,041,118.
Competing claims
Apart from the claims based on the equitable interests of the Financiers whose funds have been relevantly traced to 64-66 Berkeley Street, the applicants identify the following as creditor claimants of 64-66 Berkeley Street: Mr Preston and Mr Ireland in their capacity as liquidators and/or receivers; and FGFS (in respect of an unsecured loan).
For completeness, I note that the Tesoriero Entities previously claimed an interest in the Berkeley Street Property in respect of financial contributions made to the Berkeley Street Property. That interest was based on alleged financial contributions made by the Tesoriero Entities towards the Berkeley Street Property. The liquidators declined to include this claim in the distribution of 64-66 Berkeley Street’s assets because:
(1)the Tesoriero Entities have not demonstrated that their own moneys (as opposed to monies obtained directly or indirectly from the Financiers) were paid towards the Berkeley Street Property (nor have they demonstrated that the payments made were not gifts made at the direction of Mr Tesoriero);
(2)having regard to the findings made against Mr Tesoriero and the Tesoriero Entities in the Liability Judgment, the Tesoriero Entities are not entitled to exercise any right of equitable subrogation and that is the only mechanism by which they could obtain priority over the Financiers' equitable interest. In short, it would be inequitable for the Tesoriero Entities to enjoy rights of subrogation to the detriment of the Financiers they defrauded: Bofinger at [52], [71], [78], [82].
Had it been necessary to determine this issue, I would accept the applicants’ submissions. As it is, the claim was not pressed.
Consideration of proposed order of distribution
Table 18: 64-66 Berkeley Street Summary of Proposed Distribution
The applicants propose the following order of distribution for the assets of 64-66 Berkeley Street:
Asset Pool Proposed order of distribution Proceeds of the Berkeley Street Property First, to Mr Preston and Mr Ireland for costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 64-66 Berkeley Street, in accordance with the principle in Universal Distributing; and
Second, to the Financiers in the following proportions:
· WBC: 33.38%;
· WNZL: 9.01%;
· SMBC: 57%; and
· Societe Generale: 0.61%.
Proceeds of the Berkeley Street Property
The applicants are justified in affording first priority to Mr Preston and Mr Ireland for costs and remuneration reasonably incurred in the care, preservation or realisation of the assets of 64-66 Berkeley Street in accordance with the principle in Universal Distributing.
As mentioned, the applicants’ evidence establishes that approximately $1,774,931 of Financier funds were paid to, or used to make payments on behalf of, 64-66 Berkeley Street, including purchasing the Berkeley Street Property and repaying the Judo Bank loan. 64‑66 Berkeley Street did not use any of its own funds to purchase the Berkeley Street Property.
Applying the findings and principles in the Liability Judgment, the Financiers have an equitable proprietary interest in the proceeds of sale of the Berkeley Street Property, including in any increase in the value of the property (see principles set out at paragraphs [217]-[222] above). The Financiers’ interests rank second.
For the reasons given at paragraph [241] above, I am satisfied that the applicants are justified in distributing as between the Financiers in the proportions they have identified notwithstanding the declaration as to subrogation made in favour of Westpac and SMBC in the Liability Proceedings.
These two stages of distribution will exhaust the relevant asset.
Conclusion
I am satisfied that the applicants are justified in distributing the assets of 64-66 Berkeley Street in the manner in which they propose.
TIG
Overview
TIG is the trustee of the Tesoriero Investment Trust and was used by Mr Tesoriero as a vehicle for investing in FGOC: LJ [475], [476], [504]. TIG received money from various other entities associated with the Forum Group (including as loans) and made payments to other entities in the Forum Group. TIG did not have any employees at the date of the liquidators’ appointment on 2 November 2022.
CBA is a secured creditor of TIG pursuant to a valid and enforceable PPSA security interest granted by TIG as security for a “BetterBusiness Loan” facility. The loan facility was for $6.44 million for a term of three years. As at 2 September 2024, approximately $3,949,184 remained outstanding.
The applicants’ evidence demonstrates that TIG obtained funds from FGFS, which are traced in part to the Financiers’ funds. A total of approximately $577,014 of Financier funds were paid to or used to make payments on behalf of TIG.
TIG assets available for distribution
The TIG assets available for distribution are:
(1)funds held by TIG prior to the liquidators’ appointment which are held by CBA, totalling approximately $40,871; and
(2)the net proceeds of a settlement with Haidi Holdings Pty Ltd, which are held in a liquidation account, totalling approximately $157,424.
The settlement with Haidi was in respect to debts owed to TIG by Haidi in its capacity as trustee of the John Tesoriero Family Trust. The total settlement was $293,750.98, which comprised approximately $244,251 to pay the debt, reasonable costs of $40,000 and disbursements of $9,500. The circumstances in which the underlying debt came about are described in Re Haidi Holdings Pty Ltd [2023] VSC 739.
Competing claims
Apart from the claims based on the equitable interests of the Financiers whose funds have been traced to TIG, the applicants identify the following as creditor claimants of TIG: the liquidators; CBA (which holds a registered all present and after-acquired property PPSA security interest pursuant to the CBA loan facility); and various unsecured creditors (including FGFS, 286 Carlisle Street and Mr Tesoriero).
Consideration of proposed order of distribution
Table 19: TIG Summary of Proposed Distribution
The table below outlines the applicants’ proposed order of distribution for each asset of TIG:
Asset Pool Proposed order of distribution Pre-appointment funds First, to CBA pursuant to its registered security interest; and
Second, to the extent that any funds remain, to the Financiers in the following proportions:
· WBC: 81.4%;
· WNZL: 11.13%; and
· SMBC: 7.47%.
Funds from settlement with Haidi First, to Mr Preston and Mr Ireland for any costs and remuneration reasonably incurred in their role as liquidators in the care, preservation or realisation of the right of action resulting in the sum obtained from settlement with Haidi, pursuant to the principle in Universal Distributing. This includes Mr Preston and Mr Ireland’s costs incurred in issuing the statutory demand to Haidi, responding to the set aside application and negotiating a payment of the outstanding amounts owed;
Second, to CBA pursuant to its registered security interest; and
Third, to the extent any funds remain, in accordance with s 556 of the Corporations Act.
Pre-appointment funds
The applicants seek to distribute these funds in an orthodox way affording first priority to CBA as a secured creditor and thereafter to those of the Financiers whose funds have been relevantly traced into this asset pool. The applicants do not assert a claim pursuant to the principle in Universal Distributing given the nature of this asset. The applicants are justified in the approach they have taken.
Funds from the settlement with Haidi
The Financiers cannot trace into the proceeds of the settlement with Haidi. The settlement sum is in connection with a debt arising from unpaid entitlements that were payable to TIG by Haidi in its capacity as trustee of the John Tesoriero Family Trust. The entitlement of TIG to receive the distributions that had been declared but not paid from that trust cannot be said to be derived from, or by the use of, funds advanced by the Financiers.
Accordingly, the proposed distribution is that the first priority will be in accordance with the Universal Distributing lien, then to CBA as secured creditor and thereafter pursuant to s 556 of the Corporations Act.
Conclusion
I am satisfied that the applicants are justified in distributing the assets of TIG in the manner in which they propose.
23 Margaret Street
Prior to the commencement of the hearing of the present application, the applicants informed the Court that they no longer seek directions in relation to the distribution of the assets of 23 Margaret Street. The circumstances in relation to 23 Margaret Street are exposed in my consideration of the distribution of the assets of FGFS.
PART J – CONCLUSION
For these reasons, having regard to the known circumstances and the relevant legal principles, I am satisfied that the applicants are justified and otherwise acting reasonably in taking the approach they have articulated in relation to distribution. None of those notified by the applicants have sought to be heard against the proposed distribution. The approach advanced by the applicants is consistent with, and informed by, the imperative of preserving the assets available for distribution. Where the applicants have on an informed basis concluded that further investigation is unlikely to change the order of distribution, they have responsibly exposed the basis for forming that view and it appears to be reasonable. I will make orders giving effect to the applicants’ proposed order of distribution and the related orders sought as to joinder.
The applicants’ costs of and incidental to this application will be costs in the relevant liquidations and receiverships. As a matter of fairness, the applicants proposed that the costs order should operate on a several basis, with the costs divided in proportion to the funds of each entity available for distribution. The making of an additional order as to costs to this effect was not opposed by the Financiers. I accept that it is appropriate in the present circumstances for the costs order to operate in this way.
I certify that the preceding five hundred and forty-eight (548) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate:
Dated: 1 August 2025
SCHEDULE OF PARTIES
Second Plaintiff
14 JAMES STREET PTY LTD (IN LIQUIDATION) ACN 638 449 206
Third Plaintiff
26 EDMONSTONE ROAD PTY LTD (IN LIQUIDATION) ACN 622 944 129
Fourth Plaintiff
5 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 630 982 160
Fifth Plaintiff
6 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 639 734 473
Sixth Plaintiff
ARAMIA HOLDINGS PTY LTD (IN LIQUIDATION) ACN 114 958 717
Seventh Plaintiff
EROS MANAGEMENT PTY LTD ACN 622 298 346 (ADMINISTRATORS APPOINTED)
Eighth Plaintiff
FORUM DIRECT PTY LTD ACN 054 890 710 (ADMINISTRATORS APPOINTED)
Ninth Plaintiff
FORUM FLEET PTY LIMITED (IN LIQUIDATION) ACN 155 440 994
Tenth Plaintiff
FORUM GROUP PTY LTD (ADMINISTRATORS APPOINTED) (IN LIQUIDATION) ACN 153 336 997
Eleventh Plaintiff
FORUM GROUP (QLD) PTY LTD ACN 103 609 678 (ADMINISTRATORS APPOINTED)
Twelfth Plaintiff
FORUM GROUP (VIC) PTY LTD ACN 153 062 018 (ADMINISTRATORS APPOINTED)
Thirteenth Plaintiff
IMAGETEC FINANCIAL SERVICES PTY LTD (IN LIQUIDATION) ACN 111 978 182
Fourteenth Plaintiff
IMAGETEC SOLUTIONS AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 074 715 718
Fifteenth Plaintiff
INTRASHIELD INVESTMENT GROUP PTY LTD ACN 645 578 829 (ADMINISTRATORS APPOINTED)
Sixteenth Plaintiff
INTRASHIELD PTY LTD (IN LIQUIDATION) ACN 133 426 534
Seventeenth Plaintiff
IUGIS INVESTMENTS PTY LTD ACN 647 627 745 (ADMINISTRATORS APPOINTED)
Eighteenth Plaintiff
IUGIS PTY LTD (IN LIQUIDATION) ACN 632 882 243
Nineteenth Plaintiff
IUGIS WASTE SOLUTIONS PTY LTD (IN LIQUIDATION) ACN 647 212 299
Twentieth Plaintiff
ONESOURCE AUSTRALIA HOLDINGS PTY LIMITED ACN 120 463 541 (ADMINISTRATORS APPOINTED)
Twenty First Plaintiff
ORCA ENVIRO SOLUTIONS PTY LTD ACN 626 552 645 (ADMINISTRATORS APPOINTED)
Twenty Second Plaintiff
ORCA ENVIRO SYSTEMS PTY LTD ACN 627 597 782 (ADMINISTRATORS APPOINTED)
Twenty Third Plaintiff
SMARTPRINT FLEET MANAGEMENT PTY LTD ACN 132 807 080 (ADMINISTRATORS APPOINTED)
Twenty Fourth Plaintiff
SPARTAN CONSULTING GROUP PTY LTD (IN LIQUIDATION) ACN 168 989 544
Twenty Fifth Plaintiff
FORUM FINANCE PTY LTD (IN LIQUIDATION) ACN 153 301 172
Twenty Sixth Plaintiff
FORUM GROUP FINANCIAL SERVICES PTY LTD (IN LIQUIDATION) ACN 623 033 705
Twenty Seventh Plaintiff
FORUM ENVIRO PTY LTD (IN LIQUIDATION) ACN 168 709 840
Twenty Eighth Plaintiff
FORUM ENVIRO (AUST) PTY LTD (IN LIQUIDATION) ACN 607 484 364
Twenty Ninth Plaintiff
64-66 BERKELEY ST HAWTHORN PTY LTD ACN 643 838 662 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Thirtieth Plaintiff
9 GREGORY STREET OUYEN PTY LTD ACN 641 392 707 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
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