Background
RZ Consulting Services Pty Ltd was in liquidation and had previously acted as trustee of the Eynesbury Christmas Trust. During the liquidation, its liquidator, Shumit Banerjee, agreed to release securities held over another entity’s property in return for $75,000. Ronglai Zhang, who said he became the trust’s new trustee in January 2026, alleged that the $75,000 was trust property rather than property beneficially owned by the company.
Zhang sued Banerjee personally and as liquidator, seeking recovery of the money and any shortfall. He initially neither joined the company nor obtained leave before commencing proceedings. He later sought to join the company and sought leave to proceed. Banerjee contended that the claim could not continue without leave and was commercially futile because the former corporate trustee had indemnity rights over trust assets for liabilities and costs.
The Court’s Holding
Justice Slattery joined the company as the third defendant but refused leave to proceed against either the company or Banerjee in any capacity. A proprietary claim to an asset held by a company in liquidation still required leave under s 471B of the Corporations Act 2001, and proceedings against a court-appointed liquidator required separate leave or an appropriate invocation of the Court’s supervisory jurisdiction. Zhang had not properly sought leave against the liquidator.
The Court did not finally determine whether the $75,000 was trust property. It held, however, that the claim had a substantial risk of yielding little or nothing after the company’s arguable right of indemnity from trust assets for trustee-related administration and legal costs. The likely costs of further litigation already exceeded, or would soon overwhelm, any practical recovery. Zhang had also exposed the liquidator to significant costs by suing without prior leave and had not offered adequate protection for future defence costs. The proceedings were permanently stayed and Zhang was ordered to pay the defendants’ costs.
Key Takeaways
- A claimant pursuing property held by a company in liquidation must obtain leave even when asserting that the property is held on trust and does not beneficially belong to the company.
- Proceedings against a liquidator personally or in that office require distinct procedural authority; leave against the company is not enough.
- A former trustee’s arguable indemnity over trust assets can make a successor trustee’s recovery claim practically futile.
Why It Matters
The decision underscores that insolvency procedure protects both the liquidation estate and court-appointed liquidators from unapproved litigation. Claimants cannot avoid the leave regime merely by characterising their case as a proprietary trust claim.
It also illustrates the commercial discipline applied to small trust-property disputes. Even where a claim may be arguable, the Court may refuse leave where trustee indemnities, existing costs, and the prospect of further unrecoverable defence costs make continued litigation uneconomic.