Newman (Trustee) v El-Sheikh Investment Holdings, in the matter of El-Sheikh Investment Holdings [2025] FCA 681

Australian Securities and Investments Commission v Jones [2023] WASCA 130

Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63

Lamb v Registrar in Bankruptcy (VIC) (1984) 4 FCR 269

Mansfield (as trustee of the bankrupt estate of Yang) v Thousand Angeles Island Pty Ltd (ACN 612 556 260) (2019) 135 ACSR 635; [2019] FCA 376

Pascoe v Ambernap Pty Ltd [2008] FCA 1975

Re Allebart Pty Ltd [1971] 1 NSWLR 24

Re Bellafountain Pty Ltd [2017] NSWSC 391

Re Fogo Brazilia Holdings Pty Ltd (in liq) (2022) 162 ACSR 380; [2022] NSWSC 556

Re Greight Pty Ltd (in liquidation) (2006) 56 ACSR 334; [2006] FCA 17

Re Ramsay & Patridge (unreported, Lockhart J, 22 September 1982)

Ultra Tune Australia Pty Ltd v McCann (1999) ACSR 651; [1999] VSC 58

Weston (Trustee) v Australian Securities and Investments Commission, in the matter of Empire Property and Investment Group Pty Ltd (Deregistered) [2017] FCA 176

IN THE MATTER OF EL-SHEIKH INVESTMENT HOLDINGS PTY LTD (ACN 103 988 772)

PHILIP NEWMAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF KHALED MOHAMED EL-SHEIKH

EL-SHEIKH INVESTMENT HOLDINGS PTY LTD (ACN 103 988 772)

1. On 23 April 2025, Ms Renee di Carlo of Rogers Reidy filed a consent to act as liquidator of the Company referred to in Order 1.

1. Pursuant to s 175 of the Corporations Act 2001 (Cth), the register of members of the defendant, El-Sheikh Investment Holdings Pty Ltd (ACN 103 988 772) (Company), be corrected, nunc pro tunc, to record that the shares presently registered in the name of Khaled Mohamed El-Sheikh (Bankrupt) and Kylie El-Sheikh be registered in the name of the Plaintiff as trustee of the property of the Bankrupt.
2. Pursuant to s 461(1)(k) of the Corporations Act, the Company be wound up.
3. Renee di Carlo be appointed liquidator for the purposes of the winding up.

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

1. This is an application by Mr Philip Newman, in his capacity as trustee of the Bankrupt Estate of Mr Khaled Mohamed El-Sheikh (the Plaintiff), for orders that El-Sheikh Investment Holdings Pty Ltd (ACN 103 988 772) (the Company) be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth), the Plaintiff be appointed as liquidator of the Company and other ancillary orders.
2. The Plaintiff relies on two affidavits of Mr Newman dated 12 February 2025 and 9 May 2025 and an affidavit of Ms Ariel Borland, solicitor, dated 9 May 2025.
3. Mr Nicholas Cooper, in his capacity as controlling trustee of Ms Kylie El- Sheikh's property (Interested Party), opposes the Plaintiff's appointment as liquidator of the Company. The Interested Party submits that an independent person should be appointed as liquidator, but otherwise supports the appointment of a liquidator, or alternatively, a receiver, to the Company. The Interested Party relies on an affidavit of Ms Sahra Connor, solicitor, dated 23 April 2025.
4. For the reasons set out below, I am satisfied that it is just and equitable that the Company be wound up pursuant to s 461(1)(k) of the Corporations Act. I am not satisfied that it is appropriate that the Plaintiff be appointed as liquidator of the Company. In my assessment, an independent person should be appointed as liquidator.

1. On 12 December 2024, the Plaintiff was appointed as trustee in bankruptcy of the estate of Mr Khaled Mohamed El-Sheikh. Mr El-Sheikh and Ms El-Sheikh were previously co-directors and equal shareholders of the Company. As at 13 December 2024, Mr El-Sheikh was the sole director of the Company and the beneficial owner of one of two of its issued shares. Mr El-Sheikh's share vested in the Plaintiff under s 58 of the Bankruptcy Act 1966 (Cth). Ms El-Sheikh was the other shareholder, although she has now transferred her share to the Plaintiff, who is the sole shareholder of the Company.
2. The Company is the registered proprietor of the Property located at 131 Percy Street, Portland, Victoria. On about 1 December 2021, the Company entered into a Contract for the sale of the Property to Portland Property Investments Pty Ltd (the Purchaser) for a sale price of $675,000. The Contract provided for settlement by 1 December 2022.
3. Mr and Ms El-Sheikh, now separated, were parties to proceedings in the Federal Circuit and Family Court of Australia (Family Law Proceeding), with final orders made by consent on 27 June 2024 (Final Orders). The Final Orders require Mr El-Sheikh and Ms El-Sheikh do all things to complete the sale of the Property and to distribute 50% of the net proceeds of sale each to Mr El-Sheikh and Ms El-Sheikh's respective creditors' accounts. Ms El-Sheikh was ordered to resign as director of the Company and transfer her share in the Company to Mr El-Sheikh, which she did. The Company was not a party to the Family Law Proceeding or the Final Orders.
4. On 30 June 2024, the Interested Party was appointed controlling trustee of Ms El-Sheikh's property under s 188 of the Bankruptcy Act. Ms El-Sheikh's creditors voted to accept a personal insolvency agreement on 29 October 2024 (PIA). The funds to be made available to Ms El-Sheikh's creditors include:

(a) Ms El-Sheikh's interest in money held in a bank account in the name of Mr El-Sheikh (Unclaimed Monies), which were not provided for in the Final Orders; and

(b) Ms El-Sheikh's half share of the proceeds of sale of the Property.

1. On 22 August 2024, the Plaintiff was appointed as controlling trustee of Mr El-Sheikh's property under s 188 of the Bankruptcy Act, with a view to proposing a PIA pursuant to Part X of the Bankruptcy Act. The PIA was, however, rejected by Mr El-Sheikh's creditors and the Plaintiff was appointed trustee of Mr El-Sheikh's bankrupt estate on 12 December 2024. Creditors of Mr El-Sheikh's estate are said to be owed more than $15 million.
2. Mr El-Sheikh's bankruptcy and Ms El-Sheikh's PIA disqualify them from acting as directors of the Company: s 206B of the Corporations Act. As a result, the Company presently has no officers who can take steps to complete the settlement and sale of the Property and distribute the proceeds of sale.
3. On 26 November 2024, the Purchaser commenced proceedings in the Supreme Court of Victoria seeking specific performance of the Contract of sale. That proceeding has not yet been determined.
4. In these circumstances, the Plaintiff has made this application for the Company to be wound up and for the Plaintiff to be appointed as liquidator of the Company, so that he can investigate the circumstances of entry into the contract and, if appropriate, complete the sale and ultimately wind up the Company.
5. The Court was told that the Property, which was sold for $675,000 in 2021, was purchased by the Company for $660,000 in 2007. Other than the purchase price, the Plaintiff has not identified any particular circumstances, regarding the Contract, which he considers warrant investigation by a liquidator.

Correspondence between the Plaintiff and Interested Party

1. Prior to the commencement of this proceeding, the Plaintiff and the Interested Party exchanged correspondence in relation to the Final Orders and the winding up of the Company.
2. Relevantly for present purposes, on 12 February 2025, the Plaintiff's solicitors wrote to the Interested Party stating: "...we do not necessarily agree that Ms El Sheikh is beneficially entitled to 50% of the net proceeds of sale of the [P]roperty...". The letter also stated that, in the Plaintiff's view, the Final Orders were not binding on the Company. This point was also repeated in the Plaintiff's written submissions.
3. On 18 March 2025, the Interested Party's solicitors wrote to the Plaintiff's solicitors advising of the Interested Party's intention to apply to join the Company to the Final Orders, to reflect the parties' intent that the proceeds of sale of the Property be split evenly between them.
4. On 19 March 2025, the Interested Party's solicitors sent a further letter advising of the Interested Party's intention to amend the Final Orders to provide that the Unclaimed Monies, which were not subject to the Final Orders, be split equally between the bankrupt estate of Mr El-Sheikh and Ms El-Sheikh's PIA.
5. On 9 April 2025, the Plaintiff's solicitors sent a letter stating that an equal distribution of the matrimonial assets under the Final Orders "is inequitable" given the number of creditors in Mr El-Sheikh's bankrupt estate.
6. On 22 May 2025, the Interested Party's solicitors put a proposal to the Plaintiff's solicitors whereby the Interested Party would agree to the Plaintiff's appointment as liquidator of the Company if the Plaintiff agreed that 50% of the Unclaimed Monies and 50% of the proceeds of sale of the Property would be paid to the Interested Party.
7. On 26 May 2025, the Plaintiff's solicitors responded to the proposal and stated, among other things:

(a) the Orders do not bind the Company or any liquidator appointed to the Company as the Company is not a party to those proceedings and had no ability to represent its interests. The fact that Mr and Mrs El-Sheikh may have agreed and sought orders by consent on certain matters at a time when they were directors of the Company, and prior to our respective clients' appointments, does not change that fact;

(b) neither your client or Mrs El-Sheikh is presently a shareholder of the Company, nor it is obvious that either is a creditor

1. The Court was told that the Plaintiff does not intend to seek a variation of the Final Orders, despite previous statements that the 50/50 split under the Final Orders is inequitable. As to whether the Plaintiff continues to take the position that the Final Orders are not binding on the Company, the Court was told that the Plaintiff has not been presented with a variation of the Final Orders to consider. The evidence suggests, and I find, that as matters presently stand the Plaintiff's position is that the Final Orders are not binding on the Company.

1. The Plaintiff states that the application for his appointment as liquidator is made solely in the interests of minimising costs. The Plaintiff submits that, in circumstances where the sale of the Property needs to be dealt with as a matter of priority and will realise minimal funds, the most efficient and cost-effective course is to appoint the Plaintiff as liquidator, given his background knowledge.
2. The Plaintiff submits that it is often the case that trustees in bankrupt estates are also appointed as liquidators where the bankrupt person is the sole shareholder of the corporate entity: Weston (Trustee) v Australian Securities and Investments Commission, in the matter of Empire Property and Investment Group Pty Ltd (Deregistered) [2017] FCA 176 (Farrell J), Pascoe v Ambernap Pty Ltd [2008] FCA 1975 (Jacobson J); Mansfield (as trustee of the bankrupt estate of Yang) v Thousand Angeles Island Pty Ltd (ACN 612 556 260) (2019) 135 ACSR 635; [2019] FCA 376 (Farrell J).
3. The Plaintiff relied on Pascoe, where Jacobson J stated, at [6], that as the company had a sole member and sole director "there [was] no real difference between the interests of the bankrupt and the interests of the member of the company". Further, at [8], that as there were limited assets, there was a need to avoid incurring duplicate costs and expenses arising from the appointment of a different person as liquidator of the company.
4. The Plaintiff submits that there is no conflict at present, but he accepts that there is a potential for conflict to arise. The Plaintiff explained that, insofar as he may take the position that the Final Orders are not binding on the Company, his interests as liquidator and as trustee in the bankrupt estate of Mr El-Sheikh are aligned. That is because the position that the Final Orders are not binding on the Company would maximise the return to creditors of the Company and to creditors of Mr El-Sheikh's bankrupt estate, given the Plaintiff's position as sole shareholder. If the Company is solvent and Interested Party opposed a distribution to the Plaintiff as sole shareholder of the Company, the parties interested in that dispute would be the Interested Party and the Plaintiff in his capacity as trustee of the bankrupt estate of Mr El-Sheikh, not the liquidator. As a result, no conflict arises if the Company is solvent. If the Company is insolvent, no distribution would be made to shareholders, and no conflict arises in that case either.
5. The Plaintiff submits that to deal with competing interests in any distribution by the Company, an application could be made to the Court for orders as to the terms of distribution. Furthermore, given the terms of ss 485 and 488(2) of the Corporations Act, such an application would be necessary if an alternative liquidator or receiver was appointed.
6. The Plaintiff acknowledges that, insofar as the liquidator owes duties to creditors and has statutory obligations, including to investigate voidable transactions, there is a potential for conflict to arise. The Plaintiff submits that such conflicts can be managed by approaching the Court for directions, if required.

1. The Interested Party submits that a liquidator, or alternatively, a receiver, should be appointed to the Company. The Interested Party submits that neither the Interested Party nor the Plaintiff are capable of acting impartially, given their pre-existing duties to creditors in their capacities as trustees.
2. The Interested Party submits that a trustee in bankruptcy has a duty to act impartially and avoid any conflict of interest: Re Ramsay & Patridge (unreported, Lockhart J, 22 September 1982), cited with approval in Lamb v Registrar in Bankruptcy (VIC) (1984) 4 FCR 269 at 272 (Northrop J, Smithers ACJ and Jenkinson J). Furthermore, a liquidator must be, and must be seen to be, independent and impartial: Re Allebart Pty Ltd [1971] 1 NSWLR 24 at 28, 30 (Street J); Ultra Tune Australia Pty Ltd v McCann (1999) ACSR 651; [1999] VSC 58 at [72] (Hansen J); Australian Securities and Investments Commission v Edge (2007) 211 FLR 217; [2007] VSC 170 at [44] - [50] (Dodds-Streeton J); Australian Securities and Investments Commission v Franklin (2014) 223 FCR 204; [2014] FCAFC 85 at [58] (White J, with Jessup and Robertson JJ agreeing); Re Fogo Brazilia Holdings Pty Ltd (in liq) (2022) 162 ACSR 380; [2022] NSWSC 556 at [273] (Williams J).
3. The Interested Party submits that the test for determining whether there is a conflict of interest is whether a fair-minded lay observer might reasonably apprehend that the person might not bring an impartial mind to the resolution of the question the person is required to decide: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63 at 344 (Gleeson CJ, McHugh, Gummow and Hayne JJ). This test has been adopted in the context of liquidations and voluntary administrations under the Corporations Act, and in bankruptcy and receivership proceedings: Franklin at [59] - [60]; Re Bellafountain Pty Ltd [2017] NSWSC 391 at [36] - [37] (Gleeson AJA); Australian Securities and Investments Commission v Jones [2023] WASCA 130 at [196] - [200] (Buss P, Mitchell JA and Beech JA).
4. The Interested Party acknowledges that Mr Newman is an experienced liquidator, and there is no suggestion of any impropriety. The Interested Party submits, however, that a fair-minded lay observer might reasonably apprehend that the Plaintiff, if he was appointed, might not bring an impartial mind to the administration of the Company (either as liquidator or receiver) for the following reasons.
5. First, the correspondence establishes the Plaintiff and Interested Party are likely to fall into dispute as to the operation of the Final Orders and the distribution of the proceeds of sale of the Property.
6. Secondly, the Plaintiff as the liquidator of the Company would be required to adjudicate on proofs of debt lodged by Mr El-Sheikh, given the Plaintiff's position disputing that the Final Orders are binding and whether they reflect an agreement reached between the former shareholders. As a result, the potential for a conflict is apparent and the Plaintiff should not act as liquidator: Re Greight Pty Ltd (in liquidation) (2006) 56 ACSR 334; [2006] FCA 17 at [14] (Finkelstein J).
7. Thirdly, in considering whether there are voidable transactions available to advance the interests of the Company's creditors, a fair-minded observer might reasonably apprehend that the Plaintiff, as liquidator of the Company, might not bring an impartial mind to the investigation of voidable transactions involving Mr El-Sheikh.
8. In these circumstances, the Interested Party submits, the liquidator should be an independent person.

1. I am satisfied that it is just and equitable to wind up the Company. No party suggests otherwise or has given a reason why the Company should continue after the completion of the sale of the Property.
2. I accept that it would be cost effective and more efficient for the Plaintiff to act as liquidator, given his background knowledge. However, I am not satisfied that it is appropriate that the Plaintiff should be the liquidator of the Company.
3. The authorities relied upon by the Plaintiff, Weston and Pascoe, where a trustee in bankruptcy was appointed liquidator of the company in which the bankrupt who was the sole shareholder, were entirely different from the circumstances of the present case. In this case, Mr and Ms El-Sheikh were both shareholders before their bankruptcies. Mr El-Sheikh became the sole shareholder of the Company because of the Final Orders in the matrimonial proceedings. The parties with a potential interest in the Final Orders are the Interested Party, the Plaintiff and a liquidator of the Company.
4. There is an ongoing dispute between the Plaintiff and the Interested Party in relation to the operation of the Final Orders and the distribution of the proceeds of sale of the Property. The Plaintiff's position is that the Final Orders do not bind the Company, which position could be detrimental to Ms El-Sheikh. It is unlikely that the dispute will be resolved without a court order of some kind and the Interested Party will have to apply for a variation of the Final Orders. It would be untenable for the Plaintiff to participate in a dispute regarding the Final Orders in his capacity as trustee of the bankrupt estate of Mr El-Sheikh and as liquidator of the Company, at the same time.
5. Contrary to the Plaintiff's submission, the potential for a conflict to arise is not solely at the end of the liquidation, that is, at the time of (any) distribution to shareholder/s. The potential for conflict also exists having regard to the liquidator's obligation to adjudicate proofs of debt. The Interested Party submits that the Final Orders reflect an agreement that was reached by Mr and Ms El-Sheikh as the Company's former shareholders, which agreement is binding on the Company. The Plaintiff does not accept this, for the reasons set out in the letter of 26 May 2025. At the least, Mr and Ms El-Sheikh arguably would be contingent creditors of the Company. It is inconceivable how the Plaintiff could, as liquidator of the Company with duties to creditors, adjudicate on a proof of debt that he lodged in his capacity as trustee of the bankrupt estate of Mr El-Sheikh.
6. The Plaintiff accepts that a potential for conflict exists, at a theoretical level, in relation to the liquidator's obligation to investigate voidable transactions. The liquidator will also need to investigate the circumstances surrounding the Contract for the sale of the Property which, as mentioned, was sold in 2021 at a price that is only marginally higher than the price at which the Company purchased the Property, in 2007.
7. As Santow J (as his Honour then was) said in Advance Housing Pty Ltd (In liquidation) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230 at [233], there is not the necessary appearance of an absence of conflict that should exist were the Plaintiff to be appointed as liquidator of the Company. That in turn might lead to a reasonable apprehension that the Plaintiff as liquidator might be impeded or inhibited from taking actions that might otherwise be taken in the interests of all creditors or that he might not take them with the necessary degree of impartiality.
8. In these circumstances, I am not satisfied that it is appropriate that the Plaintiff be appointed as liquidator of the Company.

1. For the foregoing reasons, the Company should be wound up and an independent person should be appointed as liquidator of the Company. The parties are directed to confer and seek to agree the costs of the application. If the parties are unable to reach agreement, the parties may contact the Chambers of Justice Neskovcin with a proposed timetable to deal with the question of costs on the papers.

I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Neskovcin.