Liquidators, receivers in tug of war over $20 million

With the fate of $20 million in a solicitor’s trust account uncertain and three sets of insolvency practitioners on the clock, who could fault any for contemplating liens?

Certainly not iNO, who was roused from inattention during last Monday’s Corporation Lists in the NSW Supreme Court by barrister Ingrid King telling Justice Ashley Black that her client intended to apply for judicial guidance in respect of a Universal Distributing lien.

Her client – DV Recovery Management partner Daniel O’Brien – is the liquidator of H&H Funding Pty Ltd, which provided funds to Bridgeland Second Pty Ltd, the developer of the Emerald Epping residential project in Sydney’s north west.

The funds came from Beijing-born and domiciled Chinese national Zheng Qiang Huo through his investment company – Noda Development Limited – a company incorporated in the Republic of the Marshall Islands.

The monies were on lent from H&H to Bridgeland Second, which is also in liquidation with Greengate Advisory’s Patrick Loi and John Chand appointed.

Unsurprisingly the funding was secured, so Oracle Insolvency Services’ Nick Cooper and Dominic Cantone have also been thrust into the fray as receiver/managers of H&H.

That’s the straightforward part.

As well as being the lender, 74 year old Huo was a director and secretary of H&H Funding between March and December, 2019.

Since being appointed liquidator to H&H Funding on September 9, 2022 O’Brien has identified potential irregularities in dealings with proceeds of sale of units in the Emerald development. Taxes, it seems, have not been paid.

Given H&H had a full security interest over the funds it lent to Bridgeland Second O’Brien has questions for the current director – bankrupt real estate agent Rui Hu and former director Huo – about how the proceeds of those unit sales were dealt with, and by whom.

iNO’s mail is that the remaining apartments in the development were sold in a single line and the proceeds – some $20 million – now reside in the trust account of solicitors representing Bridgeland Second.

As it currently stands the ATO is the largest unsecured creditor with a claim of approximately $5 million and one of the first moves O’Brien made upon being appointed was to lodge a proof of debt for $7.296 million in the liquidation of Bridgeland Second.

A caveat over the Epping development was also lodged and despite threats to do so in court Loi and Chand haven’t challenged it.

O’Brien then had the court issue summonses for public examination to Hu and Huo which are scheduled to take place at the end of this month.

Cooper and Cantone haven’t been idle either, having been to court to perfect their appointor’s security on the PPSR before commencing proceedings in August this year seeking range of declarations aimed at forcing O’Brien to disgorge any funds or property he controls that are subject to Noda’s security.

Barrister Jennifer Mee for the receivers told Justice Black on Monday that O’Brien had not been cooperative in regards to information or monies they’d won rights to and needed to advance their claims.

“My clients have sought information under the Insolvency Practice Schedule and no information has been forthcoming,” she told the judge.

“There’s no reason why the liquidator has not handed over the funds the subject of the judgment debt and my clients need the funds to fund other proceedings,” Mee said.

If granted, the declarations would prevent O’Brien from retaining any funds to cover expenses he couldn’t show were reasonably incurred preserving the assets for Noda’s benefit.

Hence O’Brien’s application for judicial guidance in respect of a lien on the Universal Distributing principle.

Loi and Chand meanwhile are refusing to part with $1.36 million O’Brien sees as belonging to H&H and they are also contemplating their options, having sought and failed to obtain approval from Bridgeland creditors for almost $500,000 in remuneration and expenses.