Federal Court of Australia

Trafford-Jones v Liu, in the matter of the bankrupt estate of Liu (No 2) [2025] FCA 589

ORDERS

THE COURT ORDERS THAT:

1.    The order for production addressed to Liu & Woodland Law Firm Pty Ltd pursuant to the order made on 26 February 2025 is confirmed.

2.    The interim application filed on 19 March 2025 is dismissed.

3.    Liu & Woodland Law Firm Pty Ltd is to pay the applicant’s costs of the interim application.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 27 February 2025, following an order made by a Registrar of this Court on 26 February 2025, an order for production was issued to the proper officer of Liu & Woodland Law Firm Pty Ltd. The order for production sought production of the following documents:

1.    A copy of Liu & Woodland Law Firm Pty Ltd’s (Liu & Woodland) file(s) maintained in respect of the sale of each of the Properties.

2.    To the extent not captured by category 1, all Documents, including Written Communications, referring to or otherwise concerning any verification of identity carried out in respect of Liu & Woodland’s clients and / or authorised instructors in respect of the sale of each of the Properties.

3.    To the extent not captured by category 1, all Documents, including Written Communications, referring to or otherwise concerning the sale of any one or more of the Properties, including without limitation;

(a)    the contract for sale for each of the Properties;

(b)    any person(s) authorised to give instructions in respect of the sale of each of the Properties;

(c)    any valuation obtained in respect of any one or more of the Properties;

(d)    the disbursement of funds in respect of the settlement of the sale of each of the Properties, including, without limitation, any direction to pay or settlement statement;

(e)    the ultimate destination of any amounts paid in respect of the sale of each of the Properties; and

(f)    any Written Communications with one or both of the Bankrupts.

4.    Copies of Liu & Woodland’s trust account statements in respect of any matter in which Liu & Woodland’s acted for any one or more of the Associated Entities.

2    Capitalised terms used in the order for production are defined in it. In particular:

(1)    Associated Entities is defined to mean:

… any one or more of the following, whether in their own capacity of as trustee of a trust:

(a)    Sunrise Australia Developments Pty Ltd (ACN 612 121 374);

(b)    Sunrise H Pty Ltd (ACN 605 203 218); and

(c)    Wau 88 Pty Ltd (ACN 608 551 211)

(2)    Properties is defined to mean the properties situated in Homebush, New South Wales at 1 Derowie Avenue, 3 Derowie Avenue, 5 Derowie Avenue, 2 Kanoona Avenue, 4 Kanoona Avenue and 6 Kanoona Avenue.

I will adopt these definitions in the balance of these reasons.

3    By an interim application filed on 19 March 2025 Liu & Woodland seeks an order pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth) for review of the Registrar’s decision to issue the order for production. By way of clarification, in oral submissions the solicitor appearing for Liu & Woodland explained that Liu & Woodland seeks a review of the decision of the Registrar so that the terms of the order for production are varied to seek production of:

(1)    the categories of documents set out in its email dated 12 May 2025 (12 May 2025 Email) to the solicitors for the applicants who are the trustees of the bankrupt estates of Hua (Alysha) Liu and Kei (Dennis) Kwok (Trustees):

1.    The conveyancing-related documents (defined below) for the three properties previously held by Sunrise Australia Developments P/L (“Sunrise Au”) and WAU 88 P/L, being:

A.    1 Derowie Ave, Homebush NSW 2140

B.    3 Derowie Ave, Homebush NSW 2140

C.    5 Derowie Ave, Homebush NSW 2140.

2.    For the avoidance of doubt, the conveyancing-related documents include:

A.    The contracts for sales of the three properties;

B.    The valuation report of the three properties;

C.    The settlement completion records for the three properties, generated by PEXA, with the account name and account details redacted (please refer to the paragraph 4 below for further explanation);

D.    The loan closure letter confirming discharge of mortgage over the properties;

E.    The email of 11 December 2024 from the discharge bank confirming that the discharge was completed.

(2)    Liu & Woodland’s trust account statements related to the sale of the three Properties referred to in the 12 May 2025 Email which are the Properties held by two of Associated Entities, namely Sunrise Australia Developments Pty Ltd and Wau 88 Pty Ltd.

4    Section 35A(5) of the Federal Court Act provides that a party to a proceeding in which a Registrar has exercised any of the powers of the Court may, within the time prescribed by the Federal Court Rules 2011 (Cth), or within any further time allowed in accordance with the Rules, apply to the Court to review that exercise of power. The nature of the review carried out by the Court is a hearing de novo in which the matter is considered afresh on the evidence and the law at the time of that hearing: Bechara v Bates [2021] FCAFC 34 at [17].

5    In support of its application for review of the Registrar’s decision Liu & Woodland relies on an affidavit affirmed by Fu Shi on 18 March 2025. Fu Shi is the secretary of each of the Associated Entities. The Trustees rely on an affidavit affirmed by Thyge Trafford-Jones, one of the Trustees, on 14 May 2025.

background

6    Ms Liu and Mr Kwok (together, Bankrupts) were declared bankrupt in November 2022.

The history of proceedings in this Court

7    On 30 November 2023 the Trustees commenced this proceeding by way of originating application seeking the issue of examinations summons pursuant to s 81 of the Bankruptcy Act 1966 (Cth) addressed to each of the Bankrupts and their solicitor, Jack Jacovou, and of orders for production addressed to individuals and entities associated with the Bankrupts and a number of financial institutions. The examinations took place in May 2024.

8    On 18 June 2024 as a result of the information obtained during the examinations and documents produced pursuant to orders for production, the Trustees filed an interlocutory application in this proceeding seeking, among other things, the issue of further summons for examination and orders for production to a number of other individuals and entities associated with the Bankrupts and freezing orders against E&B Holdings Pty Ltd, Hanoi Landmark Investment Pty Ltd and Landmark Everest Pty Ltd.

9    On 26 June 2024 the Court made the freezing orders sought by the Trustees by consent and without admissions against each of E&B Holdings, Hanoi Landmark and Landmark Everest.

10    On 14 August 2024 the Court made orders granting leave to the Trustees to file and serve an amended interlocutory application seeking additional freezing orders against E&B Business Pty Ltd and Chris Cheung and by consent and without admissions, extending the freezing orders made against E&B Holdings, Hanoi Landmark and Landmark Everest to 26 August 2024.

11    The Trustees sought freezing orders against E&B Holdings, Hanoi Landmark, Landmark Everest, E&B Business and Mr Cheung on the basis of their belief that those entities or persons held assets, including real property, on trust for the Bankrupts which vested in them pursuant to s 58(1) of the Bankruptcy Act upon the Bankrupts becoming bankrupt (First Freezing Order Application).

12    The First Freezing Order Application was heard on 26 August 2024. At the conclusion of the hearing, judgment was reserved and the Court made orders, by consent and without admissions, further extending the freezing orders against E&B Holdings, Hanoi Landmark and Landmark Everest until determination of the application.

13    On 2 September 2024 the Court made freezing orders and ancillary orders against E&B Holdings, Hanoi Landmark, Landmark Everest, E&B Business and Mr Cheung (First Freezing Orders).

14    On 28 October 2024 the Trustees commenced proceeding NSD1509 of 2024 in this Court by way of originating application against the Bankrupts, E&B Business, E&B Holdings, Landmark Everest, Hanoi Landmark and Mr Cheung (Second Proceeding). In the Second Proceeding, among other things, the Trustees seek declarations that certain real property was held in the name of its respective registered proprietors on trust for the Bankrupts and vested in the Trustees pursuant to s 58(1) of the Bankruptcy Act upon the Bankrupts becoming bankrupt.

15    On 29 October 2019 the Trustees filed an interlocutory application in the Second Proceeding seeking freezing orders against the respondents, E&B Business, E&B Holdings, Landmark Everest, Hanoi Landmark and Mr Cheung, largely on the same terms as the First Freezing Orders. On 21 November 2024 in the Second Proceeding the Court made freezing orders against those respondents (Second Freezing Orders).

16    In August 2024, October 2024 and February 2025 the Trustees carried out further examinations in this proceeding.

The Associated Entities

17    Prior to their sale in December 2024 (see below) the registered proprietor of the Properties situated at 1 and 3 Derowie Avenue was Sunrise Australia, the registered proprietor of 5 Derowie Avenue was Wau 88 and the registered proprietor of the Properties situated at 2, 4 and 6 Kanoona Avenue was Sunrise H Pty Ltd. The Properties are adjacent to one another.

18    It was not in dispute that as at 2 March 2021 the Bankrupts, via the companies K&M International Pty Ltd and Kwok Holdings Pty Ltd, held 100% of the shares in Sunrise Australia and that in turn, Sunrise Australia held 100% of the shares in Wau 88. Relevantly:

(1)    Mr Kwok was the sole director of K&M International from its incorporation on 22 April 2016 until its deregistration;

(2)    Kwok Holdings was the sole shareholder of K&M International from 5 June 2019;

(3)    the Bankrupts were both directors, secretaries and shareholders of Kwok Holdings;

(4)    Mr Kwok was the sole director of Sunrise Australia from 29 April 2016 to 3 March 2021; and

(5)    Mr Kwok was the sole director of Wau 88 from 20 May 2016 to 3 March 2021.

19    On 3 March 2021:

(1)    all of K&M International’s shares in Sunrise Australia were transferred to Quanfang Ling, Sunrise H, New SG Pty Ltd and N&S Corporation Pty Ltd (First Sunrise Share Transfer). Quanfang is the sole director and shareholder of N&S;

(2)    all of Sunrise Australia’s shares in Wau 88 were transferred first to Quanfang, Sunrise H, New SG and N&S and then back to Sunrise Australia; and

(3)    as set out above Mr Kwok ceased to be a director of Sunrise Australia and Wau 88 and was replaced by Xian Shi. At about this time Quanfang and Jianqiu Lin were appointed as directors of Sunrise Australia and Wau 88.

20    In addition, Mr Kwok was the secretary of Sunrise H from 28 April 2016 to 27 May 2019 and K&M International previously held two ordinary shares in Sunrise H.

21    On 8 February 2024, without the Trustees’ knowledge or consent, the Bankrupts entered into a deed of agreement and settlement with Wau 88, Sunrise Australia and Quanfang pursuant to the terms of which the Bankrupts, in their capacity as beneficiaries of 40 ordinary shares in Sunrise Australia apparently held on trust for them by Quanfang, purported to direct the trustee, Quanfang, to transfer all of their interest in Sunrise Australia as to:

(1)    20 of the shares held on trust to Zeyong Liu for $225,000; and

(2)    20 of the shares held on trust to Quanfang for $225,000,

(Second Sunrise Share Transfer).

22    Relevantly the Second Sunrise Share Transfer was the subject of evidence in Trafford-Jones v Liu, in the matter of the bankrupt estate of Liu [2024] FCA 998 where Cheeseman J relevantly said at [201]:

Neither Ms Liu nor Mr Kwok disclosed to the Trustees that they held any beneficial interest in Sunrise, nor that they had entered into the Sunrise Deed. During the course of examinations, which took place only a few months after entry into the Sunrise Deed, Ms Liu gave evidence that she had not heard of Sunrise and did not know any of the properties owned by Sunrise.

23    After the First Sunrise Share Transfer and the Second Sunrise Share Transfer the shareholders of Sunrise Australia were:

(1)    Sunrise H which held 40 fully paid shares beneficially;

(2)    New SG which had 10 fully paid shares, not beneficially held;

(3)    N&S which had 10 fully paid shares, not beneficially held;

(4)    Quanfang who held 20 fully paid shares beneficially; and

(5)    Zeyong who held 20 fully paid shares beneficially.

24    In November 2024:

(1)    Quanfang ceased to be a director of the Associated Entities;

(2)    Quanfang and N&S transferred 20 and 10 shares respectively in Sunrise Australia to Chuan Zhang; and

(3)    N&S transferred 30 shares in Sunrise H to Chuan Zhang and 20 shares in Sunrise H to Jiangnan Lin.

25    In December 2024 the Properties were sold without a marketing campaign or agent for a combined purchase price exceeding $12 million to corporate purchasers that were incorporated in November or December 2024. The funds for the purchase of the Properties appears to have been sourced from entities owned and controlled by individuals who own, control or are otherwise associated with Wau 88 and Sunrise H, including Jiangnan Lin, Xian Shi and Fu Shi. The Trustees are concerned about whether the sale of the Properties were “arms-length” transactions. The Trustees consider that the purpose of the transfers may have been to seek to further distance the Properties from their hands, including by seeking to protect them from any potential claims by the Trustees.

26    On the application of the Trustees the Court has issued examination summons and orders for production to Quanfang, Xian Shi and Zeyong Liu. Although they have been served, neither Quanfang, Xian Shi or Zeyong Liu have attended Court to be examined or produced any documents in response to the summonses and orders for production.

27    In his evidence Fu Shi sets out the current officers and shareholders of the Associated Entities. He emphasises that the Bankrupts do not have any current involvement in any of those companies either as an officer or shareholder. To the extent that the Bankrupts are not officers or recorded as shareholders of any of those companies, that is so.

The order for production

28    Fu Shi gives evidence that he does not believe that the Associated Entities’ conveyancing transactions and in particular the documents requested by the order for production are of any relevance to the Bankrupts and that when the parties entered into the deed giving rise to the Second Sunrise Share Transfer, he was not aware that the Bankrupts had been involved in this proceeding or declared bankrupt.

29    Fu Shi says that for the sake of protecting commercial confidential information he is reluctant and considers it unnecessary and “even burdensome” to provide the documents relating to the sale of the Properties through the Associated Entities’ solicitor, Liu & Woodland. He says that those transactions occurred in December 2024 and neither of the Bankrupts had any involvement, benefit or interest in the transactions.

legislative framework and legal principles

30    Section 81 of the Bankruptcy Act relevantly provides:

(1)    Where a person (in this section called the relevant person) becomes a bankrupt, the Court or a Registrar may at any time (whether before or after the end of the bankruptcy), on the application of:

(a)    a person (in this section called a creditor) who has or had a debt provable in the bankruptcy;

(b)    the trustee of the relevant person’s estate; or

(c)    the Official Receiver;

summon the relevant person, or an examinable person in relation to the relevant person, for examination in relation to the bankruptcy.

…

(1B)    A summons to a person under subsection (1) may require the person to produce at the examination books (including books of an associated entity of the relevant person) that:

(a)    are in the possession of the first‑mentioned person; and

(b)    relate to the relevant person or to any of the relevant person’s examinable affairs.

31    The “examinable affairs” of a person means the person’s dealings, transactions, property and affairs and the financial affairs of an associated entity of the person, insofar as they are, or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs. In turn an “associated entity” means, in relation to a person, an entity, other than a company that is, or has been, associated with the person or a company that is, or has been associated with the person at a time when the company is, or was, as the case may be, a private company: s 5(1) of the Bankruptcy Act.

32    Section 5B of the Bankruptcy Act relevantly provides:

(1)    For the purposes of this Act, a company is associated with a person if the person:

(a)    is a company officer of the company or otherwise is concerned, or takes part, in the company’s management; or

(b)    is able to control, or to influence materially, the company’s activities or internal affairs; or

…

(d)    is in a position to cast, or to control the casting vote of, a vote at a general meeting of the company; or

….

(f)    is financially interested in the company’s success or failure or apparent success or failure; or

…

33    The order for production was issued under r 30.34 of the Rules which relevantly provides that at any hearing of a proceeding, including the trial of the proceeding, a party may apply to the Court for an order for the attendance of any person before the Court, a registrar, an examiner, a referee or other person authorised to take evidence for production by the person of any document or thing specified in the order.

34    In Roufeil (Trustee), in the matter of Tarrant (Bankrupt) v Tarrant (Bankrupt) [2018] FCA 1616 Yates J summarised the principles in relation to the power to compel production of documents under r 30.34 of the Rules at [17]:

The power to compel the production of documents in the present context is a wide one, referable to the purpose for which examinations under s 81 of the Bankruptcy Act are conducted. The power conferred by s 81 to summon persons to attend to give evidence is “an extraordinary power of an inquisitorial nature”: Re North Australian Treaty Co (1890) 45 Ch.D. 87 at 93 as quoted in Re Csidei; Ex parte Andrew (1979) 28 ALR 381 at 386. The exercise of the power provides not merely for the identification and collection of assets. It also serves the purpose of protecting the public by a “full and searching examination” of the conduct of the bankrupt in order that a “full report” by the trustee in bankruptcy may be made: Griffin v Pantzer [2004] FCAFC 113; (2004) 137 FCR 209 at [76]. Given the far-reaching nature of the power, the Court must be astute to ensure that it is not exercised oppressively, vexatiously or otherwise unfairly. That said, its purpose should not be defeated by an unduly technical or restrictive application to its use: Karounos v Official Trustee (1988) 19 FCR 330 at [335]; (1988) 80 ALR 66 at 632.

consideration

35    Liu & Woodland submit that the order for production should be varied and issued in the terms set out at [3] above for the following reasons:

(1)    the order for production is vexatious and oppressive. It seeks all of the documents relating to the sale of the Properties in circumstances where the vendor companies are not related to the Bankrupts and it would be burdensome for Liu & Woodland to produce the documents sought. Liu & Woodland contends that complying with the order for production would impose an undue and oppressive burden on the firm and in particular its principal, Ms Liu, who is a sole practitioner. Liu & Woodland submits that it would require substantial time and resources to locate, review and produce the requested documents which are in any event not relevant to the proceeding. They also rely on the fact that, at the time of its service the order for production was first returnable on 5 March 2025 allowing a very limited time in which to collate and produce the documents;

(2)    the Associated Entities, who are Liu & Woodland’s clients, do not want their commercial in confidence documents disclosed to an unrelated third party, the Trustees;

(3)    some of the documents sought by the order for production are subject to a claim for legal professional privilege and protected from disclosure under s 118 of the Evidence Act 1995 (Cth). Liu & Woodland refer to communications with their clients made for the dominant purpose of seeking or providing legal advice in facilitating the sale of the Properties. They submit that the Trustees have not demonstrated any exception to client legal privilege that would justify the production of those documents; and

(4)    the documents sought in the order for production are not relevant to the proceeding. They relate to transactions that occurred in December 2024 long after the Bankrupts ceased to have any direct or indirect involvement, interest or benefit in the Associated Entities. Liu & Woodland submit that the Trustees have failed to establish the relevance of the documents to the issues raised in the examination proceeding.

36    Essentially Liu & Woodland seek to narrow the scope of the order for production in the way described above, limited to the transactional documents for the sale of three of the Properties on the grounds that the order for production in the form issued and which the Trustees press seeks documents that are not relevant and are privileged and because it is oppressive. I address each of those grounds in turn.

37    The power of the Court to issue an order for production is wide, referable to the purpose for which examinations under s 81 of the Bankruptcy Act are conducted. As explained in Roufeil the exercise of the power serves the purpose of protecting the public by a “full and searching examination” of a bankrupt’s conduct to enable a trustee to provide a full report. On the other hand, the power is not to be exercised oppressively or vexatiously.

38    The order for production is in aid of exercise of the power under s 81 of the Bankruptcy Act. It seeks the production of a well-defined category of documents in relation to the transactions undertaken by Sunrise Australia, Wau 88 and Sunrise H. Each of those companies is an associated entity of the Bankrupts within the meaning of s 5B(1) of the Bankruptcy Act as:

(1)    Mr Kwok was a director of each of Sunrise Australia and Wau 88 and a secretary of Sunrise H: see s 5B(1)(a);

(2)    the Bankrupts through their companies held 100% of the shares in Sunrise Australia which in turn held 100% of the shares in Wau 88 and thus could control those companies’ activities and were in a position to cast or control the casting of a vote at a general meeting: see subs 5B(1)(b), (d); and

(3)    Kwok Holdings, a company which the Bankrupts controlled, previously held two shares in Sunrise H: see s 5B(1)(d).

39    Liu & Woodand submit that the documents sought in the order for production are not relevant because the Bankrupts are no longer officers of, or shareholder in, the Associated Entities. However, it is not necessary that the relationship of “associated entity” be established at the time an order for production is issued or served. As set out above, an associated entity is one that is or has been associated with the person or a company that is, or has been, associated with the person at a time when the company is or was a private company (my emphasis).

40    The documents sought in the order for production are sought as part of the Trustees’ investigations into their suspicion that the Properties or their proceeds of sale are in whole or in part held on trust for the Bankrupts. The Second Proceeding concerns a similar claim in relation to other transactions. Mr Trafford-Jones explains in his affidavit the basis on which the Trustees holds their suspicion about the sale of the Properties and the potential entitlement to them by the Bankrupts. His evidence was not challenged, and I accept it.

41    As I have already observed, the categories of document sought in the order for production are well defined and, in my view, confined. While Liu & Woodland submit that the order for production is oppressive, beyond Fu Shi’s evidence that the order for production might “even be burdensome”, there is no evidence to support that contention. Liu & Woodland do not for example identify in their evidence the volume of the material that might be caught, the time it would take to review the material and the resources required. The evidence given by Ms Liu from the bar table is not sufficient to prove that the order for production is oppressive.

42    Nor does the fact that the order for production was first returnable before the Court only a few days after its service make it oppressive. It was open to Liu & Woodland to seek further time to produce the documents. They did not do so.

43    That the order for production seeks production of documents that might be subject to a claim for legal professional privilege is not a reason for it not to be issued. As is the usual practice, documents caught by an order for production over which a claim for legal professional privilege is made are to be produced albeit, as a practical matter, in a discrete or separate “envelope” and with the claim asserted. Any challenge to the claim by the party seeking production can then be addressed at a later stage.

44    Finally, Liu & Woodland had a concern about producing documents which their clients considered to be commercially confidential. They described the Trustees as third parties with no interest in the documents. I have already addressed the question of relevance and the Trustees’ interest in the documents sought by the order for production. To the extent that Liu & Woodland (or their clients) have concerns about the confidentiality of any of the documents, I note that production is to the Court with access to the Trustees only for use in this proceeding and/or for the purpose of recovering assets for the benefit of the creditors of the estates of the Bankrupts. Questions of confidentiality of particular documents can be raised with the Trustees and the Court at the appropriate time.

45    I will not accede to Liu & Woodland’s application to set aside the order for production and in its place issue an order for production in the narrower terms set out at [3] above. I am satisfied that there is a sufficient connection between the documents sought in the order for production and the examinable affairs of the Bankrupts. The order for production in the form sought by the Trustees and issued pursuant to the order of the Registrar should remain in place.

conclusion

46    It follows from the above that the issue of the order for production should be confirmed and the interim application dismissed. As they have been unsuccessful Liu & Woodland should pay the Trustees’ costs of the interim application.

47    I will make orders accordingly.

Associate:

Dated:    5 June 2025

SCHEDULE OF PARTIES