In Re Mandeville Group Pty Ltd (In Liq) [2020] VSC 293 (27 May 2020)

TRUSTS - Express trusts - Creation - Declaration of unit trust by deed - Numerous versions of unit trust deeds executed - Whether certainty of intention, subject matter and object manifested - Whether failure of express unit trust due to different or conflicting trust deeds - Where trustee seeks judicial advice as to whether it is justified in conducting winding up of the corporate trustee on basis that it holds property in its capacity as trustee of the express unit trust - Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

TRUSTS - Express trusts - Ipso facto clause - Where corporate trustee in liquidation holds property as bare trustee of unit trust - Where bare trustee sought orders under s 63 of the Trustee Act 1958 Vic for conferral of the necessary powers to carry on the business of the unit trust and preserve, realise and distribute the assets - Where liquidator sought orders permitting him to rely on statutory powers as liquidator of corporate trustee pursuant to s 477 of the Corporations Act 2001 (Cth) to take all necessary steps to sell property - Alternatively, liquidator sought orders appointing the liquidator as receiver over the property - Orders made for conferral on bare trustee of powers sought under s 63 of the Trustee Act 1958 (Vic) and conferral on liquidator of powers under s 477 of the Corporations Act 2001 (Cth).

1 The first plaintiff, Mr Barry Wight, is a registered liquidator. Mr Wight was appointed as liquidator of the second plaintiff, Mandeville Group Pty Ltd, on 15 October 2019, when a creditors' voluntary liquidation of the company was initiated by resolution of its sole director and sole shareholder, Mr Adrian Mihailescu.[1]

2 At the time of Mr Wight's appointment as liquidator, Mandeville Group Pty Ltd was the registered proprietor of a property located at 3 Mandeville Crescent, Toorak, Victoria (the Property). It was also the trustee of the Mandeville Group Trust No 1.

3 The liquidator has taken possession of the Property and he now seeks orders from the Court for a power of sale.[2]

4 The liquidator deposes that the Property is the only asset of the company, and the sole purpose of the Mandeville Group Trust No 1 was purchasing and developing the Property.[3] However, there is some inconsistency in the books and records of the company as to whether the Property was purchased by Mandeville Group Pty Ltd in its own right or in its capacity as trustee for the Mandeville Group Trust No 1. The liquidator's investigations have also revealed there is a lack of clarity as to the identity of the current unitholders of the trust and, in the course of his appointment, the liquidator has been provided with three alternative trust deeds (each of which contain different unitholders), and two competing trust deeds for an earlier trust pertaining to the Property.

5 In those circumstances, the plaintiffs commenced this proceeding by a RedCrest (Corporations) Originating Process filed on 11 November 2019.[4] In the Originating Process, the plaintiffs sought orders in relation to obtaining the necessary powers to preserve, realise and distribute the assets of the Mandeville Group Trust No 1 and for payment of the liquidator's remuneration and expenses therefrom; alternatively, orders appointing the liquidator as receiver over the property of the Mandeville Group Trust No 1.

6 The initiating documents were served on the Australian Securities and Investments Commission (ASIC). In addition, the plaintiffs' solicitor gave notice of the filing of the Originating Process to:

(a) the secured and unsecured creditors of the Mandeville Group Trust No 1 according to its books and records; and

(b) the Unitholders of the Trust; and

(c) the (sole) director of the company.

7 At that time, the only interested person who had indicated an intention to be heard on the plaintiffs' application was Jieyun Investments Pty Ltd (Jieyun), who had informed the plaintiffs' solicitor that it proposed to intervene only to seek orders for the payment of $608,047 into Court from the proceeds of sale.[5] (Jieyun's position is discussed further below.)

8 Given that the (ongoing) investigations and enquiries undertaken by the liquidator have identified inconsistencies in the company's books and records and raised doubts as to the capacity in which the Property is held − whether the Property is owned by Mandeville Group Pty Ltd in its own right or on trust for the Mandeville Group Trust No 1 (and if so, which trust deed is the applicable trust deed) or for the persons who sought to subscribe for units in it − the liquidator's focus is in 'ensuring he has power of sale (whether on behalf of the company as its liquidator or on behalf of the trust pursuant to a Court order).'[6]

9 Relevantly, the position is that if the Property is held by Mandeville Group Pty Ltd in its own capacity, the liquidator has power to sell or otherwise dispose of the Property pursuant to s 477 of the Corporations Act 2001 (Cth). But in the event that the Property is held by Mandeville Group Pty Ltd in its capacity as trustee of the Mandeville Group Trust No 1 or on constructive trust for the persons who sought to subscribe for units in that trust, s 477 does not empower the liquidator to sell the trust property,[7] and he cannot proceed to effect a sale without obtaining an order of the Court or by appointment of a receiver over the trust assets.[8]

10 Accordingly, in order to avoid any uncertainty as to whether the liquidator has the power to sell the Property, the plaintiffs seek directions from the Court, which are framed in the Second Further Amended Originating Process filed on 14 April 2020, in the following terms:[9]

1. A direction that the first plaintiff is justified in conducting the winding up of the second plaintiff on the basis that the property located at 3 Mandeville Crescent, Toorak VIC 3142, referred to in the certificate of title Volume 07436 and Folio 131 (the Property), is held by the Second Plaintiff in its capacity as trustee of the Mandeville Group Trust No 1 (Trust) or in the alternative on constructive trust for the benefit of persons who sought to subscribe for units in the Mandeville Group Trust No 1 (alternatively, Trust) or
2. In the alternative to 1 above, a direction that the first plaintiff is justified in conducting the winding up of the second plaintiff on the basis that the Property is held by the second plaintiff in its own right.

11 In the plaintiffs' (earlier) Amended Originating Process filed on 24 January 2020, they also sought declaratory relief as to the ownership of the Property. By order of the Court, the Amended Originating Process was served on the following interested persons in or about late January 2020:[10]

(a) Westpac Banking Corporation (the registered mortgagee of the Property);

(b) the 'initial unitholders' in the Mandeville Group Trust No 1, namely:

(c) the 'further initial unitholders' in the Mandeville Group Trust No 1 who are represented by Mr Xaio Chen, namely:

12 However, as none of those interested persons filed an appearance in the proceeding (or sought to appear), the Court subsequently ordered, inter alia, that a contradictor be appointed in relation to the declaratory relief sought by the plaintiffs in respect of the ownership of the Property, and that the matter be listed for hearing on Monday, 6 April 2020 in respect of the declaratory relief sought.[11]

13 Although the nature of the substantive relief sought by the liquidator has now changed from declaratory relief to one of seeking directions from the Court, the hearing nevertheless proceeded on 6 April 2020 with assistance from a contradictor. Written outlines of submissions were filed by the plaintiffs[12] and by the contradictor,[13] along with an agreed chronology, in advance of the hearing. The matter was heard by an audio-visual link and Mr Christopher Brown of counsel appeared on behalf of the plaintiffs and Ms Vicki Bell of counsel appeared as the contradictor.[14] Neither ASIC, Jieyun, nor any of the persons who sought to subscribe for units in the Mandeville Group Trust No 1 appeared at the hearing.

14 At the outset of the hearing, counsel for the plaintiffs informed the Court that, having been in contact with many of the unitholders, and the director of Mandeville Group Pty Ltd, the position is that '[n]o one is disputing that the property should be sold and so there is no party out there that we are aware of that says, no, this property shouldn't be sold';[15] rather, 'everybody, in fact, wants the property sold and the best price got for the property'.[16] He continued, to acknowledge the potential for there to be 'a dispute down the track about who gets what from the proceeds' but said that 'at this stage, the main objective for the liquidator is to have, or to ensure that he has, the power to sell the property and get in those proceeds'. Counsel also informed the Court that while the liquidator has no interest in one outcome or another, the liquidator 'has formed a view via legal advice that it is more likely that [the Property] is held on trust',[17] rather than by the company in its own right.

15 For the reasons which follow, I am satisfied that it is appropriate for the Court to give the directions and make orders in, or substantially in, the terms of the 'principal position' sought by the liquidator.

16 The factual background giving rise to the plaintiffs' application is set out in the thirteen supporting affidavits upon which they rely, namely:

(a) Affidavit of Mr Barry Wight affirmed 7 November 2019;

(b) Affidavit of Mr Barry Wight affirmed 18 December 2019;

(c) Affidavit of Ms Kimberley MacKay sworn 26 November 2019;

(d) Affidavit of Ms Kimberley MacKay sworn 3 December 2019;

(e) Affidavit of Mr Mitchell Waters affirmed 19 December 2019;

(f) Affidavit of Mr Mitchell Waters affirmed 30 January 2020;

(g) Affidavit of Mr Mitchell Waters affirmed 3 April 2020;

(h) Affidavit of Ms Petra Gerendasi affirmed 17 February 2020;

(i) Affidavit of Mr Adrian Mihailescu sworn 17 February 2020;

(j) Affidavit of Mr James Jia Ye sworn 17 February 2020;

(k) Affidavit of Mr Xiao Chen affirmed 19 February 2020;

(l) Affidavit of Mr Hanxin Qiu affirmed 21 February 2020; and

(m) Affidavit of Mr Kan Xin Tang affirmed 21 February 2020.

17 In summary, the key background facts are as follows.

18 On or about 18 May 2016, Mr Dali Cvek entered into a Contract of Sale of Real Estate with Ms Rita Klapanis, the registered proprietor of the Property.[18] The contract of sale stated the purchase price as being $4,438,000, of which $350,000 was payable by way of deposit by 1 June 2016, of which $100,000 was acknowledged as paid. The balance of $4,088,000 was payable at settlement, which was due on or before 18 September 2016.[19]

Approach to the initial investors in the Mandeville project

19 Following entry into the contract of sale, and prior to settlement taking place, Mr Cvek approached each of Mr Ye and Ms Gerendasi separately and sought funds from each of them to enable the deposit to be paid.[20] Subsequently, each of them agreed to invest in the 'Mandeville project', and Mr Cvek in consultation with his colleague, Mr Mihailescu, arranged for each of them to execute loan agreements and trust deeds recording their 'investment'.

20 At or about that time, Mr Cvek had nominated 'Rothmann Piper Investment Group Pty Ltd (A.C.N. 603 943 317) atf Rothman Piper Trust No 2' as the 'substitute purchaser' of the Property.[21] But subsequently, in around August 2016, Mr Cvek apparently decided that a new company should be formed to undertake the purchase, following which he instructed Mr Mihailescu, to form a new company and appoint himself as director, and establish a trust (being the Mandeville Group Trust No 1), for the purpose of purchasing the Property.[22] The new company, Mandeville Group Pty Ltd, was incorporated on 18 August 2016.

21 On 6 September 2016, prior to settlement of the purchase of the Property, Mr Cvek instructed Mr Mihailescu to execute a (further) nomination form nominating the newly-formed company, Mandeville Group Pty Ltd, as purchaser of the Property.[23] The nomination form made no mention of the 'Mandeville Trust'.[24]

22 On 3 October 2016, settlement took place and the Property was transferred to Mandeville Group Pty Ltd.[25]

23 Following settlement, later in October 2016, Mr Cvek approached Mr Chen and offered him the opportunity to invest in the Property and its development.[26] Mr Cvek provided Mr Chen with a feasibility report and drawings in relation to the Property.[27] Mr Chen accepted that invitation and subsequently invited several other investors known to him, including Mr Hanxin Qui and Mr Kan Xin Tang to invest also.[28]

24 In October 2016, Mr Chen introduced Messrs Cvek and Mihailescu to Mr Qiu, Mr Tang, Mr Xiatong Hao and Ms Liling Cheng (who together with Mr Chen are referred to as the Sydney investors) and they met to discuss the proposal. Mr Chen's evidence is that Messrs Cvek and Mihailescu informed him and the Sydney investors that the investment would be via units in the trust and loan agreements.[29] It appears that subsequently each of the Sydney investors agreed to invest in the Property and its development on that basis, and Mr Chen arranged for each of them to execute loan agreements and trust deeds for the Trust.[30]

25 In late 2016, Mr Cvek moved to Spain.[31]

26 The certificate of title records that Mandeville Group Pty Ltd became registered as the sole proprietor of an estate in fee simple in the Property on 13 October 2016 and that the title is encumbered by a registered mortgage No AN175285R in favour of Westpac Banking Corporation which was registered on the same date.[32] The relevant mortgage documentation is a 'RAMS Low Rate Home Loan Agreement Details' (showing Westpac Banking Corporation as credit provider for loans originated by RAMS Financial Group Pty Limited (Westpac)) which was executed by the directors of Mandeville Group Pty Ltd on 7 September 2016.[33] Therein, the original loan amount was stated as being $3,328,000, made up of fees and charges of $821.10 and the balance of $3,327,178.90. The liquidator deposes that when the proceeding was commenced, the amount outstanding pursuant to the mortgage was approximately $3,400,000.[34]

27 In addition to Westpac's mortgage, there are several caveats registered on the title to the Property, as follows:[35]

Interest as chargee pursuant to a statutory charge arising under the Water Act 1989.

Interest as chargee pursuant to a loan agreement between Petra Gerendasi (lender) and the company as trustee for the Trust (borrower) for the sum of $800,000 dated 8 June 2016.

Interest as chargee pursuant to a loan agreement between James Jia Ye (lender) and the company as trustee for the Trust (borrower) for the sum of $200,000 dated 18 August 2016.[36]

Interest as chargee pursuant to a loan agreement between Petra Gerendasi (lender) and the company as trustee for the Trust (borrower) for the sum of $270,000 dated 3 October 2016.[37]

Interest as chargee pursuant to a declaration of trust made with the registered proprietor dated 25 October 2016.

Interest as chargee pursuant to a statutory charge arising under the Corporations Act 2001 (Cth).

28 During the hearing, counsel for the plaintiffs informed the Court that all of the caveat holders, including Mr Cvek, have agreed to release their caveats so to enable any sale of the Property to proceed, but on the understanding that they will have an opportunity to make an argument about their entitlement to the proceeds at a later date.[38]

29 As noted in the summary of caveats above, Mr Cvek claims an interest in the Property as chargee pursuant to a declaration of trust made with the registered proprietor dated 25 October 2016. The relevant trust deed has not been produced by him on the hearing of this application. However, following the hearing, the plaintiffs' counsel provided to the Court a copy of a letter from Mr Cvek's (then) solicitor to the plaintiffs' solicitor dated 5 December 2019, wherein Mr Cvek's solicitor states:[39]

In case it was not clear to you, 88 North Pty Ltd held its units in the Mandeville Group Trust No 1 (Mandeville Trust) as trustee of the Cvek Family Trust (CFT). Dali Cvek subsequently replaced 88 North Pty Ltd as the trustee of the CFT.

The Company was the trustee of the Mandeville Trust and owned the real property in that capacity.

Upon our instructions, the CFT was a unitholder of the Mandeville Trust from the date of its establishment. Subsequent versions of the unit trust deed continued to record the CFT as holding units in the Mandeville Trust.

A unitholder is entitled to register a caveat in respect of its interest.[40]

30 Mandeville Group Pty Ltd was incorporated on 18 August 2016. At the time of incorporation, its directors were Mr Adrian Mihailescu and Mr Ernest Balint. Mr Mihailescu has known Mr Cvek for approximately 25 years. From 2015, Mr Cvek employed Mr Mihailescu as an assistant and office manager for his various property developments.[41]

31 Upon incorporation, Mr Mihailescu and Mr Balint each held 50 of the 100 issued ordinary shares in the company. Neither Mr Mihailescu nor Mr Balint owned the shares beneficially.[42]

32 Mr Balint ceased to be a director of the company on 1 January 2017.[43] On 15 November 2017, Mr Balint ceased being a shareholder of the company and thereafter all of the 100 issued ordinary shares were held by Mr Mihailescu.[44]

33 On 17 September 2019, Ms Gerendasi and a company associated with Mr Ye, JY Investments Group Pty Ltd (JY Investments), became shareholders of the company, each of them holding 48 of the issued ordinary shares.[45] There is no evidence as to the circumstances in which each of Ms Gerendasi and JY Investments became shareholders of the company. The ASIC search records that in the case of Ms Gerendasi, the shares were beneficially owned, but that JY Investments did not own the shares beneficially.[46] The sole shareholder of JY Investments is Mr Ye.[47] Each of Ms Gerendasi and Mr Ye claim an interest as unitholders in the Mandeville Group Trust No 1.

34 On 15 October 2019, Ms Gerendasi and JY Investments ceased being shareholders, whereupon all 100 of the issued ordinary shares in the company were held by Mr Mihailescu, and recorded as being beneficially owned by him.[48] Here again, there is no evidence as to the circumstances in which each of Ms Gerendasi and JY Investments ceased to be shareholders of the company.

35 Also on 15 October 2019, Mr Wight was appointed as liquidator of Mandeville Group Pty Ltd pursuant to a resolution of the sole director and (then) sole shareholder, Mr Mihailescu.[49]

36 As noted earlier, Mandeville Group Pty Ltd was incorporated three months after Mr Cvek had entered into the contract for the purchase of the Property. By that point in time, Mr Cvek had sought and obtained money from each of Mr Ye ($200,000) and Ms Gerendasi ($800,000) which was paid variously to the real estate agent, to an entity named Rothmann Piper Investment Group Pty Ltd (discussed further below), and to the vendor's solicitor's trust account by way of payment of the balance of the purchase price.

37 The evidence suggests that Mandeville Group Pty Ltd was incorporated for the purposes of the Mandeville project, but what that project entailed, and the precise legal structure of the proposed development, in respect of both ownership of the key asset (being the Property) and the structure of third-party investment, is unclear.

38 The substance of the evidence filed on behalf of the initial investors, Mr Ye and Ms Gerendasi, and the Sydney investors who invested following the purchase of the Property, is summarised below.

39 Mr Ye is an accountant. He first met Mr Cvek in late 2014. Mr Cvek had attended a seminar Mr Ye presented on investment in Australia and Mr Cvek contacted Mr Ye following the meeting. Later they met in person and struck up a friendship and thereafter they continued meeting on a weekly basis.[50] During their catch ups, Mr Cvek would tell Mr Ye about his various property ventures in Toorak and South Yarra, and by June 2016, Mr Ye regarded Mr Cvek as a close friend.[51] Over this period of time, Mr Ye also met Mr Mihailescu through Mr Cvek.

40 In about late May or early June 2016, Mr Cvek told Mr Ye that he had just put in an offer of around $4.438 million to purchase the Property, which had been accepted verbally. He added that, in order to proceed with the purchase of the Property, he needed funds urgently to pay the deposit as all of his own funds were tied up at the time.[52] Mr Ye told him that he had approximately $200,000 available but that it could only be a short term loan as he would need to be able to access the funds in 12 months' time for other personal reasons.[53] Mr Cvek said he only needed the funds for a short term, and he then outlined details of the proposed loan agreement. Relevantly, Mr Cvek said that the funds would be lent by Mr Ye to the entity which owned the Property pursuant to a loan agreement, the loan would be secured against the Mandeville Property as a second ranking mortgage behind any bank who ultimately lent the rest of the purchase price taking a first ranking security, and the loan would accrue interest from the repayment date.[54]

41 Mr Ye said that Mr Cvek also told him that the added benefit to lending the funds was that he would obtain an investment in the Property and would benefit from any profit earned on the development. In this regard, Mr Cvek said the Property would be held on trust and Mr Ye would be offered units in the trust for $1 per unit; the trust would be a closed trust between the two of them and another investor (later identified as Ms Gerendasi) who was a close friend of Mr Cvek, any profits realized from the development of the Property would be paid into the trust, and they, as unitholders, would share in that profit.[55]

42 Mr Ye told Mr Cvek he was willing to lend and invest in the Property by lending $200,000 on that basis. Shortly thereafter, Mr Cvek provided Mr Ye with documentation.

43 On 3 June 2016, Mr Ye executed a loan agreement, whereby he agreed to lend $200,000 to Rothmann Piper Investment Group Pty Ltd (Rothmann Piper) as trustee for the Rothmann Piper Trust No 2 (Rothmann Piper Trust), and a unit trust deed for the Rothmann Piper Trust. Clause 8 of the loan agreement provided that '[t]he Borrower must only use Loan for the purposes of purchase or expenses associated with the acquisition or purchase of the Property' and in clause 9 the Borrower 'agrees that it will use the principal amount for contribution towards the purchase of the Property.'[56] The 'Repayment Date' was defined in clause 1 to mean 'the earlier of Completion Date[57] of the Property or 24 Months from the Drawdown Date[58] or earlier at the Borrower's election.'[59] The loan agreement also provided that the loan was to be secured by the trustee granting him a second ranking mortgage over the Property.[60]

44 Mr Ye and the trustee for the Rothmann Piper Trust also entered into a 'Minimum Guarantee Agreement' dated 3 June 2016[61] whereby the trustee agreed to provide Mr Ye (as unitholder) a minimum guarantee of 20% on the initial sum invested (being $200,000) upon completion of the project, and where the project is sold prior to completion, the trustee agreed to provide an annualised minimum guarantee of 20%.

45 The trust deed establishing the Rothmann Piper Trust is denoted as a 'Unit Trust - Fixed Deed' dated 3 June 2016.[62] The parties are described as the three 'Initial Unitholders' being 88 North Pty Ltd (an entity associated with Mr Cvek), a second (as yet unnamed) unitholder, and Mr Ye. The deed was executed by Mr Cvek on behalf of Rothmann Piper, Mr Mihailescu on behalf of 88 North Pty Ltd, and by Mr Ye. The unnamed second unitholder has not signed the deed. Mr Ye was aware that the deed included an unnamed 'Second Initial Unitholder' that had not executed the deed and he said he understood Mr Cvek was still in discussions with that person.[63]

46 Recital B of the Rothmann Piper trust deed states that '[t]he initial Unitholders have paid the initial sum[64] to the Trustee [Rothmann Piper] to establish the [Rothmann Piper Trust] which is to be governed in accordance with this deed.'[65] Recital D describes the trust as 'a fixed trust consist[ing] of 100 units.'[66]

47 Clause 2.3 of the Rothmann Piper trust deed provides for assets to vest in the trustee as follows:

2.3 Assets vest in Trustee

Any Assets held by the Trustee in its capacity as trustee of the Trust, must be clearly identified as property of the Trust and held separately from the assets held by the Trustee for itself or as the trustee of any other trust.

48 The trust deed makes no separate reference to the Property being an asset of the trust. However, clause 2.5 of the trust deed states the purpose of the trust as follows:

2.5 Purpose of Trust

The primary purpose of the Trust is to carry on the business of Real Estate development of the property located at 3 Mandeville Crescent, Toorak, Victoria, Australia.

49 Further, clause 9.6, which is headed 'Distribution Date', states:[67]

(a) The trustee must distribute the income of the trust (income - expenses and obligations) within 30 days once full and final settlement of the final and last remaining units/townhouses/apartments of the property located at 3 Mandeville Crescent Toorak Vic 3142 and upon satisfactory payment of all expenses and debt obligations of the trust.

50 The schedule to the trust deed specifies the number of units held by each of the initial unitholders as follows:

51 On 3 June 2016, at Mr Cvek's direction, Mr Ye paid a bank cheque for the sum of $200,000 into the RT Edgar Sales Trust Account.[68] RT Edgar was the real estate agency acting for the vendor of the Property and the payment was made by way of part payment of the deposit due for the purchase of the Property.[69]

52 In November 2017, Mr Ye discovered that the Property was owned by Mandeville Group Pty Ltd and not Rothmann Piper. He raised his concern about this with Mr Cvek (who by then was living in Spain) by email and was later told that this had occurred by error.[70] Mr Cvek then asked him to execute a new loan agreement and trust deed to address the problem.[71]

53 In or around early February 2018, Mr Ye met with Mr Cvek and Mr Mihailescu to execute the fresh set of transaction documents.[72] He executed a loan agreement with Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1 named as the borrower (Mandeville loan agreement). He said the key terms of the Mandeville loan agreement appeared to be similar to the loan agreement with Rothmann Piper, save for the change in the name of the borrower and the term of the loan.[73]

54 Although executed in February 2018,[74] the Mandeville loan agreement is dated 18 August 2016. The Borrower is described as Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1 (Mandeville Trust). The Mandeville loan agreement contains the following relevant terms:[75]

(a) Clause 8 provides that '[t]he Borrower must only use Loan for the purposes of purchase or expenses associated with the acquisition or purchase of the Property'.

(b) In clause 9 '[t]he Borrower agrees that it will use the principal amount for contribution towards the purchase of the Property.'

(c) The 'Repayment Date' was defined in clause 1.1 to mean 'the earlier of Completion Date of the Property or 12 Months from the Drawdown Date.

(d) The 'Completion Date' was defined in clause 1.1 to mean '5 business days after the Property has been fully settled and all outstanding financial obligations of the Borrower associated with the property have been paid and concluded.

(e) The 'Drawdown Date' was defined in clause 1.1 to mean 18 August 2016.

(f) Under clause 3.2, interest at a rate of 10% per annum (the 'Default Interest Rate' as defined in clause 1.1) is payable from the earlier of the Completion Date and 12 months from the Drawdown Date.

(g) Under clause 5, the loan was to be secured by the trustee granting Mr Ye a second ranking mortgage over the Property (see 'Security' as defined in clause 1.1).[76]

55 In similar fashion to the Rothmann Trust, the trust deed establishing the Mandeville Group Trust No 1 is styled as a 'Unit Trust - Fixed Deed'.[77] The deed is dated 18 August 2016 but it was executed in February 2018. The parties are described as two (not three) 'Initial Unitholders' being Mr Ye and 88 North Pty Ltd. (That is, Ms Gerendasi is not named as a party even though she has separately executed a trust deed.) The trust deed was executed by Mr Mihailescu as director and Mr Cvek (purportedly) as a director of Mandeville Group Pty Ltd, Mr Cvek as the sole director of 88 North Pty Ltd, and by Mr Ye.

56 The deed recites that '[t]he initial Unitholders have paid the initial sum[78] to the Trustee [Mandeville Group Pty Ltd] to establish the [Mandeville Trust] which is to be governed in accordance with this deed.[79] Recital D describes the trust as 'a fixed trust consist[ing] of 100 units.'

57 Clauses 2.3, 2.5 and 9.6 of the trust deed establishing the Mandeville Trust are expressed in the same terms as the counterpart provisions of the Rothmann Piper trust deed (set out above).

58 The schedule to the deed specifies the number of units held by each of the initial unitholders as follows:[80]

59 Mr Ye continued to chase Mr Cvek for updates on when he would return the loan funds.[81] To date, despite Mr Cvek telling him that he was making arrangements to do so, none of the loan funds have been repaid to Mr Ye.[82]

60 Petra Gerendasi first met Mr Cvek in about February 2016. Each of them had sons who were attending the same kindergarten. Shortly after they met, Mr Cvek mentioned to Ms Gerendasi that he was a property developer. When Ms Gerendasi and Mr Cvek were dropping off or collecting their respective sons at the kindergarten, they would talk regularly, and often discussed the projects that Mr Cvek was working on.[83]

61 In around late May 2016, Mr Cvek approached Ms Gerendasi about investing in the Property. He said he was looking for investors in the project and asked her to invest $800,000.[84] He provided her with a one page feasibility study and told her the profit on it would be about $2 million. Mr Cvek proposed that the funds would be treated as a loan and secured against the Property by a second ranking mortgage after the bank's first ranking mortgage.[85] Ms Gerendasi's evidence is that Mr Cvek told her that a new entity would be incorporated and would hold the Property on trust and she would obtain units in the trust, along with two others who had lent money to it being a company controlled by Mr Cvek, and a friend of Mr Cvek named James Ye.[86]

62 On or around 8 June 2016, Ms Gerendasi agreed to invest $800,000. She did this by executing a loan agreement for the sum of $800,000 with Rothmann Piper as trustee for the Rothmann Piper Trust (as Borrower) (first Gerendasi loan agreement) and also a unit trust deed for the Rothmann Piper Trust.[87] Ms Gerendasi's evidence is that she paid the sum of $800,000 as directed by Mr Cvek, namely by paying a sum of $200,000 on 8 June 2016 (comprised of the sum of $50,000 to the vendor's real estate agent RT Edgar (Toorak) Pty Ltd and $150,000 to Rothmann Piper), and the sum of $600,000 on 15 July 2016 to the Toorak Law Trust Account (towards payment of the balance of the purchase price due in October 2016).[88]

63 The first Gerendasi loan agreement was dated 8 June 2016 and was in similar (but not the same) terms as Mr Ye's loan agreement with the trustee of the Rothmann Piper Trust. The first Gerendasi loan agreement provided that Ms Gerendasi's loan of $800,000 would be secured by the trustee granting her a security interest over the Property.[89]

64 The deed for the Rothmann Piper Trust is a 'Unit Trust - Fixed Deed' dated 3 June 2016.[90] The trustee is Rothmann Piper and the named parties are Mr Ye, 88 North Pty Ltd and Ms Gerendasi. The deed is expressed to be 'signed sealed and delivered' by Rothmann Piper in accordance with s 127 of the Corporations Act 2001 (Cth), but is signed only by Mr Cvek. Each of Ms Gerendasi and Mr Ye has also executed the deed.

65 Clauses 2.3, 2.5 and 9.6 of the trust deed establishing the Rothmann Piper Trust No 2 are expressed in the same terms as the counterpart provisions of the Rothmann Piper trust deed (set out above). The schedule to the trust deed specifies the number of units held by each of the initial unitholders. The respective unitholdings accord with those set out in the schedule to Mr Ye's Rothmann Piper trust deed (above).

66 A few months later, in late September or early October 2016, Mr Cvek told Ms Gerendasi that he had managed to secure a bank loan for most, but not all, of the balance of the purchase price for the Property and that he urgently required an additional $270,000 to complete the purchase. Ms Gerendasi's evidence is that at that time, Mr Cvek also told her that, in addition to entering into a further loan agreement, he would transfer to her three units in the trust that were held by his company, 88 North Pty Ltd.[91]

67 Ms Gerendasi told Mr Cvek that she would lend the additional funds.[92] When he provided her with a draft loan agreement on or about 3 October 2016, she noticed that the borrower in the draft loan agreement was 'Mandeville Group Pty Ltd', and not Rothmann Piper. She asked Mr Cvek why this was the case and he told her that they had had to change the nominated purchaser of the Property at the last minute. When she asked Mr Cvek whether there was also a new trust entity, he confirmed that there was a new trust called the Mandeville Group Trust No 1 and that the Property would be owned by Mandeville Group Pty Ltd on trust for the Mandeville Group Trust No 1.[93]

68 Given the change in identity of the purchaser, Ms Gerendasi told Mr Cvek that the first Gerendasi loan agreement should be novated to Mandeville Group Pty Ltd. Ms Gerendasi also told Mr Cvek that she thought it would be necessary to execute a new trust deed for the Mandeville Group Trust No 1 in place of the Rothmann Piper Trust, and he agreed that that was appropriate.[94] Mr Cvek told her that there was no issue with novating the first Gerendasi loan agreement and that it could be achieved by simply hand amending that document to replace the references to 'Rothmann Piper Investment Group' and 'Rothmann Piper Trust No 2' with 'Mandeville Group' and 'Mandeville Group Trust No 1' as required and signing each change.[95]

69 Accordingly, on or about 3 October 2016, Ms Gerendasi executed:[96]

(a) the handwritten amendments to the first loan agreement to novate the first Gerendasi loan agreement from Rothmann Piper (as trustee Rothmann Piper Trust) to Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1 (novated first loan agreement);[97]

(b) a loan agreement between Ms Gerendasi as lender and the company as borrower for the loan of $270,000 (second loan agreement);[98] and

(c) a trust deed for the Mandeville Group Trust No 1 (Mandeville trust deed)[99] pursuant to which the unit holdings were distributed as follows:

(i) First Initial Unitholder: 88 North Pty Ltd ATF Cvek Family Trust - 84 units;

(ii) Second Initial Unitholder: Petra Gerendasi - 13 units; and

(iii) Third Initial Unitholder: James Jia Ye - 3 units.

70 The provisions of the second loan agreement reflected those of the novated first loan agreement. Relevantly, the definition of 'Security' in clause 1.1 and the terms in which clause 5 (dealing with Security) was expressed remained the same. Similarly, save that the identity of the 'Borrower' had now changed, from Rothmann Piper as trustee for the Rothmann Piper Trust to Mandeville Group Pty Ltd (in its own right, rather than 'as trustee for the Mandeville Group Trust No 1' under the novated first loan agreement), clauses 8 and 9 of the second loan agreement, dealing with 'Use of the Loan' and 'Undertakings of the Borrower' respectively, continued to be framed in the same terms as before, namely:

8. Use of the Loan

The Borrower must only use Loan for the purposes as it deems necessary.

9. Undertakings of the Borrower

The Borrower agrees that it will use the funds as it deems necessary.

71 The Mandeville trust deed is styled as a 'Unit Trust - Fixed Deed' dated 3 October 2016.[100] The trustee is recorded as 'Mandeville Group Group Pty Ltd' (obviously a typographical error) and the parties are named as being Mr Ye, 88 North Pty Ltd and Ms Gerendasi.

72 Clauses 2.3, 2.5 and 9.6 of the trust deed establishing the Mandeville trust are expressed in the same terms as the counterpart provisions of the Rothmann Piper trust deed (set out above).

73 The schedule to the Mandeville trust deed specifies the number of units held by each of the initial unitholders as follows:

74 In accordance with directions given by Mr Cvek, Ms Gerendasi paid the sum of $270,000 as follows:[101]

(a) the sum of $240,000 immediately by bank cheque to ELG Pty Ltd, an entity associated with the vendor of the Property; and

(b) the sum of $30,000 immediately into a bank account which she was informed belonged to Mr Mihailescu, whom she understood provided administrative assistance to Mr Cvek on his developments.

75 Later that same day, Mr Cvek emailed Ms Gerendasi to let her know that the Property had settled.[102] On 18 October 2016, she received a further email from him enclosing a copy of the transfer of land for the Property, which recorded Mandeville Group Pty Ltd as the owner.[103]

76 Mr Xiao Chen, also known as 'Chris Chen', is a lawyer who resides in New South Wales. He has known Mr Cvek since 2010 when they were at university together.[104]

77 In or around 2014, Mr Cvek introduced him to Mr Mihailescu and the three of them developed a close friendship.[105] Through that friendship, Mr Chen was introduced to various investment opportunities in South Yarra and Toorak. Mr Chen was aware from his conversations with Mr Cvek over the years that he had had success in buying and developing land.[106] Prior to him investing in the Property, Mr Chen had invested approximately $300,000 with Mr Cvek through various investments.[107]

78 In or around early October 2016, Mr Cvek and Mr Mihailescu told Mr Chen that they had purchased a property at 3 Mandeville Crescent, Toorak. Mr Chen's evidence was that, at that time, he understood Mr Cvek had purchased the Property in his own name, started the planning process with his project management company, priced the investment and searched for co-investors, of whom he had found two: Ms Gerendasi (whom Mr Chen had not met previously) and Mr Ye (whom Mr Chen knew well from previous investments since December 2014).[108]

79 In or around October 2016, Mr Chen had several phone conferences with Mr Mihailescu and Mr Cvek to discuss investment in the Property and its development. Mr Chen said he understood that Mr Mihailescu was the director/trustee of the company responsible for all administrative and financial functions and activities aside from development management, marketing, certain project management functions which was overseen by Mr Cvek.[109] Mr Mihailescu informed him that the Property had already been purchased and he needed to raise approximately $500,000 to cover among other things, project/development management and other expenses, payout of existing loans, obligations, unitholding transaction costs, working capital and project management expenses for the Mandeville Property, with the intention to develop the Property into apartments (Mandeville project).[110] Mr Mihailescu also provided him with several 'Mandeville Feasibility Reports', for different stages of the Mandeville project, and the 'Drawings' for the Property.[111]

80 Mr Chen said he was very interested in investing in the Mandeville project but as he did not have enough funds to invest $500,000 himself, he approached some people he knew who might find it of interest.[112] He then introduced Mr Cvek and Mr Mihailescu to some of his close friends, being Mr Hanxin Qiu, Mr Xiatong Hao, Mr Kan Xin Tang and Ms Liling Cheng.

81 Mr Chen said the Sydney investors met several times to discuss whether or not to invest in the Mandeville project. They understood that it was the trust that held the Property through the company, and a key issue that was raised in these discussions was what would happen in the event that the Mandeville project failed and how they could potentially secure their investment.[113] He said that Mr Mihailescu, who had 10 years working experience with the taxation office, had offered them an arrangement whereby they could execute secured loan agreements along with unit trust deeds for ownerships of units in the trust by acquiring units from Mr Cvek (thereby diluting his interest only), and this arrangement effectively dealt with their concerns.[114]

82 Mr Chen said that the agreed price for each unit in the trust was $108,000.[115] While this evidence is at odds with what is stated in the trust deeds, it reflects what is stated in the Mandeville Feasibility Report provided by Mr Mihailescu, where the 'investment offer' is described in the following terms and the 'offer price' is stated as being $108,000 per unit:[116]

INVESTMENT OFFER A. 3 UNITS (3%) ($324,000 TOTAL INVESTMENT)

83 Mr Chen deposed that on 22 October 2016, which was after the settlement of the Property, Mr Mihailescu organised for him to fly to Melbourne for a short overnight visit. Both Mr Milhailescu and Mr Cvek picked him up from the airport, and later they met with Xiaotong Hao (one of the Sydney investors) at a cafe in Armadale and discussed the details of the Mandeville project. Mr Chen said that during this meeting, amongst other things both he and Mr Hao were assured by Mr Mihailescu that the Property was held under trust and that Mandeville Group Pty Ltd was the trustee of the trust of which Mr Mihailescu was the sole director and sole shareholder.[117] As per the Mandeville Feasibility Report, they were also aware that Mr Cvek maintained the project management functions of the Mandeville project and understood that his company received project management fees for its services and that the Cvek family trust held over 80% of the investment.[118]

84 Following the meeting, Mr Chen shared the details of those discussions with the other Sydney investors. They all agreed that they would go ahead with investing in the Mandeville project, and on the same day Mr Chen informed Mr Cvek and Mr Mihailescu of their decision.[119] Later that evening, Mr Mihaeilescu provided Mr Chen with a loan agreement for signing that he had prepared following their meeting at the cafe.[120] The loan agreement was between Mr Chen (Lender) and Mandeville Group Pty Ltd ATF the trust (Borrower).[121] Mr Chen signed the document and left the document with Mr Mihailescu to countersign and send a soft copy to him. However, he did not receive a soft copy of the executed loan agreement.[122]

85 On 26 October 2016, Mr Chen received an email from Mr Mihailescu providing Mr Cvek's bank details for payment of funds for the investment and acquisition of units in the Mandeville project.[123] Mr Chen subsequently provided the payment as instructed by Mr Mihailescu for his one unit and Mr Cvek diluted his unitholding to reflect this acquisition.[124] While Mr Chen does not expressly mention having executed the trust deed, it seems clear that he did so. A copy of his execution page (taken from the trust deed) appears as part of the conformed copy of (what the liquidator refers to as) the third deed dated 25 October 2016.[125]

86 On 27 October 2016, Mr Chen facilitated the execution and exchange of the loan agreements entered into by the Sydney investors to provide funds for the development of the Mandeville project,[126] and also the execution and exchange of trust deeds by which the Sydney investors would purchase units in the Trust.[127] On 2 November 2016, he flew to Melbourne urgently because the funds invested by the Sydney investors needed to be cleared by 2 November 2016 so that the next stage of the Mandeville project could proceed.[128] Mr Chen's evidence is that because of difficulties and delays with the transfers of funds he made payments totalling $155,000.[129]

87 Following execution of the documents, Mr Chen received updates from Mr Cvek from time to time. From December 2016 Mr Cvek was living in Madrid, and Mr Chen went to Spain to visit him on two occasions.[130] Mr Chen said he was satisfied from these visits that the Mandeville project was progressing.[131]

88 Mr Kan Xin Tang was one of the Sydney investors. He is a draftsperson and is a close friend of Mr Chen. He said that he did not know much about trusts but Mr Chen explained the structure to him, to the effect that Mandeville Group Pty Ltd owned the Property for the benefit of the Mandeville Group Trust No 1 so that the true owners of the Property were the unit holders of the trust rather than the shareholders of the company.[132]

89 Mr Tang purchased 0.5 units in the trust for a consideration of $54,000. On or around 26 October 2016, he executed a trust deed and a loan agreement and emailed them to Mr Chen, who uploaded them to Dropbox for Mr Mihailescu and Mr Cvek to download directly.[133] On 28 October 2016, the sum of $54,028**,** being the amount due to the company under the loan agreement, including a transaction fee for electronic transfer, was debited from his account.[134] The money was paid into Mr Cvek's account, as instructed by Mr Mihailescu. When he asked what the funds were to be used for, Mr Mihailescu said that it was for a variety of purposes deemed necessary by the trust including paying down any outstanding loans the trust owed and needed to pay and some other bills which included paying out existing loans and payments.[135]

90 The loan agreement referable to Mr Tang is exhibited to Mr Chen's affidavit.[136] The loan agreement, which is dated 26 October 2016, records Mr Tang as 'Lender' and Mandeville Group Pty Ltd as 'Borrower'. The recitals to the loan agreement state:

1. The loan will be secured by the Trustee[137] granting the Lender a security interest in the property[138] in the event of a default by the Borrower.

1. The loan can be recalled at any time by the Lender prior to construction or unless otherwise agreed to in writing between the parties by the Lender providing 90 days written notice to the Borrower.

1. In the event that this loan is recalled by the Lender, the Lender will be entitled to a fixed interest return of 10% per annum calculated daily over the duration of the loan being calculated from the drawdown date up to and until the date the loan is repaid by the Borrower.
2. In the event that the loan is recalled by the Lender, the Lender will transfer its rights to its Unit Holdings (as classified by the Unit Trust Deed) in 3 Mandeville Group Trust No 1 to 88 North Pty Ltd.

91 As foreshadowed by recital E, clause 3 of the loan agreement, which is headed 'Interest', provides in clause 3.4:

3.4 Upon full payment of any loan recalled by the Lender, the Lender shall transfer all and any rights and ownership of its units in the Mandeville Group unit trust back to 88 North Pty Ltd upon date of payment by the Borrower.

92 Further, under clause 6, which deals with 'Events of Default', clause 6.2(b) states that it will be an event of default on the part of the Lender 'if the Lender fails to revert any units in the Mandeville Group Unit Trust and/or revocation of any Security interest held by the Lender as per clause 3 of this Loan Agreement.'

93 Clause 4 of the loan agreement is headed 'Repayment of Principal and Interest'. Clause 4.1 provides that the 'Borrower' must repay the 'Principal Sum', which is defined to mean '$54,000 AUD', and all accrued interest on the 'Repayment Date'.[139]

94 Clause 5 of the loan agreement is headed 'Security'. Clauses 5.1 and 5.2 provide that:[140]

5.1 The Lender has the right under this Agreement to take a registrable security interest over the asset of the Company including any land held by the Company and this Agreement shall serve as notice of the Borrowers granting of such rights to the Lender provided that any such Security Interest does not cause detriment to the development or any management actions as is required by the Borrower to complete the Development in accordance with this deed. An example of this would include during the planning or approvals process or where the company requires the plan of subdivision to be lodged and approved in order to complete the development and its obligations to Unit Holders in its performance of its duties as Trustee.

5.2 The Lender has the right under this Agreement to take a registrable security interest in the event of default by the Borrower.

95 Clauses 8 and 9 deal with 'Use of the Loan' and 'Undertakings of the Borrower' respectively, and provide as follows:

8. Use of the Loan

The Borrower must only use Loan for the purposes as it deems necessary.

9. Undertakings of the Borrower

The Borrower agrees that it will use the funds as it deems necessary.

96 The loan agreement was expressed to be 'signed sealed and delivered' by Mandeville Group Pty Ltd in accordance with s 127 of the Corporations Act 2001 (Cth) by each of Mr Mihailescu and Mr Cvek. However, as at 26 October 2016, the directors of the company were Mr Mihailescu and Mr Balint. That said, however, the evidence strongly suggests that Mr Cvek had either express or ostensible authority to act on behalf of Mandeville and to bind it to the loan agreement.[141]

97 The trust deed that was executed by Mr Tang (and each of the other Sydney investors) is exhibited to Mr Chen's affidavit.[142] The trust deed is styled as a 'Unit Trust - Fixed Deed establishing the Mandeville Group Trust No 1' and is dated 25 October 2016. The parties to the trust deed are listed as being Mr Ye, 88 North Pty Ltd, Ms Gerendasi, Mr Qiu, Mr Hao, Mr Tang, Ms Cheng and Mr Chen. The recitals to the trust deed record the relevant 'Background' as follows:

1. The Initial Unitholders are: 88 North Pty Ltd, Petra Gerendasi, James Jia Ye, Hanxin Qiu, Xiaotong Hao, Kan Xiu Tang, Liling Cheng and Xiao Chen.
2. The Initial Unitholders have paid the initial sum [being $1.00 AUD per unit[143]] to the Trustee MANDEVILLE GROUP PTY LTD ACN 614 322 299, to establish the Mandeville Group Trust No 1 which is to be governed in accordance with this deed.

1. MANDEVILLE GROUP PTY LTD ACN 614 322 299 has agreed to be the initial trustee of the trust and hold all moneys and investments on the terms of this deed.

1. The trust is a fixed trust consists of 100 units.
2. The provisions of this Deed both binds and benefits all Unitholders.

98 The Schedule to the Trust Deed records the unitholders as being:

99 The trust deed was executed by Mandeville Group Pty Ltd in the same manner as the loan agreement (described above), purportedly in accordance with s 127 of the Corporations Act 2001 (Cth), and by each of the Sydney investors separately executing a copy. Mr Tang's evidence is that he executed it on or around 26 October 2016. The terms of the trust deed that was executed by Mr Tang are the same as those of the trust deeds that were executed Mr Qiu, Mr Hao and Ms Cheng respectively. While no copy of the trust deed signed by Mr Chen is in evidence, his execution page appears as part of the conformed copy produced by the liquidator.[144] There is no evidence of the 25 October 2016 trust deed having been executed by either Mr Ye, Ms Gerendasi or 88 North Pty Ltd.

100 Clause 2.3 of the trust deed provides for assets to vest in the trustee as follows:[145]

2.3 Assets vest in Trustee

Any Assets held by the Trustee in its capacity as trustee of the Trust, must be clearly identified as property of the Trust and held separately from the assets held by the Trustee for itself or as the trustee of any other trust.

101 The trust deed makes no specific reference to the Property being an asset of the trust. However, clause 2.5 of the trust deed states the purpose of the trust as follows:[146]

2.5 Purpose of Trust

The primary purpose of the Trust is to carry on the business of Real Estate development of the property located at 3 Mandeville Crescent, Toorak, Victoria, Australia.

102 Further, clause 9.6, which is headed 'Distribution Date', states:[147]

(a) The trustee must distribute the income of the trust (income - expenses and obligations) within 30 days once full and final settlement of the final and last remaining units/townhouses/apartments of the property located at 3 Mandeville Crescent Toorak Vic 3142 and upon satisfactory payment of all expenses and debt obligations of the trust.

103 Mr Tang said that in or around August 2019, he had a face-to-face meeting with Mr Mihailescu in Melbourne, which Mr Chen also attended, to understand what happened to the money they transferred to Mr Cvek's account.[148] Mr Mihailescu told them that the money was used for the Mandeville Property.

104 Mr Hanxin Qiu, who is an IT Business Analyst, was another one of the Sydney investors. He is a friend of Mr Chen. Mr Qiu was approached by Mr Chen in or about early October 2016 about a potential investment opportunity in Melbourne initiated by both Mr Mihailescu and Mr Cvek.[149] In essence, he was told by Mr Chen that the investment opportunity was to purchase a property at 3 Mandeville Crescent, Toorak, Victoria that was to be converted into a development. After considering the matter, on 25 October 2016 he informed Mr Chen that he had decided to invest in the Mandeville project.[150]

105 On 26 October 2016 Mr Qiu received an email from Mr Chen forwarding an email from Mr Mihailescu and Mr Cvek attaching a copy of an unexecuted loan agreement with Mandeville Group Pty Ltd for a loan amount of $108,000. He signed the loan agreement the same day.[151] The next day, Mr Chen forwarded him an email from Mr Cvek attaching the executed version of the loan agreement.[152] Later that same day (27 October 2016), in accordance with instructions from Mr Mihailescu, Mr Qiu transferred a total of $108,000 to Mr Cvek's account.[153]

106 The loan agreement pertaining to Mr Qui, which is exhibited to Mr Chen's affidavit,[154] is dated 26 October 2016, and records Mr Qui as 'Lender' and Mandeville Group Pty Ltd as 'Borrower'. The loan agreement contains the same terms and conditions as Mr Tang's loan agreement (set out above), save that the 'Principal Sum' is defined to mean '$108,000 AUD.'

107 On 26 October 2016, Mr Qiu also received a copy of an unexecuted trust deed from Mr Cvek, that had been forwarded to him by email from Mr Chen.[155] Pursuant to the trust deed, the unit holdings in the Mandeville Trust were distributed as follows:

(a) First Initial Unit Holder: 88 North Pty Ltd ACN 169 495 952 ATF Cvek Family Trust - 84 units.

(b) Second Initial Unitholder: Petra Gerendasi - 13 units.

(c) Third Initial Unitholder: James Jia Ye - 3 units.

108 Mr Qiu signed the trust deed the same day.[156] The next day (27 October 2016), he received an email from Mr Chen forwarding an email from Mr Cvek attaching a copy of the trust deed executed by Mandeville Group Pty Ltd.[157] A copy of the trust deed that was executed by Mr Qui is exhibited to his affidavit.[158] As noted above, the trust deed that was executed by Mr Qiu contained the same terms as that which was executed by Mr Tang.

109 Mr Qiu's evidence was that at the time of executing the loan agreement, he was of the understanding that the funds he had provided through his loan agreement would be used for various requirements such as for any activity the company/trust deemed necessary and as stipulated by Mr Mihailescu relating to the Mandeville project[159] and its associated cash flow and other expense requirements.[160] He also understood that each unitholder of the Mandeville trust would be entitled to profits following the completion of the Mandeville project proportionate to their unitholding in the Mandeville Group Trust No 1.[161]

110 Ms Liling Cheng was another of the Sydney investors. She filed no affidavit evidence. However, the loan agreement pertaining to Ms Cheng is exhibited to Mr Chen's affidavit.[162] It is dated 26 October 2016, and records Ms Cheng as 'Lender' and Mandeville Group Pty Ltd as 'Borrower'. The loan agreement contains the same terms and conditions as Mr Tang's loan agreement (set out above), including that the 'Principal Sum' is defined to mean '$54,000 AUD.'

111 A copy of the trust deed that was executed by Ms Cheng is also exhibited to Mr Chen's affidavit.[163] The trust deed contained the same terms as that which was executed by Mr Tang.

112 Mr Xiaotong Hao was also one of the Sydney investors that was introduced by Mr Chen. He filed no affidavit evidence.

113 The loan agreement referable to Mr Hao is exhibited to Mr Chen's affidavit.[164] It is dated 26 October 2016, and records Mr Hao as 'Lender' and Mandeville Group Pty Ltd as 'Borrower'. The loan agreement contains the same terms and conditions as Mr Tang's loan agreement (set out above), save that the 'Principal Sum' is defined to mean '$108,000 AUD.'

114 A copy of the trust deed that was executed by Mr Hao is exhibited to Mr Chen's affidavit.[165] The trust deed contained the same terms as that which was executed by Mr Tang.

115 Following Mr Cvek's re-location to Spain in December 2016, Ms Gerendasi said he was difficult to contact and rarely responded to requests. She said that when Mr Cvek did respond, the updates he gave were usually vague and conflicted with other information he had given previously, and she began to worry about her investment in the Property.[166]

116 In 2019, she contacted Mr Mihailescu to try to get some answers. Mr Mihailescu informed Ms Gerendasi that the company owed approximately $3.3 million to RAMS under the first ranking mortgage.[167] He also told her that the company had numerous other debts and that an investor in another scheme of Mr Cvek's had obtained a freezing order against the company.[168] In 2019, Ms Gerendasi also became aware of the sale by Mr Cvek of some of his units in the Mandeville Group Trust No 1 to the Sydney investors and that Mr Cvek had sought to set up a new trust with the Sydney investors to facilitate their participation in the Mandeville project. All of this information was a cause of concern to Ms Gerendasi, and as a result, in July 2019, she lodged a caveat on the title to the Property pursuant to each of the novated first loan agreement and the second loan agreement.[169]

117 Mr Chen apparently had a different view of matters to Ms Gerendasi. He says he had several conversations with Mr Ye and Mr Mihailescu in 2019, and later 'became aware of the activities precipitated by Mr Mihailescu, Mr Ye and Ms Gerendasi without the authority of all unitholders which jeopardised the entire [Mandeville] project and cost all investors by entering into new trust deed, shareholding restructure of [Mandeville Group Pty Ltd], appointment of officers and other unethical conduct'.[170]

Jieyun proceeding - freezing order made over the Property

118 As noted in the introduction, a separate proceeding was commenced in this Court by Jieyun against Toorak Development Group Pty Ltd and others, including Mandeville Group Pty Ltd (as ninth defendant), by Writ filed on 21 August 2018, (proceeding number S ECI 2018 00919) (the Jieyun proceeding). Relevantly, Jieyun alleges that Mandeville Group Pty Ltd knowingly received $608,047[171] and it seeks orders to trace into the Property (or proceeds of sale) the allegedly misappropriated funds.[172] On 3 September 2018, at the request of Jieyun, Justice Lyons made an interlocutory freezing order over the Australian assets of Mandeville Group Pty Ltd 'up to the unencumbered value of AUD$108,047'[173] for the confined purpose of preserving its assets so as to prevent frustration of the process of the Court.

119 Upon becoming aware of the freezing order, the liquidator made enquiries and obtained information about the Jieyun proceeding and the allegations made against Mandeville Group Pty Ltd.[174] Discussions then took place between the parties, the liquidator having indicated that he would be seeking an order from the Court setting aside the freezing order as against the company. Following the hearing in this proceeding, the Court was informed by the plaintiffs' solicitor that an accommodation had been reached between the parties whereby, upon the giving of certain undertakings by the liquidator,[175] Lyons J made orders in the Jieyun proceeding by consent of the relevant parties on 20 April 2020, lifting the freezing order as against Mandeville Group Pty Ltd.

120 In the first Wight affidavit, the liquidator deposes that the Property, which was purchased for the sum of $4,438,000, appears to be encumbered by a mortgage granted in favour of Westpac dated 3 October 2016.[176] The title search records that the mortgage was registered on 13 October 2016,[177] and it is first ranking. The mortgage sum advanced was $3,328,000 and the sum outstanding as at the commencement of the proceeding was approximately $3,400,000.[178]

121 The caveats lodged on the title to the Property have been noted in the table (at [27] above). While the amount of Mr Cvek's claim is not stated, the other caveats lodged by 'investors' reflect claims totalling a further (at least) $1,270,000. There are also (unspecified) statutory charges arising under the Water Act 1989 (Vic) that are the subject of the caveat filed by South East Water Corporation.

122 In the case of 'unsecured' creditors, the liquidator has identified from the books and records of the company and the trust that there appear to be four unsecured creditors, being the Australian Taxation Office (for the sum of $1,653.20); Gadens Lawyers (for the sum of $341,566.88); Ratio Consultants Pty Ltd (for the sum of $5,071.66), and the State Revenue Office (for the sum of $1,653.20).[179]

123 In his first affidavit, Mr Wight deposed that there appear to be secured debts of $4,670,000 and unsecured debts of $399,291.74. He observed that on the assumption the value of the Property is the same or slightly higher than the purchase price (of $4,438,000), 'there will be no net proceeds of sale after payment of sale costs, payment to secured and unsecured creditors and payment of the liquidation costs for distribution to unitholders.'[180] In his second affidavit, affirmed on 18 December 2019, Mr Wight provided updated details of the creditor pool. After noting that the loan agreements with four of the Sydney investors (who have not lodged caveats) total a further $324,000, and in the Jieyun proceeding, the amount claimed by Jieyun is $608,047, the liquidator deposed that '[i]n the event that all of these claims are accepted, the claims total $6,001,338.74.'[181]

124 At the time of affirming his second affidavit, the liquidator had not yet formed a view on these claims, nor had he formed a concluded view on whether the Property is held by Mandeville Group Pty Ltd in its own right or on trust for the Mandeville Group Trust No 1. He stated:

[10] I have not yet formed a view on the above claims. I anticipate the exercise of considering proofs of debt will be complex, as the books and records of the Company are incomplete and contradictory. The Company and the Trust did not complete financial statements or file any tax returns. Further, I am not confident that I can rely on the books and records of the Company as accurate. The fact that there are numerous trust deeds (as set out in my First Affidavit) in the name of Rothmann Piper Trust No 2 and Mandeville Group Trust No 1, each with different unit holders, causes me some concern.

[11] I have also not yet formed a concluded view on whether the Property is held by the Company in its personal capacity or on trust for the Trust. In light of the status of the books and records of the Company, I believe this will be a difficult question. If this question needs to be determined, I consider I will need to apply to the Court for a declaration, given the uncertainty. Based on my experience in seeking orders or declarations from the Court in matters arising in liquidations, and having regard to the interests involved in the liquidation of the Company, I estimate that the costs of bringing that application will be approximately $60,000 in remuneration and legal costs. In addition, interested parties would also need to incur legal fees to protect their interests, which fees may also be payable out of the Property.

125 Since then, however, further work has been undertaken and the plaintiffs' solicitor has procured affidavits from several of the 'investors' and these have been filed in the proceeding. Also, the Court has appointed a contradictor (to address only the issue of the capacity in which the company holds the Property) and the originating process has recently been amended so as to seek 'directions' from the Court.

The gist of the rival contentions advanced by the plaintiffs and the contradictor

126 Against that background, the plaintiffs' counsel has clarified that the plaintiffs' 'principal position', and the 'principal order' now sought, is that the Court give 'a direction that the liquidator would be justified in conducting the winding up of the second plaintiff on the basis that it holds the Property on trust for the Mandeville Group Trust No 1 (Trust) being an express trust.'[182] In the alternative, the plaintiffs submit that 'if the elements of the Trust have not been established (being certainty of intention, subject matter and object), it is open to the Court to direct that the liquidator conduct the winding up on the basis that the Property is held on constructive trust.'[183] In that regard, during the hearing, the focus was on a 'common intention constructive trust', however, counsel for the plaintiffs now seeks to have the Court instead focus on a 'joint endeavour constructive trust' of the kind upheld by Derrington J in Staatz (as liquidator of Wollumbin Horizons Pty Ltd) (in liq) v Berry (No 3).[184]

127 The position advanced by counsel for the 'contradictor' is essentially that:

(a) There is a real question as to the status of the various unit trusts established by the various deeds;

(b) Where there are competing trusts it is not open to the Court to make a declaration that the Property is held by Mandeville Group Pty Ltd as trustee of the Mandeville Group Trust No 1;

(c) There is insufficient evidence to establish that the Property was an asset of any of the unit trusts;

(e) There is no common intention constructive trust;

(f) The contemporaneous evidence in this proceeding supports a finding that the Property was owned by Mandeville Group Pty Ltd in its own right, rather than as trustee.

Nature and scope of an application for directions by a liquidator

128 In Re G B Nathan & Co Pty Ltd (in liq),[185] in dealing with an application by a liquidator for directions under (then) s 479(3) of the Corporations Law,[186] McLelland J explained the nature and scope of an application to the court for directions by a liquidator. His Honour commenced by examining the historical antecedents of the provision, noting the 'significant similarities' between the winding up of a company under the control of the court, and the administration of a deceased estate under the control of the court, and the 'similarities' between the status of a court-appointed liquidator and that of a court-appointed receiver. He stated:[187]

The historical antecedents of s 479(3), the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator's application for directions is the manner in which the liquidator should act in carrying out his function as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitory form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction.

Modern Australian authority confirms the view that s 479(3) "does not enable the court to make binding orders in the nature of judgments" and that the function of a liquidator's application for directions "is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company's transactions before the liquidation": see Re Security Provident Fund Ltd (In Liq) (1984) 73 FLR 264 at 265; . . .

129 In this context, his Honour also observed that 'there are instances where a court has, in proceedings commenced as a liquidator's application for directions, gone on to make orders declaratory of substantive rights, clearly intended to be of binding effect on the parties to the proceedings, and where necessary has made representative orders for this purposes'.[188] And while his Honour acknowledged that the procedures of the court are sufficiently flexible to enable and accommodate such a course, so as to 'avoid the need to commence further proceedings involving additional cost and delay',[189] he continued, to express a note of caution, stating:[190]

However it is important that the distinction between the two kinds of proceedings [ie, proceedings commenced as an application for directions to be changed into proceedings for the determination of substantive rights] be not lost sight of or blurred, and such a fundamental change should not be permitted unless the court is satisfied that those affected either consent to that course (see eg, Re Standard Insurance Co Pty Ltd (1963) 5 FLR 292; 80 WN (NSW) 1355 and Murdoch [v Crawford [1986] VicRp 10; [1986] VR 97] (at 100-101)), or will not suffer injustice in consequence of the alteration to the status of the proceedings.

130 In Bastion v Gideon Investments Pty Ltd (in liq),[191] Austin J was faced with a situation where the director who had sole control of the company had died prior to the liquidator's appointment, and it was unclear whether the company was the trustee of a trading trust. The liquidator had conducted extensive investigations in relation to the affairs of the company and also in relation to the possible existence of a trading trust and its affairs. A draft trust deed and draft management agreement and an information memorandum were located, but as the liquidator remained uncertain as to whether there was a trust in existence governing investors' rights, he made application to the court seeking the protection of directions.

131 His Honour held it was appropriate to make directions under s 479(3) of the Corporations Law,[192] and that on the evidence, it was appropriate to direct that a trust be recognised by the liquidator on the terms of the draft trust deed and that certain persons be recognised as beneficiaries. In doing so, Austin J referred to the analysis of McLelland J in Re G B Nathan[193] and stated:[194]

[48] In my opinion the subject matter of the first application is a proper subject matter for an application for directions under s 479 (3). It is appropriate for the liquidator, confronted by unsatisfactory corporate records and uncertain indications that a large part of the company's business was conducted as trustee, to bring the facts before the Court and seek the protection of directions under s 479 (3). It is appropriate for the Court to give the direction sought by the liquidator once it is satisfied, as I am, that all reasonable inquiries have been made by the liquidator to establish the true facts. In this case I am impressed by the thorough and systematic investigations that have been conducted.

132 Having found the application for directions was in principle an appropriate one, his Honour then turned to the particular directions sought by the liquidator. In dealing with the directions sought in relation to the trust, Austin J adopted a methodical approach, and worked patiently through the documents. Having done so, his Honour concluded as follows:[195]

Directions relating to the Trust

[51] In my opinion the evidence, though in some respects flimsy (like the evidence that was before me in the Graf Holdings case), persuades me that the funds of investors were collected by Mr Bastion on behalf of the company as trustee of an investment trust, and it is more likely than not that the terms of the investment trust were contained in the Trust Deed. I have indicated that the Trust Deed is very much a draft document, noting particularly that internal cross-references were frequently incorrect. However, one can work out the correct references, with patience, and so in the end the terms of the trust are reasonably precise. The most serious problem is that the number of units held by each initial unitholder is not set out in the schedule, as it should be according to clause 3 (2), but the liquidator appears to have worked out the value of their investments from other evidence.

[52] I am particularly influenced by the fact that the draft Management Agreement recites that the GHF Trading Trust was constituted by a deed dated 1 August 1993 (evidently the Trust Deed), and the evidence that investors believed that they were investing in accordance with it.

[53] On the evidence before me I cannot reach the conclusion that the Trust was amended by the Management Agreement. I note that the Information Memorandum appears to proceed on the basis that the Management Agreement was at that time operative, and some investors appear to have believed that they invested on the basis of the Management Agreement. However, the draft Management Agreement seems to contemplate the issue of new redeemable units, and I can see no evidence that any such units were issued.

[54] Even if I had formed the view, on the evidence, that the Management Agreement became operative, its terms would not apply to investors who had become beneficiaries prior to its commencement.

[55] The significance of this conclusion may be that it affects the question whether the company has acted in breach of trust by investing in property other than equities, bonds, currency markets and futures. It will be recalled that the powers of investment in the Trust Deed are very wide, but they would have been restricted if the Management Agreement had become operative.

[56] In summary, I am prepared to give the direction sought in paragraph (1) of the interlocutory process, since that paragraph identifies the Trust Deed but not the Management Agreement.

[57] Having regard to the liquidator's evidence of his thorough investigations, I am prepared to give a direction in terms of paragraph (2) of the interlocutory process, to the effect that he would be justified in recognising as beneficiaries the persons listed in Schedule B and others who file a proof of their claims supported by appropriate evidence. I doubt that claims by investors as beneficiaries are best treated as proofs of debt, but that is a matter of machinery for the liquidator to decide upon. Additionally, I should draw attention to the limited nature of the protection that will be given by my direction to the liquidator. When the liquidator acts in recognition of the claims of the beneficiaries, he will be acting (for the most part) on behalf of the company in its capacity as trustee. My direction, given under s 479 (3) rather than under s 63 of the Trustee Act, will not protect the company as trustee, and may not protect the liquidator as its agent.

[58] The liquidator seeks a direction, as liquidator, either that he would be justified in admitting a claim against the company by the receiver and manager of the Trust (to be appointed under the second application) for the total amount of the losses suffered by the beneficiaries, or that he would be justified in admitting claims against the company by each of the beneficiaries for their respective losses. With some hesitation, I have reached the conclusion that neither direction should be given, at least at this stage. For the reasons I have given, the liquidator would be justified, having recognised the existence of the Trust, in treating the assets of the company as trust assets. I am prepared to give a direction in those terms, if it is sought. That being so, the assets are under his control for the purposes of administration of the Trust. The claims to recovery by the investors should be treated as claims for distribution of their beneficial entitlements, to the extent that assets remain in the Trust, and claims for compensation for breach of trust to the extent that the available assets fall short of the amount of the claim. The assessment and disposition of the investors' claims is (for the reasons I shall give) a task for the company as trustee, to be performed on its behalf by the liquidator. In my opinion the receiver and manager does not need to have a role in that process, and it would be at least premature and probably unnecessary to give any direction about the assessment of the claims.

133 More recently, in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand,[196] in the counterpart context of a trustee seeking judicial advice, the High Court emphasised the importance of a trustee in doubt seeking judicial advice as to the correct course of action, and made clear that the only jurisdictional bar is that an 'applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument.'[197]

134 Thereafter, in Hall v Poolman[198] the New South Wales Court of Appeal accepted that the principles espoused by the High Court in Macedonian Orthodox Church in the context of trustees seeking judicial advice under s 63 are of relevance in the context of an application for judicial directions under ss 479(3) and 511 of the Corporations Act 2001 (Cth).

135 Further, in Re Mento Developments (Aust) Pty Ltd (in liq),[199] Robson J also applied a similar approach to that taken by the High Court in Macedonian Orthodox Church to the position of a court-appointed liquidator who was seeking directions in the winding up of the company pursuant to s 479(3) of the Corporations Act 2001 (Cth). In essence, Robson J said that, in his view:[200]

(1) The liquidator is entitled to seek directions on his administration of the winding up even though the issue about which he seeks a direction may be or become an adversarial issue in other proceedings.

(2) The direction or advice is to be directed to advising the liquidator on whether or not he or she is justified in conducting the winding up in a certain way and not deciding disputes between competing parties.

(3) The direction or advice should not seek to resolve an issue between competing parties but the fact that the advise [sic] may tend to foreclose an issue in other disputed proceedings is not of special significance in the court exercising its discretion to give private advice to the liquidator.

(4) Where a liquidator seeks advice on an issue which may be contested between competing parties, the court should be alert to not going further than is necessary to give the advice sought.

(5) The liquidator is not limited to seeking directions about the limited range of matters that Wixart contended as set out above. It is unnecessary for me to proscribe the range.

136 More recently, in Federal Commissioner of Taxation v Thomas,[201] the High Court has confirmed that the power to give judicial advice is not a vehicle for the attainment of purposes extraneous to the protection of the trust estate and the trustee, and that rarely will it be appropriate for the court to grant declaratory relief. In Thomas, the primary judge had acceded to the trustee's request and given declaratory relief in relation to franking credits, framed in terms which expressed a view about the operation of the relevant taxation legislation. In later proceedings, between the trustee and the Commissioner of Taxation, the trustee relied on the earlier decision of the High Court in Executor Trustee & Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA),[202] and argued that the Commissioner was obliged to act on the basis of the interests as declared by the court in the judicial advice application. But the High Court rejected that view, observing that directions made under the judicial directions power 'do not bind' the Commissioner in the application of the taxation laws,[203] because it is no part of such an application for the court to determine how the taxing acts operate.[204]

137 Here, while the plaintiffs commenced the proceeding as one seeking orders to allow the liquidator to sell the property and take steps to wind up the trust, and then amended the proceeding to one seeking declaratory relief, and gave notice to the interested parties (none of whom filed an appearance or sought to appear), they later reverted to the more traditional course of seeking directions from the Court as to whether the liquidator 'is justified' in embarking on the course he proposes.

138 In those circumstances, it is clear that in the proceeding as presently constituted, the Court does not, as McLelland J observed in Re G B Nathan, determine the rights and liabilities arising from the company's transactions before the liquidation; nor is it being asked to determine any question between the company and the interested persons and make a determination that is binding on them. Rather, the position is akin to that described by Robson J in Re Mento Developments, such that the Court's role is essentially one of considering the competing accounts of events and giving guidance to the liquidator to assist him to get on with the winding up of Mandeville Group Pty Ltd and selling the Property.

139 The plaintiffs' application is made under ss 90-15 and 90-20 of Schedule 2 Insolvency Practice Schedule (Corporations) (Schedule 2) to the Corporations Act 2001 (Cth) (Corporations Act), s 1318 of the Corporations Act, ss 63 and 67 of the Trustee Act 1958 (Vic) (Trustee Act), r 39.02 and r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) and the inherent jurisdiction of this Honourable Court.

140 Section 90-15 of Schedule 2 confers power on the Court to make 'such orders as it thinks fit in relation to the external administration of a company.' The '[e]xamples of orders that may be made' set out in sub-s (3), which include 'determining any question arising in the external administration of the company',[205] demonstrate that the power is broad and probably more extensive than the powers formerly available under ss 479(3) and 511 of the Corporations Act.[206]

141 The power conferred on the Court under ss 63 and 67 of the Trustee Act and r 54.02 of the Rules to give directions to trustees is also of broad compass. In Ballard v Attorney-General,[207] Kyrou J observed that r 54.02 'confers on the court very broad powers' and 'enables a trustee to seek an order of the court either to approve a transaction or to direct that an act be done in execution of the trust.'[208]

142 Counsel for the plaintiffs canvassed the body of evidence before the Court, and pointed to several matters as indicating that the Property was held on an express trust, by Mandeville Group Pty Ltd as trustee of the Mandeville Group Trust No 1, as follows:

(a) the clear expectation of the investors that the Property would be held by a trust in which they would be issued units;[209]

(b) Mr Mihailescu, the sole director and shareholder of Mandeville Group Pty Ltd, states (against his own interest as sole shareholder of the company) that it was his understanding that the Property would be held by company on trust for the Trust, and that the relevant trust deed was the one dated 3 October 2016;[210]

(c) the various loan agreements executed by the investors either refer to the borrower as being the trust and/or refer to the trust as providing the security; and

(d) Mr Cvek's claim (made in a recent letter from his (then) solicitor[211]) that his caveat is founded on his related interest as a unitholder in the Mandeville Group Trust No 1 and that the trust is the beneficial owner of the property.

143 During the hearing, counsel for the plaintiffs submitted that, apart from the evidence given on behalf of the investors (summarised above), the terms on which the loans were made also demonstrate that the investment by each investor has two elements that were intrinsically linked, being that:

(a) their invested funds were to be provided by way of a secured loan; and

(b) the share of profits/ownership were to be recognised by unit(s) in the Mandeville Group Trust No 1, proportionate to their invested funds.

144 Reference was made to the following terms, by way of example:

(a) Recital E to the loan agreements with investors Qiu, Hao, Tang, and Cheng respectively provides that '[i]n the event that the loan is recalled by the Lender, the Lender will transfer its rights to its Unit Holdings (as classified by the Unit Trust Deed) in 3 [sic] Mandeville Group Trust No 1[212] to 88 North Pty Ltd[213].'

(b) Clause 3 of the loan agreements with investors Qiu, Hao, Tang, and Cheng respectively deals with 'Interest' and provides in sub-cl 3.3 that '[i]n the event that the Loan is recalled by the Lender, the Lender shall transfer all and any rights and ownership of its units in the Mandeville Group unit trust back to 88 North Pty Ltd upon date of repayment by the Borrower.'

145 Counsel for the plaintiffs frankly acknowledged that the material before the Court also contains indications to the contrary, which would be consistent with the Property being owned by Mandeville Group Pty Ltd in its own right, such as:

(a) the 'Sale of Real Estate Nomination Form' that was signed by Mr Cvek (as purchaser) on 6 September 2016, prior to the settlement of the Property, in which he nominated Mandeville Group Pty Ltd as the substitute purchaser (without any mention of the Mandeville Group Trust No 1);[214]

(b) the Westpac Banking Corporation (as credit provider for loans originated by RAMS Financial Group Pty Ltd) documentation headed 'RAMS Low Rate Home Loan Agreement Details' records the 'customer' and 'mortgagor' as Mandeville Group Pty Ltd, and in response to the question 'is the customer a trustee'- the (then) directors of the company answered by ticking the 'No' box;[215]

(c) the State Revenue Office 'Duties Form 62 Purchaser Statement' pertaining to the purchase of the Property, which was signed by Mr Mihailescu on 6 September 2016, records in 'Part B −Transferee type' that the transferee is '[a] corporation that is not acting as a trustee';[216] and

(d) in an email from Mr Cvek to the solicitor acting for Mandeville Group Pty Ltd, sent at around the settlement date of the Property, in response to the question from the vendor's solicitor as to whether the company acts as trustee for any trust, Mr Cvek responds 'no trust'.[217]

146 Counsel for the contradictor contended that there is insufficient evidence to establish that the Property was an asset of any of the unit trusts. Rather, she submitted the contemporaneous evidence before the Court supports a finding that the Property is held by Mandeville Group Pty Ltd in its own right, rather than as trustee, and noted that none of the trust deeds expressly stated that the Property is an asset of the relevant trust.

147 In support of her submission, counsel referred to the four evidentiary matters noted above, namely the Westpac loan documentation, the nomination form, the State Revenue Office Duties Form 62 and the email correspondence. She also noted[218] that the second loan agreement (which Ms Gerendasi entered into prior to settlement), and the loan agreements entered into by the Sydney investors dated 26 October 2016 (being after the settlement), are all made with Mandeville Group Pty Ltd in its own right.[219] None of those loan agreements reference the Mandeville Group Trust No 1. Further, clause 9 of the second loan agreement expressly required Mandeville Group Pty Ltd to use the funds for the purchase of the Property.

Consideration and disposition of the application

148 As noted earlier, in the present case, the Court's role is essentially one of considering the competing accounts of events and giving guidance to the liquidator to assist him to get on with the winding up of Mandeville Group Pty Ltd and selling the Property.

149 The liquidator, with assistance from his staff and the plaintiffs' solicitor, has conducted investigations and reviewed the books and records of the plaintiffs, and obtained affidavits from the investors in the Mandeville project and Mr Mihailescu.

150 When all of the available evidence is collated and considered, the picture that emerges is one where Mr Cvek was the promoter of the Mandeville project, which involved the purchase and development of the Property. To that end, Mr Cvek, with the assistance of Mr Mihailescu, sought and obtained funds from 'investors'. The investors were approached to participate in the Mandeville project. Before coming on board as an investor, each of them was informed that the Property would be held by a company on trust and they would provide funds secured via a loan agreement and would participate in the profits of the development of the Property via their holding of units in a unit trust.

151 From the outset, however, the precise vehicle for the acquisition and the manner of funding was something of 'a moving feast'[220] − following entry into the contract to purchase the Property, changes were made to the identity of the purchasing entity, even after the initial funds were advanced by Mr Ye and Ms Gerendasi − and there was a lack of attention to detail in the preparation of the supporting documentation. In that regard, it is unclear who prepared the documentation. Counsel for the plaintiffs noted that there is no evidence of any lawyers being involved − none of the investors appear to have dealt with a lawyer or solicitor acting on behalf of the company − and all of the documents seem to have come from either Mr Cvek or Mr Mihailescu.[221]

152 The end result is there are a succession of loan agreements and trust deeds in evidence before the Court, made with different entities both before and after the purchase of the Property, some of which are at odds with details of 'ownership' information that Mr Cvek and/or Mr Mihailescu provided to the mortgagee (Westpac), the State Revenue Office, and to the solicitors acting in connection with the settlement of the purchase.

153 The lack of clarity in the suite of documents for the Mandeville project is mostly explicable by the context in which the events took place, where documentation was being prepared and provided to the investors by Mr Cvek and/or Mr Mihailescu at the last minute, and in circumstances where the investors were not informed, in a timely way or at all, of important changes to the transaction structure made unilaterally by Mr Cvek and/or Mr Mihailescu.

154 An example of this 'moving feast' context is Mr Cvek's instruction to Mr Mihailescu to execute a (further) 'Sale of Real Estate Nomination Form' in September 2016, nominating the (then) newly-formed company, Mandeville Group Pty Ltd, as purchaser of the Property.[222] That nomination took place against the background of Mr Cvek's earlier nomination of 'Rothmann Piper Investment Group Pty Ltd (A.C.N. 603 943 317) atf Rothman Piper Trust No 2' as the 'substitute purchaser',[223] which was current at the time each of initial investors provided funds.

155 When Mr Cvek approached Mr Ye and Ms Gerendasi in early June 2016 to provide funds to facilitate the purchase of the Property, he informed each of them in essence that the Property would be held by a company on trust, the funds they provided would be by way of loan and secured against the Property but rank behind that of the bank lending the rest of the purchase price (ultimately, Westpac), and any profits from the development would be paid into a trust in which they would hold units (along with Mr Cvek), and each of them as unitholders would share in the profit. Each of them agreed to proceed on that basis.

156 On 3 June 2016 Mr Ye paid $200,000 to the vendor's real estate agent as part payment of the deposit. On 8 June 2016, Ms Gerendasi paid a total of $800,000 towards the purchase of the Property as directed by Mr Cvek. Each of them separately executed both a loan agreement and a deed of trust with Rothmann Piper Investment Group Pty Ltd as trustee for Rothmann Piper Trust No 2, believing that it was the entity that would own the Property. Belatedly, however, each of them discovered that Mandeville Group Pty Ltd had subsequently been nominated as the substitute purchaser, following which they requested fresh (or novated) documentation from Mr Cvek to reflect this.

157 In the case of Ms Gerendasi, her evidence is that in late September or early October 2016, Mr Cvek contacted her and said he urgently required an additional $270,000 to complete the purchase of the Property. He indicated that if she agreed to provide the additional funds, a further loan agreement would be required and he would transfer to her a further three units in the trust that were held by his company, 88 North Pty Ltd. Ms Gerendasi agreed to do so but when she was shown the draft documents, she noticed that the borrower was 'Mandeville Group Pty Ltd', and not Rothmann Piper.[224] Mr Cvek said that her first loan agreement with Rothmann Piper should be novated to the new company, to which Ms Gerendasi agreed, but she thought it was also necessary to execute a new trust deed for the Mandeville Group Trust in place of the Rothmann Piper Trust, and Mr Cvek agreed that that was appropriate.[225] Accordingly, on 3 October 2016, Ms Gerendasi paid a further $270,000 as directed to facilitate the purchase, settlement took place and the Property was transferred to Mandeville Group Pty Ltd.[226]

158 Also on 3 October 2016, Ms Gerendasi executed handwritten amendments to the first loan agreement (to novate the first loan agreement from Rothmann Piper to Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1), and executed a (further) loan agreement with Mandeville Group Pty Ltd (with no mention of any trust) as borrower for the loan of $270,000. In addition, she executed a fresh trust deed dated 3 October 2016 establishing the Mandeville Group Trust No 1, which recorded the unit holders as being 88 North Pty Ltd ATF Cvek Family Trust (as to 84 units), Ms Gerendasi (as to 13 units) and Mr Ye (as to 3 units).[227] That version of the trust deed is also executed by each of Mandeville Group Pty Ltd, 88 North Pty Ltd and Mr Ye (whose signature is witnessed by Ms Gerendasi).[228]

159 In the case of Mr Ye, his evidence is that in November 2017, more than a year after the settlement, he discovered that the Property was owned by Mandeville Group Pty Ltd and not Rothmann Piper as trustee for Rothmann Piper Trust.[229] When he raised the matter with Mr Cvek, he was told that Mr Mihailescu must have made a mistake in nominating Mandeville Group Pty Ltd as the ultimate purchaser, and the error could be fixed by executing new versions of the transaction documents with the company and the Mandeville Group Trust No 1.[230]

160 To that end, in early February 2018, Mr Ye executed a fresh loan agreement with Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1 that was dated 18 August 2016.[231] At the same time, he also executed a fresh trust deed (purportedly) establishing the Mandeville Group Trust No 1, dated 18 August 2016, wherein the unitholders are described as being 88 North Pty Ltd (as to 80 units) and Mr Ye (as to 20 units).[232] Mr Ye's evidence is that Mr Cvek offered him the additional units to make up for the errors with the company entity.[233] As will be noted, however, this version of the trust deed makes no mention of Ms Gerendasi as a unitholder, and she is not a signatory to it. And given that Mr Ye has executed the 3 October 2016 trust deed, it is unclear why it was thought necessary in February 2018 for Mr Cvek and Mr Ye to execute the 18 August 2016 trust deed, save possibly to record the transfer of the additional units from Mr Cvek to Mr Ye.

161 Counsel for the contradictor places much emphasis on the contemporaneous documents, submitting that they support a finding that the Property is held by Mandeville Group Pty Ltd in its own right, rather than as trustee. But for the most part, the contemporaneous evidence referred to is documentation that was prepared unilaterally by Mr Mihailescu and/or Mr Cvek of which the investors were unaware.

162 First, there is the 6 September 2016 nomination form,[234] which nominates Mandeville Group Pty Ltd as purchaser of the Property but makes no mention of the 'Mandeville Trust'. Neither Mr Ye nor Ms Gerendasi was consulted about or informed of this change to the identity of the purchaser (from Rothmann Piper as trustee for Rothmann Piper Trust to Mandeville Group Pty Ltd) at or about the time it took place.

163 Secondly, on the same day, Mr Mihailescu apparently signed the State Revenue Office 'Duties Form 62 Purchaser Statement' pertaining to the purchase of the Property, confirming that the transferee is '[a] corporation that is not acting as a trustee'.[235] Once again, it appears that neither Mr Ye nor Ms Gerendasi was provided with this document or informed of this change to the identity of the purchaser at or about the time the document was submitted to the State Revenue Office.

164 Thirdly, there is the Westpac documentation headed 'RAMS Low Rate Home Loan Agreement Details'[236] which records the 'customer' and 'mortgagor' as Mandeville Group Pty Ltd. In response to the question 'is the customer a trustee' - the (then) directors of the company (Mr Balint and Mr Mihailescu) answered by ticking the 'No' box. Here again, there is no evidence that either Mr Ye or Ms Gerendasi was provided with this document or informed of this change to the identity of the purchaser at or about the time the document was submitted to Westpac.

165 Fourthly, there is the email from Mr Cvek to the solicitor acting for Mandeville Group Pty Ltd, sent on or around the settlement date of the Property, where in response to the question from the vendor's solicitor as to whether Mandeville Group Pty Ltd acts as trustee for any trust, Mr Cvek responds 'no trust'.[237] There is no evidence that either Mr Ye or Ms Gerendasi was provided with this document or informed by Mr Cvek of its contents at or about the time it was sent.

166 Further, there is the certificate of title, which records Mandeville Group Pty Ltd as the registered proprietor of the Property. But, as counsel for the plaintiffs noted, 'properties that are held on trust are never registered that way with the Titles Office in any event'.[238] Accordingly, that registration (without any reference to a trust arrangement) would not foreclose there being a trust in existence.

167 In those circumstances, it is unlikely that either Ms Gerendasi or Mr Ye would have been aware it might later be asserted that the Property was owned by Mandeville Group Pty Ltd in its own right rather than as trustee of the Mandeville Group Trust No 1. Ms Gerendasi's evidence is that having executed the additional documents on 3 October 2016, Mr Cvek informed her later that day that 'Mandeville has settled',[239] and on 18 October 2016 she received an email from him enclosing a copy of the Transfer of Land for the Property and 'she saw that the Company was the owner of the Mandeville Property.'[240] That email also included a copy of the State Revenue Office 'Duties Form 62 Purchaser Statement' as signed by Mr Mihailescu, but the covering email made no reference to it or its contents. Mr Ye's evidence is that it was not until '[s]ome time in November 2017 that [he] found out that the Mandeville Property was owned by the Company, not Rothmann Piper'.[241]

168 Accordingly, the position is that as at 3 October 2016, when the settlement took place, each of Mr Ye and Ms Gerendasi had invested in the Mandeville project and provided funds as requested by Mr Cvek, on the understanding that the Property would be owned and developed by a company as trustee of a trust; the funds they loaned would be secured against the Property and they, as unitholders, would share in any profits realised from development.

169 In the case of Ms Gerendasi, on 3 October 2016 she executed her second loan agreement, made with Mandeville Group Pty Ltd (without any mention of its capacity as trustee for the Mandeville Group Trust No 1), but her first loan agreement (as novated) and the deed of trust were also made that day with Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1. Both Mr Ye and Mr Cvek's company, 88 North Pty Ltd (as trustee for the Cvek family trust), are signatories to that trust deed.

170 The schedule to the 3 October 2016 trust deed records that the 100 units were held as follows:

(i) First Initial Unitholder: 88 North Pty Ltd ATF Cvek Family Trust - 84 units;

(ii) Second Initial Unitholder: Petra Gerendasi - 13 units; and

(iii) Third Initial Unitholder: James Jia Ye - 3 units.

171 It will be noted that Ms Gerendasi's unitholding has increased (from 10 units) to 13 units, and 88 North Pty Ltd's unitholding has decreased (from 87 units) to 84 units, reflecting the transfer of the three additional units Mr Cvek promised to Ms Gerendasi in conjunction with her agreeing to provide the second loan of $270,000.

172 In the case of Mr Ye, it appears that the later documentation he entered into with Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1 dated 16 August 2016 (but executed in February 2018) to correct the 'error'[242] was intended to replace, and was effectively substituted for, his earlier loan agreement made with Rothmann Piper as trustee for the Rothmann Piper Trust, and in the case of the trust deed, to record his enhanced unit holding as a result of the additional units Mr Cvek offered him.

173 Mr Mihailescu, who was one of the directors of Mandeville Group Pty Ltd at 3 October 2016, and served as Mr Cvek's 'right-hand man' throughout, has deposed that on 3 October 2016, when Ms Gerendasi attended the office to execute the documents for the second loan, she expressed some concern that the documents she had previously executed were with Rothmann Piper, whereupon 'Mr Cvek assured [her] that the Mandeville Property would be owned by the Company and held on trust for the Mandeville Property Trust No 1.'[243] Further, on 22 November 2019, in response to an email from the plaintiffs' solicitor asking whether the Property was property of the Trust or owned by the Company in its personal capacity, Mr Mihailescu stated:[244]

As far as I understood the property was purchased for the trust when Petra [Gerendasi] who was a unitholder provided the funds for the Mandeville Group Trust No. 1 which was settled on the 3rd of October 2016. As far as I knew this was what it was for.

If there is any other paperwork that is inconsistent with that it must be incorrect and/or I misunderstood what I was signing because Dali [Cvek] might have told me something incorrect.

. . .

174 As counsel for the plaintiffs noted, in circumstances where Mr Mihailescu is recorded as the sole shareholder of Mandeville Group Pty Ltd, and as holding those shares beneficially, the evidence given by him is effectively evidence that is adverse to his personal interest.[245]

175 Turning then to the position of the Sydney investors, who were introduced to Mr Cvek by Mr Chen, each of them was approached after settlement of the Property had taken place. For the most part, Mr Chen acted as a conduit or 'go-between' between the Sydney investors and Mr Cvek and Mr Mihailescu, and he conveyed information to them and arranged for them to execute the relevant documentation.[246] The tenor of the approach made to the Sydney investors to invest in the Mandeville project was consistent with that made to Mr Ye and Ms Gerendasi. They were informed that the Property would be held by a trust in which they would be issued units, and each investor would be required to enter into a loan agreement and a trust deed. Mr Chen's evidence is that Mr Mihailescu offered them an arrangement whereby they could execute secured loan agreements along with unit trust deeds for ownership of units in the trust, by acquiring units from Mr Cvek (thereby diluting his interest only) at an (effective) price of $108,000 for each unit.

176 On 25 or 26 October 2016, each of the Sydney investors executed both a loan agreement and a trust deed. Mr Chen's evidence is that his loan agreement was made with Mandeville Group Pty Ltd as trustee for the Mandeville Group Trust No 1, but no copy of this document is available. Each of the other Sydney investors executed a loan agreement with Mandeville Group Pty Ltd, without any express mention of it acting in a trustee capacity. However, as counsel for the plaintiffs observed, the loan agreements contain indications of a relevant trustee relationship or that a trustee is involved in the ownership of the Property. For example:[247]

(a) The recitals describe the 'Background' as follows:

1. The loan will be secured by the Trustee granting the Lender a security interest in the property in the event of a default by the Borrower.

1. In the event that the loan is recalled by the Lender, the Lender will transfer its rights to its Unit Holdings (as classified by the Unit Trust Deed) in 3 Mandeville Group Trust No 1 to 88 North Pty Ltd.

(b) The expressions 'Company', 'Property', 'Security' and 'Unit Trust' are defined in clause 1.1 of the loan agreements as follows:

Company means Mandeville Group Pty Ltd ATF Mandeville Group Trust No 1.

Property means the property located at 3 Mandeville Crescent, Toorak, VIC 3142.

Security means granting of a security interest over the Property and any other mortgage, pledge, lien, hypothecation, security interest or other encumbrance or charge and any guarantee or indemnity now or in the future given by the Borrower or any other person in favour of the Lender to secure the obligations of the Borrower under the agreement unless such granting of security will negatively impact the operation of the Trustee and or development of the Property.

Unit Trust means Mandeville Group Unit Trust No 1.

(c) Clause 5 of the loan agreements deals with 'Security' and clauses 5.1 and 5.2 provide that:[248]

5.1 The Lender has the right under this Agreement to take a registrable security interest over the asset of the Company including any land held by the Company and this Agreement shall serve as notice of the Borrowers granting of such rights to the Lender provided that any such Security Interest does not cause detriment to the development or any management actions as is required by the Borrower to complete the Development in accordance with this deed. An example of this would include during the planning or approvals process or where the company requires the plan of subdivision to be lodged and approved in order to complete the development and its obligations to Unit Holders in its performance of its duties as Trustee.

5.2 The Lender has the right under this Agreement to take a registrable security interest in the event of default by the Borrower.

177 Notwithstanding that each of the Sydney investors, including Mr Chen, was acquiring their units in the trust from Mr Cvek, the documentation executed in each case was a fresh unit trust deed dated 25 October 2016, rather than a transfer of units. The 25 October 2016 trust deed was not executed by either Mr Ye or Ms Gerendasi, but it records their unit holdings as being 3 units and 13 units respectively (which reflects their unit holdings under the 3 October 2016 trust deed). The unit holding of Mr Cvek's company, 88 North Pty Ltd ATF Cvek Family Trust is recorded in the 25 October 2016 trust deed as being 80 units, which is a reduction from the 84 units recorded in the 3 October 2016 trust deed. This 25 October 2016 trust deed appears to be the trust deed that Mr Cvek has referenced in the caveat lodged by him against the Property.

178 Clause 4.3 of the 3 October 2016 trust deed deals with 'Registration of Transfers' and provides:[249]

(a) A transfer is not effective until Registered.

(b) The Trustee may not refuse to record any transfer in the Register.

179 The companion expressions 'Register', 'Registered' and 'Registration' are defined in clause 1.1, as follows:[250]

Register means the register of Unitholders required to be maintained under the Deed.

Registered means recorded in the Register.

Registration means recording in the Register

180 Counsel for the plaintiffs informed the Court there is no evidence of any 'Register' in the company's books and records,[251] nor is there any evidence of any certificates, but he noted that clause 3.6(a) is not expressed in mandatory terms.[252] The trust deed does not prescribe any particular form for the transfer of units, but counsel submitted that 'arguably, the form of transfer from 88 North to the Sydney investors was effectively done by the 25 October purported replacement deed,'[253] whereby Mr Cvek has effectively transferred a total of four of the units held by him as trustee for the Cvek Family Trust to the Sydney investors in the proportions indicated. While each of those transfers is 'not effective until Registered', the trustee may not refuse to record any such transfer in the Register.

181 Upon a perusal of each of the 3 October 2016 and 25 October 2016 trust deeds it will be noted that there are some (minor) differences between the provisions contained in them.[254] However, in circumstances where the Sydney investors have acquired their unit holdings by transfer from Mr Cvek as trustee for the Cvek Family Trust, and neither Mr Ye nor Ms Gerendasi have executed the later deed, it is likely that the provisions of the earlier trust deed will prevail. In that event, it is relevant to note that clause 15.4 of the 3 October 2016 trust deed provides:[255]

Restrictions on Unitholders

A Unitholder:

(a) must not interfere with any rights or powers of the Trustee under this Deed;

(b) must not exercise a right in respect of an Asset or lodge a caveat or other notice affecting an Asset or otherwise claim any interest in an Asset; or

(c) may not require an Asset to be transferred to the Unitholder.

182 Against that background, the plaintiffs submit the evidence before the Court supports the conclusion that the Property is held by Mandeville Group Pty Ltd on trust for the investor unitholders, and that an express trust was formed for that purpose, being the Mandeville Group Trust No 1.[256]

183 When addressing the requirements for an express trust, counsel referred the Court to Pascoe v Boensch,[257] where the Full Court of the Federal Court conveniently stated the relevant principles as follows:[258]

[19] For the purposes of this appeal, it is necessary to refer briefly to certain elementary principles of trust law relating to the voluntary constitution of a trust by way of declaration. We emphasise both "voluntary" and "declaration" for the reason that where valuable consideration is given for the creation of a trust somewhat different principles can apply if the trust is not fully constituted at the time of the declaration.

[20] (i) Essential to the voluntary creation of any express trust, whether arising by declaration or transfer, is that the trust itself satisfies the three certainties outlined by Lord Langdale in Knight v Knight [1840] EngR 862; (1840) 3 Beav 148 at 173, ie there must be certainty of intention to create a trust; certainty as to the subject matter of the trust; and certainty as to the objects (or beneficiaries) of the trust: on the three certainties see generally Ford and Lee, Principles of the Law of Trusts, Chs 2, 4 and 5; Dal Pont and Chalmers, Equity and Trusts in Australia (4th ed, 2007) Ch 17. . . .

[21] (ii) Though there is no required formula to be used to create a trust: Richards v Delbridge (1874) LR 18 Eq 11 at 14; the declarant must manifest an intention presently to create a relationship in respect to property which the law characterises as a trust: Re Armstrong (decd) [1960] VicRp 34; [1960] VR 202. The intention must be one actually had: Commissioner of Stamp Duties (Q) v Jolliffe [1920] HCA 45; (1920) 28 CLR 178; and it must be to create an immediately operative trust: Harpur v Levy [2007] VSCA 128; (2007) 16 VR 587 at [62]- [63]. An intention that the trust be constituted at a later date will be ineffective to create a trust either at the time of the declaration or at that later date. The ultimate onus of proving the intention to create a trust rests on the parties seeking to propound it: Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72 at [45].

[22] (iii) The requirement that there be certainty as to the beneficiaries of a trust is tied to the supervision and control that courts exercise over trusts: a court might be called upon to administer a trust or to direct the distribution of it to some person or persons. For present purposes it is sufficient to note that, if a trust was declared in the memorandum, it was a fixed trust and, in consequence, the beneficiaries of it must be ascertained or else ascertainable when their interests are to vest: see Kinsela v Caldwell [1975] HCA 10; (1975) 132 CLR 458 at 461.

184 More recently, in Korda v Australian Executor Trustees (SA) Limited,[259] where the High Court held that documents constituting a pine plantation investment scheme, considered separately or together, did not support the existence of a trust or trusts of the tree and land sales proceeds in the hands of the two companies, French CJ addressed the requirements for an 'express trust', stating:[260]

[3] The question whether an express trust exists must always be answered by reference to intention.[261] An express trust cannot be created unless the person or persons creating it can be taken to have intended to do so.[262] Absent, as in this case, an explicit declaration of such an intention, the court must determine whether intention is to be imputed. It does so by reference to the language of the documents or oral dealings[263] having regard to the nature of the transactions and the circumstances attending the relationship between the parties.[264]

. . .

Finding an express trust

[5] It has rightly been observed that "many express trusts are not express at all. They are implied, or inferred, or perhaps imputed to people on the basis of their assumed intent."[265] . . .

The seventh edition of Jacobs' Law of Trusts in Australia offers the usefully succinct observation that the creator of an express or declared trust will have used language which expresses an intention to create a trust[266]:

"The author of the trust has meant to create a trust, and has used language which explicitly or impliedly expresses that intention, either orally or in writing. The fact that a trust was intended may even be deduced from the conduct of the parties concerned but if there is any uncertainty as to intention, there will be no trust." (footnote omitted)

185 Further, French CJ noted that '[i]n each case it is a question of fact for the courts to determine whether an intention to create a trust is sufficiently evinced',[267] and he said '[t]he process of ascertaining whether the necessary intention to create a trust should be imputed is one of construction of the relevant text or oral dealings in their context.'[268]

The documentation and the parties' dealings support the existence of an express trust essentially in the terms of the 3 October 2016 trust deed

186 In the present case, having reviewed and considered at some length all of the relevant documentation and the parties dealings in the context in which they took place, I am satisfied that each of the initial investors and the Sydney investors contributed funds to the Mandeville project on the understanding that they would become unit holders under a unit trust deed, and that the Property would be owned by the trust. In my view, essentially for the reasons advanced by counsel for the plaintiffs, the documentation and the parties' dealings support the existence of an express trust essentially in the terms of the 3 October 2016 trust deed. That deed establishes a fixed trust consisting of 100 units. The primary purpose of the trust is 'to carry on the business of Real Estate development of the property located at 3 Mandeville Crescent, Toorak'.[269] Further, the deed binds Mandeville Group Pty Ltd as trustee and each of the initial investors, being 88 North Pty Ltd (ATF the Cvek Family Trust), Ms Gerendasi and Mr Ye, and any persons claiming through them such as the Sydney investors (who have taken a transfer of their units from Mr Cvek).

187 Accordingly, I am satisfied that the liquidator is justified in conducting the winding up of Mandeville Group Pty Ltd on the basis that the Property is held by the company in its capacity as trustee for the Mandeville Group Trust No 1.

Unnecessary to deal with alternative constructive trust argument

188 In those circumstances, it is unnecessary for the Court to deal with the alternative argument advanced by the plaintiffs, to the effect that if the Court were not satisfied that there was a properly constituted express trust, in the form of the Mandeville Group Trust No 1, it would nevertheless be open to the Court to find that the Property is held on constructive trust by Mandeville Group Pty Ltd for the benefit of persons who sought to subscribe for units in the Mandeville Group Trust No 1.[270]

189 In supplementary submissions provided following the conclusion of the hearing, the plaintiffs submit that the manner in which the investors' investment in the Mandeville project was structured, do not differ greatly from the facts under consideration in Re Wollumbin.[271]

190 In Re Wollumbin, the liquidator of the company applied to the court pursuant to s 90‑15 of Sch 2 of the Corporations Act for orders or directions in relation to land in northern New South Wales held by the company, following the failure of a scheme or venture seeking to establish a form of commune called the 'Bhula Bhula Community' or 'Bhula Bhula Community Village' on the land. Each of the subscribers had contributed funds to the scheme on the understanding that they would become unit holders under a unit trust deed, and that the property would be owned by the trust.

191 Justice Derrington held that the liquidator was justified in treating the deed of trust purporting to establish the unit trust as ineffective and in treating the relevant property as held by the company as bare trustee pursuant to a constructive trust for those parties who made monetary contributions for the purpose of becoming members of the commune. In so doing, his Honour expressed a preference for a 'failed joint endeavour' constructive trust rather than a 'common intention' constructive trust, stating:[272]

[178] Whilst some not unreasonable arguments exist in support of the conclusion that a common intention constructive trust existed in relation to the interests of the Community members from time to time, the circumstances do not sit comfortably with the underlying rationale for trusts of that nature. The circumstances of this matter, particularly at that point in time when the last member joined the Community, more accurately indicate the existence of that form of constructive trust which arises upon the failure of a joint endeavour.

192 His Honour explained the circumstances giving rise to a joint endeavour constructive trust, stating:

[149] Where people have made contributions on the basis and for the purpose of furthering a joint endeavour, the substratum of the joint endeavour is removed prematurely without attributable blame, and the benefit of the contributions by one party would otherwise be enjoyed by another where that was not specifically intended or specially provided, equity will not permit that other party to assert or retain the title to the extent it would be unconscionable for them to do so: Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 at 147-8 adopting Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 per Deane J.

193 In the present case, as counsel for the plaintiffs observed, the investors in the Mandeville project were not merely lending money to the company or the trust. Rather, from the outset, each of them was investing in a Property that had been purchased for development, and they expected ownership and return of profits for that investment - which was to be derived largely from their ownership of units in the trust. Counsel submitted that '[t]he monies invested via loans appear to merely enable the investors to have additional security against the property (per clause 5 of the loan agreements)' and '[w]hilst that element was not present in Wollumbin, the underlying intention and expectation that each investor would hold ownership in the property by way of units in the trust, is the same.'[273]

194 Counsel for the plaintiffs submitted that here, it would be open to the investors to argue in support of a constructive trust along similar lines to the failed joint endeavour constructive trust found in Re Wollumbin, on the basis that:[274]

(a) they agreed to invest in the purchase and development of the property (and providing those funds by way of loan) in return for a share of the ownership of the property and its profit (by way of their units in the Trust);

(b) the substratum of that joint endeavour has failed without fault of the investors because the trustee (the Company) failed to recognise the beneficial owner of the property as the Trust (pursuant to the Purchase Documents) and failed to properly establish the unit trust as was promised to the investors and pursuant to the expectations and intentions; and

(c) as a result (assuming that the express trust has failed and the Property is not held for the benefit of the Trust) the Company holds legal and beneficial title to the Property - which would be unconscionable in the circumstances.

195 In my view, for the reasons outlined by counsel for the plaintiffs, there is some force in the plaintiffs' alternative argument. However, as the Court is satisfied that there was relevantly a properly constituted express trust, in the form of the Mandeville Group Trust No 1, no occasion arises to further consider whether the Property was held on a 'failed joint endeavour' constructive trust for the benefit of the persons who sought to subscribe for units in the Mandeville Group Trust No 1.

196 For completeness, I note that at the hearing, the plaintiffs did not pursue their argument for a resulting trust. Counsel for the plaintiffs acknowledged that the resulting trust argument they raised in their written outline has difficulties, as was highlighted by counsel for the contradictor, and they accepted that it is probably not open to the Court to find a resulting trust in circumstances where some of the investors came on board after the Property was purchased.[275]

'Ipso facto' clause enlivened - second plaintiff holds the Property as a bare trustee

197 If, as appears to be the case, the 3 October 2016 trust deed is the relevant trust deed constituting the Mandeville Group Trust No 1, it seems clear that with the appointment of the liquidator to Mandeville Group Pty Ltd on 15 October 2019, the 'ipso facto' clause, clause 12.2 (dealing with 'Compulsory retirement'), was enlivened so as to effect a compulsory retirement of Mandeville Group Pty Ltd as trustee of the Mandeville Group Trust No 1 at that date.[276] In those circumstances, Mandeville Group Pty Ltd (and consequently, Mr Wight) is left holding the trust assets as a bare trustee. As such, only limited powers are available, and these do not include a power of sale.[277]

Powers sought under s 63 of the Trustee Act

198 Against that background, the plaintiffs have sought an order pursuant to s 63 of the Trustee Act, conferring on Mandeville Group Pty Ltd nunc pro tunc the necessary powers to enable the second plaintiff to wind up the Mandeville Group Trust No 1, including to:

(b) sell the assets of the Trust, including the Property;

(c) pay the creditors of the Trust from the proceeds of the assets, pursuant to the priorities prescribed under the provisions of the Corporations Act 2001 (Cth);

(d) compromise any claim made against the second plaintiff in its capacity as trustee of the Trust or against any of the Trust property on any terms the second plaintiff sees fit;

(e) bring any claim against any party on behalf of the Trust; and

(f) execute any tax returns, financial statements or other documents relating to the Trust.

199 At the hearing, the focus was on the Property (which Mr Wight has deposed is '[t]he only asset of the company'[278]) and ensuring that in the context of the winding up of the Mandeville Group Trust No 1, Mandeville Group Pty Ltd would have the requisite power to sell the Property. However, in my view, it is appropriate, for the avoidance of doubt, to authorise Mandeville Group Pty Ltd to carry on the business of the Mandeville Group Trust No 1. It is also in the interests of the Mandeville Group Trust No 1 and its creditors that the Mandeville Group Pty Ltd, under the control of the liquidator, have the power to sell the assets of the Trust, including the Property, for the purpose of maximising the return to creditors. It is also desirable that Mandeville Group Pty Ltd (and necessarily, Mr Wight) have the related powers he sought to compromise claims, bring claims on behalf of the Trust, and to execute tax returns and financial documentation relating to the Trust. Accordingly, I propose to make an order under s 63 of the Trustee Act conferring on the second plaintiff the powers necessary to enable the second plaintiff to wind up the Mandeville Group Trust No 1, and to make that order 'nunc pro tunc', thereby rendering it unnecessary for the Court to make any associated 'relieving' order under s 1318 of the Corporations Act or s 67 of the Trustee Act.

The trustee's right of indemnity and accompanying lien

200 The 3 October 2016 trust deed confers on the trustee an express right to be indemnified out of the assets of the Mandeville Group Trust No 1 'for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to the Trust'.[279] Further, this indemnity is expressed to be 'in addition to any indemnity allowed by law' and '[i]t continues to apply after the Trustee retires or is removed as trustee of the Trust.'[280]

201 Where, as here, a company that is the trustee of a trust goes into liquidation, and the company in liquidation has incurred liabilities in carrying out trust business, the trustee's right of indemnity and accompanying equitable lien over the assets of the trust will enure in favour of the company in liquidation, notwithstanding that the company has been removed as trustee and only holds the assets as a bare trustee.[281]

Powers sought under s 477 of the Corporations Act

202 Counsel for the plaintiffs submitted that in circumstances where it appears to be very unlikely that the sale of the Property will result in a surplus and where it is more likely that the Property is owned by the Trust, it is more appropriate that the Court make orders giving powers to the liquidator under s 477 of the Corporations Act, rather than for the appointment of the liquidator as receiver over the trust property (which may cause unnecessary confusion as to which capacity the liquidator is acting when selling the Property).[282]

203 Counsel for the plaintiff referred the Court to Re Brimson Pty Ltd (in liq),[283] where Moshinsky J observed:

[49] It is now settled that the liquidator of an insolvent (former) corporate trustee cannot sell the trust's property without order of the Court, or by appointment of a receiver over the trust assets: see [Re Killarnee] at [44] per Allsop CJ (Farrell J agreeing at [196]); Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484; (2014) 291 FLR 17 at [10]; Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 at [45]. The rationale for this position is that, on a proper understanding, the trust assets are not the "property of the company", but are instead trust property in which the corporate trustee has a proprietary interest by way of lien or charge to secure its right of exoneration: see [Re Killarnee] at [89]. Thus, to the extent that the subject of a sale is the whole of a trust asset, rather than merely the company's lien or charge in respect of that asset, it is not authorised by the power of sale in s 477(2)(c).

[50] The courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets. In situations where the property of the trust will be exhausted following its sale and subsequent distribution to creditors, it may be appropriate merely to give the liquidator a power of sale: see [Re Killarnee] at [91]. The more common course is, however, for the liquidator of the insolvent (former) corporate trustee to apply to be appointed a receiver for the purpose of selling the trust assets and distributing the proceeds among trust creditors: see [Re Killarnee] at [142] per Siopis J; Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121 (Amirbeaggi); Taylor v CJ & KL Bond Super Pty Ltd, in the matter of CJ & KL Bond Pty Ltd (in liq) [2018] FCA 1430 (Taylor v CJ & KL Bond Super Pty Ltd); [Re Wollumbin [2019] FCA 924; (2019) 138 ACSR 231]. Orders appointing a liquidator as a receiver for this purpose may be made nunc pro tunc to authorise sales of trust assets that have already occurred: Jones & Matrix at [91], [152], [198].

204 In my view, the evidence before the Court favours the Court making orders giving powers to the liquidator under s 477 of the Corporations Act rather than appointing the liquidator as a receiver.

205 In the second Wight affidavit, the liquidator deposed that four real estate agencies had undertaken an appraisal of the Property and provided an estimated value range for the sale of the Property. The estimates ranged from (the lowest) of $4.3 to $4.7 million to (the highest) of $5 to $5.5 million[284] and the standard sales commission quoted by the agents was in the range of 1.1% to 1.43%.[285] (I note that the respective real estate agents provided their estimates several months before the COVID-19 pandemic resulted in stage 3 restrictions being imposed in Victoria.)

206 The liquidator also referred to the fact he had earlier deposed there appeared to be secured debts of at least $4,670,000 and unsecured debts of $399,921.74.[286] In addition to this amount, there is a further $324,000 referable to the loan agreements made between the company and (four of) the Sydney investors and there is the claim made by Jieyun in the related proceeding for $608,047.[287] The liquidator deposes that '[i]n the event all of these claims are accepted, the claims total $6,001,338.74.'[288] In addition, he estimates that the costs of bringing this application for directions will be 'approximately $60,000 in remuneration and legal costs.'[289] I note that this estimate was given prior to the appointment of the contradictor by the Court.

207 In his first affidavit, the liquidator observed that given the quantum of the secured and unsecured debts, if the value of the Property is the same or slightly higher than the purchase price (being $4,438,000), 'there will be no net proceeds of sale after payment of sale costs, payment to secured and unsecured creditors and payment of the liquidation costs for distribution to unitholders.'[290]

208 In those circumstances, I am satisfied that it is appropriate for the Court to make orders giving the liquidator the statutory powers under s 477 of the Corporations Act.

The liquidator's remuneration, costs and expenses

209 When addressing the liquidator's claim for remuneration and recovery of costs and expenses, counsel for the plaintiffs referred the Court to the decisions of Brereton J in Re Stansfield[291] and of Riordan J in Re Matthew Forbes Pty Ltd (in liq),[292] and the later observations made by Gordon J in Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth[293] as confirming that a liquidator's entitlement to recover remuneration, costs and expenses in cases of this kind are regulated by the priority regime established by s 556(1) of the Corporations Act. Counsel submitted that orders for the liquidator's costs and remuneration are now routinely made pursuant to s 556(1) even though the relevant property is trust property.[294]

210 In the circumstances, I am satisfied that it is appropriate to order that the liquidator is entitled to be paid his remuneration, costs and expenses properly incurred in preserving, realising or getting in the assets of the Trust, including the Property, and of and incidental to this application (including the costs of the contradictor), and that such remuneration, costs and expenses are to be paid in accordance with the priority specified in s 556(1) of the Corporations Act.

211 As noted earlier, the liquidator has reached an accommodation with the plaintiff in the Jieyun proceeding and also with the caveators (mentioned above) that will permit the Property to be sold in an orderly way, and provides that any surplus remaining after the sale and payment of realisation and other costs not be distributed by the liquidator and be held on trust in order that they may agitate their respective claims.

212 Accordingly, having regard to those arrangements, I am satisfied that it is appropriate to make an order to the effect that if, following the sale of the Property, there are any surplus funds following (a) the payment or discharge of Westpac's first registered mortgage and (b) the payment of the liquidator's remuneration, costs and expenses, the liquidator is to hold the surplus funds on trust pending further order of this Court.

213 As the Court is satisfied that it is appropriate to make orders and directions to the effect that the liquidator would be justified in conducting the winding up of the Mandeville Group Pty Ltd on the basis that it holds the Property on trust for the Mandeville Group Trust No 1 being an express trust, I propose to make orders and directions along the following lines.

1. Pursuant to section 90‑15 of Schedule 2 of the Corporations Act 2001 (Cth), the first plaintiff is justified in conducting the winding up of the second plaintiff on the basis that:
   • (a) The property located at 3 Mandeville Crescent, Toorak VIC 3142, being the whole of the land comprised in certificate of title Volume 07436 Folio 131 (the Property), is held by the second plaintiff in its capacity as trustee of the Mandeville Group Trust No 1 (Trust).
   • (b) The first plaintiff is entitled to be paid his remuneration, costs and expenses properly incurred in preserving, realising or getting in assets of the Trust, including the Property (Remuneration and Expenses).
   • (c) The Remuneration and Expenses include the remuneration, costs and expenses of and incidental to this application (including the costs of the contradictor) and are to be paid in accordance with the priority specified in section 556(1) of the Corporations Act 2001 (Cth).
2. Pursuant to section 63 of the Trustee Act 1958 (Vic), the following powers necessary to enable the second plaintiff to wind up the Trust, are conferred nunc pro tunc on the second plaintiff:
   • (a) the power to carry on the business of the Trust;
   • (b) the power to sell the Property (including paying out or otherwise discharging Westpac Banking Corporation's first registered mortgage);
   • (c) the power to compromise any claim made against the second plaintiff in its capacity as trustee of the Trust or against the Property on any terms the second plaintiff sees fit;
   • (d) the power to bring any claim against any party on behalf of the Trust; and
   • (e) the power to execute any tax returns, financial statements or other documents relating to the Trust.
3. Pursuant to section 90‑15 of Schedule 2 of the Corporations Act 2001 (Cth), the first plaintiff is able to rely on his statutory powers as liquidator of the second plaintiff pursuant to section 477 of the Corporations Act 2001 (Cth) to take all necessary steps to wind up the Trust pursuant to paragraph 2 above.
4. If, following the sale of the Property, there are any surplus funds following:
   • (a) payment or discharge of Westpac's first registered mortgage; and
   • (b) payment of the Remuneration and Expenses referred to in paragraphs 1(b) and (c) of these orders,

the first plaintiff is to hold the surplus funds on trust pending further order of this Court.

215 As the form of orders proposed differs from the orders the plaintiffs submitted following the hearing as reflecting their 'principal position', I will hear from the parties on the precise form of the orders to be made.

[1] Fifth affidavit of Mitchell Kenneth Bascomb Waters affirmed on 3 April 2020.

[2] First affidavit of Barry Wight affirmed on 7 November 2019 (first Wight affidavit) at [27].

[3] First Wight affidavit at [26], [6].

[4] The first Wight affidavit was filed in support of the application.

[5] Exhibit KCM-10 to the first MacKay affidavit; second MacKay affidavit at [7].

[6] Plaintiffs' submissions re ownership of the property, at [31].

[7] Re Stansfield DIY Wealth Pty Limited (in liq) [2014] NSWSC 1484; (2014) 291 FLR 17 at 25 [30], 26 [33] (Re Stansfield).

[8] Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 at 323 [44], 333 [89] (Allsop CJ) (Re Killarnee); Re Stansfield [2014] NSWSC 1484; (2014) 291 FLR 17 at 20-1 [10].

[9] Second Further Amended Originating Process dated 14 April 2020, [1]-[2].

[10] See generally, third affidavit of Mitchell Waters affirmed 30 January 2020.

[11] See Orders made by Lyons J on 27 February 2020.

[12] See plaintiffs' outline of submissions filed on 3 December 2019, and plaintiffs' submissions re ownership of the property filed on 29 March 2020. In advance of the hearing, the plaintiffs' solicitors also sent an email to the Court dated 3 April 2020, concerning the amendments they proposed making to the Amended Originating Process so as to seek 'directions' rather than declaratory relief. Following the hearing, the plaintiffs provided supplementary submissions dated 8 April 2020.

[13] Contradictor's written outline of submissions filed on 3 April 2020.

[14] Orders made by Lyons J on 31 January 2020 at [4]; transcript 31/01/20 pp 4-5 (Lyons J): The plaintiffs' solicitors, Holding Redlich Lawyers, were appointed as the solicitor for the contradictor.

[15] Transcript 06/04/20, at p 5 (Mr Brown).

[18] Affidavit of Adrian Mihailescu sworn 17 February 2020 at [5] (Mihailescu affidavit).

[19] Contract of Sale, exhibit BW-8 to the first Wight affidavit.

[20] Affidavit of James Jia Ye sworn on 17 February 2020 at [12]-[13] (Ye affidavit); affidavit of Petra Gerendasi affirmed on 17 February 2020 at [8] (Gerendasi affidavit).

[21] Real Estate Nomination Form at end of exhibit PG-2 to the Gerendasi affidavit; Mihailescu affidavit at [6].

[22] Mihailescu affidavit at [8]-[10].

[23] Ibid at [10]; exhibit KCM-16 to the second MacKay affidavit.

[24] Exhibit KCM-16 to the second MacKay affidavit.

[26] Affidavit of Xiao Chen affirmed on 19 February 2020 at [8]-[15] (Chen affidavit).

[27] Ibid at [11], exhibits XC-1 and XC-2.

[32] Certificate of title vol. 07436 folio 131, exhibit BW-3 to the first Wight affidavit.

[33] Exhibit BW-9 to the first Wight affidavit.

[35] Ibid at [14]-[15], exhibit BW-3.

[36] Exhibit BW-11 to the first Wight affidavit.

[37] Exhibit BW-12 to the first Wight affidavit.

[38] Transcript 06/04/20, at p 20 (Mr Brown).

[39] A copy of this letter from Rigby Cooke Lawyers dated 5 December 2019 appears as annexure 'A' to the plaintiffs' supplementary submissions (Rigby Cooke Letter).

[40] Costa and Duppe Properties Pty Ltd v Duppe [1986] VicRp 9; [1986] VR 90.

[42] ASIC search, exhibit KCM-1 to the first MacKay affidavit.

[47] A company search for JY Investments obtained from ASIC is attached to the contradictor's submissions and marked as Annexure A. Mr Ye is recorded as being the sole director, secretary and shareholder of JY Investments.

[48] ASIC search, exhibit KCM-1 to the first MacKay affidavit.

[57] 'Completion Date' was defined in cl 1.1 to mean '5 business days after the Property has been fully settled and all outstanding financial obligations of the Borrower associated with the property have been paid and concluded.'

[58] 'Drawdown Date' was defined in cl 1.1 to mean 3 June 2016.

[60] Clause 5 and the definition of 'Security' in cl 1.1 which provides:

Security means a second ranking mortgage over the Property and any other mortgage, pledge, lien, hypothecation, security interest or other encumbrance or charge and any guarantee or indemnity now or in the future given by the Borrower or any other person in favour of the Lender to secure the obligations of the Borrower under the agreement.

[64] 'Initial Sum' is defined in cl 1.1 to mean 'the sum paid by the Initial Unitholders on commencement of the Trust being $1.00 AUD per unit'.

[71] Ye affidavit at [18], [21], exhibits JY-6, JY-7.

[76] The definition of 'Security' remained the same as it was under the loan agreement with the Rothmann Piper trustee.

[78] Initial sum is defined in cl 1.1 to mean 'the sum paid by the Initial Unitholders on commencement of the Trust being $1.00 AUD per unit.'

[87] Ibid at [8], exhibits PG-1, PG-2.

[88] Gerendasi affidavit at [10], exhibit PG-3.

[89] Note that the definition of 'Security' in clause 1.1 differs from that contained in Mr Ye's loan agreement, and provides:

Security means granting of a security interest over the Property and any other mortgage, pledge, lien, hypothecation, security interest or other encumbrance or charge and any guarantee or indemnity now or in the future given by the Borrower or any other person in favour of the Lender to secure the obligations of the Borrower under the agreement unless such granting of security will negatively impact the operation of the Trustee and or the development of the Property as advised by the Trustee.

[90] Exhibit PG-2 to the Gerendasi affidavit.

[97] Exhibit PG-4 to the Gerendasi affidavit.

[98] Exhibit PG-5 to the Gerendasi affidavit.

[99] Exhibit PG-6 to the Gerendasi affidavit.

[101] Gerendasi affidavit at [17], exhibit PG-7.

[102] Gerendasi affidavit at [19], exhibit PG-8.

[103] Gerendasi affidavit at [20], exhibit PG-9.

[111] Ibid, exhibit XC-1 (Mandeville Feasibility Report), exhibit XC-2 (Drawings).

[115] Ibid at [23], exhibit XC-1 (Mandeville Feasibility Report).

[116] Chen affidavit at [11], exhibit XC-1; transcript 06/04/20, at pp 47-48 (Mr Brown).

[122] Ibid; exhibit BW-14 to the first Wight affidavit; transcript 06/04/20, at p 35 (Mr Brown): During the hearing, counsel for the plaintiffs referred to the fact that the liquidator has provided a copy of a loan agreement dated 3 May 2015 that Mr Chen entered into with Mr Cvek (as Borrower) for a principal sum of $200,000. It is unclear whether this loan agreement has any relevance to the Mandeville project.

[123] Chen affidavit at [24], exhibit XC-3.

[125] Exhibit BW-6 to the first Wight affidavit.

[126] Chen affidavit at [25]; exhibit XC-4.

[127] Chen affidavit at [26], exhibit XC-5.

[132] Affidavit of Mr Kan Xin Tang affirmed on 21 February 2020 at [5] (Tang affidavit).

[136] Exhibit XC-4 to the Chen affidavit.

[137] The term 'Trustee' is not defined in the loan agreement.

[138] The term 'Property' is defined in cl 1.1 of the loan agreement to mean 'the property located at 3 Mandeville Crescent, Toorak, VIC 3142.'

[139] The expression 'Repayment Date' as defined in cl 1.1 of the loan agreement means 'the earlier of Completion Date of the Property or earlier at the Borrowers election.' The expression 'Completion Date' means '5 business days after the Property has been fully settled and all outstanding financial obligations of the Borrower associated with the property have been paid and concluded.'

[141] In this regard, counsel for the contradictor observes (contradictor's outline of submissions, p 9 fn 37) that:

Mr Mihailescu has deposed that he incorporated Mandeville at the direction of Mr Cvek (Mihailescu Affidavit at [8]-[9]), Mr Cvek told Mr Mihailescu that it would be more efficient for Mr Balint and Mr Mihailescu to be directors so they could execute paperwork in Mr Cvek's absence (Mihailescu Affidavit at [8]-[9]), Mr Cvek directed Mr Mihailescu to execute a Sale of Real Estate Nomination Form on behalf of Mandeville and Mr Mihailescu complied with that instruction (Mihailescu Affidavit at [12]-[13]) and that Mr Mihailescu executed various loan agreements and trust deeds on Mr Cvek's instruction (Mihailescu Affidavit at [12]-[19]).

[142] Exhibit XC-5 to the Chen affidavit.

[143] Initial sum is defined in cl 1.1 to mean 'the sum paid by the Initial Unitholders on commencement of the Trust being $1.00 AUD per unit.'

[144] Exhibit BW-6 to the first Wight affidavit.

[149] Affidavit of Mr Hanxin Qiu affirmed on 21 February 2020 at [4] (Qiu affidavit).

[152] Qiu affidavit at [8], exhibit HQ-3.

[153] Qiu affidavit at [9], exhibit HQ-4.

[154] Exhibit XC-4 to the Chen affidavit.

[155] Qiu affidavit at [10], exhibit HQ-5.

[158] Exhibit HQ-6 to the Qiu affidavit; exhibit XC-5 to the Chen affidavit.

[159] Qiu affidavit at [4]: a reference to the purchase of the Property and its conversion into a development.

[162] Exhibit XC-4 to the Chen affidavit.

[163] Exhibit XC-5 to the Chen affidavit.

[164] Exhibit XC-4 to the Chen affidavit.

[165] Exhibit XC-5 to the Chen affidavit.

[171] Exhibit KCM-10 to the first MacKay affidavit.

[172] Exhibit KCM-8 to the first MacKay affidavit.

[173] Exhibit KCM-12 to the first MacKay affidavit: Order of Lyons J made on 3 September 2018, at paragraph 2 and Schedule 1 at [6(a)(ix)]: it is unclear whether the reference to AUD$108,047 is a typographical error and should read 'AUD$608,047'.

[174] See first MacKay affidavit at [18]: Relevantly, it seems Jieyun initially alleged that Mandeville Group Pty Ltd received approximately $108,000 from Toorak Development Group Pty Ltd in breach of the relevant trust deed. More recently, however, the solicitor acting for Jieyun, Mr Payne Wu, has asserted a claim for $608,047.

[175] The liquidator undertook not to distribute 'surplus funds', being those funds remaining following the sale of the Property following:

'(1) The payment of realisation and other costs recoverable in accordance with the principle in Re Universal Distributing Co Ltd (in liq) [1933] HCA 2; (1933 48 CLR 171; and

(2) the discharge of Westpac's registered mortgage over the Property,

[176] First Wight affidavit at [13].

[177] Exhibit BW-3 to the first Wight affidavit.

[178] First Wight affidavit at [13].

[181] Second affidavit of Barry Wight affirmed on 18 December 2019 at [13] (second Wight affidavit).

[182] Plaintiffs' supplementary submissions at [2].

[184] [2019] FCA 924; (2019) 138 ACSR 231 (Re Wollumbin).

[185] (1991) 24 NSWLR 674 (Re G B Nathan).

[186] Section 479(3) of the Corporations Law provides that: 'The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up.'

[187] Re G B Nathan (1991) 24 NSWLR 674, at 679-80.

[188] Ibid at 680, citing by way of example, Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207.

[191] (2000) 35 ACSR 466 (Bastion v Gideon).

[192] His Honour noted (at [49]) that '[n]o direction was sought by the company in liquidation under s 63 of the Trustee Act 1925 (NSW).'

[193] (1991) 24 NSWLR 674, at 679-80.

[194] (2000) 35 ACSR 466, at 475-6 [48].

[196] [2008] HCA 42; (2008) 237 CLR 66 (Macedonian Orthodox Church).

[197] Ibid at 89-90 [58] (Gummow ACJ, Kirby, Hayne and Heydon JJ).

[198] (2009) 75 NSWLR 99 at 144 [172] (Spigelman CJ, Hodgson JA and Austin J) (Hall v Poolman).

[199] [2009] VSC 343; (2009) 73 ACSR 622 (Re Mento Developments).

[201] (2018) 264 CLR 382 (Thomas).

[202] [1939] HCA 35; (1939) 62 CLR 545 (Executor Trustee).

[203] Thomas (2018) 264 CLR 382, at 408 [55] (Kiefel CJ, Bell, Keane, Nettle, Gordon and Edelman JJ).

[204] Ibid at 408-9 [57] (Kiefel CJ, Bell, Keane, Nettle, Gordon and Edelman JJ).

[205] Section 90-15(3)(a).

[206] See Re Krejci (as liquidator of Community Work Pty Ltd) (in liq) [2018] FCA 425, at [46]-[47] (per Gleeson J); Re Buddy Management Pty Ltd (in liq) [2019] FCA 566, at [40] (per Gleeson J).

[207] (2010) 30 VR 413.

[209] Gerendasi affidavit at [7(c)], [13]; Ye Affidavit at [9(a)], [10(a)], [20]; Chen Affidavit at [14], [17]; Qui Affidavit at [14]; Tang Affidavit at [5].

[210] Mihailescu affidavit at [12] and [13]; exhibit KCM-5 to the first MacKay affidavit (email exchange between Mr Mihailescu and the plaintiffs' solicitors dated 22 November 2019).

[212] The reference to '3' before Mandeville Group Trust No 1 appears to be a typographical error. (The address of the Property is 3 Mandeville Crescent).

[213] Rigby Cooke Letter: 88 North Pty Ltd was the trustee of the Cvek Family Trust, but subsequently Mr Cvek replaced it as trustee.

[214] Exhibit KCM-16 to the second MacKay affidavit.

[215] Exhibit BW-9 to the first Wight affidavit.

[216] Exhibit PG-9 to the Gerendasi affidavit; exhibit KCM-16 to the second MacKay affidavit.

[217] Exhibit KCM-6 to the first MacKay affidavit.

[218] Contradictor's outline of submissions, at [49(d)].

[219] The loan agreement entered into by Mr Ye (dated 18 August 2016 but executed in early February 2018) was, however, with Mandeville Group Pty Ltd in its capacity as trustee.

[220] Transcript 06/04/20, at p 3 (Mr Brown).

[222] Exhibit KCM-16 to the second MacKay affidavit.

[223] Exhibit PG-2 to the Gerendasi affidavit, 'Real Estate Nomination Form' (last page); Mihailescu affidavit at [6].

[228] Exhibit PG-6 to the Gerendasi affidavit at pp 44-5.

[229] Ye affidavit at [18]. It is unclear what happened to the Rothmann Piper Trust.

[232] Exhibit JY-7 to the Ye affidavit.

[234] Exhibit KCM-16 to the second MacKay affidavit.

[235] Exhibit PG-9 to the Gerendasi affidavit; exhibit KCM-16 to the second MacKay affidavit.

[236] Exhibit BW-9 to the first Wight affidavit.

[237] Exhibit KCM-6 to the first MacKay affidavit.

[238] Transcript 06/04/20, at p 22 (Mr Brown).

[239] Gerendasi affidavit at [19], exhibit PG-8.

[240] Gerendasi affidavit at [20], exhibit PG-9.

[244] First MacKay affidavit at [9], [11], exhibit KCM-5.

[245] Transcript 06/04/20, at p 66 (Mr Brown).

[246] Neither Mr Hao nor Ms Cheng filed an affidavit, but Mr Chen was the point of contact between each of them and Mr Cvek and Mr Mihailescu. Mr Chen has exhibited copies of executed loan agreements for each of them at exhibit XC-4 and the executed trust deeds at exhibit XC-5.

[247] Exhibit BW-14 to the first Wight affidavit: loan agreements made between Mandeville Group Pty Ltd (as Borrower) and each of Hanxin Qiu (26 October 2016), Xiaotong Hao (26 October 2016), Kan Xin Tang (26 October 2016), and Liling Cheng (26 October 2016), respectively as 'Lender'. Note that the loan agreement with Mr Chen contained in that exhibit is dated 3 May 2015 and appears to relate to an earlier transaction between him and Mr Cvek.

[249] Exhibit PG-6 to the Gerendasi affidavit at p 15.

[251] Transcript 06/04/20, at p 43 (Mr Brown).

[252] Clause 3.6(a) states '[t]he Trustee may, but is not obliged to, issue certificates for Units.'

[253] Transcript 06/04/20, at p 43 (Mr Brown).

[254] Aside from the date, description of the parties and number of units held by each, cl 3.7 (dealing with 'Fractions') and cl 15.4 (dealing with 'Restrictions on Unitholders') differ between each deed. There may be other differences.

[255] Exhibit PG-6 to the Gerendasi affidavit at p 30 (emphasis in bold added).

[256] Plaintiffs' 29 March submissions re ownership of the Property at [12].

[257] [2008] FCAFC 147; (2008) 250 ALR 24 (Pascoe v Boensch).

[258] Ibid at 29 [19]-[22] (Finn, Dowsett and Edmonds JJ).

[259] [2015] HCA 6; (2015) 255 CLR 62 (Korda).

[261] Re Australian Elizabethan Theatre Trust [1991] FCA 344; (1991) 30 FCR 491 at 502 per Gummow J.

[262] Garrett v L'Estrange [1911] HCA 67; (1911) 13 CLR 430 at 434 per Griffith CJ, Barton and O'Connor JJ agreeing at 435; [1911] HCA 67.

[263] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at 286 [103] per Heydon and Crennan JJ; [2011] HCA 26.

[264] Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In liq) [2000] HCA 25; (2000) 202 CLR 588 at 605 [34] per Gaudron, McHugh, Gummow and Hayne JJ citing Walker v Corboy (1990) 19 NSWLR 382.

[265] Parkinson, "Chaos in the Law of Trusts", [1991] SydLawRw 18; (1991) 13 Sydney Law Review 227 at 231; see also Costigan, "The Classification of Trusts as Express, Resulting, and Constructive", (1914) 27 Harvard Law Review 437 at 438-439; Cope, Constructive Trusts, (1992) at 5-6.

[266] Jacobs' Law of Trusts in Australia, 7th ed (2006) at 44 [306].

[267] [2015] HCA 6; (2015) 255 CLR 62, at 73 [10] citing Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390 at 396 per Wilson J, Gibbs CJ, Murphy and Aickin JJ agreeing at 392.

[268] [2015] HCA 6; (2015) 255 CLR 62 at 73 [11].

[269] Exhibit PG-6 to the Gerendasi affidavit: cl 2.5.

[270] Transcript 06/04/20, at pp 117, 120-2 (Mr Brown).

[271] [2019] FCA 924; (2019) 138 ACSR 231.

[273] Plaintiffs' supplementary submissions at [6].

[275] Transcript 06/04/20, at p 117 (Mr Brown).

[276] Relevantly, cl 12.2 provides that:

(a) the Trustee enters into liquidation, whether compulsory or voluntary (not being a voluntary liquidation for the purposes of amalgamation or reconstruction), or has an administrator, receiver or official manager or receiver and manager appointed or makes or enters into any composition or scheme of arrangement with its creditors/is subject to an Insolvency Event; ...

Each of the other trust deeds contains an 'ipso facto' clause expressed in the same or similar terms.

[277] See, eg, Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 [26] (Gordon J).

[278] First Wight affidavit at [26].

[279] Exhibit PG-6 to the Gerendasi affidavit, cl 14.2(a).

[281] Re Killarnee [2018] FCAFC 40; (2018) 260 FCR 310 at 344 [142] (Siopis J).

[282] Plaintiffs' outline of submissions at [28].

[283] (2019) 136 ACSR 649 at 655-6 [49].

[284] Second Wight affidavit at [4].

[290] First Wight affidavit at [29].

[291] [2014] NSWSC 1484; (2014) 291 FLR 17 at 20 [7].

[292] [2018] VSC 331 at [27]- [30].

[293] [2019] HCA 20; (2019) 368 ALR 390 at 437 [169]

[294] Transcript 06/04/20, at p 136 (Mr Brown), citing the decisions of Kennedy J in Re Mackie Group Pty Ltd (in liq) (2017) 122 ACSR 537 at [50]-[64] and Re St George's Development Company Pty Ltd (in liq) [2018] VSC 595.