Re Chang Jiang Financial Pty Ltd (in liq)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2024 03773

IN THE MATTER of CHANG JIANG FINANCIAL PTY LTD (IN LIQUIDATION)
(ACN 624 164 067)

BETWEEN:

STEPHEN ROBERT DIXON and GEOFFREY TRENT HANCOCK in their capacities as joint and several Liquidators of CHANG JIANG FINANCIAL PTY LTD (IN LIQUIDATION) (ACN 624 164 067)	First and Second Plaintiffs
- and -
CHANG JIANG FINANCIAL PTY LTD (IN LIQUIDATION) (ACN 624 164 067)	Third Plaintiff
v
LONG RIVER AUSTRALIA PTY LTD (ACN 661 725 613)	Defendant

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JUDGE:	Sloss J
WHERE HELD:	Melbourne
DATES OF HEARING:	6 and 18 November 2024
DATE OF JUDGMENT:	18 November 2024 (ex tempore)
CASE MAY BE CITED AS:	Re Chang Jiang Financial Pty Ltd (in liq)
MEDIUM NEUTRAL CITATION:	[2024] VSC 721

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CORPORATIONS – Corporations Act 2001 (Cth) – Section 90-15, Insolvency Practice Schedule (Corporations) – Liquidators’ application for directions in conduct of external administration – Liquidators have identified that significant funds (in the form of bank cheques and moneys in a Westpac account) are being held by the company’s agent (Long River) as part of the company’s business operations – Liquidators understand that Long River did not conduct any other business apart from acting as an agent for the company in relation to receiving customer funds – Long River has no beneficial interest in those funds and its sole director does not know to whom those funds belong – Liquidators are concerned that bank cheques will shortly go ‘stale’ unless banked – Liquidators sought orders and directions authorising them to effectively take control of the recovered funds (the proceeds of the bank cheques and the moneys in the Westpac account) and deposit them in the Court’s Common Fund No. 1 where they would be held and preserved pending ascertainment of beneficial owner(s) – Long River and interested persons were given notice of orders and directions sought by Liquidators – Liquidators authorised to take appropriate steps to facilitate payment of the recovered funds into the Court’s Common Fund No. 1 – Liquidators entitled to apply for payment of their reasonable remuneration, costs and expenses incurred in the care, preservation and realisation of the recovered funds out of the recovered funds held in the Court’s Common Fund No. 1 – Any person affected by the orders and directions made pursuant to this judgment has liberty to apply.

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APPEARANCES:	Counsel	Solicitors
For the plaintiffs	Mr J Kohn	Mason Black + Mendelsons Lawyers
No appearance by or on behalf of the defendant

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 4

Affidavit evidence and chronology............................................................................................ 4
The Company................................................................................................................................ 5
Restraining orders were made in respect of Mr Zhuo Chen on 24 October 2023...... 6
Criminal charges were laid against Mr Zhuo Chen on 25 October 2023.................... 7
AUSTRAC suspended the Company’s registration on the Remittance Sector Register on 24 October 2023............................................................................................................. 7

External Administration of the Company..................................................................................... 8

Initial steps of the administrators............................................................................................... 8
Administrators’ s 439A report........................................................................................... 9

Steps undertaken as Liquidators................................................................................................ 9
Liquidators’ First Report.................................................................................................. 10

Cash on hand recovered by the Liquidators........................................................................... 12
Cash on hand recovered from Company premises...................................................... 12
Cash on hand recovered from Macquarie Bank........................................................... 13

Funds held by the Company’s agent, Long River.................................................................. 14
Incorporation of Long River............................................................................................ 14
Long River’s bank accounts were used to pool money for the Company’s business 14
The Liquidators understand that Long River acted solely as an agent for the Company in relation to receiving customer funds.................................................................. 15
The Liquidators have identified customers of the Company who transferred funds to Long River at the direction of the Company............................................................... 16
The Liquidators believe that the Long River Funds belong to the Company.......... 17

Long River does not oppose the Liquidators’ proposal to pay Long River Funds into Funds in Court.................................................................................................................................... 18

The plaintiffs’ originating process............................................................................................... 18

Relevant principles.......................................................................................................................... 21

Plaintiffs’ submissions................................................................................................................... 24

Consideration and disposition...................................................................................................... 25

Conclusion......................................................................................................................................... 34

HER HONOUR:

Introduction

This proceeding is brought by the first and second plaintiffs, Stephen Robert Dixon and Geoffrey Trent Hancock (the Liquidators) in their capacity as joint and several liquidators of the third plaintiff, Chang Jiang Financial Pty Ltd (In Liquidation) (ACN 624 164 067) (the Company).

The named defendant is Long River Australia Pty Ltd (Long River). The Liquidators understand from their enquiries that Long River did not conduct any business apart from acting as an agent for the Company in relation to receiving customer funds, and that Long River’s bank accounts were used to pool money for the Company’s business.

In essence, the Liquidators have identified that there are significant amounts of funds that were involved in, or the subject of aspects of, the Company’s former business operations that currently are held by third parties (primarily Long River). However, because the Australian Federal Police (AFP) seized and now have control of the books and records of the Company, the Liquidators are unable to ascertain or express an opinion as to who is the beneficial owner of, or person(s) beneficially entitled to those funds. In the case of the funds held by Long River, the solicitor acting for Long River has informed the Liquidators that neither Long River nor its sole director, Ms Zhenting Yu, maintains any beneficial interest in the ‘Long River Funds’[1] and Ms Yu does not know who those funds belong to.
[1]The term ‘Long River Funds’ is defined in paragraph 5.

In those circumstances, the plaintiffs seek assistance from the Court pursuant to

s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 of the Corporations Act 2001 (Cth) (Corporations Act), and the inherent jurisdiction of the Court, to permit the Liquidators, in their capacity as liquidators, to pay, or procure the payment of, funds the subject of the Company’s former business operations that currently are held by third parties (including Long River) into ‘Funds in Court’ so as to preserve them, pending investigation as to their beneficial ownership once the books and records of the Company become available to the Liquidators. The Liquidators anticipate that once the Company’s books and records are released or made available by the AFP, they will be able to determine who is beneficially entitled to the funds.

For the sake of clarity – and while further explanation will be given later in these reasons – it is necessary at this early stage to identify the funds that the plaintiffs seek be paid into Funds in Court. The originating process refers to two types of asset, the first being ‘Cash Assets’ and the second being ‘Long River Funds’. The Cash Assets constitute (a) cash on hand held in a safety deposit box, and (b) proceeds from an account held with Macquarie Bank. The Long River Funds comprise (a) two bank cheques issued by the Commonwealth Bank of Australia to Long River upon closure of its account(s), and (b) cash held in Long River’s Westpac account (the Long River Funds).

Following the hearing on 6 November 2024, when it became clear that a ‘staged’ process was required to be adopted, the plaintiffs formulated a set of proposed interim orders to address the Long River Funds (only). In those proposed interim orders, it was noted under ‘Other matters’ that orders are no longer sought in relation to the Cash Assets, given that they are in the Liquidators’ possession and control and that no other party has made a claim on them. Accordingly, the plaintiffs propose that the funds comprising the Cash Assets will be dealt with by the Liquidators in the ordinary course of the winding up of the Company.

Having provided the proposed interim orders and a short supplementary submission, the plaintiffs requested that the matter be re-listed for a further hearing for the making of the interim orders sought. The matter was re-listed for further hearing on 18 November 2024, and a copy of the minute of proposed orders sought was provided to the solicitors for Long River and the AFP.

While the plaintiffs have served the originating process on Long River and given notice of the application to interested persons or parties, being the AFP and AUSTRAC[2], and four customers of the Company who were directed to deposit funds with Long River[3], there is no contradictor present before the Court on the hearing of their application. Long River has informed the Court that it does not intend to appear at the hearing of the application but will abide any order of the Court, and does not wish to be heard in the proceeding generally unless any order for costs is sought against it.[4]
[2]‘AUSTRAC’ is the acronym for the Australian Transaction Reports and Analysis Centre, which is an Australian government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism financing.
[3]Being Balance International Co Ltd, China North New Material, Helios Assets Holding Pty Ltd and Mr Yi Lu (see Second Pomaroff Affidavit, at [5]-[12]). I note that an exchange at the directions hearing on 13 September 2024 gave rise to the notification of these interested persons: see Transcript, 13.09.2024, T9:27-10:19.
[4]Notice of Appearance filed on 10 October 2024.

In the case of the AFP, following provision of the documents on 2 September 2024, the AFP Deputy Counsel and Coordinator, Criminal Assets Litigation, responded to the Liquidators’ solicitors by email dated 11 September 2024, and stated that the ‘AFP neither consents nor opposes the relief sought in the attached application’.[5] Subsequently, by email sent on the morning of 6 November 2024, shortly prior to the commencement of the hearing, the AFP’s office of Chief Legal Counsel informed the Court as follows:[6]

We have instructions to advise:
1.the Commissioner maintains the position to neither consent nor oppose the liquidator’s application; and
2.the Commissioner does not intend to restrain the [bank] cheque funds ($74,973.76 and $2,936,302.47 respectively) referred to in the application documents.

[5]First Pomaroff Affidavit, at [6]-[7].

[6]Email from Ms Jen Sheehan, Litigation Lawyer, office of Chief General Counsel, AFP dated 6 November 2024, sent to my Chambers and to the Liquidators’ solicitors.

In the case of AUSTRAC, the Senior Legal Officer of AUSTRAC emailed the Liquidators’ solicitors on 6 September 2024 stating that ‘AUSTRAC has no interest in these proceedings’.[7]
[7]First Pomaroff Affidavit, at [8].

In the case of each of the ‘customer’ interested persons that were given notice of the application, none of them informed the Liquidators that they proposed to appear and none of them appeared or was represented at the hearing when their names were called by my Associate.[8]
[8]See Second Dixon Affidavit, at [8]; Second Pomaroff Affidavit, at [5]-[12].

In the circumstances, I am satisfied that the defendant and each of the interested persons are on notice of this application, and having been apprised of the relief the Liquidators seek, do not wish to appear in the proceeding. I do not consider the absence of a contradictor to be an impediment to the determination of the questions at hand at least at this point, particularly given that reasonable steps have been taken to obtain a contradictor, and the natural intervener has elected against intervening.[9] However, the absence of a contradictor may need to be re-visited in advance of the Court considering any later application regarding the determination of the beneficial ownership of the Long River Funds deposited with Funds in Court.
[9]For a statement of principles regarding the absence of a contradictor, see Re Balsub Pty Ltd (in liq) [2023] FCA 1635, at [38]-[40] (McEvoy J). Particularly, see [40], where McEvoy J quotes Halley J in Re Sparks, IG Energy Holdings (Australia) Pty Ltd) (2023) 168 ACSR 104, at 115 [53]-[54].

Background
Affidavit evidence and chronology

In support of their application, the plaintiffs rely upon the following affidavits and documents:

(a) an affidavit of Stephen Robert Dixon sworn on 22 July 2024 (First Dixon Affidavit);

(b) an affidavit of Jason Timothy Pomaroff affirmed on 11 September 2024 (First Pomaroff Affidavit);

(c) an affidavit of service of Jason Timothy Pomaroff affirmed on 26 September 2024 (Second Pomaroff Affidavit);

(d) a second affidavit of Stephen Robert Dixon sworn on 26 September 2024 (Second Dixon Affidavit);

(e) a third affidavit of Stephen Robert Dixon sworn on 29 October 2024 (Third Dixon Affidavit);

(f) a fourth affidavit of Stephen Robert Dixon sworn 1 November 2024 (Fourth Dixon Affidavit);

(g) their written outline of submissions filed on 25 September 2024;[10]

(h) their written outline of supplementary submissions (annexing a proposed form of order) filed on 11 November 2024;[11] and

(i) the aide-mémoire dated 4 November 2024.

[10]Prepared by Dr Paul Vout KC and Mr Joshua Kohn of counsel.

[11]Also prepared by Dr Paul Vout KC and Mr Joshua Kohn of counsel.

The plaintiffs’ affidavit material, which was formally read by counsel at the hearing on 6 November 2024, establishes the following background facts regarding the application.

The Company

The Company was incorporated in Victoria on 1 February 2018. According to records maintained by the Australian Securities and Investments Commission (ASIC):[12]
[12]First Dixon Affidavit, at [6]-[7], Exhibit SRD-1, at 14-22.

(a) On 1 February 2018, Mr Zhuo Chen and Ms Fei Duan were each appointed as a director and secretary of the Company. Mr Chen resigned as a director and secretary of the Company on 1 February 2018.

(b) On 12 October 2022:

(i) Ms Lihua Liu was appointed as a director and secretary of the Company; and

(ii) Ms Fei Duan resigned as a director and secretary of the Company.

(c) The current shareholders of the Company are:

(i) Everest Management (Hong Kong) Company Limited (beneficially as to 48 shares); and

(ii) Changjiang Financial Services Pty Ltd (beneficially as to 72 shares).

(d) Former shareholders of the Company at various (unspecified) times were:

(i) Fei Duan (beneficially as to 120 shares);

(ii) Everest Management (Hong Kong) Company Limited (beneficially as to 48 shares);

(iii) Zhuo Family Pty Ltd (beneficially as to 72 shares).

At all relevant times prior to liquidation the Company carried on business providing foreign exchange services to corporate and individual customers, both domestically and internationally.[13] The Company (prior to liquidation) operated several foreign exchange outlets across Australia, from three locations in Victoria and four locations in New South Wales.[14]
[13]First Dixon Affidavit, at [6]-[8], Exhibit SRD-1, at 14.
[14]First Dixon Affidavit, at [9].

Restraining orders were made in respect of Mr Zhuo Chen on 24 October 2023

On 24 October 2023, on an ex parte application brought by the Commissioner of the AFP in the Confiscation and Proceeds of Crime List in the Supreme Court of Victoria (in proceeding S ECI 2023 04939), the AFP relevantly sought, and obtained, ‘restraining orders’ pursuant to ss 18 and 19 of the Proceeds of Crime Act 2002 (Cth) restraining, amongst other things, the disposal of or dealings with all of the right, title and interest in all shares in (inter alia) the Company and all other property legally or beneficially owned by Mr Zhuo Chen (also known as Joe) (including cash currency of whatever denomination or country of issue).[15] As noted above, Mr Zhuo Chen was formerly a director and secretary of the Company.
[15]Third Dixon Affidavit, at [6]-[8], Exhibit SRD-2, at 21-25. In his Fourth Affidavit, Mr Dixon deposes that on 4 June 2024, the AFP filed a further application in the Confiscation and Proceeds of Crime List proceeding (S ECI 2023 04939) pursuant to s 59 of the Proceeds of Crime Act 2002 (Cth) for a forfeiture order, under ss 47 and 49 of the Proceeds of Crime Act 2002 (Cth).[15] The respondents to the forfeiture application are ‘Zhuo Chen in his own right and as trustee for his son Callum Chen, Jie Lu and 569 Stirling Highway Pty Ltd.’

Criminal charges were laid against Mr Zhuo Chen on 25 October 2023

Mr Zhuo Chen is also currently facing criminal charges.[16] According to the charge sheet addressed to Mr Chen, on 25 October 2023, Mr Chen (together with others) has been charged with the following offences under ss 400.2B(2) and 11.5 of the Criminal Code 1995 (Cth):[17]
[16]Third Dixon Affidavit, at [6].
[17]A true copy of a charge sheet addressed to Mr Chen appears at Exhibit SRD-3, at 7 (emphasis in bold italics added).

(a) between 1 March 2021 and 24 October 2023 (Charge 1):

conspir[ing] to engage in conduct in relation to money or property that was, and they believed it to be, proceeds of general crime, which conduct concealed or disguised the nature of the money or property, the source or location of the money or property, any rights in respect of the money or property and the identity of any person who has rights or effective control of the money or property and when the conduct occurs, the value of the money and other property is $10,000,000 or more.

(b) between 16 November 2022 and 24 October 2023 (Charge 2):

conspir[ing] to engage in conduct in relation to money or property that was, and they believed it to be, proceeds of general crime, which conduct concealed or disguised the nature of the money or property, the source or location of the money or property, any rights in respect of the money or property and the identity of any person who has rights or effective control of the money or property and at the time of the dealing, the value of the money and other property is $10,000,000 or more.

AUSTRAC suspended the Company’s registration on the Remittance Sector Register on 24 October 2023

At all relevant times prior to October 2023, the Company was registered on the ‘Remittance Sector Register’ as an independent remittance dealer under s 75C of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).

On or about 25 October 2023, AUSTRAC served on the Company a notice of decision to suspend its registration on the Remittance Sector Register.[18] On the same date, the AFP conducted raids on various offices, including some physical premises operated by the Company, in connection with a money laundering investigation into the ‘Changjiang Currency Exchange and Long River money laundering syndicate’.[19] In addition, the Company’s AML/CTF Compliance Officer, Mr Ding Wang, who was the Company’s ‘key personnel’ for the purposes of subparagraph 59.11(4)(a) of the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No. 1), was charged with various criminal offences.[20] At or around the same time, the Company ceased trading operations.[21]
[18]First Dixon Affidavit, at [10], Exhibit SRD-1, at 23-24.
[19]First Dixon Affidavit, at [11].
[20]Plaintiff’s outline of submissions dated 25 September 2024, at [8].
[21]First Dixon Affidavit, at [12].

External Administration of the Company

The Liquidators were appointed as liquidators of the Company on 29 January 2024.[22] That appointment took place in circumstances where initially, Messrs Dixon and Hancock were the joint and several administrators of the Company, having been appointed in that capacity pursuant to s 436A of the Corporations Act on 29 November 2023. However, as no deed of company arrangement was proposed, at the second meeting of creditors held on 29 January 2024 the creditors resolved that the Company be placed in liquidation and that Messrs Dixon and Hancock be appointed as liquidators of the Company.[23]
[22]First Dixon Affidavit, at [19], Exhibit SRD-1, at 89.
[23]First Dixon Affidavit, at [19], Exhibit SRD-1, at 89.

Initial steps of the administrators

On 29 November 2023, in their (then) capacity as administrators, Messrs Dixon and Hancock assumed control of the Company and notified creditors and other stakeholders of their appointment. They wrote to Ms Lihua Liu (the sole director of the Company at the relevant time) and the Company’s external accountant requesting the Company’s books, records and financial information, undertook an urgent review of the Company’s financial position and general operations with an emphasis on identifying and securing the Company’s financial assets, and conducted preliminary investigations into the affairs of the Company. Having done so, pursuant to

r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Insolvency Practice Rules), they provided a report to all creditors of the Company ahead of the Second Meeting (s 439A report).[24]
[24]Exhibit SRD-1, at 34ff.

Administrators’ s 439A report

In their s 439A report, the administrators expressly noted that their report had been ’prepared with reference to the limited books and records of the Company’ because the ‘majority of the Company’s books and records were confiscated by the AFP as part of its money laundering investigation’, but added that they were currently (i.e. as at 29 January 2024) ‘liaising with the AFP to obtain access to the Company’s financial records.’[25]
[25]Exhibit SRD-1, at 41, [2.3].

Further, when addressing the Report on Company Activities and Property (ROCAP) required to be completed by the director, Ms Lihua Liu, the administrators stated:[26]

5.1 ROCAP
In accordance with the provisions of Section 438B of the Act, the Director is required to submit a ROCAP to the Administrators detailing the Company's assets and liabilities, amongst other information. We are advised by the Director's legal representative that the Director is not in a position to complete the ROCAP on account of not presently having access to any books and records pertaining to the Company, which as noted earlier have been confiscated by the AFP.
The Director has sought an extension of time to comply with her obligation to submit a ROCAP pending the availability of the Company's books and records from the AFP. Having regard to the circumstances of this matter, we have granted a temporary extension. The submission of the Director's ROCAP will be revisited at the end of January 2024.
The ROCAP is an important document which is relied upon by Administrators in so far as identifying potential realisable assets of the Company, disclosing and quantifying the Company's creditors and providing pertinent information concerning the Company's general affairs. The absence of the ROCAP has impeded the Administration process and made it difficult to identify and quantify the Company's assets and liabilities.
[26]Exhibit SRD-1, at 47, [5.1].

Steps undertaken as Liquidators

Later, in their role as liquidators, the Liquidators were required, pursuant to r 70-40 of the Insolvency Practice Rules and s 70-50 of the IPS, to provide creditors with a statutory report within three months of their appointment as Joint and Several Liquidators (Liquidators’ First Report).

Liquidators’ First Report

The Liquidators provided the Liquidators’ First Report to creditors on or about 26 April 2024.[27] Therein they again noted the difficulties they had encountered (and continued to experience) in obtaining the books and records of the Company, as follows:[28]
[27]Exhibit SRD-1, at 94ff.
[28]Exhibit SRD-1, at 97 [3] and 98 [4] (emphasis in bold italics added).

3 Books and records
…
We advise that the Company's MYOB account has not been backed up since August 2023 and the Company's remaining books and records are currently unavailable as they are in the possession of the AFP due to an ongoing money laundering investigation. As a result, we have been unable to form an opinion regarding the Company's compliance with Section 286 of the Act.
To address this issue, we issued a notice pursuant to Section 530B of the Act to the AFP [on 23 February 2024], requesting the AFP provides us with details of all seized books and records pertaining to the Company. In response to our notice, the AFP provided an index [on 11 March 2024] disclosing what books and records they seized as part of their investigation. Further correspondence has been issued by my office to the AFP seeking copies of various books and records identified on the indexes as pertaining to the Company. The AFP has agreed to provide us with the necessary records, however, they have requested additional time to process the information due to the substantial volume of data involved.
…
4 Estimated assets and liabilities
We received a Report on Company Activities and Property ("ROCAP") from the Director on 31 January 2024. The ROCAP was subsequently lodged with the ASIC on 1 February 2024.
The Report on Company Affairs and Property (ROCAP) plays an important role for Administrators and Liquidators as it helps identify potential realisable assets of the Company, discloses and quantifies the Company's creditors, and provides essential information about the Company's general affairs.
The ROCAP received from the Director did not include any useful information as the Director did not have access to any of the Company's books and records as a point of reference. The absence of such information, which would ordinarily be available in the ROCAP, has significantly impeded the Liquidation process, causing delays in the Liquidators' investigations and slowing the recovery of the Company's assets.
A summary of the Company's assets and liabilities, based on the ROCAP, discussions with the Director and our investigations to date, are detailed in the following table:

On 9 September 2024, the Liquidators’ solicitor sent a letter to the AFP and the ‘Criminal Asset Confiscation Taskforce’ requesting an update about obtaining access to the Company’s books and records.[29] The AFP replied by letter dated 18 September 2024, stating that the AFP would be in a better position to consider the Liquidators’ requests and respond to the s 530B Notice once the briefs of evidence had been served on the seven co-accused, which was expected to occur by 17 October 2024.[30] On 18 October 2024, the Liquidators’ solicitor was informed by email that the briefs of evidence had been served, following which they kindly requested that the AFP provide an update within seven days (of 24 October 2024) ‘regarding both the expected timing and specific arrangements for making the Company’s books and records available to the Liquidators.’[31] In so doing, they also reiterated that ‘the Liquidators are unable to meaningfully progress their investigations into the Company's affairs and deal with creditors' claims without access to the books and records.’[32]
[29]Exhibit SRD-3, at 35 [4].
[30]Exhibit SRD-3, at 35 [5].
[31]Exhibit SRD-3, at 36 [7].
[32]Exhibit SRD-3, at 36 [8].

Counsel for the plaintiffs further explained the difficulty that the absence of the books and records and a fully informed ROCAP presents for the Liquidators:[33]

[MR KOHN:] Now, obviously, ordinarily, Your Honour, the director would have access to the books and records and would able to tell us, for example, in this case, who the beneficial owner of the funds are or were, or any other person that might have a claim to them. But because we don't have that assistance of the ROCAP, we're stuck in the position that we're in, where we don't have access to the documents yet. And we don't have - - -
HER HONOUR: That was subsequently completed while - - -
MR KOHN: It is, but it's not - - -
HER HONOUR: Still didn't have the books and records, yes.
MR KOHN: Correct. So unsurprisingly, there's a lot of don't knows, unknown, nil information. So it's unhelpful. I'd be in a different position if I had the ROCAP with a meaningful explanation as to, for example, who the beneficial owner of the Long River funds were, then I could easily say to Your Honour, please go to question X on the ROCAP and identify that one. And that would have been beneficial because it's a sworn statement, the ROCAP, but unfortunately I'm not in that position.
[33]Transcript, 06.11.24, at T27:3-22.

Cash on hand recovered by the Liquidators

Many of the Company’s financial accounts were frozen prior to the Liquidators’ appointment in compliance with Court Orders issued as part of the alleged money laundering investigations undertaken by the AFP.[34] However, in their s 439A report, the administrators stated that their ‘initial review and interpretation of the Court Orders indicates that the restrictions imposed by the Court only applies to certain individuals and not the Company.’[35]
[34]Section 439A report, Exhibit SRD-1, at 48.
[35]Section 439A report, Exhibit SRD-1, at 48.

Cash on hand recovered from Company premises

To date, the Liquidators have collected or recovered cash from various premises operated by the Company in Victoria and New South Wales in the sum of (or equivalent to) Australian Dollars $462,587.[36] Those funds are currently stored in safety deposit boxes operated by a third-party provider, which are secured in a vault and insured.
[36]Liquidators’ First Report to creditors, Exhibit SRD-1, at 100-101.

In the Liquidators’ First Report to creditors, the Liquidators stated:[37]
[37]Liquidators’ First Report to creditors, Exhibit SRD-1, at 100-101.

2. Cash on Hand
The Director's ROCAP did not disclose any cash on hand, however, we were notified by the Company's Former Director that the Company held physical cash in various currencies at its various trading locations across Victoria and New South Wales. Following our appointment, we immediately initiated the recovery of cash from each location.
The breakdown of cash collected from each premises is summarised below and is represented in Australian dollars:

We confirm that our staff members visited all of the listed locations, where they collected cash assets and relevant records. Subsequently, we contacted the landlords of these leased premises to inform them of the termination of their respective leases held with the Company and issued them with Notices of Intention Not to Exercise Property Rights.
The cash funds are currently being stored in safety deposit boxes with a third-party provider. The funds are secured in a vault and are adequately insured. We are presently making arrangement to have these funds deposited into the liquidation account held on behalf of the Company. The financial institution which is the intended recipient of the deposited funds is seeking approval from AUSTRAC and the AFP before accepting such a large denomination of cash funds. We expect to have this matter resolved shortly.

Cash on hand recovered from Macquarie Bank

In addition, on 6 May 2024, subsequent to their First Report, the Liquidators procured the release by Macquarie Bank of the sum of $112,598.04 held in a cash management account in the name of the Company, which has been paid into the liquidation account held by the Liquidators.[38]
[38]First Dixon Affidavit, at [42].

Funds held by the Company’s agent, Long River

The Liquidators’ investigations to date have also revealed that there were other funds held by various entities that appear to be assets of the Company, in particular (for present purposes) funds that were held via its agent (in relation to receiving customer funds), Long River.

Incorporation of Long River

A search of the ASIC register for Long River is included in Exhibit SRD-1.[39] It reveals that Long River was incorporated in Victoria on 15 August 2022. The sole director and secretary of Long River since incorporation is Ms Zhenting Yu. Ms Yu is also recorded as the sole shareholder of Long River, holding 100 shares beneficially. According to Ms Sally Vardy of Balmer & Associates, the solicitors for Long River, Long River was incorporated whilst Ms Yu was an employee of the Company (a reference to Chang Jiang Financial Pty Ltd).[40]
[39]First Dixon Affidavit, at [26]-[27], Exhibit SRD-1, at 222-225.
[40]See email to the Liquidators’ firm dated 15 April 2024, Exhibit SRD-1, at 281.

Long River’s bank accounts were used to pool money for the Company’s business

The Liquidators’ staff ascertained from two of the Company’s employees that Long River’s bank accounts were used to pool money for the Company’s business. In those circumstances, on or about 5 April 2024, the Liquidators wrote to Long River and requested that if Long River were in possession of any funds belonging to the Company and/or its customers, that such funds be transferred to the Liquidators within 5 business days.[41]
[41]First Dixon Affidavit at [31], Exhibit SRD-1, at 278.

On 12 April 2024, Mr Octavian Mazureac of the Liquidators’ office emailed Ms Sally Vardy of Balmer & Associates, the solicitors for Long River,[42] and requested that any money that customers of the Company deposited in Long River’s bank account ‘with expectations to receive funds converted into a different currency’, be transferred to the Company.[43]
[42]See Form 4: Notice of Appearance filed on 10 September 2024.
[43]First Dixon Affidavit at [32], Exhibit SRD-1, at 279.

On 15 April 2024, Ms Vardy responded to the Liquidators’ office stating, amongst other things, that:[44]
[44]First Dixon Affidavit at [33], Exhibit SRD-1, at 281 (emphasis in bold italics added and account numbers redacted).

I am in secure possession of two cheques from the Commonwealth Bank of Australia for $74,973.76 and $2,936,302.47 respectively, which represent the proceeds of accounts numbered XXXX and XXXX, which were closed in or about November 2023.
As Ms Yu understands it, there is presently also approximately $68,122.39 in Westpac account number XXXX in the name of Long River Australia Pty Ltd, which account was frozen in about August 2023.
…
Ms Yu is in possession of bank statements for the accounts referred to above.
Neither Long River Australia Pty Ltd, nor Ms Yu, maintains any beneficial interest in the funds referred to above. However, Ms Yu does not know who they belong to. While it might well be that you are entitled to custody of such funds, for the reasons articulated in your letter of 5 April 2024 or otherwise, Ms Yu does not have enough information for us to conclude categorically that that is the case, or whether there might be other claimants to the funds.
In those circumstances, Ms Yu is not able simply to hand you the cheques, or transfer funds to you from the frozen Westpac Account. However, Ms Yu will abide any order of a court of competent jurisdiction that she do so.
Ms Yu does not wish to be obstructive. However, in the context of what we understand are continuing criminal investigations of certain staff of Chang Jiang Financial Pty Ltd, we would invite you to participate in a without prejudice discussion with us in relation to your claims to the funds you have referred to, and those that we have referred to above. The AFP has been on notice of the cheques since December 2023, but we do not know what, if any, interest it might claim in the funds.

The Liquidators understand that Long River acted solely as an agent for the Company in relation to receiving customer funds

The Liquidators understand from their enquiries that ‘Long River did not conduct any other business apart from acting as agent for the Company in relation to receiving customer funds.’[45] Accordingly, they believe that the ‘Long River Funds’, comprising:
[45]First Dixon Affidavit, at [35].

(a) cash held in Long River’s Westpac Account #XXXX – in the sum of $68,122.39 as at 31 August 2023; and

(b) funds the subject of two bank cheques issued by the Commonwealth Bank of Australia to Long River, the first being dated 20 November 2023 in the sum of $2,936,302.47, and the second being dated 15 December 2023 in the sum of $74,973.76, which represent the proceeds of accounts #XXXX and #XXXX which were closed in or about November 2023,[46]

are in each case funds that were transferred to Long River as part of the conduct or operation of the Company’s business.

[46]Exhibit SRD-2, at 14-15.

In the Liquidators’ First Report to creditors, the Liquidators stated:[47]
[47]Liquidators’ First Report to creditors, Exhibit SRD-1, at 100 (emphasis in bold italics added); First Dixon Affidavit, at [23].

Other Bank Accounts
…
Through documentation provided by customers of the Company, we have observed that certain customers were directed to transfer funds to bank accounts held by related entities within the Group of Companies. Specifically, we have identified several bank accounts controlled by the related entity Long River Australia Pty Ltd ("Long River Australia"), containing approximately $3,079,399. We are aware that at least $367,720 of these funds represents the funds deposited by customers of the Company. Our investigations into the origins and ownership of these funds are ongoing.
Furthermore, based on customer's documentation and our forensic investigations, we have identified in excess of thirty (30) Chinese bank accounts held by various individuals in China, which were nominated by the Company to customers seeking to transfer or convert funds into foreign currency. Our investigations indicate that approximately $9,177,833 was deposited into these accounts by Chinese nationals. It is important to note that the current status of these funds, including whether they have been converted into cryptocurrency or deposited into Australian bank accounts, remains unknown as our forensic inquiries continue.

The Liquidators have identified customers of the Company who transferred funds to Long River at the direction of the Company

To date, based on documentation provided by customers of the Company, in particular claim forms, proofs of debt and supporting documents lodged in the winding up of the Company, the Liquidators have quantified the potential transfer of funds by customers of the Company to Long River to be, at a minimum, the sum of $286,000 USD, as follows:[48]

a.        Balance International Co Ltd - USD $40,000 to Long River.
b.        China North New Material - USD $100,000 to Long River.
c.         Helios Assets Holding Pty Ltd - USD $96,000 to Long River.
d.        Yi Lu - USD $50,000 to Long River.

[48]First Dixon Affidavit, at [28].

Copies of claim forms (and supporting evidence) provided by customers of the Company to the administrators are included in Exhibit SRD-1.[49] For e.g., in the case of Helios Assets Holding Pty Ltd (Helios), the documentation includes a ‘Statement of Evidence’ from Thomas Haihuan Wang on behalf of Helios, in which he deposes to a conversation with Mia, an employee of Changjiang Currency Exchange, on 20 October 2023 about the exchange rate of USD to AUD. Mr Wang states that during that conversation:[50]

Mia provided Thomas Haihuan Wang with an account number that was documented as Changjiang Currency Exchange, but whose account name was Long River Australia Pty Ltd. (Appendix 3)
…
[49]Exhibit SRD-1, at 226-270.
[50]Exhibit SRD-1, at 234.

The Liquidators believe that the Long River Funds belong to the Company

The Liquidators believe that the Long River Funds (including cash at bank and the cheques in the sum of $74,973.76 and $2,936,302.47 referred to above) belong to the Company.[51]
[51]First Dixon Affidavit, at [35].

The Liquidators understand from their enquiries that Long River did not conduct any business apart from acting as an agent for the Company in relation to receiving customer funds.[52]
[52]First Dixon Affidavit, at [35].

Mr Dixon deposes, in the Third Dixon Affidavit, that based on his investigations, ‘the cheques were issued by the Commonwealth Bank drawing funds held in Long River accounts after those accounts were closed’.[53] In the circumstances, the Liquidators believe the two cheques ‘are prima facie Long River funds’, and that ‘the cheques do not belong to a specific client of the Company’.[54] The Liquidators note that Long River does not oppose the Liquidators’ proposal to pay the Long River Funds into Funds in Court.
[53]Third Dixon Affidavit, at [17].
[54]Third Dixon Affidavit, at [17].

Long River does not oppose the Liquidators’ proposal to pay Long River Funds into Funds in Court

As noted earlier, the solicitor acting for Long River has informed the Liquidators that neither Long River nor its sole director, Ms Zhenting Yu, maintains any beneficial interest in the Long River Funds and Ms Yu does not know who those funds belong to. However, while Ms Yu is not prepared to simply hand the bank cheques and/or the funds in the Westpac account to the Liquidators, Ms Yu’s solicitor has informed the Court that Ms Yu will abide any order of the Court.

The Liquidators have been informed by Long River’s solicitor that, in addition to the two bank cheques mentioned in the above email dated 15 April 2024, there was (as at 31 August 2023) $68,122.39 held in Long River’s Westpac account number XXXX (Westpac Account).[55]
[55]First Dixon Affidavit, at [34], Exhibit SRD-1, at 283.

On 13 September 2024, Ms Vardy further informed Mr Pomaroff of the Liquidators’ solicitors, by email, that the two cheques comprising the Long River Funds are Commonwealth Bank of Australia bank cheques dated 15 December 2023 and 20 November 2023 respectively, and represent the proceeds of Long River’s former Commonwealth Bank of Australia account(s) which were closed in or about November 2023.[56]
[56]Plaintiff’s outline of submissions dated 25 September 2024, at [23].

The plaintiffs’ originating process

Against that background, the Liquidators, in the performance of their duties as liquidators, are seeking to recover, or preserve what appear to be, assets of the Company. Having identified that there are significant funds presently held by the Company’s agent, Long River, which appear to be assets involved in the conduct of the Company’s business, the Liquidators seek the assistance of the Court to permit them to collect those funds pending investigation as to their beneficial ownership once the books and records of the Company become available to the Liquidators. In the case of the two bank cheques issued to Long River by the Commonwealth Bank upon closure of its accounts, the Liquidators observe that they are ‘under time pressures’,[57] because the bank cheques which comprise the Long River Funds will shortly become ‘stale’ due to the effluxion of time.[58] Accordingly, the Liquidators seek to have the Court direct that Long River, by its solicitor, deliver the bank cheques directly to Funds in Court or to the Liquidators and have them banked forthwith, so that the proceeds may be held by Funds in Court and preserved pending ascertainment of the beneficial owner of the funds.
[57]Outline of submissions, at [39].
[58]After 15 months from the date on their face unless otherwise agreed with the bank: Cheques Act 1986 (Cth), s 89(1) read with s 3(5).

By originating process filed on 22 July 2024, the plaintiffs sought the following orders:

(a) an order pursuant to s 90-15 of the IPS, being Schedule 2 of the Corporations Act, and the inherent jurisdiction of the Court, that the Liquidators are authorised to take all necessary steps to take possession of the Long River Funds and the Cash Assets (Funds);

(b) an order pursuant to s 90-15 of the IPS that the Liquidators are directed to deal with the Funds in the following manner:

(iv) the Liquidators may apply the Funds in payment of their reasonable remuneration, costs and expenses incurred in the care, preservation and realisation of the Funds;

(v) subject to any amounts applied pursuant to the above, the Liquidators shall pay the Funds into [Funds in Court at the Supreme Court] and not seek to pay or apply the Funds pending a further order of the Court;

(vi) any party [a]ffected by these orders shall have liberty to apply (on not less than 5 days’ written notice) for the purpose of seeking a declaration as to the existence and value of any claims in relation to the Funds; and

(c) a direction, pursuant to s 90-15 of the IPS that the Liquidators are justified and acting reasonably, in taking possession, dealing with, and realising the Funds in the manner provided for.

It remains the case that as at the date of hearing of the originating process, the Liquidators and their legal representatives have not had access to the Company’s books and records. The Liquidators informed the Court that at a meeting between the Liquidators and the AFP held on 7 November 2024, the AFP agreed to make the Company’s books available for inspection (which is due to occur within 4 weeks).

At the hearing on 6 November 2024, counsel for the plaintiffs foreshadowed that in light of recent developments concerning the prospect that the Liquidators would gain some access to the Company’s books and records, and with greater clarity as to the position of the AFP, some amendment of the originating process would likely be required.

As explained above, as a result of matters discussed at the hearing on 6 November 2024, the plaintiff formulated interim orders to facilitate the banking of the Long River Funds (being the Long River bank cheques and the funds held in the Long River Westpac account) into Funds in Court, pending the ascertainment of the beneficial owner(s) of those funds. The proposed orders noted that the plaintiffs no longer seek orders in relation to the Cash Assets referred to in the originating process as they are in the Liquidators’ possession and control and no other party has made a claim on them. Accordingly, the Cash Assets will be dealt with in the ordinary course of the winding up of the Company.

Another issue which arose at the hearing on 6 November 2024 related to when the Liquidators should be paid their reasonable remuneration, costs and expenses.[59] The originating process sought such payment prior to the funds being paid into Funds in Court. However, at the hearing, I raised with counsel the need for caution when dealing with funds placed in Court, and making deductions from them, particularly in circumstances where the beneficial ownership of those funds has not been ascertained. In response, the plaintiffs re-cast their proposed orders so as to have the funds paid into Funds in Court (and thus preserved pending the ascertainment of beneficial ownership) prior to any application by the Liquidators for payment of their reasonable remuneration, costs and expenses.
[59]Transcript, 06.11.2024, T9:24-T13:22.

Relevant principles

The IPS sets out the following principles:

(a) the Court may make such orders as it thinks fit in relation to the external administration of a company;[60]
[60]See sub-s 90-15(1) of the IPS.

(b)
the Court may exercise its power to make such orders on application under

s 90-20;[61]
[61]See sub-s 90-15(2)(b) of the IPS. Subsection 90-15(2)(a) of the IPS provides that the Court may exercise the power under sub-s 90-15(1) on its own initiative, during proceedings before the Court.

(c) a person with a financial interest in the external administration of a company may apply for orders under s 90-15;[62]

(d) an external administrator is a person with a financial interest in the external administration of a company;[63] and

(e) the term ‘external administrator’ includes the liquidator of a company.[64]

[62]See sub-s 90-20(1) of the IPS.

[63]See sub-s 5-30(a)(iii) of the IPS.

[64]See sub-s 5-20 of the IPS.

The IPS provides the following (non-exclusive) list of orders that may be made pursuant to s 90-15:[65]
[65]See sub-s 90-15(3) of the IPS.

(a) an order determining any question arising in the external administration of the company;
(b) an order that a person cease to be the external administrator of the company;
(c) an order that another registered liquidator be appointed as the external administrator of the company;
(d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company;
(e) an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator;
(f) an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.

The IPS also provides a (non-exclusive) list of matters the Court may take into account when making orders:[66]

(a) whether the liquidator has faithfully performed, or is faithfully performing, the liquidator’s duties; and
(b) whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and
(c) whether an action or failure to act by the liquidator is in compliance with an order of the Court; and
(d) whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and
(e) the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act.

[66]See sub-s 90-15(4) of the IPS.

As regards the application of s 90-15 of the IPS, the plaintiffs submit that:

(a) the language of sub-s 90-15(1) of the IPS is ‘unconstrained’;[67]
[67]See Shangri-La Construction Pty Ltd v GVE Hampton Pty Ltd (in liq) & Ors (2021) 152 ACSR 19; [2021] VSC 161, at 31-32 [81] per Connock J.

(b) the power conferred by sub-s 90-15(1) has been held to encompass both the giving of directions and the determination of substantive rights,[68] and is arguably wider than the power to give directions to liquidators under former ss 479 and 511 of the Corporations Act;[69]
[68]See Re Frigger [2020] WASC 365, at [12]; Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481, at 357 [7]-[8] per Gleeson JA, citing Reidy, Re Choice Ltd (Admin apptd) [2017] FCA 1582.
[69]See Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481, at 357 [8]; In the matter of Force Corp Pty Ltd (in liq) (2020) 149 ACSR 451; [2020] NSWSC 1842, at 456 [17].

(c) as Gleeson J identified in Re Force Corp Pty Ltd (in liq):[70]
[70](2020) 149 ACSR 451; [2020] NSWSC 1842, at 456 [19]. Quoted with approval by Delany J in Holden v Monpetit Soler Pty Ltd [2024] VSC 394, at [20]. The plaintiff notes that similar principles have been identified and summarised in cases such as Re Krejci, in the matter of Union Standard International Group Pty Limited (No 8) [2023] FCA 1054, at [24] (Cheeseman J), and Re KSK Holdings (Australia) Pty Ltd (In Liq) [2019] NSWSC 1463 (Rees J).

(vii) ‘[t]he proper subject matter of an application for directions is to provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion, but not a matter relating to the making or implementation of a business or commercial decision unless there is a particular legal issue raised or an attack on the propriety or reasonableness of the decision’;[71]
[71](citations omitted)

(viii) ‘[a]ssuming the liquidator has made full and fair disclosure to the Court of the material facts, he or she 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;[72]
[72](citations omitted).

(ix)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’;[73]

(d) in exercising the discretion under s 90-15 of the IPS, a consideration for the Court is that the effect of the direction will be to exonerate the Liquidators from personal liability – accordingly, closer scrutiny will be required than when exercising power under s 477 of the Corporations Act; and

(e) in giving a direction under s 90-15, the Court should be satisfied that the Liquidators’ decision, in all the circumstances, is a proper one.[74]

[73](citations omitted).

[74]Citing Union Standard International Group Pty Limited (No 8) [2023] FCA 1054, at [25].

Plaintiffs’ submissions

The plaintiffs submit that it is appropriate for the Court to make the following interim orders and directions in the present case, in circumstances where:

(a) they do not involve business decisions or matters of commercial judgment; and

(b) the directions would permit the Liquidators to collect the Long River Funds and have them preserved pending investigation as to their beneficial ownership – which would be appropriate in circumstances where the AFP is currently in control of the Company’s books and records and the Liquidators therefore are unable to express an opinion as to who is beneficially entitled to the Long River Funds.

If the Liquidators are unable to determine who beneficially owns the Long River Funds, then they intend to conduct examinations pursuant to s 596A and/or s 596B of the Corporations Act. Without access to the books and records, the Liquidators are unable to provide an estimate of how long their investigations would take or the period in which the examinations would be conducted.

The plaintiffs submit that the Liquidators are under time pressure because the cheques comprising the Long River Funds will shortly become stale due to the effluxion of time. In that regard, the plaintiffs refer to the Cheques Act 1986 (Cth), which provides that cheques become stale after 15 months from the date on their face unless otherwise agreed with the bank.[75]
[75]Cheques Act 1986 (Cth), s 89(1) read with s 3(5).

The plaintiffs also note that:

(a) the defendant and the interested persons do not oppose the relief sought by the Liquidators;

(b) any beneficial owner of (any portion of) the Long River Funds or creditor of the Company will not be prejudiced by the relief sought; and

(c) no substantive rights are to be determined by the Court.

In their supplementary submissions, the plaintiffs submit that the orders sought are consistent with the observations of the New South Wales Court of Appeal in One T Development v Krejci in his capacity as liquidator of ENA Development Pty Ltd (One T Development)[76] (which are set out in the below section), and of Williams J in Salvestrin Enterprises Pty Ltd (in liq).[77] In light of these cases, the plaintiffs’ counsel submits that it is appropriate to order that the Liquidators are justified and acting reasonably in seeking orders for the payment of the Long River Funds into Funds in Court pending the Liquidators ascertaining the beneficial ownership of those funds.
[76][2023] NSWCA 120.
[77][2023] NSWSC 1348.

Consideration and disposition

In my view, it is clear that the power conferred by s 90-15 is broader than its predecessor (s 479(3) of the Corporations Act) and enables the Court to make an order of the kind sought by the plaintiffs to permit the Liquidators to take steps to preserve property the subject of the Company’s operations, in advance of the making of any determination of beneficial ownership.

In the recent decision of the New South Wales Court of Appeal in One T Development,[78] the principal ground of appeal was that the primary judge, on an application under s 90-15, had erred in determining that the liquidator was justified in dealing with the subject property as property to which the company was entitled beneficially−[79]

in circumstances where: (i) the beneficial interest in the said property was seriously in issue; (ii) any transfer of the said property to a third party may be irremediable; (iii) there was evidence before the learned judge at first instance that the beneficial interest in the said property resided other than in [the company]; (iv) the Court was not being requested to make a binding determination as to the beneficial ownership of the said property.

[78][2023] NSWCA 120, referred to by Delany J in Holden v Monpetit Soler Pty Ltd [2024] VSC 394, at [21].

[79][2023] NSWCA 120, at [3].

In dismissing the appeal, the Court (Ward P, Leeming and Mitchelmore JJA) helpfully outlined the nature and scope of the orders that now are available to be made under s 90-15, particularly in the situation where liquidators are required to make decisions and take action based on information and materials which may turn out to be incomplete. The Court stated:[80]
[80][2023] NSWCA 120, at [28]-[45] (emphasis in bold italics added).

The nature of the orders made by the primary judge
28The starting point is the juristic nature of the orders made by the primary judge. Nothing has been determined in this litigation as to the title to the land and shares.
29The liquidator is in dispute with persons who were formerly involved in the ownership and management of ENA. Further, the liquidator is required to make decisions and take action based on information and materials which may well turn out to be incomplete. That is scarcely an uncommon situation.
30Companies legislation has long conferred power upon courts to give directions to liquidators. Previously, s 479(3) of the Corporations Act 2001 (Cth) had simply provided:

The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up.

31That power, and its earlier equivalents, was construed as being subject to important restrictions. As much is clear from the decision of McLelland J in Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 679-680 explaining the scope of the power:
The historical antecedents of s 479(3), the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator’s application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitory form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, 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 in accordance with the direction.
Modern Australian authority confirms the view that s 479(3) “does not enable the court to make binding orders in the nature of judgments” and that the function of a liquidator’s application for directions “is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company's transactions before the liquidation”.

32However, since 2017 (in the circumstances described in In the matter ofGlengrant Civil Pty Ltd (in liq) [2017] NSWSC 843 at [12]-[30]), s 90-15 of Schedule 2 to the Corporations Act (being the Insolvency Practice Schedule (Corporations)) has made the following much more elaborate provision:
90-15 Court may make orders in relation to external administration
. . .

33It is plain that the current form of the conferral of power is broader than its predecessor. The restriction noted by McLelland J concerning determining rights and liabilities cannot survive the express power in subsection (3)(a). The former power, framed in terms of authorising the liquidator to “apply to the Court for directions in relation to any particular matter arising under the winding up”, has been expanded so as to include, specifically, “an order determining any question arising in the external administration of the company”. There is no reason not to read the new grant of power broadly, nor is there any reason to prevent “any” from bearing its ordinary meaning. After all, it is “quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words”: Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54, and, in the context of the Corporations Act, see Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 at [17] and Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in liq) (2019) 101 NSWLR 358; [2019] NSWCA 304 at [61]. The basic question posed by statute is whether the order relates to the external administration of the company.
34Those principles are apparent in decisions on the new provision. The position was described by Gleeson JA, sitting in the Corporations List, in In the matter of Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481; 125 ACSR 355 at [6]-[8] as follows:
Section 90-15(1) of Sch 2 of the Corporations Act – Insolvency Practice Schedule (Corporations) – applies to this application, given the repeal of s 479(3) of the Corporations Act by the Insolvency Law Reform Act 2016 (Cth). Section 90-15(1) provides that the Court may make such orders as it thinks fit in relation to the external administration of a company. A company is taken to be under external administration, if, among others, a liquidator has been appointed in relation to the company:

s 5-15(c), Sch 2. Among other things, a court can make an order determining any question arising in the external administration of the company: s 90-15(3)(a).
The ambit of s 90-15 has not yet been fully considered in the authorities. In Reidy, In the Matter of eChoice Limited (Admin Apptd) [2017] FCA 1582, Yates J at [27] accepted that an application by an administrator for directions, that formerly would have been made under s 447D(1) of the Corporations Act (now repealed), would fall within the purview of the statutory power in s 90-15 to make an order that determines a question arising in the external administration of a company.
In Walley, In the Matter of Poles & Underground Pty Ltd (Admin Apptd) [2017] FCA 486 at [41], Gleeson J remarked that the question of whether to exercise the power in s 90-15 was “to be answered by reference to the principles applied to the exercise of the discretions previously contained in s 479(3) and s 511 of the Act”. That may be accepted insofar as the external administrator seeks the directions of the Court, but the power under s 90-15 to “make such orders as it thinks fit in relation to the external administration of a company” (s 90-15(1)) including “an order determining any question arising in the external administration of a company” (s 90-15(3)(a)), is wider and accommodates the determination of substantive rights. Of course, the Court would not do so without affording potentially affected parties an opportunity to be heard: Meadow Springs Fairway Resort Ltd (in liq) v Balance Securities Ltd [2007] FCA 1443, at [49]-[51] (French J, referring to Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (1994) 49 FCR 334 at 352; [1994] FCA 1031 (Northrop J)); Re Willmott Forests Ltd (No 2) [2012] VSC 125; 88 ACSR 18 at [45]-[46] (Davies J); In the Matter of ICS Real Estate Pty Ltd (in liq) [2014] NSWSC 479 at [25] (Brereton J).

35There is no reason to doubt that the current form of the power extends to the determination of substantive rights, although that could only occur, as Gleeson JA observed, with necessary and proper parties being given an opportunity to be heard, and (it might be added) joined.
36However, the orders from which this appeal has been brought do not determine any title to property. They merely confirm that, in advance of a determination of beneficial title to property in the company’s name, the liquidator would be justified in proceeding on the basis that the property was owned beneficially by the company and is available for the benefit of creditors. They are to that extent unusual, insofar as there will have been a hearing as to whether the liquidator would be justified in proceeding on a basis, and also a hearing which will determine finally whether that basis is correct. However, the nature of the opposition taken to the liquidator explains the course which has been taken.
37A somewhat comparable position arose in Bastion v Gideon Investments [2000] NSWSC 939; 35 ACSR 466. The incomplete records of the company suggested, but fell far short from establishing, that it was the trustee of a trust; if so, then some of the company’s creditors had proprietary rights in relation to some assets held at law by the company. The liquidator applied under s 479(3) for orders that he would be justified in recognising the existence of an express trust and recognising certain persons as beneficiaries of that trust (see at [40]). Austin J made those orders, saying at [48]-[49]:
In my opinion the subject matter of the first application is a proper subject matter for an application for directions under s 479(3). It is appropriate for the liquidator, confronted by unsatisfactory corporate records and uncertain indications that a large part of the company's business was conducted as trustee, to bring the facts before the Court and seek the protection of directions under s 479(3). It is appropriate for the Court to give the direction sought by the liquidator once it is satisfied, as I am, that all reasonable inquiries have been made by the liquidator to establish the true facts. In this case I am impressed by the thorough and systematic investigations that have been conducted.
The directions are sought by the applicant as liquidator under s 479(3). No direction is sought by the company in liquidation under s 63 of the Trustee Act 1925 (NSW). I should note the very limited scope of the protection that directions under s 479(3) will give in the present circumstances. The directions will not determine as between the company and the investors whether there is a trust or any particular person is a beneficiary or any particular assets are held by the company in trust for the investors, and will not protect the company or liquidator from any claims by persons who do not receive a distribution but are able to establish that they should have been recognised as beneficiaries. As McLelland J pointed out in the G B Nathan case (at 681), the significance of the directions is only that if the liquidator acts in accordance with them and has made full and fair disclosure of the material facts, he will be protected from claims by unsecured creditors or contributories in respect of any alleged breach of his duties as liquidator.

38Another case where a liquidator has been given a direction that the liquidator would be justified in treating assets as held on trust may be seen in In the matter of Montpac Pty Ltd (in liq) and Global Network Link Pty Ltd (in liq) [2020] NSWSC 1237; 149 ACSR 138 at [12]-[20], to which the primary judge referred. Significantly, the power extends to cases where there is a lively contest as to whether or not the assets are held on trust. Sometimes it will be possible and appropriate for the liquidator to let the competing claimants take primary carriage of resolving the disputed ownership of assets. For example, if incomplete corporate records suggest the same assets are held under separate trusts, each in favour of a different beneficiary, there will be good reason for the liquidator to take a neutral role (a more complicated example of this may be seen in In re MF Global Australia Ltd (in liq) [2012] NSWSC 994; 267 FLR 27 at [2]). However, there may also be cases where it is appropriate for the liquidator to assume primary carriage of a dispute over the beneficial ownership of company assets. The possibility that the liquidator’s view although properly founded might turn out to be wrong and the certainty that substantial costs will be incurred will, in an appropriate case, favour the exercise of the power to give some protection to a liquidator.
39In the present case, the issue is not so much whether all reasonable inquiries have been made by a liquidator faced with incomplete or unsatisfactory corporate records (as was the case in Bastion v Gideon Investments) but whether there is a proper basis for the liquidator to proceed on the basis that the trust was not created in 2009. But it is not disputed (subject to grounds 2 and 3 which are addressed below) that the primary judge was, in light of the material before his Honour, entitled to be sceptical of the authenticity of the deed of trust.
40The effect of the orders is limited. They do not determine title to any property. Instead, they provide qualified comfort to the liquidator in the event that it turns out that he is wrong to proceed on the basis that the assets are assets held beneficially by the company being wound up. Ultimately, Mr Rogers [counsel for the appellant] accepted that the orders had only two consequences adverse to One T (or any other person): they tended to stand in the way of any interlocutory relief restraining a sale or dealing with the property by the liquidator, and they tended to prevent any costs order being sought personally against the liquidator if it turned out the property was not beneficially that of the company, insofar as the liquidator could point to the orders to justify the reasonableness of his conduct.
41This Court was not taken to any evidence suggesting the likelihood of a dealing, still less some dealing with irreversible consequences in the event that it turned out that the property was not beneficially owned by the company. Thus the only practical consequence of the orders was the possibility that, in the event that it is determined that the property is not beneficially owned by the company, it could not be said that the liquidator had behaved without a proper foundation, always assuming there had been a candid disclosure of all relevant matters by him to the court when the application was heard.
42That is to say, all that has been determined is that the liquidator would be justified and acting reasonably to proceed on the basis that certain assets owned in law by the company in liquidation were owned by it beneficially. The principal purpose for that order is, it may be inferred, the other litigation in which questions of title will be determined, to which the company is a necessary party and in respect of which the liquidator will have to determine his stance.
43The appellant submitted that the primary judge should not have drawn the inference that there were grave doubts that the trust deed had not been created in 2009. However, that submission cannot be reconciled with the proper and candid acknowledgement [by counsel for the appellant] that there was a proper basis in the evidence for his Honour to have the doubts he did.
44The appellant also submitted that his Honour should not have expressed those doubts in circumstances where there were disputed facts and the Court was not being asked to make a binding declaration as to beneficial ownership. However, the doubts were an inherent element of the reasons for concluding that the liquidator would be justified in proceeding on the basis that the company owned the assets beneficially, and in the somewhat unusual circumstances of this dispute there was no error in making orders with the limited effect described above in order to provide protection to the liquidator. The consequence of those orders is that, if the liquidator fails and the property is found not to be beneficially owned by the company, he will not be able to be criticised for improperly making groundless and unwarranted allegations of serious fraud, unless it be shown that there had been material nondisclosure at the time the orders were made.
45Contrary to the appellant’s submission, there was nothing wrong – still less any appellable error in the exercise of a discretion – in the primary judge giving the directions in the present case. Nothing that we have seen in the conduct of this litigation suggests that there was anything inappropriate in taking that course; to the contrary, everything we have seen and read about the conduct of this proceeding, and this appeal, confirms that it could not be said to have involved appellable error to grant relief.

Adopting a ‘staged’ approach, the question for consideration at this point in the proceeding is whether the Liquidators are authorised to procure or facilitate the taking of all necessary steps to pay the Long River Funds[81] into Court where they may be held by Funds in Court and preserved pending the ascertainment of the beneficial ownership of those funds.
[81]It will be recalled that the Long River Funds are comprised of two cheques from the Commonwealth Bank of Australia for $74,973.76 and $2,936,302.47 respectively, representing the proceeds of accounts numbered XXXX and XXXX, which were closed in or about November 2023, in addition to $68,122.39 held in Long River’s Westpac Account number XXXX.

The rationale for the plaintiffs’ proposal is that it would allow all of the Funds that the Liquidators have identified as being held by the Company’s agent to be collected and paid into Court, and thus be preserved pending investigation to ascertain their beneficial ownership. On its face this would be a prudent course given, as the plaintiffs submit, the AFP is currently in control of the Company’s books and records and the Liquidators are unable to express an opinion as to the beneficial entitlement to the Funds. This is particularly relevant in circumstances where the two bank cheques held by Long River will (likely) become stale in the coming months.[82]
[82]The cheques are dated 15 December 2023 and 20 November 2023. The Cheques Act 1986 (Cth), s 89(1) read with s 3(5) provides that cheques become stale after 15 months from the date on their face unless otherwise agreed with the bank.

The Liquidators are aware that at least $367,720 of the Long River Funds represents the funds deposited by customers of the Company.[83] Counsel for the plaintiffs confirmed[84] that the figure of $367,720 represents or approximates the amount of USD $286,000 that the Liquidators are aware customers of the Company (who are now creditors) were directed to pay into bank accounts held in the name of Long River.[85]
[83]First Dixon Affidavit at [23].
[84]Transcript, 06.11.24, at TT30-31 (Mr Kohn).
[85]Note that the sum total of values transferred by Balance International Co Ltd, China North New Material Group HongKong Limited, Helios Assets Holding Pty Ltd and Mr Yi Lu to bank accounts held in the name of Long River amounts to USD $286,000.

Save as noted above, the Liquidators do not know how much of the balance of the Long River Funds represents contributions made by creditors to the Company, and who is beneficially entitled to the remainder (if any) of the Long River Funds. It is because there is a lack of information presently available to the Liquidators concerning the beneficial ownership of the Long River Funds, and the risk that the bank cheques will become ‘stale’ if they are not banked promptly, that the Liquidators seek a direction from the Court that the bank cheques be delivered and paid into Funds in Court.

It is clear that the function of the liquidator’s application for directions is to ‘provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion’.[86] Further, the Court may give directions where it will be ‘of advantage in the liquidation’.[87]
[86]Re Force Corp Pty Ltd (in liq) (2020) 149 ACSR 451; [2020] NSWSC 1842, at 456 [19]. Quoted with approval by Delany J in Holden v Monpetit Soler Pty Ltd [2024] VSC 394, at [20].
[87]Dean-Wilcox v Soluble Solution Hydroponics Pty Limited (1997) 42 NSWLR 209, at 212; (1997) 24 ACSR 79, at 81.

In GDK Projects Pty Ltd v Umberto Pty Ltd (in liq),[88] Farrell J stated:

Despite the breadth of the power conferred by s 90-15(1), it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration.

[88][2018] FCA 541, at [33].

In Re Krejci in the matter of Union Standard International Group Pty Limited (No 8),[89] making an order pursuant to s 90-15(1) of the IPS, Cheeseman J bore in mind the following relevant factors:[90]

(a) ‘reasonable efforts have been made by the Liquidators to notify potentially interested parties … and, following notice being given, no substantive opposition to the relief sought by the Liquidators has been forthcoming’; and

(b) ‘there is a public interest in permitting experienced Liquidators, acting in a diligent and proper fashion, to expose, by way of investigation, the true state of the company’s affairs in order to discharge their duties in what they have assessed to be in the company’s interest’.

[89][2023] FCA 1054.

[90][2023] FCA 1054, at [35].

As outlined above, I am satisfied that the defendant and the interested persons are on notice of this application, do not wish to appear in the proceeding, and have stated that they do not oppose the relief sought by the Liquidators.

As noted previously, due to the unavailability of the Company’s books and records, the Liquidators have been unable to express an opinion as to who is beneficially entitled to the Funds. In those circumstances, the prudent and sensible course is to make the interim orders and directions sought, thereby permitting the Liquidators to effectively collect the Funds and have them preserved pending investigation as to their beneficial ownership. The directions sought by the plaintiffs do not involve business decisions or matters of commercial judgment. I am content with the course proposed, given that the orders will include liberty to apply to any person who can demonstrate sufficient interest, and once the Long River Funds are held by Funds in Court the funds may only be disbursed by order of the Court.

The proposed orders and directions (as discussed with counsel in Court on 18 November 2024) will permit the Liquidators to continue their investigations directed to ascertainment of the identity of the beneficial owner(s) of the Long River Funds, in circumstances where the Long River Funds will be secure in Funds in Court. Securing the Funds in a timely manner is important given the Liquidators’ concern that the two cheques held by Long River may become stale in the coming months if not banked.

I am satisfied therefore that, in all the circumstances, the interim relief sought is appropriate to be made and that Liquidators’ decision to seek such orders and directions is a proper one.[91]
[91]Union Standard International Group Pty Limited (No 8) [2023] FCA 1054, at [25].

In addition, because the Liquidators are required to act promptly to avoid the bank cheques becoming stale, but in circumstances where they do not have access to the Company’s books and records, it is also appropriate to make an order under s 90-15, for the benefit of the Liquidators, confirming that the Liquidators are justified and acting reasonably in seeking such interim orders. Assuming that the Liquidators have made a full and fair disclosure to the Court of the material facts, such a direction would operate to protect the Liquidators 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 them in accordance with the orders and directions.[92]
[92]Re Force Corp Pty Ltd (in liq) (2020) 149 ACSR 451; [2020] NSWSC 1842, at 456 [19]. Quoted with approval by Delany J in Holden v Monpetit Soler Pty Ltd [2024] VSC 394, at [20].

While no interested person or party has appeared to oppose the interim orders and directions sought, it is appropriate in my view to include an order granting liberty to apply to any person affected by these orders on not less than five business days’ written notice.

Conclusion

In the circumstances, the Court proposes that the following orders be made, and that a copy of the email from the AFP dated 6 November 2024 (confirming that no restraining orders are sought in respect of the funds the subject of the Long River Bank Cheques), be included as an annexure to the orders:

Payment of assets held by Long River into Funds in Court
1.Pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 of the Corporations Act 2001 (Cth), and the inherent jurisdiction of the Court, the defendant, by its solicitor, shall forthwith deliver up possession of the Long River Bank Cheques to the solicitors for the Liquidators.
2.The Liquidators shall open and maintain separate liquidation bank accounts with the National Australia Bank Limited (Liquidation Account No 2 and Liquidation Account No 3) and, subject to acceptance by the National Australia Bank Limited, and the Commonwealth Bank of Australia as drawer, deposit:
(a)the Commonwealth Bank of Australia Bank Cheque numbered XXXX dated 20 November 2023 and payable to Long River in the amount of $2,936,302.47 − in Liquidation Account No 2; and
(b)the Commonwealth Bank of Australia Bank Cheque number XXXX dated 15 December 2023 payable to Long River in the amount of $74,973.76 − in Liquidation Account No 3;

(together, the Long River Bank Cheques) and once cleared, transfer forthwith to the Associate Judge who is the Senior Master the proceeds (net of fees but including any interest) of each of the Long River Bank Cheques and request that the proceeds of each of the Long River Bank Cheques be kept separate in separate accounts in Common Fund Number 1 and not be intermingled with any other funds.
3.Pursuant to section 90-15 of the IPS, and the inherent jurisdiction of the Court, the defendant, by its solicitor, shall provide by EFT transfer to the Associate Judge who is the Senior Master the funds held in the Long River Westpac Bank Account, within 2 business days of being served with these orders, and the proceeds shall be kept separate in Common Fund Number 1 and not be intermingled with the proceeds of either of the Long River Bank Cheques.
4.No portion of the funds provided to the Associate Judge who is the Senior Master, pursuant to paragraphs 2 and 3 above shall be disbursed otherwise than pursuant to an order of the Court.

Liquidators are justified and acting reasonably in seeking to preserve the Long River Funds pending ascertainment of beneficial ownership
5.Pursuant to section 90-15 of the IPS, the Liquidators are justified and acting reasonably in seeking the orders set out in paragraphs 1, 2 and 3 above to ensure that:
(a) the Long River Bank Cheques do not go stale; and
(b)the funds the subject of the Long River Bank Cheques and the Long River Westpac Bank Account (together, the Long River Funds) are preserved and kept separate pending the Liquidators ascertaining the beneficial owners of those funds.

Liquidators’ application for payment of remuneration, costs and expenses from Funds in Court
6.Any application by the Liquidators for payment of funds out of ‘Funds in Court’ for their reasonable remuneration, costs and expenses incurred in the care, preservation and realisation of the Long River Funds shall be filed and served on each of the persons set out in paragraph 7 below, by Friday, 7 February 2025.

Service of orders on affected persons
7.        A copy of these orders shall be served on:
(a)       the defendant;
(b)       the Australian Federal Police;
(c)       Balance International Co Ltd;
(d)      China North New Material;
(e)       Helios Assets Holding Pty Ltd; and
(f)       Mr Yi Lu,
by 4.00pm on Tuesday, 19 November 2024,
(g)and in the case of any other person identified by the plaintiffs as having an interest in the Long River Funds, within 2 business days of identification.

General
8.The matter be listed for a directions hearing on Friday, 14 February 2025, at 11.30am (or so soon thereafter as it may be heard).
9.Any person affected by these orders and directions shall have liberty to apply (on not less than 5 days’ written notice).

10. Costs be reserved.

[2024] VSC 721

18 November 2024 (ex tempore)