Mansfield in his capacity as the trustee in the bankruptcy of Yang v Palladium Investments International Pty Ltd

Confidential Exhibit 3. Confidential Exhibit DIM-4 be removed from the Court file and returned to the Plaintiffs' solicitors and in lieu thereof a copy of the Redacted Exhibit DIM-4 that was tendered in these proceedings be placed on the Court file. 4. The confidentiality order in respect of Confidential Exhibit DIM-4 (Order 4) made on 15 June 2023 be discharged.

Powers of the Receivers & sale of the West End Property 5. Pursuant to r 39.05 (f) and (h) of the Rules order 6 made on 6 July 2018 be varied by deleting "of the Palladium Trust" and substituting "of the assets of the Palladium Trust". 6. Pursuant to section 81(1)(a) of the Trustee Act 1925 with effect from 6 July 2018 that there be conferred upon Palladium as bare trustee of the Palladium Trust the power to sell or realise the property of the Palladium Trust, with such power to be exercised by David Ian Mansfield or Michael James Billingsley as joint and several liquidators (Liquidators) of Palladium. 7. To the extent necessary, an order that Mr Mansfield and Mr Billingsley as joint and several receivers and manager (Receivers) have all the powers that a receiver has in respect of the business and property of a company under section 420 of the Corporations Act 2001 (Cth) (other than in section 420(2)(s), (t), (u) and (w)) as if the reference in that section to "the corporation" were a reference to the Trust.

Remuneration and expenses 8. The remuneration incurred by the Receivers of the Palladium Trust be fixed in the amount of $78,923.00 plus GST in the amount of $7,892.30 for the period 6 July 2018 to 14 August 2022. 9. The expenses incurred by the Receivers of the Palladium Trust for the period 6 July 2018 to 30 March 2023 be fixed in the amount of $639.35 plus GST in the amount of $8.45. 10. Pursuant to section 60-10(1)(c) of the Insolvency Practice Schedule (Corporations), Schedule 2 to the Act (IPS) that the Liquidators' remuneration in respect of the winding up of Palladium for the period 6 July 2018 to 14 August 2022 be fixed in the amount of $193,009.50 plus GST in the amount of $19,300.95.

Costs 11. The costs of this Interlocutory Process be a cost in the liquidation of Palladium noting that these costs exclude such costs as are covered by the above orders made in respect of remuneration and expenses.

Resignation of Michael Billingsley 12. Michael James Billingsley be removed from office as a joint and several liquidator of Palladium. 13. Michael James Billingsley be removed from office as a joint and several receiver and manager of the assets of the Palladium Trust. THE COURT DECLARES THAT: 14. Pursuant to section 90-15(1) of the IPS the Liquidators are justified in using the assets of the Palladium Trust to pay the following amounts in priority to any amounts payable to the Deputy Commissioner of Taxation pursuant to the notices issued to Palladium pursuant to section 260-5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) dated 9 March 2018: (a) the Receivers' remuneration and expenses as fixed in accordance with orders 8 and 9 above; (b) the Liquidators' remuneration as fixed in accordance with order 10 above; and (c) the expenses incurred by the Liquidators in connection with the winding up of Palladium between 6 July 2018 and 30 March 2023 in the amount of $408,595.43 plus GST in the amount of $39,801.57; and (d) the costs of this Interlocutory Process excluding such costs as are covered by the orders made in respect of remuneration and expenses. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION 1 These reasons concern an interlocutory process filed on 31 May 2023 in which the plaintiffs seek a miscellany of relief in relation to, amongst other things, the liquidation of the first defendant, Palladium Investments International Pty Ltd ACN 613 148 431, which is relevantly the bare Trustee of a unit trust known as the Palladium Trust. 2 The plaintiff is David Ian Mansfield in his capacity as the trustee of the bankrupt estate of the second defendant, Jin Heung Yang (Bankrupt). 3 The Bankrupt is the sole director and shareholder of Palladium and has been the sole unitholder of the Palladium Trust from at least about 23 February 2017. He is believed to be outside Australia. He has been served the interlocutory process and related materials and notified of the hearing date at his last known email addresses. He did not appear at the hearing of the application. 4 For reasons which will become apparent, the effect of the orders which I will make today will amongst other things join as plaintiffs to these proceedings, David Ian Mansfield and Michael James Billingsley in their capacities as joint and several liquidators of Palladium and joint and several Receivers and managers of the assets of the Palladium Trust. 5 On the plaintiff's application, orders were made in this proceeding by the then docket judge on 6 July 2018 that the Palladium be wound up, and that Mr Mansfield and Mr Billingsley be appointed jointly and severally as liquidators of Palladium (Liquidators) and as receivers and managers of the Palladium Trust. The present application seeks to clarify and if necessary supplement the orders made on 6 July 2018. 6 The relief sought in the interlocutory process seeks the joinder of Mr Mansfield and Mr Billingsley as plaintiffs in their capacities as Liquidators and Receivers, and the balance of the application is therefore effectively brought by them in those capacities. Once joined, they seek, among other things, orders: (1) confirming the powers of the Receivers as at the date of their appointment and approving the sale by the Receivers of a property located at 31104/40 Duncan Street, West End, Queensland (West End Property) which occurred on 21 January 2019; (2) with respect to their remuneration and expenses incurred as Liquidators and Receivers; (3) that they, as Liquidators, are justified in paying certain costs and expenses from the assets of the Palladium Trust in priority to any payments made pursuant to notices issued to Palladium in its own right and as the Trustee of the Palladium Trust by the Commissioner of Taxation on 9 March 2018 under section 260-5 of Schedule 1 of the Taxation Administration Act 1953 (Garnishee Notices); (4) removing Mr Billingsley from office as a Liquidator of Palladium and as a Receiver of the Palladium Trust; and (5) discharging a freezing order made by the Court on the application of the plaintiff in proceeding NSD 522/2018 in respect of Palladium. 7 The following evidence is relied upon in support of the application: (1) an affidavit of David Ian Mansfield sworn 29 May 2023 (Mansfield Affidavit) with Exhibit DIM-3 and a redacted version of Exhibit DIM-4. (2) an affidavit of Abhimanyu Chopra affirmed 14 June 2023 and exhibit AC-2 with exhibit AC-2; and (3) an affidavit of Abhimanyu Chopra affirmed 19 June 2023. 8 The plaintiff seeks leave to tender and rely only on the redacted form of the Exhibit DIM-4. The redactions are very limited and confined to discrete narrations over which privilege is claimed. In the circumstances, it is appropriate that the confidential Exhibit DIM-4 be removed from the Court file and returned to the plaintiffs. The existing confidentiality order over DIM-4 will be discharged. There is no need for a confidentiality order over the redacted Exhibit DIM-4. 9 The Bankrupt has been served with the application as described at paragraph 3 above. The Commissioner has also been served with the application, and has confirmed that he does not seek to be heard.

BACKGROUND 10 Mr Mansfield was appointed trustee in bankruptcy of the bankrupt estate of the Bankrupt on 22 March 2018. The Statement of Affairs submitted by the Bankrupt disclosed that as at 22 March 2018 the Bankrupt was the sole director and shareholder of Palladium which was the trustee of the Palladium Trust and that Palladium's principal activity was property investment. 11 On 6 April 2018, on the application of Mr Mansfield in Federal Court proceeding NSD522/2018, Markovic J made freezing orders against a number of parties including Palladium. It is only the freezing orders made against Palladium that are relevant on this application. On 11 April 2018, Lee J extended the operation of the freezing orders until further order. 12 On 6 July 2018, the then docket judge made orders that Palladium be wound up and that the Mr Mansfield and Mr Billingsley be appointed liquidators of Palladium. By the operation of an ipso facto clause in the Trust Deed for the Palladium Trust, Palladium upon its liquidation was automatically removed as the trustee of the Palladium Trust. Palladium continued thereafter as a bare trustee. A replacement trustee was not appointed. In those circumstances, the then docket judge also ordered that Mr Mansfield and Mr Billingsley be appointed as receivers and managers of the Palladium Trust. As mentioned, part of the present application is to regularise the form in which the orders were made on 6 July 2018. 13 Since his appointment, Mr Mansfield's subsequent investigations have confirmed the following: (1) Palladium was established to hold assets and act as Trustee of the Palladium Trust and that it did not otherwise carry on any business its own name or capacity. (2) Palladium held a number of assets in its capacity as the Trustee of the Palladium Trust (Trust Property), however did not hold any assets in its own right. (3) Palladium has no third party creditors other than, potentially, the Bankrupt (and Mr Mansfield's investigations are continuing in that regard). No creditors have lodged proofs of debt in the liquidation of Palladium. (4) On 9 March 2018, the Commissioner issued the Garnishee Notices to Palladium in its own right and in its capacity as Trustee of the Palladium Trust in respect of the Bankrupt's liabilities to the Commissioner which directed Palladium to transfer to the Commissioner up to $26.63 million of any amounts payable to the Bankrupt by Palladium. 14 The Trust Property identified to date is comprised of: (1) the balance of the proceeds of sale of the West End Property (after third party costs incurred in connection with the sale) in the amount of $670,789.32; (2) shares in certain entities in respect of which the Liquidators' investigations are ongoing; (3) funds in the amount of approximately $18,329.21 held in the pre-appointment bank accounts of Palladium which have not been released to the plaintiffs by the Commonwealth Bank of Australia (CBA) as a consequence of the freezing orders which are in place; and (4) the Liquidators have identified various choses in action in relation to claims against various parties for the recovery of payments totalling $7,767,415 made by Palladium. Those claims are the subject of litigation (in proceeding NSD598/2021) which was commenced on 22 June 2021 (the Recovery Proceedings).

Joinder of the Liquidators and Receivers 15 I am satisfied it is appropriate, given the relief sought, to join Mr Mansfield and Mr Billingsley as the second and third plaintiffs in their respective capacities as Liquidators and Receivers. Where I refer to plaintiffs hereafter, I include Mr Mansfield and Mr Billingsley as the second and third plaintiffs respectively.

Receivers' powers and sale of the West End Property 16 The order made on 6 July 2018 appointing Mr Mansfield and Mr Billingsley as Receivers was framed by reference to the Palladium Trust and should be varied to make the appointment referrable to the assets of the Palladium Trust. 17 The plaintiffs submit that there appears to have been a slippage between the prayers contained in the Originating Process, namely prayer 11, and the short minutes of order which were handed up on 6 July 2018 with the consequence that the short minutes handed up inadvertently omitted any reference to "an order that the receivers and mangers of the Trust have the powers of a liquidator under s 477(2) of the Corporations Act 2001 (Cth)." Counsel for the plaintiffs has taken me to the relevant documents and the transcript of the hearing on 6 July 2018. I am satisfied that it is appropriate to make an order rectifying the omission of an order of this type from the orders of 6 July 2018. The order I will make which will take effect from 6 July 2018.

West End Property 18 The primary asset of the Palladium Trust was the West End Property. Mr Mansfield has deposed to the details of the sale of that property by the Receivers. The property was ultimately sold after the Receivers accepted an offer of $685,000 in January 2019. This followed the Receivers obtaining a valuation of the property on 19 December 2018 which indicated a market value of $670,000. The net sale proceeds were paid into an account held by Mr Mansfield, which currently holds $670,789.32. 19 Mr Mansfield was not aware until around 29 January 2022 that the orders made at the time of his appointment as Receiver did not expressly deal with the Receivers' powers. Mr Mansfield deferred bringing an application to regularise the position until he was ready to bring forward the balance of this application in relation to remuneration and expenses. While I can see that in the particular circumstances of this case the only persons affected by the delay are likely to have been the plaintiffs, it would have been better for Mr Mansfield and Mr Billingsley as court-appointed receivers to have promptly re-listed the proceedings to have the position corrected as soon as practicable after it was discovered.

Receivers' powers 20 The need for the appointment of a receiver in circumstances such as these is the subject of differing authorities. The plaintiffs referred to: Amirbeaggi, Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121 at [27] - [30]; Apostolou v VA Corporation Aust Pty Ltd [2010] FCA 64; 77 ACSR 84 at [46] - [47]; Aced Kang Investments Pty Ltd (in liq) in the matter of Aced Kang Investments Pty Ltd (in liq) [2017] FCA 476 at [12] - [13]. The plaintiffs provided detailed submissions on this point but ultimately submitted that in this case where: (1) Mr Mansfield and Mr Billingsley had been appointed as Receivers of Palladium Trust; and (2) Mr Mansfield and Mr Billingsley remained as Liquidators of Palladium which in turn remained as the bare Trustee; the narrow question for determination was whether an additional order in effect retrospectively authorising the sale of West End Property by the Receivers should be made. 21 The plaintiffs submitted that: (1) s 420 of the Act provides the basis for the Receivers to complete the sale of the West End Property; (2) some authorities cast doubt on whether s 420 authorises a sale which is not otherwise authorised by a trust instrument; (3) such doubt is further exacerbated in this proceeding by the fact that the originating process include a prayer for an order clarifying or confirming the Receivers' powers. 22 As such, the plaintiffs, as a matter of prudence, seek an order under either the Trustee Act 1925 (NSW) or in the Court's inherent jurisdiction confirming that the Receivers had power to sell or deal with the assets as was contemplated at the time of their original appointment. 23 I am satisfied that it is appropriate to make the order sought and given the procedural history it isnot redundant to do so. 24 The plaintiffs submitted that s 81(1) of the Trustee Act, which applies to the Palladium Trust Deed, is a basis to make orders with respect to the sale of trust assets in the capacity as a bare trustee, citing Amirbeaggi at [36] - [38]. I accept that is so and I will make the order sought on that basis.

Remuneration and Expenses 25 The plaintiffs seek orders fixing their remuneration and recoupment of expenses incurred in their capacity as Receivers of the Palladium Trust and as Liquidators of Palladium.

Legal Principles 26 The plaintiffs seek orders to address the remuneration and expenses of the Liquidators and Receivers. In the present context, the principles with respect to the remuneration of Liquidators and court-appointed Receivers are sufficiently similar to be considered together. The relevant legal principles are well established and are set out comprehensively in the plaintiffs' written submissions at [35] to [41]. I adopt and apply the principles as set out.

Application 27 The plaintiffs seek the following sums to be fixed as their remuneration for work undertaken in the period from 6 July 2018 to 14 August 2022 as follows: (1) in their capacity as Liquidators of Palladium: $193,000.50 plus GST of $19,300.95; and (2) in their capacity as Receivers of the Palladium trust: $78,923.00 plus GST of $7,892.30. 28 I have reviewed the evidence relied on by the plaintiffs as set out above and am satisfied that the remuneration sought to be fixed by the plaintiffs in respect of their capacities as Receivers and Liquidators is reasonable and proportionate. In reaching this conclusion, I have had regard to [71] to [111] of the Mansfield Affidavit and exhibits DIM-3 and DIM-4 and am satisfied that: (1) the work charged for was necessary across the period over which it was performed and appropriate having regard the value and nature of the property; (2) the work charged has been appropriately reviewed, and is reflected in some of the time costs incurred not being charged by the plaintiffs to reflect what is in effect a "learning curve" discount in respect of the work undertaken by some staff; (3) the evidence before me does not disclose any obvious deficiencies in the quality of the work undertaken; (4) the division of work between staff of differing levels of experience was appropriate having regard its complexity; (5) I accept that there are some unusual features in this matter, but the matter did not require the Liquidators to deal with 'extraordinary' issues in the sense contemplated by s 60-12 of the Insolvency Practice Schedule (Corporations), Schedule 2 to the Act (IPS); (6) that there appears to be only one potential creditor, namely, the Bankrupt, who has not taken an active part in these proceedings or actively engaged with his Trustee or the Liquidators; and (7) the remuneration which is calculated on a time-cost basis is detailed in the evidence led on this application and appears to have been properly recorded, reviewed, revised and charged. 29 The plaintiffs seek the following sums to be fixed as their expenses incurred from 6 July 2018 30 March 2023 as follows: (1) in their capacity as Liquidators of Palladium: $408,595.43 plus GST of $39,801.57; and (2) in their capacity as Receivers of the Palladium Trust: $639.35 plus GST of $8.45. 30 I acknowledge that the expenses sought to be fixed in respect of the liquidation of Palladium is approximately $450,000 and prima facie amounts to well over half the value of the net proceeds of sale of the West End Property and the funds in the CBA account (approximately $700,000). However, this sum must be properly considered in context. The expenses are largely comprised of of the legal fees incurred in connection with the Recovery Proceedings in which the Liquidators seek recovery of impugned payments which are alleged to exceed $7.7 million. 31 I am satisfied that the expenses sought by the plaintiffs have been properly incurred in the course of their roles as Receivers and Liquidators. Accordingly, I will make orders as sought by the plaintiffs.

Payment of remuneration and costs in priority to garnishee notices 32 The plaintiffs seek to have their remuneration and expenses paid in priority to any payment under the Garnishee Notices. 33 As set out above, the Commissioner has issued Garnishee Notices to Palladium in its own right and in its capacity as trustee of the Palladium Trust in respect of the Bankrupt's liabilities to the Commissioner to the sum of $26.63 million, the Bankrupt being a potential creditor of Palladium and the sole unit holder of the Palladium Trust. 34 The plaintiffs in their communications with the Commissioner have maintained the position that any amounts payable under the Garnishee Notices only become payable once there has been a distribution payable to the Bankrupt, citing Re Octaviar Ltd (in liq) [2016] NSWSC 16. 35 The plaintiffs submit that in a "vanilla situation" such as this, where there is a single corporate trustee which has the sole function of acting as the trustee of a single trust, it is proper for the costs and expenses of the liquidation to be paid pursuant to the trustee's right to indemnity, citing Re Rathner (liquidator), Garrows Close Pty Ltd (in liq) [2021] FCA 505 at [30] to [31] (Beach J). The plaintiffs submit that a receiver's remuneration and expenses would similarly be paid from the proceeds of sale of assets in priority to any other distribution, citing Re Say. 36 The Commissioner is on notice of the plaintiffs' position and has been served with the principal materials on which the plaintiffs rely and has been provided with notice of this interlocutory hearing and has indicated that he does not wish to be heard. In these circumstances, I consider it appropriate to make a declaration under s 90-15 of the IPS as sought by the plaintiffs, prioritising the payment of their remuneration and expenses over any payments under the Garnishee Notices.

Resignation of Mr Billingsley 37 The plaintiffs seek orders removing Mr Billingsley as one of the Liquidators and as one of the Receivers. Mr Billingsley has resigned as a partner of Deloitte and is now at another firm. Both Mr Billingsley and Mr Mansfield consider it appropriate for Mr Billingsley to resign to avoid potential duplication of costs across the two firms and in circumstances where there are greater synergies for Mr Mansfield to retain his roles with respect to Palladium and the Palladium Trust. I consider it appropriate to make the orders as sought.

Freezing orders 38 As noted above, the funds in the CBA account held by Palladium are the subject of freezing orders made by in NSD 522/2018. 39 The plaintiffs seek a discharge of this freezing order where Palladium has entered into liquidation and is under the control of Mr Mansfield. I consider it appropriate to make this order discharging the freezing order made against Palladium only (as opposed to the other defendants in NSD522/2018 in respect of whom no relief if sought in this application). 40 I note that the plaintiffs have sought this order in this proceedings rather than bringing a separate application in NSD522/2018 having regard to the relatively small amount in the CBA account. The order should be made in NSD522/2018. I consider it appropriate to make an order dispensing with the need to file an interlocutory application in NSD522/2018. I will make an order in NSD522/2018 to the effect sought by the plaintiffs. I will make these orders in NSD522/2018.

Conclusion 41 For these reasons I will make orders substantially in the form of the orders sought by the plaintiffs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.