FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Zhuo & Ji (No 3) [2024] FedCFamC1F 159
File number: SYC 3409 of 2022 Judgment of: HARPER J Date of judgment: 15 March 2024 Catchwords: FAMILY LAW – PROPERTY – PRACTICE AND PROCEDURE – APPOINTMENT OF RECEIVER – Where the property proceedings had been listed to proceed as if undefended on the basis of the husband’s non‑compliance – Where shortly before the final hearing the husband placed a number of companies into voluntary liquidation – Where the liquidator was served with the wife’s Further Amended Initiating Application just prior to the commencement of the hearing – Where the companies in liquidation were corporate trustees for a number of trusts – Where assets were beneficially owned by the trusts –
Where the final relief sought by the wife would vest real property held by the companies in liquidation in the wife or cause her to receive the net proceeds of the sale of the properties – Where the corporate trustees cannot act as trustee for sale upon being placed in liquidation – Liquidator seeking to protect the equitable lien of trustee companies over trust assets – The liquidator does not have the power to sell trust assets – Where the liquidator brought an application to be appointed receiver in order to effect the sale of the properties – Where the net proceeds of the sale are to be held by the liquidator pending the determination of these proceedings – Where no prejudice will be caused to the rights of the spouse parties – Orders made appointing the liquidator as the receiver.Legislation: Corporations Act 2000 (Cth) s 420 and s 477(2)(c)
Family Law Act 1975 (Cth) Pt VIII, s 79 and s 80(1)(k)
Cases cited: Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2009) 239 CLR 346; [2009] HCA 32
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524; [2019] HCA 20
D Pty Ltd and Ors & Sadler and Ors FLC ¶93–736; [2016] FamCAFC 187
Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Ltd) v Kerr [2014] NSWSC 243
Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310; [2018] FCAFC 40
Malloy and Ors & Stopford Malloy (2017) FLC ¶93–804; [2017] FamCAFC 204
Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61
R v Ross-Jones, Ex Parte Beaumont (1979) 141 CLR 504; [1979] HCA 5
Re Crest Realty Pty Ltd (No 2) (in liq) (1977) 2 ACLR 502; [1977] 1 NSWLR 664
Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17; [2014] NSWSC 1484
Zhuo & Ji (No 2) [2023] FedCFamC1F 640
Zhuo & Ji [2023] FedCFamC1F 357
Division: Division 1 First Instance Number of paragraphs: 22 Date of last submission: 26 February 2024 Date of hearing: Determined on the papers in chambers Counsel for the Applicant:
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- Zhuo & Ji (No 3) [2024] FedCFamC1F 159
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- [2024] FedCFamC1F 159
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CaseChat Overview and Summary
The legal issues before the court were whether the liquidator had the necessary powers to sell the trust assets and, if not, whether he could be appointed as a receiver to achieve the sale. The court had to consider the roles and powers of liquidators and receivers, and how these roles could be reconciled to achieve the desired outcome without prejudicing the rights of the parties involved. The court also had to ensure that the appointment of the liquidator as receiver would not cause any prejudice to the rights of the spouse parties.
The court found that the liquidator did not have the power to sell the trust assets directly but could be appointed as a receiver to effect the sale. The court reasoned that the appointment of the liquidator as receiver would not prejudice the rights of the parties involved and would allow for the efficient realisation of the trust assets. The court was satisfied that the net proceeds of the sale would be held by the liquidator pending the determination of the proceedings, and that the liquidator would report to the court on the financial position of each trust and recover the costs of the receivership and liquidation. The court also noted that the husband would be required to cooperate with the liquidator in the sale of the properties.
The court made orders appointing Mr Caruana as the receiver of the assets and undertakings of several trusts. The receiver was granted powers to manage the assets and undertake necessary actions to realise the property and pay costs and creditors. The court also ordered that the costs and expenses of the receivership be paid from the trust property and that the net proceeds of the sale be deposited into an account nominated by the receiver. The court further directed the husband to cooperate with the receiver in the sale of specified properties. These orders were made to ensure the efficient administration of the trusts and the realisation of the assets for the benefit of the parties involved in the proceedings.
Orders
Orders of the court
SYC 3409 of 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:
MR CARUANA IN HIS CAPACITY AS LIQUIDATOR AND RECEIVER
Applicant
AND:
MS ZHUO
First Respondent
MR JI
Second Respondent
MS R (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
15 MARCH 2024
THE COURT ORDERS, PENDING FURTHER ORDER OF THE COURT, THAT:
1. Mr Caruana of RR Accountants be appointed without security as receiver and manager (“the Receiver”) of the assets and undertakings of each of:
(a) the HH Trust;
(b) the SS Trust;
(c) the V Trust;
(d) the L Trust; and
(e) the DD Trust.
2. In each case, the Receiver have the powers that a receiver of a corporation’s property would have pursuant to s 420 of the Corporations Act 2001 (Cth).
3. In addition, the Receiver has the following powers:
(a) to do all things necessary or convenient to be done for or in connection with or as incidental to the attainment of the objectives noted in these orders; and
(b) to the extent necessary to discharge and perform his duties and functions as receiver, to discontinue, terminate or wind up any business, enterprise or venture, in whole or in part.
4. In each case, upon completion of the realisation of property and payment of costs and expenses and creditors, the Receiver is to:
(a) file with the Court a statement of receipts and payments in relation to the realisation of property and payments made by the Receiver in the administration of that trust, verified by affidavit; and
(b) retain, pending further order, any balance in an appropriate account held with a reputable financial institution.
5. The costs, expenses and renumeration of the Receiver incurred in:
(a) acting as the Receiver of the assets and undertaking of the trust;
(b) acting as the liquidator of the trustee company (unless it is established that the particular company engaged in any business other than as trustee of the trust); and
(c) calculated in accordance with the schedule of charge out rates as set out in Exhibit MC-1 (Affidavit of Mr Caruana filed 26 February 2024, p.27) be paid from the trust property.
6. Mr Caruana henceforth in all filed documents be referred to as Fourth Respondent to the proceedings “in his capacity as liquidator and receiver”.
7. Mr Caruana in his capacity as liquidator and receiver may apply to the Court for directions by filing the appropriate application supported by evidence to be returnable on no less than 72 hours’ notice on a date nominated by the chambers of Justice Harper.
8. Notwithstanding the orders made on 31 March 2023, or any other order of the Court, the Respondent husband (“the husband”) is to sign all documents and do all things reasonably necessary as directed by the Receiver to cause the sale of N Street, Suburb P (folio …).
9. For the purposes of Order 8 the net proceeds of sale of Suburb P, including any share claimed by the husband, shall be deposited directly into an account nominated by the Receiver in writing.
THE COURT NOTES THAT:
A. The object of the appointment of the Receiver in Order 1 is to:
(a) enable the Receiver to identify and realise the assets and undertaking of each trust, to enforce the indemnities of the Fifth to Ninth Respondents, as trustees of the respective trusts, and to apply the proceeds to discharge the liabilities of each of those trustees which were incurred by them in their capacity as trustee;
(b) report to the Court on his findings as to the financial position of each of the trusts; and
(c) enable the Receiver to recover the costs of the receivership and, if it be that each of the Fifth to Ninth Respondents sole function was to act as trustee of its relevant discretionary trust, the general costs of the liquidation.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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