Shirota v Liu

1. The Receivers are to be paid remuneration on a time-spent basis to be calculated at the standard rates of Mackay Goodwin that are referred to in the affidavit made by Edward Narayan on 19 August 2025.
2. The costs, expenses, and remuneration of the Receivers, including the costs of this application, are to be paid from the Assets of the Trust.
3. In the event the proceeds of realisation of the Assets of the Trust are sufficient to pay in full the creditors of the Company whose debts were incurred by the Company in its capacity as trustee of the Trust, and the costs, expenses, and remuneration of the Receivers, the Receivers shall seek further directions from the court as to the disposition of the remaining Assets of the Trust.

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

Delivered ex tempore, revised from transcript

1. On 9 April 2025, the applicants (Liquidators) were appointed as liquidators of Pachira Investments Pty Limited (in liq) (Company). The Company was registered on 14 March 2016. Mr Yuan Zhou has been the Company's director since that date. Mr Zhou and Mr Zhidong Liu each hold 50 shares in the Company.
2. The Liquidators have been provided with limited records of the Company. However, it appears to the Liquidators, from the information they have, that at the time the Company was ordered to be wound up, the Company was the trustee of a trust known as the "Pachira Unit Trust" (Trust). The Trust was settled by a deed dated the same day that the Company was registered, being 14 March 2016.
3. The Liquidators understand that the Company's sole function was to act as trustee of the Trust. That understanding arises from records maintained on the Australian Business Register, a loan agreement executed by the Company, the judgment which I gave in Shirota v Liu (No 2) [2024] FCA 187, and the fact that the trust deed was executed on the same day that the Company was registered.
4. The Liquidators also understand that the Company only ever held one asset, being a property located at 4 Drovers Way, Lindfield, NSW (Lindfield Property). The Lindfield Property was sold by a mortgagee in possession and the surplus proceeds from the sale, totalling $942,486.93, were paid into court pursuant to orders which were made by me in related proceedings (NSD885/2023) on 29 February 2024 (and later revised by orders made on 21 August 2024) (Money In Court).
5. At this stage, the Liquidators have identified that the Company has one unsecured creditor, Eastern Investments (Aust) Pty Limited (Eastern), which claims to be owed $2,200,856 by the Company under the terms of a loan agreement. Eastern pursued and obtained the winding up order against the Company. Eastern has the benefit of an order in its favour that its costs of the winding up proceedings totalling $8,799.10 be paid.
6. As the Lindfield property is the only asset which was held by the Company, the Liquidators will not be in a position to make a distribution to creditors of the Company without resort to the Money In Court.
7. At this stage of the winding up of the Company:

(a) Liquidators' remuneration of $15,000 has been approved, but has not yet been paid to the Liquidators, and it is practically inevitable that further remuneration and expenses will be incurred by the Liquidators;

(b) the Liquidators have not yet called for proofs of debt, as the Company holds no funds to pay creditors; and

(c) the Liquidators have not been provided with a copy of the loan agreement pursuant to which Eastern claims to be owed money by the Company.

1. Upon going into liquidation, cl 85 of the trust deed had the effect of automatically removing the Company from the office of trustee of the Trust. The Liquidators do not know whether a new trustee has been appointed to the Trust under cl 82 of the trust deed, but they have not been informed that a new trustee has been appointed, and it seems to me very unlikely that a new trustee has been appointed. In those circumstances, the Company holds the assets of the Trust as a bare trustee.
2. In order to realise the assets of the Trust and return a dividend to creditors, the Liquidators seek orders for their appointment as receivers of the property, assets and undertaking of the Trust and that their remuneration and expenses be paid from the assets of the Trust.
3. The Company has a right to be indemnified out of and exonerated from the assets of the Trust in respect of liabilities incurred in its capacity as trustee, and that right is protected by a proprietary right in the assets of the Trust by way of a charge or lien over those assets. That right survives and is not otherwise affected by its removal as trustee. Now that the Company holds the Trust assets only as bare trustee, the Company is able to enforce its charge or lien over the Trust assets only by the appointment of a receiver or by specific orders of the court such as orders for judicial sale. It is well established that in these circumstances, the appropriate course of action is to appoint the Liquidators as the receivers of the assets of the Trust for the purpose of realising the assets for the benefit of creditors. That is plainly the appropriate course in the present case. Further, upon their appointment, the Liquidators in their capacity as the receivers and managers of the Trust assets are entitled to have their remuneration, costs and expenses paid from the assets of the Trust in priority to the other creditors.
4. Accordingly, I make orders substantially in the form proposed by the plaintiffs.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.