Federal Court of Australia

Hogan v Ma [2023] FCA 1383

ORDERS

THE COURT ORDERS THAT:

1.    The second plaintiff (Receiver) is appointed nunc pro tunc as receiver and manager of all of the assets, property and undertakings of the Trust known as the M & L Family Trust ABN 21 572 164 771 established by the trust deed dated 14 May 2015, a copy of which is Annexure A to the affidavit of Benjamin Neil Wibo Dibden sworn on 26 October 2023, including but not limited to the choses in action brought on behalf of the Trust the subject of these Proceedings.

2.    Any requirement for the Receiver to file a guarantee is dispensed with.

3.    The Receiver is granted all the powers provided for under section 420 of the Corporations Act 2001 (Cth) (other than those in sub-sections 420(2)(s), (t), (u) and (w) of the Act) as if the reference in that section to “the corporation” were a reference to the Trust.

4.    The Receiver has liberty to apply to the Court for further orders, directions and/or advice concerning any matter in respect of or in relation to his receivership of the assets, property and undertakings of the Trust, including for the determination and/or fixing of his remuneration pursuant to rule 14.24 of the Federal Court Rules 2011(Cth).

5.    The plaintiffs to serve any request for further and better particulars of the first, second and third defendants’ (“the Active Defendants”) defences by 16 November 2023.

6.    The Active Defendants to respond to any requests for further and better particulars from the plaintiffs by 29 November 2023.

7.    The plaintiffs to file and serve any reply to the Active Defendants’ defences by 11 December 2023.

8.    The plaintiffs to file and serve any further evidence in chief, including any expert evidence, by 14 February 2024.

9.    The Active Defendants to file and serve their evidence in response, including any expert evidence, by 27 March 2024.

10.    The proceedings be referred to the National Operations Registrar for allocation to a docket judge.

11.    The proceedings be listed for a case management hearing on a date to be advised by the Associate to the docket judge.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHEESEMAN J:

1    These reasons relate to an application for interlocutory relief sought in prayers 1 to 5 of the amended originating process filed on 13 September 2023 by the first plaintiff, Michael Hogan, as liquidator of the second plaintiff, Marth Holdings Pty Ltd (in liquidation) (the Company). The Company entered liquidation on 17 July 2020. The interlocutory relief sought relates to the appointment of the liquidator as receiver of the property, assets and undertakings of the discretionary trust known as the M & L Family Trust, and various ancillary orders that give effect to the proposed appointment. The Company was the Trustee of the Trust. The interlocutory application came before me in the New South Wales Corporations List.

2    The substantive proceeding is against five defendants. They are Mark Chong Ma, the first defendant; Jingxi Li, the second defendant; Marsh Capital Pty Ltd, the third defendant; Yaxun Zhao, the fourth defendant; and the Registrar General of New South Wales, the fifth defendant.

3    The first defendant, Mr Ma, is the former sole director, secretary and shareholder of the Company, and was the director at the time each of the transactions that are sought to be impugned in the substantive proceeding occurred. He is also the named appointer, and a named beneficiary, of the Trust. He accepts in his defence filed in this proceeding that the Company acted as the Trustee of the Trust since 14 January 2015 and that the Company did not act otherwise than as Trustee of the Trust. Mr Ma shares common legal representation with the third defendant, March Capital. On the hearing of the interlocutory application, their solicitor informed the Court that they did not oppose the interlocutory relief sought by the plaintiffs and did not wish to be heard.

4    The second defendant, Ms Li, is the former spouse of Mr Ma. She has lodged a proof of debt in the liquidation of the Company, which at this stage has been admitted for voting purposes only. She is also a named beneficiary of the Trust. She was represented at the hearing of the interlocutory application and her solicitor informed the Court that she did not oppose the interlocutory relief sought by the plaintiffs and did not wish to be heard.

5    The fourth defendant, Ms Zhao is the mother of Ms Li and has not taken any part in the proceeding to date. She has not filed an address for service in the proceeding. The matter was called outside three times and she did not appear at the hearing of the interlocutory application.

6    The fifth defendant, the Registrar General, has filed a submitting appearance.

7    The substantive proceeding arises from three Transactions which pre-dated the commencement of the liquidation of the Company:

(1)    a transfer of $3,277,000 by the Company to Marsh Capital on 27 June 2017;

(2)    a transfer of $2,750,035 by the Company to GHH Holding Pty Ltd on 15 September 2017; and

(3)    a transfer of the property located at 65 Fiddens Wharf Road, Killara to Ms Li for the stated consideration of $1.00 on 29 July 2019.

8    Broadly, the plaintiffs claim that the Transactions are voidable (being uncommercial transactions, insolvent transactions, unfair loans, unreasonable director-related transactions, creditor-defeating dispositions or alienations to defraud creditors).

9    On this interlocutory application, the plaintiffs rely on the following evidence in support of the application for interlocutory relief:

(1)    the affidavit of Benjamin Neil Wibo Dibden sworn 26 October 2023; and

(2)    the affidavit of Michael Andrew Hogan sworn on 26 June 2023; and

(3)    the Liquidator’s statutory report to creditors dated 3 January 2023.

10    The plaintiffs filed detailed submissions in advance of the interlocutory hearing that were comprehensively referenced to the evidence. In these circumstances, and noting that the interested parties are on notice and there is no active opposition to the application, I can be relatively brief in detailing my reasons for making orders substantially in the form sought by the plaintiffs.

11    The purpose of the interlocutory relief sought by the plaintiffs is primarily to ensure that the plaintiffs have standing to bring the claims being prosecuted in this proceeding. The relevant choses in action are assets of the Company, being claims which have arisen in connection with the Company’s role as Trustee of the Trust, the Company only ever having acted as the Trustee of the Trust.

12    The principles relevant to an application of this type have been summarised in a number of cases, for present purposes it is convenient to refer to, without repeating, the summary which I gave in Ward, in the matter of PIC Lindfield 19 Pty Ltd (in liquidation) v Zhu [2021] FCA 1526 at [18] and the recent discussion of the principles in Donnelly (Liquidator), in the matter of Dunjey Property Pty Ltd (in liq) [2023] FCA 1254 at [14] to [17]. I adopt and apply those principles.

13    The Trust was established, and the Company was appointed as Trustee, on 14 January 2015. At all material times, including when the Transactions occurred, the Company acted as Trustee of the Trust. The evidence on this application does not suggest that the Company ever acted other than in its capacity as Trustee of the Trust. Pursuant to the terms of the relevant trust deed, the Company is entitled to be indemnified out of the assets of the Trust for liabilities incurred in connection with acting as the Trustee. This is also the position at law.

14    On 17 July 2020, when the Company entered liquidation, the Company was removed as Trustee of the Trust by operation of clause 47 of the Trust Deed.

15    No replacement trustee has been appointed to the Trust. The first defendant, in his capacity as the named appointer confirms that he has not appointed a replacement trustee. There is no current trustee of the Trust, other than the Company which has been reduced to a bare trustee.

16    The following is a summary of the proofs of debt presently lodged in the winding up of the Company, upon which the Liquidator has not yet formally adjudicated.

17    Whilst no formal adjudication of these claims has yet been made, the debts claimed by the Deputy Commissioner of Taxation are the subject of assessments issued by the Deputy Commissioner, which serve as conclusive evidence of the matters contained therein. In addition the Liquidator points to the costs incurred in relation to the winding up of the Company, noting again that the Company only ever acted as Trustee of the Trust.

18    The liquidator submits, and I accept, that these debts are entitled to be satisfied pursuant to the former Trustee’s right of exoneration and indemnity.

19    The evidence led on this application, limited though it necessarily is by the information available to the Liquidator, suggests that the Company and the Trust do not have assets available to discharge the liabilities of the Trust other than via the choses in action that the plaintiffs are pursuing in this proceeding.

20    Being satisfied as I am that the Company only acted as a Trustee of the Trust and that no other Trustee has been appointed to the Trust it is appropriate to appoint the Liquidator as receiver and manager. Doing so will remove doubt if there be any, as to the Liquidator’s standing to pursue the present proceeding. I will make orders substantially as sought.

21    For completeness I note, that at the hearing the plaintiffs sought two orders in addition to those included in the Amended Originating Process. After an exchange with counsel appearing for the plaintiffs, I concluded that at this time, it was premature to make those orders. The plaintiffs did not seek to be heard against that course.

Associate:

Dated:    10 November 2023

SCHEDULE OF PARTIES