Federal Court of Australia

Yan v Spyrakis (Trustee), in the matter of the bankrupt estate of Liu [2024] FCA 768

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 90-15(3)(b) of the Schedule 2—Insolvency Practice Schedule (Bankruptcy) to the Bankruptcy Act 1966 (Cth), the Respondent cease to be the trustee of the bankrupt estate of Wensheng Liu.

2.    Pursuant to s 90-15(3)(c) of the Schedule 2—Insolvency Practice Schedule (Bankruptcy) to the Bankruptcy Act 1966 (Cth), Mark Julian Robinson be appointed the trustee of the bankrupt estate of Wensheng Liu.

3.    In the event that agreement between the Applicant and Prospective Interveners as to the appropriate orders for costs is not reached:

(a)    the parties are to agree a timetable by 4:00pm on Tuesday 30 July 2024 in which short submissions on, and any evidence with respect to, costs are to be filed and served; and

(b)    subject to further order of the Court, any issue as to costs is to be determined on the papers.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    The Applicant, Mr Jianhua Yan, is a creditor of the bankrupt estate of Mr Wensheng Liu (the Estate). This is an application by Mr Yan under s 90-15(1) and (3) of Schedule 2—Insolvency Practice Schedule (Bankruptcy) of the Bankruptcy Act 1966 (Cth) to remove Mr Sarandos Spyrakis (the Trustee) from his position as trustee of the Estate and replace him with Mr Mark Julian Robinson of Fort Restructuring. On 10 August 2023, Mr Robinson signed a Trustee Consent to Act Declaration and Declaration of Independence, Relevant Relationships and Indemnities.

2    While no notice of appearance, submitting or otherwise, was filed by the Trustee and the Trustee has not sought to participate in the proceeding, an affidavit of service was filed establishing that the Trustee was served with the application: see the affidavit of Talysha Sabatino, Process Server, sworn on 26 November 2023.

3    On 12 December 2023, Ms Lan Liu and The Won Capital Pty Ltd (Prospective Interveners) applied for leave to intervene and be heard in the proceeding. Mr Liu was previously the sole director and shareholder of The Won. The Won’s shares are currently held by the Trustee who appointed Ms Liu (who is married to Mr Liu) as the director of The Won on 31 August 2023 in circumstances which I shortly explain.

4    For the reasons below, I refused the application for leave to intervene and granted the Applicant’s application.

2.    BACKGROUND

5    On 5 November 2017, Mr Yan agreed to loan AUD$10,000,000 in RMB to The Won represented by Mr Liu (The Won agreement). On 19 December 2017, Mr Yan entered into a loan agreement to lend AUD$10,000,000 in RMB to Mr Lui and GR Capital Group Pty Ltd ACN 167 099 425 (GR Capital) (the GR Capital agreement). The terms of these loans were subsequently extended by agreement.

6    In February 2019, Mr Yan commenced proceedings in the Supreme Court of New South Wales to recover money allegedly owing to him by the defendants, including The Won, Mr Liu and GR Capital (Supreme Court Proceeding). The causes of action pleaded in Mr Yan’s further amended statement of claim are:

(1)    the debt owing under the GR Capital agreement;

(2)    the debt owing under The Won agreement; and

(3)    an action for monies had and received against Mr Lui for $20,000,000 on the basis that the loan proceeds for the above two loans were paid to him personally.

7    On 11 November 2021, Mr Liu became a bankrupt by lodging a debtor’s petition and appointed Sarandos Spryrakis, the respondent, as his trustee in bankruptcy. Mr Liu prepared and signed a statement of affairs which listed Mr Yan as a creditor in the sum of $20 million pursuant to an obligation incurred in July 2018.

8    On 21 March 2022, the Trustee published a report to creditors (Trustee’s report). No further report to creditors has been provided. The Trustee’s report stated that his investigations are ongoing. The three unsecured creditors identified in the Trustee’s report to whom the largest debts were owed were Mr Yan in sum of $20,000,000, Ruifa Wang in the sum of $7,851,170, and Y Liu and Xinfeng Australia International Investment Pty Ltd ACN 611 966 664 in the sum of $15,000,000. The Trustee’s report concluded that debts owed to unsecured creditors totalled $63,991,460 and that there are no available unencumbered assets available to meet creditor claims.

9    In July 2022, Katzmann J gave Mr Yan leave to continue with the Supreme Court Proceeding pursuant to s 58(3)(b) of the Bankruptcy Act, despite Mr Liu being made bankrupt: Yan v Spyrakis as trustee in bankruptcy for Liu [2022] FCA 872.

10    On 14 August 2023, the Applicant’s solicitors, Dentons Australia Limited, sent a letter to the Trustee. The letter explained that, as a creditor holding more than 25% of the value of the creditors, Mr Yan directed the Trustee to convene a meeting of the creditors pursuant to s 75-‍15(1)(c) of the Schedule of the Bankruptcy Act in order for creditors to vote on two resolutions, namely: the removal of the Trustee; and the appointment of Mr Robinson. In the letter, Dentons also explained that should the creditors appoint Mr Robinson as the replacement trustee, Mr Yan would contribute $20,000 to fund investigations by Mr Robinson of the bankrupt’s affairs. On 27 September 2023, the Trustee recorded that he would provide a “formal response in due course”. No formal response, however, has been forthcoming; nor has any meeting of the creditors been convened to-date.

11    By letter dated 24 August 2023, Dentons gave notice to Hugh & Associates Lawyers, solicitors for Mr and Ms Liu, of Mr Yan’s intention to apply to wind up The Won on just and equitable grounds given that “the Company has no director and no directors are likely to be appointed given that the bankrupt estate is the company’s sole shareholder”.

12    On 31 August 2023, the Trustee signed a shareholder’s resolution appointing Ms Liu as the sole director of The Won, despite having previously concluded in the Trustee’s report that The Won was insolvent. The Trustee did so at the request of Hugh & Associates. On the same day, Hugh & Associates wrote to Dentons advising of the appointment and seeking confirmation that, in those circumstances, Mr Yan would not proceed with any application to wind up The Won.

13    On 11 June 2024, judgment was entered in the Supreme Court Proceeding for Mr Yan against the defendants. Specifically, Pike J made the following orders:

1.    Judgment for [Mr Yan] against [The Won] in the sum of $12,650,447.83, which sum is calculated in accordance with the schedule annexed to this judgment and marked “A”.

2.    Judgment for [Mr Yan] against [Mr Liu] and [GR Capital] in the sum of $12,337,534.25, which sum is calculated in accordance with the schedule annexed to this judgment and marked “B”.

14    On 21 June 2024, Pike J handed down judgment in Yan v The Won Capital Pty Ltd [2024] NSWSC 758 dealing with the remaining issues, namely whether the GR Capital Deed of Company Arrangement should be terminated and the question of costs.

3.    EVIDENCE

15    The Applicant read the following affidavits on both the application for leave to intervene and amended originating application:

(1)    the affidavit of Mr Yan affirmed on 27 October 2023 in support of the application seeking replacement of the Trustee;

(2)    the affidavit of Mr Yan affirmed on 14 June 2024 in which he deposed that it was not his intention to seek to replace Ms Liu as the director of The Won and that he had placed $70,000 into his solicitor’s trust account for the purpose of funding Mr Robinson to conduct investigations into the Estate, given information that the examination of the Mr Liu’s affairs was likely to exceed $20,000 which he had originally deposited;

(3)    the affidavits of two substantial creditors in support of the application for replacement of the Trustee, namely:

(a)    Yuqing Liu, director, Xinfeng, affirmed on 13 March 2024; and

(b)    Ruifa Wang affirmed on 28 February 2024; and

(4)    the affidavits of Justin Bates, solicitor, sworn on 13 March, 29 April, 3 May, 14 June and 21 June 2024.

16    I note that the affidavits of Mr Yan affirmed on 27 October 2023 and 14 June 2024 were translated by certified interpreters in compliance with the Code of Conduct for Interpreters in Legal Proceedings at Annexure A to the Federal Court Practice Note GPN-INTERP: see the affidavits of Chenyang Yan affirmed on 27 October 2023 and Lu Tang affirmed on 14 June 2024 respectively which were also read on both the interlocutory and substantive applications.

17    The Applicant also tendered materials produced by the Trustee under subpoena, and the defendants’ defence and plaintiff’s reply in the Supreme Court Proceeding.

18    The Prospective Interveners read the following affidavits, subject to agreed limitations, on the application for leave to intervene:

(1)    the affidavits of Marcellus Dignam sworn on 30 January and 24 April 2024; and

(2)    the affidavit of Ms Liu affirmed on 17 April 2024.

4.    APPLICATION FOR LEAVE TO INTERVENE

19    The Prospective Interveners sought leave to intervene pursuant to rule 2.03(1) of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules). The parties agreed that the issue of whether leave to intervene be granted should be deferred until the hearing of the application. At the hearing, I dismissed the application for leave to intervene and stated that I would give reasons for so ruling in my decision on the substantive application.

4.1    Submissions of the Prospective Interveners

20    The Prospective Interveners maintained their application for leave to intervene at the hearing on 27 June 2024 on two bases.

21    First, the Prospective Interveners submitted that, despite the amendment to the originating application so as to omit the claim for an order setting aside the Trustee’s decision to appoint Ms Liu as director of The Won, Mr Yan’s evidence is transparent in seeking to remove the Trustee for the purpose of winding up The Won.

22    Secondly, the Prospective Interveners submitted that the Applicant brought the proceeding not in the interests of the creditors as a whole, but in his own interests, and therefore the Court would benefit from having a contradictor in the proceeding. In their submission, without the Prospective Interveners being heard, the Court would not have an opportunity to consider genuine grounds of opposition to the remaining orders sought in the application that should be ventilated.

23    In addition, the Prospective Interveners relied upon the fact that the Applicant proposed orders (with which the Prospective Interveners agreed) requiring the Proposed Interveners to prepare evidence and submissions on the substantive application.

4.2    Reasons for refusing the application for leave to intervene

24    The relevant test for an application for leave to intervene, pursuant to rule 2.03(1) of the Bankruptcy Rules, is whether the prospective intervener has established there are “special circumstances” which justify the making of the order for leave to be heard: Clyne v Andrew (1984) 1 FCR 169 at 170 (Beaumont J); Foyster v Insolvency & Trustee Service Australia [2005] FMCA 457 at [14] (Jarrett FM).

25    As earlier mentioned, the originating application as originally filed sought an order pursuant to s 90-15 of the Schedule to the Bankruptcy Act that the Trustee’s decision to appoint Ms Liu as the director of The Won be set aside. Furthermore, at the time that the interlocutory application for leave to intervene was filed, the Supreme Court Proceeding between Mr Yan, Mr Liu and The Won was still on foot. In this context, it is understandable that Ms Liu and The Won should seek to intervene on this application. However, circumstances evolved over the course of this proceeding which, in my view, meant that the Prospective Interveners no longer had a sufficient interest in the proceeding to establish special circumstances warranting a grant of leave to intervene.

26    First, as explained above, on 16 February 2024, the Applicant filed an amended application abandoning the claim for relief which directly concerned the Prospective Interveners and on 11 June 2024, judgment was entered in the Supreme Court Proceeding.

27    Secondly, while the Applicant previously sought the removal of Ms Liu as a director of The Won, I do not accept that this continues to be a collateral purpose of the proceeding. Any decision on whether Ms Liu should be replaced as the director of The Won would be a decision for the proposed new trustee, Mr Robinson, exercising his powers independently. The Prospective Interveners expressly did not submit that Mr Robinson would not act in any manner except in accordance with his professional obligations. Further, Mr Yan gave unchallenged evidence that he did “not intend to seek that Lan Liu be replaced as the director of The Won Capital Pty Ltd”: Mr Yan’s affidavit affirmed on 14 June 2024 at [3].

28    Thirdly, while the absence of a contradictor may support an application for leave to intervene, this factor alone is not sufficient to establish “special circumstances” justifying the making of the order for leave to be heard in this case. In this regard, this case stands in contrast, for example, to Karellas Investments Pty Ltd v FW Projects Pty Ltd (In Liq) [2021] FCA 870 at [44]–[47] (Cheeseman J), where this consideration was merely one of several considerations held to justify the grant of leave to intervene to a substantial creditor on an application to appoint a special purpose liquidator to the respondent company in liquidation. Furthermore, as the Applicant submitted and I explain further below, the majority of creditors in value support the grant of relief sought in the amended originating application.

29    Fourthly, I do not consider that the fact that the hearing of the interlocutory application was deferred until the final hearing provides a sufficient basis for granting leave; nor does the fact that the Prospective Interveners were afforded the opportunity to file written submissions addressing the substantive application in the event that leave to intervene was granted. Adopting this procedure is common in applications for leave to intervene given, among other things, that the proposed substantive submissions may afford assistance to the Court in determining the question of whether leave to intervene should be granted and if so, the scope of that leave.

30    However, I note that I reserved the costs of the interlocutory application on 27 June 2024 and, in light of the evolving circumstances of this case, I consider it appropriate to make orders permitting the Applicant and Prospective Interveners to make submissions on the issue of costs in the event that agreement cannot be reached.

5.    THE AMENDED ORIGINATING APPLICATION

5.1    Statutory framework and relevant legal principles

31    The Applicant seeks orders under s 90-15 of the Schedule to the Bankruptcy Act. That provision relevantly provides that:

Court may make orders

(1)    The Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate.

Orders on own initiative or on application

(2)    The Court may exercise the power under subsection (1):

(a)    on its own initiative, during proceedings before the Court; or

(b)    on application under section 90-20.

Examples of orders that may be made

(3)    Without limiting subsection (1), those orders may include any one or more of the following:

…

(b)    an order that a person cease to be the trustee of the estate;

…

Matters that may be taken into account

(4)    Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

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

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

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

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

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

32    Section 90-15 of the Schedule therefore confers a discretion on the Court to make orders removing a trustee in the exercise of which the Court may take into account, but is not limited to, the matters identified in s 90-15(4). Section 90-20 in turn provides that:

(1)    Each of the following persons may apply for an order under section 90‑15:

(a)    a person with a financial interest in the administration of the regulated debtor’s estate;

(b)    if the committee of inspection (if any) so resolves—a creditor, on behalf of the committee;

(c)    the Inspector-General.

(2)    If an application is made by a person referred to in paragraph (1)(b), the reasonable expenses associated with the application are to be taken to be expenses of the administration of the estate.

33    The effect of ss 90-15(1), (2)(b) and (3), and s 90-20(1)(a) of the Schedule is that the Court has power, on the application of a person with a financial interest in the administration of a regulated debtor’s estate, to make orders relevantly that a person cease to be the trustee of the estate in bankruptcy. A “regulated debtor” includes a bankrupt: s 5-15(a) of the Schedule. A person has a “financial interest” in the administration of a regulated debtor’s estate if the person is a creditor: s 5-30(a)(ii) of the Schedule. I am therefore satisfied that the Court has jurisdiction to entertain the application.

34    The relevant question for the Court is whether removal of a trustee would be in the best interests of the bankruptcy: Mokhtar v Piscopo [2024] FCA 493 at [42] (Perry J). I recently summarised the relevant principles and authorities regarding applications to replace a trustee in Mokhtar at [28]–[42]. The following two principles, in particular, are worth emphasising in this case:

(1)    the Court should not unduly interfere with the administration of a bankrupt’s estate by a trustee; and

(2)    it is not necessary for an applicant to establish error, misfeasance, negligence or other poor conduct by a trustee in order to succeed on an application for an order that a trustee of a bankrupt estate cease to act in that role.

5.2    Disposition of the amended application

35    It should be emphasised at the outset that I was not asked to, and do not, make any findings of misconduct by the Trustee. Nonetheless, I accept the Applicant’s submission that it is in the best interests of the bankruptcy that the Trustee be replaced by Mr Robinson as the trustee of the Estate for four cumulative reasons.

36    First, I accept that there are at least three matters which would, on their face, appear to be beneficial for a trustee to investigate.

37    The first is that there is evidence to support that Mr Liu may have assets in China which have not been investigated by the Trustee. Pursuant to their two loan agreements, Mr Yan transferred a total of 101,700,000 RMB into a Chinese bank account in Mr Lui’s name. Yet the Trustee’s report does not refer to the Trustee having undertaken any investigations as to the existence (or otherwise) of any overseas assets, particularly assets in China. Mr Yan stated in his affidavit affirmed on 27 October 2023 that he has no knowledge of the Trustee providing any further reports to the creditors: at [20]. In those circumstances, I infer that there is a real possibility that the Trustee has not investigated whether Mr Liu continues to hold assets overseas despite the real possibility that substantial assets which could potentially be realised for the benefit of the Estate may be located abroad.

38    The second matter for investigation is that there is inconsistent evidence about the size of a debt owed to Mr Liu by GR Capital. In the Trustee’s report, the Trustee recorded, based on Mr Liu’s Statement of Affairs, that the bankrupt estate was owed $678,000 by GR Capital. However, Mr Liu had earlier submitted a proof of debt dated 21 November 2018 in the administration of GR Capital claiming to be owed $16,638,256.99 by GR Capital in respect of funds which he had apparently advanced to GR Capital: see Yan v The Won at [22]; the Supplementary Second Report to Creditors under Insolvency Practice Rules (Corporations) 75-225 with respect to GR Capital (Administrators Appointed) (Receivers & Managers Appointed). The Applicant submits that it is unlikely that the discrepancy arose due to repayment of the loan by GR Capital because on 18 February 2019 GR Capital entered into a Deed of Company Arrangement which restricted the company’s ability to pay creditors, except employee claims in the ordinary course of business. The Applicant also appropriately drew my attention to the finding in Yan v The Won at [22] that the proof of debt provided in support of Mr Liu’s claim to GR Capital in fact misappropriated “Mr Yan’s loan funds and claimed that these were a debt which GR Capital owed” to Mr Liu, as opposed to a debt owed by GR Capital to Mr Yan. Given this finding and the significant inconsistency in the value of debt owed to the Estate, I agree with the Applicant that this is a significant matter which appears worthy of investigation.

39    The third matter for investigation is whether the Estate holds any equity in a property in Sylvania NSW which could be realised. Mr Liu disclosed to the Trustee that the property was worth $3 million. The Trustee’s report recorded that the property is subject to a mortgage in the sum of $2,041,752. It also stated that caveats have been lodged on the title to the property by three of the unsecured creditors in the Estate, namely, Everest Private Pty Ltd, Xinfeng, and Mr Yan, as well as Ms Lui whose claim is based on alleged contributions to the initial purchase of the property and subsequent payments in relation to it. These matters suggest that an investigation into the property may also be in the interests of the bankruptcy.

40    Secondly, in the Trustee’s report it was estimated that the Estate owes $63,991,460 to all known unsecured creditors. I accept Mr Yan’s evidence that he is “prepared to fund the entire cost of the examination of Mr Liu” if Mr Robinson is appointed as the trustee of the Estate but is “not willing to provide funding to the Bankrupt Estate if [the Trustee] remains as the trustee of the Bankrupt Estate”: Mr Yan’s affidavits affirmed on 14 June 2024 at [6] and on 27 October 2023 at [42] respectively. In this regard, not only is Mr Yan owed $12,337,534.25 (as ordered by Pike J), but he has also paid $70,000 into his solicitor’s trust account for this purpose. Given the size of the debts owed by the Estate to Mr Yan and other, it would plainly be in the best interests of the Estate to receive this funding in order to conduct further investigations with respect to the potential recovery of assets for the Estate.

41    The Applicant made submissions on the competing offer of funding made by Ms Liu in her affidavit affirmed on 17 April 2024. Ms Liu stated that she is “prepared to fund the [Trustee] between $20,000 and $40,000 to conduct investigations in the bankruptcy” and believed another creditor, Kai Li, was also prepared to contribute funding to the Trustee: at [5].

42    The Applicant submits that the funding offer from Mr Yan should be preferred for two reasons. First, the offer by Mr Yan is for a greater sum of money and has greater certainty because it has been paid into his solicitor’s trust account.

43    Second, the applicant submits that in choosing a trustee “the views of those with a vested interest in minimising investigations, such as those involved in or benefiting from transactions likely to be impugned, should be discounted”: Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in Liq) [2019] NSWCA 304; (2019) 101 NSWLR 358 at [67](ii) (Bell P, with Bathurst CJ agreeing at [1] and Macfarlan JA agreeing at [76]); see also Mokhtar at [34] (Perry J) as to the potential application by analogy of principles regarding liquidation in bankruptcy matters.

44    The short point is that, in circumstances where Ms Liu was not granted leave to intervene in the proceeding and her affidavit was not read on the substantive application for relief, there is no evidence before me as to her intention to fund any investigation into the bankruptcy. In any event, it is unlikely that I would have given that evidence any real weight. It will be recalled in this regard that Mr Yan lent AUD$10,000,000 to Mr Lui and GR Capital in late 2017 pursuant to the GR Capital Agreement, and this is one of the significant debts claimed in the bankruptcy by Mr Yan. As Ms Liu was a director of GR Capital when the Agreement was entered into, she would appear to have a vested interest in minimising the proposed investigations.

45    Thirdly, the replacement of the Trustee by Mr Robinson is supported by the majority of creditors in value. As identified above, the Estate owes approximately $63,991,460 to unsecured creditors. The Trustee’s report also finds that the following creditors are owed money as part of that total: Ruifa Wang ($7,851,170); Y Liu and Xinfeng ($15 million); and Mr Yan ($20 million). Rufia Wang affirmed an affidavit on 28 February 2024 stating their support for replacing the Trustee with Mr Robinson “[o]n the basis that Jianhua Yan is prepared to contribute funding to the Bankrupt Estate for investigations if [the Trustee] is replaced by Mark Julian Robinson as trustee”: at [4]. Yuqing Liu is a director of Xinfeng and a joint creditor of the Estate with Xinfeng: affidavit of Yuqing Liu affirmed on 13 March 2024 at [1]–[2]. Yuqing Liu and Xingeng support the replacement of the Trustee with Mr Robinson on the same basis: at [5]. Although, Mr Yan’s debt has now been determined in the Supreme Court Proceeding to be a lesser amount than originally estimated in the Trustee’s report, I accept that the majority of creditors in value support the application.

46    Finally, I accept the Applicant’s submission that the Trustee has made decisions which may not necessarily have been in the best interests of the bankruptcy. In this respect, I make two preliminary observations. First, the Applicant did not submit that these decisions by the Trustee were beyond power or improper, nor do I make any such findings. Second, as noted above, the Court should not unduly interfere with the administration of a bankrupt’s estate by a trustee. Accordingly, considered in isolation, these unusual decisions by the Trustee would not suffice to substantiate an application for his removal. However, when these decisions are considered together with the other factors which I have set out above, they lend further support to the orders sought by the Applicant.

47    The first issue concerned the process by which the Trustee appointed Ms Liu as the director of The Won. As earlier explained, the relevant sequence of events was that on 24 August 2023, Dentons wrote to Hugh & Associates advising that the Applicant intended to seek that The Won be wound up in the Supreme Court Proceeding. On 25 August 2023, Hugh & Associates wrote to the Trustee requesting that Ms Liu be appointed as director of The Won in order to allow The Won to continue to defend the Supreme Court Proceeding. On 31 August 2023, the Trustee appointed Ms Liu as director of The Won without consulting the Estate’s creditors.

48    The issue with the Trustee’s decision is that on 31 May 2021 Parker J handed down judgment in Xinfeng Australia International Investment Pty Ltd v GR Capital Group Pty Ltd [2021] NSWSC 614 in which “his Honour rejected an illegality argument advanced by GR Capital that was either identical to, or certainly very similar to, the arguments said to be advanced by GR Capital” in the Supreme Court Proceeding: Yan v The Won at [92] (Pike J). On this basis, Pike J ordered that the active defendants in the Supreme Court Proceeding (including The Won) pay the Applicant’s costs on the indemnity basis from 30 June 2021. The Applicant submits that if the Trustee had consulted with the creditors, then the Trustee may have made a different decision with respect to the appointment of a director to The Won. I accept that while the Trustee was not under a legal obligation to consult the creditors on this issue, the process adopted by the Trustee was not necessarily in the best interests of the bankruptcy.

49    The second questionable decision by the Trustee was the failure to call a meeting of the creditors when directed by the Applicant. On 14 August 2023, Dentons wrote to the Trustee directing the Trustee to convene a meeting of the creditors pursuant to s 75-15(1)(c) of the Schedule of the Bankruptcy Act for the creditors to vote on the following resolutions:

1.    Resolution 1

Remove [the Trustee] as trustee of the bankrupt estate of Wensheng LIU.

2.    Resolution 2

Mark Julian Robinson be appointed as trustee of the bankrupt estate of Wensheng LIU.

(Emphasis in original.)

50    It appears that the Trustee may not have received this correspondence until 14 September 2023. On 27 September 2023, the Trustee responded to this correspondence and his reply included the following statement:

With respect to your client’s request for a meeting of creditors to change the trustee, I will provide a formal response in due course. Please note that a change of trustee in a bankrupt estate requires the support of a majority of creditors in number and a majority of creditors in value and after a review of the creditors disclosed in the Statement of Affairs it appears unlikely that this would be supported by the creditors.

(Emphasis added.)

51    I agree with the Applicant that the Trustee appears to have prejudged the outcome of the creditors meeting without a clear basis. As a result, in my view, the failure to call the creditors meeting was not necessarily in the best interests of the bankruptcy.

52    The Applicant also sought an order for costs on the amended application. However, in circumstances where the Trustee did not participate in the proceeding, I am not prepared to make this order.

6.    CONCLUSION

53    The application for leave to intervene is dismissed and the application to replace the Trustee with Mr Robinson as the trustee of the Estate is granted.

Associate:

Dated:    16 July 2024