Judgment Hand Down: Re Zhang Zhenxin

The Petition for an insolvency administration order is opposed by Mr Zhang’s widow, Mrs Zhang, on the grounds of fraud and illegality. The substantive hearing of the Petition is due to be heard in early 2024.

In October 2023, the Petitioner issued an application for the appointment of an interim receiver pending the substantive hearing of the Petition. This was on the basis that Mr Zhang’s estate has been unrepresented since his death and that the Petitioner had learnt of two major asset disposals by companies in which the estate had shares. Mrs Zhang opposed the application on the grounds, inter alia, that it was not necessary to appoint receivers, there was no urgency, and the appointment would cause significant harm.

The Judge held that, apart from guidance which could be gleaned from the court’s approach to the appointment of provisional liquidators, the test was supplied by an objective reading of the legislation and rules. The court must be satisfied, on an application to appoint an interim receiver that: the debtor is unable to pay the debtor’s debt, security is provided, as required, and that that an appointment is “necessary for the protection of the debtor’s property”. If a court is satisfied of these matters, the court can exercise its discretion, asking, whether in the circumstances of the case it is right make an appointment.

On the facts, the Judge considered it was necessary to appoint receivers due to a lack of visibility about the estate, the failure to provide information and undertakings when requested, various dealings which had taken place and an expressed desire on Mrs Zhang’s part to continue to deal with the assets of the estate. The Judge also considered Mrs Zhang’s substantive defence to the Petition. The Judge emphasised that evidence of fraud needs to be genuine. The Judge formed the provisional view that “although a defence has been raised it fails to meet the threshold of serious and genuine” and the Petitioner was therefore likely to succeed.

The Judge also rejected Mrs Zhang’s arguments that the prejudice to the estate from the appointment would outweigh the potential prejudice in not appointing a receiver. He contrasted the prejudice from the appointment of an interim receiver with that which would result from the appointment of a provisional liquidator.

Read the judgment here.

Paul Fradley appeared for the successful petitioning creditor, led by Blair Leahy KC of Twenty Essex and instructed by Macfarlanes.