Banerjee (Liquidator), in the matter of Eastside Formwork Pty Ltd (in liq) v Stojic

1. The interlocutory process filed on 4 March 2025 be dismissed with costs, as agreed or taxed.

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

1. These proceedings were commenced in 2021 by Mr Shumit Banerjee, the liquidator of Eastside Formwork Pty Ltd (in liq) (the company) against five defendants. Only the first and fifth defendants are actively defending the proceedings. They are Mrs Stojic, the first defendant, and Buildquip Pty Ltd, the fifth defendant. The proceedings are listed for hearing for eight days, commencing on 5 May 2025, before me.

The plaintiffs seek to appoint a receiver to the property of the first defendant

1. By an interlocutory process filed on 4 March 2025, the plaintiffs seek orders for the appointment of a receiver to the property of the first defendant pursuant to s 1323(1) of the Corporations Act 2001 (Cth). In the alternative, the plaintiffs seek a freezing order restraining the defendants from, in effect, causing the unencumbered value of her assets to fall below $6,602,643.73. That sum is said to be the "sum of the claims of unrelated unsecured creditors in the liquidation of the company". Originally, these orders were also sought against the fifth defendant, but that claim was, by the end of the hearing of the interlocutory process, no longer pressed.
2. The substantive proceedings are brought by the first plaintiff as the liquidator of the second plaintiff against Mrs Stojic as a person who acted as a director of the company, although whether she was in fact a director is the subject of some dispute. It is alleged in the Second Further Amended Statement of Claim (SFASC), among other claims, that she and her husband Dane Stojic, now a bankrupt, were involved in a scheme which sought to deal with funds in the company so that she, Dane, and another corporation under their control received those funds, leaving the company without funds to deal with its unrelated creditors on liquidation. This contention is also disputed. One of those creditors is the Australian Taxation Office (ATO).
3. The original amount pleaded as owing to the ATO by proof of debt dated 23 December 2020 was $1,915,117.10. The SFASC now pleads a substantially greater liability. The SFAFC was filed on 23 October 2023 and included a pleading in [23] as follows:

Tax liability and creditors of the Company

1. As at the Winding-Up Date, creditors claimed to be owed debts of at least $6,189,103.04$10,338,542 by the Company, including the Commissioner in the amount of $1,915,117.10$6,064,556.06.

Particulars:

1. ATO amended proof of debt dated 23 December 20204 November 2022.

1. When the Originating Process was filed, the plaintiffs also filed an interlocutory process seeking to restrain Mrs Stojic from dealing with her assets below the unencumbered value of $2,271,914.39, being the value of the claims made against her at that time.
2. Mrs Stojic sought to resolve the interlocutory process by offering an undertaking, which was in evidence before me. By that undertaking, she stated that the property she was then in the process of purchasing unencumbered at Coogee was being bought for $3,810,000 without a mortgage, and undertook that she would

not Encumber or allow any Encumbrance to be created over the Property or otherwise deal with or dispose of [her] interest in the Property in any way without first giving the Applicants 21 days' written notice of [her] intention to do so.

1. It appears to be common ground that she has complied with that undertaking. From 21 December 2021, Mrs Stojic has given notice to the first plaintiff from time to time that she intended to borrow funds for various purposes, including renovations, paying out previous loans, refinancing loans and paying legal fees. The notices are summarised and attached to the affidavit of the first plaintiff dated 3 March 2025 in [11]-[20].
2. On 31 January 2025, a further notice was given notifying the first plaintiff that Mrs Stojic intended to refinance the Coogee property in order to make tax payments, repay previously borrowed funds and providing for ongoing legal fees in these proceedings.
3. In addition to the Coogee property, which is her home, Mrs Stojic also owns a unit at Hurstville. It is currently for sale. On its title is registered a mortgage for $510,300 and a caveat in favour of Dane Stojic, which it is said was lodged pursuant to a loan agreement dated 6 January 2025. That loan agreement was in evidence before me and shows that the "initial sum" borrowed was $735,940 and was repayable on demand or default. The purpose of the loan as set out in the loan agreement was:

1.7 ...to enable the Borrower to meet loan repayments, legal fees, insurances and school fees, as well as other incidental borrowings that may be required from time to time.

1. By letter of 3 April 2025, written after the filing of this interlocutory process, Mrs Stojic's solicitors informed the plaintiffs' solicitors that:

· her property was valued at some $6,500,000, although she does not provide a copy of her valuation

· she now intended to borrow $950,000, which would take the total secured on the Coogee property to $2,370,000.

· the equity in Coogee was therefore in excess of $4,000,000, and

· the total of the funds owing to Dane Stojic was $690,000.

1. In that letter, it was noted that the Hurstville property was estimated to sell for $750,000 to $800,000, and the existing loan was $500,000, thus, approximately $300,000 would be available after settlement. This figure does not seem to take into account the costs of sale and uses the higher estimate value. The more likely figure would be closer to $250,000, and perhaps less if real estate agent commission were taken into account.
2. The letter also sets out the calls on Mrs Stojic's funds. They include refinancing of prior loans and payments to the ATO, including director's penalties.

Has the plaintiff made out the basis for an order under s 1323(1)?

1. I turn now to the questions for determination in these proceedings. The first is whether the plaintiff has made out the basis for an order under s 1323(1). That section provides:
   1. Power of Court to prohibit payment or transfer of money, financial products or other property

(1) Where:

(a) an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act; or

(b) a prosecution has been begun against a person for a contravention of this Act; or

(c) a civil proceeding has been begun against a person under this Act;

and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person) to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the relevant person), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders:

(d) an order prohibiting a person who is indebted to the relevant person or to an associate of the relevant person from making a payment in total or partial discharge of the debt to, or to another person at the direction or request of, the person to whom the debt is owed;

(e) an order prohibiting a person holding money, financial products or other property, on behalf of the relevant person, or on behalf of an associate of the relevant person, from paying all or any of the money, or transferring, or otherwise parting with possession of, the financial products or other property, to, or to another person at the direction or request of, the person on whose behalf the money, financial products or other property, is or are held;

(f) an order prohibiting the taking or sending out of this jurisdiction, or out of Australia, by a person of money of the relevant person or of an associate of the relevant person;

(g) an order prohibiting the taking, sending or transfer by a person of financial products or other property of the relevant person, or of an associate of the relevant person:

(i) from a place in this jurisdiction to a place outside this jurisdiction (including the transfer of financial products from a register in this jurisdiction to a register outside this jurisdiction); or

(ii) from a place in Australia to a place outside Australia (including the transfer of financial products from a register in Australia to a register outside Australia);

(h) an order appointing:

(i) if the relevant person is a natural person - a receiver or trustee, having such powers as the Court orders, of the property or of part of the property of that person; or

(ii) if the relevant person is a body corporate - a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person;

(j) if the relevant person is a natural person - an order requiring that person to deliver up to the Court his or her passport and such other documents as the Court thinks fit;

(k) if the relevant person is a natural person - an order prohibiting that person from leaving this jurisdiction, or Australia, without the consent of the Court.

1. The plaintiffs asserted, with no real contest to that assertion being received from the defendants, that the first two limbs of s 1323(1) were satisfied. Those are, that the second plaintiff is an "aggrieved person" and that the first defendant is a "relevant person" against whom civil proceedings have been commenced and who may become liable to pay money within the meaning of that section.
2. The plaintiffs contended that the third element - whether a protective remedy, whether it be the appointment of a receiver or a freezing order was "necessary or desirable" to protect the interests of the company - was also made out.
3. The plaintiffs pointed to the fact that the existing undertaking has resulted in the debt over the Coogee property increasing over time, and the fact that the Hurstville property was not subject to the undertaking and is now being sold without the necessity to give the plaintiffs 21 days' notice. The plaintiffs pointed to the allegations of a scheme which are pleaded against Mrs Stojic and her husband Dane, to findings by Halley J of failures to produce documents by Mr Stojic in response to a warrant, as well as inconsistencies in the evidence as to Mrs Stojic's access to the @eastsideformwork.com.au emails or server, to the lack of evidence as to any other assets held by Mrs Stojic, and the "hopelessly insolvent" position of Buildquip, the fifth defendant, which was demonstrated by the balance sheet for Buildquip which was provided as an annexure to Mrs Stojic's affidavit of 17 March 2025.
4. Against that, the defendants say that Mrs Stojic has always complied with her duties pursuant to the undertaking. There is nothing to say that the sale of the Hurstville property is a precursor to dissipation of its sale proceeds; on the contrary, they say, her explanation that she needs the funds for legal fees, loan repayments, ATO payments and repayment of the loan to her husband indicate that she is aware of her liabilities and is seeking to meet them. They point to the irony of her seeking to fund her ATO liabilities through refinancing and the sale of Hurstville, and the liquidator who brings these proceedings to reclaim funds to pay the ATO seeking to enjoin her from doing so.
5. The plaintiffs say that a risk of dissipation is not a predominant consideration, citing ASIC v Sigalla [2010] NSWSC 1423 at [24], but it is a reasonably persuasive factor. They say that Mrs Stojic has not shown any evidence of prejudice occurring to her, were an order to be made. Against this, the defendants point to the Borrower Statement of the loan to Buildquip which expires on 22 April 2025 and which is sought to be refinanced by the loan over the Coogee property.
6. Before looking at the issue of whether such an order is "necessary or desirable", I need to consider the respondents' submission that the delay in bringing this application is such that I should not, by way of an exercise of my discretion, make the order. The question to be asked is, has the plaintiff delayed to an extent that the Court's intervention is not justified?
7. In Naidenov (as liquidator) v Anderson, in the matter of Peach & Co Pty Ltd (in liq) [2024] FCA 1232, Goodman J discussed the proposition that the time which had elapsed for the liquidator to seek an order told against the orders being made. While his Honour had already found that there was no necessity or desirability of appointment of a receiver in that case, he was of the view that as various events then relied upon had not been the subject of freezing orders sought at the time, the events did not ground a later necessity or desirability for the purpose of protecting the plaintiffs' interests (see [31]).
8. The defendants point to one of the factors relied on by the liquidator, being evidence from an affidavit of Mrs Stojic from as long ago as 5 June 2023, which set out her knowledge of (or at least use of a computer with access to) the relevant mail server. Additionally, the plaintiffs had previously sought to re-agitate the interlocutory process, which was stood over generally, on the giving of the undertaking before Halley J, then the docket judge, in March 2024. That application was in response to a notification by Mrs Stojic that she intended to borrow $200,000 (a refinance which was not proceeded with) and it cuts across the plaintiffs' submission that the current refinance was "the first to have occurred after the amendment of the pleading in October 2023".
9. The defendants also point to the delay in the context of the hearing being less than three weeks away and the Hurstville property not having yet been sold.
10. As to delay, the plaintiffs say that the relevant time against which to assess any delay is the January 2025 notification of a further refinance. As the previous refinance did not go ahead, and the January 2025 notification was made around the same time as the Hurstville property was sought to be sold, the plaintiffs say they acted promptly in seeking interlocutory orders.
11. I am of the view that the January 2025 date is the more appropriate one from which to assess delay, and because of that (and because of my direction seeking submissions on the urgency of this application, which ironically delayed the hearing of it) I am of the view that any delay is not fatal to the application by the plaintiffs.

Is it "necessary or desirable" to appoint a receiver, or to make a freezing order?

1. I now turn to whether it is, in the light of the foregoing, "necessary or desirable" to appoint a receiver, and if I am satisfied that a receiver should be appointed, then, in the alternative, should an alternative or lesser order be made, such as a freezing order.
2. The defendants say that the appointment of a receiver is a drastic remedy, covering all of the first defendant's property, including her family home at Coogee and "even her fridge".
3. The plaintiffs urge me not to look at the drastic nature of the remedy (calling in aid Barrett J's analysis in [22] of ASIC v Burnard (2007) 64 ACSR 360; [2007] NSWSC 1217, and McDougall J at [44] in ASIC v Krecichwost (2007) 64 ACSR 411; [2007] NSWSC 948), but instead at the desirability of the appointment of a receiver with the protection of the interests of the company at the forefront of the determination. They point to the provisions of order 4 in the interlocutory process, which provide for Mrs Stojic to have her living expenses and legal expenses paid out of her assets, and which, they say, balance any prejudice to which she may be able to point. The plaintiffs say the remedy of appointment of a receiver is more akin to a freezing order, given that the purpose is to preserve the status quo pending the outcome of the proceedings (cf [44] of Krecichwost).
4. Mrs Stojic points out that she has, when seeking to borrow money, included repayment of tax debts, (including the current notification), and says that this is not the act of a person who is seeking to dissipate assets. The sale of Hurstville, she says, is an open and transparent process which does not indicate any breach of the undertaking and must be sold to fund these proceedings, her living expenses, and repayments such as loan repayments and debts to the ATO.
5. The defendants say that the property is charged with a debt to her husband which exceeds the equity available and which is secured by caveat. A review of the Secured Loan Agreement, however, does not indicate that the loan requires repayment from the proceeds of the Hurstville property (see cl 2 of exhibit R2); it is repayable on demand or on default. Mrs Stojic indicates on the one hand that she needs to repay her husband (see p 2 of the letter of 3 April 2025), but notes that her equity would, as noted above, be far less than that - a maximum of $300,000 or less.
6. The interlocutory process seeks orders restraining Mrs Stojic from repaying Dane Stojic any amounts "which would otherwise be payable to [him] the subject of any security recorded on title to the Hurstville Property, including the security the subject of the Dane Caveat". This order was not the subject of any argument before me, and if made, raises the spectre of Dane refusing to lift the caveat to allow the Hurstville property to be sold. As noted, Dane is a bankrupt and not an active party, and so was not in Court to engage with the question of whether any right he may have to be repaid out of the proceeds of any sale should be interfered with.
7. In my view, the possibility of the funds available from Hurstville being paid to Dane, rather than being used for her living expenses, tax liabilities and the legal fees for these proceedings, is the most persuasive aspect of the plaintiffs' case.
8. I am not required to make a final determination of the strength of the plaintiffs' ultimate case, but accept that, given the history of the proceedings set out in [37] of Mr Banerjee's affidavit of 4 March 2025, there is at least a reasonably maintainable view that Mrs Stojic has not conducted these proceedings in the most helpful way. Mr Banerjee also describes and annexes emails which would support a finding that there was a reasonable basis for the breaches pleaded in the SFAFC.
9. I do not, of course, make any considered findings in that respect, but merely make the observation that there is a "reasonably persuasive case" (see Courtenay House Capital Trading Group Pty Ltd (in liq) (2018) 133 ACSR 451; [2018] NSWSC 1918 at [13]), which is one of the discretionary factors I need to take into account in determining this matter.

The plaintiffs have not made out the need or desirability of a receiver

1. Despite what I have taken into account in the foregoing consideration of the plaintiffs' submissions, and weighing all of the factors in this case, I am of the view that the plaintiffs have not satisfied me that it is necessary or desirable to appoint a receiver. That is because I cannot be satisfied that either the increased amounts proposed to be secured over Coogee, or the sale of the Hurstville property individually, or taken together, are acts which require that the first defendant's freedom to deal with her own assets should be impinged upon (see Barrett J in Sigalla at [17]).
2. I am persuaded by the reasons given by the first defendant for the refinance, being payment of her living expenses, her legal fees and repayments of debts including the ATO, as being indicative of the refinance in the sale being unexceptional (akin to "in the ordinary course of business") and not warranting or making it desirable to appoint a receiver.
3. I note that the first defendant was not cross-examined on the two affidavits she relied upon in her resistance to the orders. On that basis, her evidence that the equity in the Coogee property is now over $4,000,000, and that the improved value of Coogee is due (at least in part) to the renovations she undertook with previously borrowed funds, is not contested and can be accepted. I also accept her evidence in [39] of her affidavit of 7 April 2025 that she needs to sell Hurstville to pay her debts, "particularly those incurred through these legal proceedings".
4. Hurstville was not, it should be recalled, made subject to the undertaking, and she should be free to sell that property. It is, however, unlikely that any sale will be concluded by the time the proceedings are heard in early May 2025, and should the plaintiffs wish to restrict her use of any proceeds to repay her husband, then they will need to serve him with any interlocutory process to that effect.
5. Additionally, I find it persuasive that she has complied with the terms of the original undertaking, and no suggestion can reasonably be made that the sale of Hurstville was a breach of that undertaking.
6. I also take into account that these proceedings are not an investigation or a prosecution, but a civil proceeding, albeit by a liquidator, and the observations of Santow J in Re HIH Insurance Ltd (in prov liq); ASIC v Adler (2001) 38 ACSR 266; [2001] NSWSC 451 at [4]-[7], cited in Sigalla at [19]. There, Santow J observed, as summarised by Barrett J in Sigalla, that "the public interest role of ASIC may warrant an order in circumstances where it might be denied to a private litigant" and stressed the proportionate nature of the remedy.
7. It seems to me that, in undertaking the "risk assessment and risk management" exercise described by French J in ASIC v Carey (No 3) (2006) 232 ALR 577; [2006] FCA 433 at [26], the protection of the interests of the company do not override the interests of Mrs Stojic to manage her own financial interests and assets. That is particularly so in the light of the proximity of the final hearing of this matter. The desirability of the appointment of a receiver rests more in the wish of the plaintiffs to have a greater pool of assets to draw upon, rather than being a response to a risk of dissipation for the protection of the company.
8. Given that I have found that it is not necessary or desirable to appoint a receiver, then I cannot proceed to determine whether an alternative or lesser order such as a freezing order should be made under the section of the Corporations Act (see Barrett J at [22] in Burnard).

If an order under s 1323(1) were made out, should the plaintiffs' undertaking as to damages be rejected?

1. The defendants served an affidavit of their solicitor Mr Lancaster, which was served after 4.00pm the day before the hearing. This service was well outside the orders for evidence made by me when listing this matter. That affidavit sets out searches as to Mr Banerjee's personal asset position including a title search of what appears to be his private home. Mr Banerjee is an accountant acting as the liquidator of the second plaintiff, and it was noted from the bar table that time did not permit the preparation of evidence in reply, apart from the tender of a letter from the ATO of 16 April 2025 which became exhibit A3.
2. Had the affidavit been objected to, I would not have allowed it to be read because of the late service. However, the plaintiffs were able to overcome the prejudice to some extent.
3. The ATO letter confirms that the ATO is funding the proceedings, including "an agreed component of adverse costs and an undertaking as to damages". A lack of an Oxford comma here makes it unclear whether there is an "agreed component" which includes the undertaking as to damages, or whether they are separate elements, but in any event, it seems to me that the ATO's willingness to provide a confirmation of "indemnity funding" for the plaintiffs would have persuaded me, were it relevant, that the undertaking as to damages was not worthless.

1. I now turn to what orders should be made. I note that orders 8 and 9 of the interlocutory process seek "asset disclosure affidavits" to be sworn by the first and fifth defendants. This matter was not separately argued before me. The relief sought appears to be consequential upon the making of the substantive orders. Accordingly, I do not make those orders.
2. The interlocutory process should be dismissed, with costs. That dismissal does not prejudice the bringing of any further application, either for orders relating to the payment of the loan to Dane Stojic if thought necessary, or for orders under s 1323(1) of the Corporations Act if there is some change in circumstances which the plaintiffs regard as warranting such orders.

I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Needham.