Chan v Moore — Director Loan Account Dispute Judgment

Original Word Document (172.9 KB) Federal Court of Australia

Chan v Moore [2026] FCA 496

| File number(s): | NSD 589 of 2023 |

| Judgment of: | HALLEY J |

| Date of judgment: | 24 April 2026 |

| Catchwords: | CORPORATIONS – rejection by liquidator of proof of debt – where proof of debt based on contested balance in director loan account – where director claims advances made to company by a related company in Hong Kong were capital contributions made by her, or on her behalf, and should be treated as credits to her director loan account – where advances from related company not supported by invoices –where sisterly loan arrangement claimed by director to explain advances from related company– where het financial records of the Australia company were incomplete – where no documentary evidence to substantiate sister loan theory -director has not established that advances from related company were capital contributions by her, or on her behalf, to company – amended originating process dismissed

CORPORATIONS – further amended notice of cross claim by liquidator against director for outstanding balance on director loan account – where evidence establishes that rejection of claim that advances made by related company were capital contributions made by or on behalf of director leads to debit balance on director loan account – judgment for liquidator on the further amended notice of cross claim |

| Legislation: | Corporations Act 2001 (Cth) ss 181, 182, 184

Corporations Regulations 2001 (Cth) reg 5.6.49, 5.6.54 |

| Cases cited: | 5G Developments Pty Ltd (in liq) v Massie, 5G Developments Pty Ltd (in liq) [2021] FCA 791

Burness (as trustees of the Bankrupt Estate of Lymberatos) v Brown [2009] FCA 1041

In the matter of David Gregory Young in his capacity as liquidator of Great Wall Resources Pty Ltd (in liquidation) ACN 080 224 808 and the Corporations Act; Capocchiano v Young [2013] NSWSC 879

Jones v Dunkel (1959) 101 CLR 298

Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332

Westpac Banking Corporation v Totterdell (1998) 20 WAR 150 |

| Division: | General Division |

| Registry: | New South Wales |

| National Practice Area: | Commercial and Corporations |

| Sub-area: | Corporations and Corporate Insolvency |

| Number of paragraphs: | 107 |

| Date of hearing: | 20 October 2025 to 23 October 2025 |

| Counsel for the Plaintiffs/Cross Respondents: | Mr J Mack with Mr L Hamilton |

| Solicitor for the Plaintiffs/Cross Respondents: | Harris Freidman Lawyers |

| Counsel for the Defendant/Cross Claimants: | Mr J Baird |

| Solicitor for the Defendant/Cross-Claimants: | D&D Law |

ORDERS

| NSD 589 of 2023 |

| BETWEEN: | JULIA MEI CHU CHAN and others named in the schedule

Plaintiff | |
| AND: | DANIEL PETER MOORE

Defendant | |
| (CROSS CLAIM) |

| BETWEEN: | INTEGRATED NATURAL SOLUTIONS PTY LTD (IN LIQUIDATION) ACN 134 017 182

First Cross Claimant | |

| | DANIEL PETER MOORE in his capacity as Liquidator of Integrated Natural Solutions Pty Ltd (in liquidation)

Second Cross Claimant | |

| AND: | JULIA MEI CHU CHAN and DAVID HIU PING LAU

Cross Respondents | |

| order made by: | HALLEY J |
| DATE OF ORDER: | 24 April 2026 |
THE COURT ORDERS THAT:

1. The amended originating process be dismissed.

2. The parties are to confer and seek to reach agreement and provide consent orders to give effect to these reasons for judgment with respect to the relief sought in the further amended notice of cross claim and with respect to the costs of the proceeding by 8 May 202 6.

3. To the extent that the parties are not able to reach agreement on the matters the subject of Order 2 above by 8 May 2026, the parties are to provide competing short minutes of order to the Court, an outline of submissions not exceeding 5 pages and any evidence in support of the orders they seek, by 14 May 20 2 6, and the proceeding will be listed for a case management hearing at 9.30 am on 15 May 2026.

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

REASONS FOR JUDGMENT

HALLEY J:

A.     Introduction

1 The failure of a director to operate a company in a manner that ensures that there is a clear delineation between company and personal funds will almost invariably expose the director to adverse consequences in a winding up of the company.

2 In this proceeding, the central issue for determination is whether funds in an aggregate amount of $3,037,101 (Related Party Contribution) received by Integrated Natural Solutions Pty Ltd ACN 134 017 182, in liquidation, (INS Australia) from a related company in Hong Kong, INS Integrated Natural Solutions Limited (INS Hong Kong), constituted a capital contribution that was provided by or on behalf of the first plaintiff, Mei Chu (Julia) Chan (Julia Chan) to INS Australia and, therefore, should be credited to Julia Chan’s director loan account with INS Australia (Director Loan Account). Julia Chan was the sole director of INS Australia prior to its winding up and a 30% shareholder in INS Hong Kong.

3 The dispute giving rise to this proceeding was the rejection by Daniel Peter Moore, the liquidator of INS Australia, and the defendant and second cross-claimant to this proceeding (Liquidator), of a proof of debt lodged by Julia Chan in the winding up of INS Australia.

4 Julia Chan contends that the Related Party Contribution constituted loans made to her by her sister, Karen Oi Ping Chan (Karen Chan). She contends that it should be included in the Director Loan Account, with the result that she should be admitted by the Liquidator as a creditor in the winding up of INS Australia in an amount of $2,040,922 (which was later revised to be $2,041,016), representing the credit balance in the Director Loan Account if the Related Party Contribution is treated as a capital contribution by her to INS Australia.

5 The Liquidator contends that the evidence advanced by Julia Chan in the proceeding is insufficient to find that Julia Chan should be admitted as a creditor for $2,041,016 or any other amount in the winding up of INS Australia.

6 The Liquidator and INS Australia claim in their further amended notice of cross claim that the first cross respondent, Julia Chan, pay $996,085 to INS Australia. This amount represents the debit balance of the Director Loan Account as at 20 December 2021, after taking into account the return by Julia Chan of $358,000 to INS Australia between 22 December and 24 December 2021, and on the assumption that the Related Party Contribution did not constitute a capital contribution made by, or on behalf of, Julia Chan to INS Australia.

7 For the reasons that follow, I have concluded that (a) Julia Chan has not established that the Related Party Contribution constituted a capital contribution that was provided by, or on her behalf, to INS Australia, and (b) the cross claimants have established that the amount owing by Julia Chan to INS Australia on the Director Loan Account is $996,085.

B.     Salient Facts

B.1.     INS Australia

8 INS Australia, the first cross claimant, was incorporated in Australia on 4 November 2008. It was involved in the business of distributing Australian papaw ointment products, including those manufactured by Lucas’ Papaw Remedies Pty Ltd ACN 640 186 223 (Lucas Papaw), overseas, including in Hong Kong.

9 Julia Chan was a director of INS Australia in the period from 4 November 2008 to 30 December 2021.

B.2.     INS Hong Kong

10 INS Hong Kong is a private company registered in Hong Kong under business registration number 50264103. INS Hong Kong acquired Lucas Papaw and other products from INS Australia for on-sale to customers.

11 At all material times, (a) Karen Chan was the secretary of INS Hong Kong, (b) Karen Chan and Julia Chan’s husband, Hiu Ping (David) Lau, were the only directors of INS Hong Kong, and (c) the shareholders in INS Hong Kong were Karen Chan (2%), Julia Chan (30%), Mr Lau (38%) and Julia Chan’s brother, Kam Cheong Chan (30%).

B.3.     Personal bank accounts

12 At all material times Julia Chan maintained a personal Complete Access account with the CBA bearing account number xxxx0798 (Julia Chan personal account).

13 At all material times Mr Lau maintained a MasterCard credit card account with the CBA bearing an account number ending in x5361 (Credit Card account).

B.4.     Bank accounts of INS Australia

14 At all material times, INS Australia maintained the following bank accounts:

(a) a Premium Business Cheque account bearing the account number xxxx sxxxx6108 with the CBA (INS Business Account);

(b) a Business Online Saver account with the CBA;

(c) a Hong Kong Dollar account with the CBA bearing the account number xxxx xxxx4968 (INS HKD Account);

(d) a US Dollar account with the CBA;

(e) a Chinese Yuan account with the CBA; and

(f) a Singapore Dollar account with the CBA bearing the account number xxxx xxxx4984.

B.5.     The Rocks and Darling Point Properties

15 Julia Chan and Mr Lau are (and at all material times were) the registered proprietors, as joint tenants, of the property situated at and known as 5/171 Gloucester Street, The Rocks, NSW (The Rocks Property).

16 Julia Chan and Mr Lau maintained a Better Business Loan Facility with the Commonwealth Bank of Australia (CBA) bearing account number xx xxxx xxxx 2796, secured over The Rocks Property (The Rocks Loan Facility).

17 On 13 September 2019, Julia Chan caused INS Australia to pay $500,000 into The Rocks Loan Facility.

18 Julia Chan and Mr Lau are (and at all material times were) the registered proprietors, as joint tenants, of the property situated at and known as 6/65 Darling Point Road, Darling Point, NSW (Darling Point Property).

19 Julia Chan and Mr Lau maintained an Investment Home Loan Facility with the CBA bearing account number xxxxx9609, secured over the Darling Point Property (Darling Point Loan Facility).

20 On 13 September 2019, Julia Chan caused INS Australia to pay $100,000 into the Darling Point Facility.

21 On 29 November 2019, $100,000 was transferred from the Julia Chan personal account to the INS Business Account.

B.6.     Invoices issued by INS Australia to INS Hong Kong

22 In the period between 25 July 2016 and 17 March 2021, INS Australia issued 36 invoices to INS Hong Kong for the sale of Lucas Papaw stock and, on one occasion, Calendula products, in an aggregate amount of $2,516,090.70 (INS Australia I nvoices).

B.7.     Transfers of funds from INS Hong Kong to INS Australia

23 In the period between 6 May 2016 and 10 November 2021, there were 68 transactions between INS Australia and INS Hong Kong in which funds in an aggregate amount of $5,528,397.02 were transferred from INS Hong Kong to INS Australia. The payments made in 55 of these transactions were received into the INS Business Account in an aggregate amount of $4,461,518, in the period between 6 May 2016 and 10 November 2021. The remaining payments were made in 13 transactions that were received into the INS HKD Account in an aggregate amount of HKD 6,263,219.98, in the period between 29 January 2020 and 29 June 2021. The AUD equivalent for these transactions, if the exchange rate as that the date of the last transaction of 5.8706 HKD to 1 AUD is used, is $1,066,897.02.

B.8.     Winding up of INS Australia

24 On 25 November 2021, Lucas Papaw, a creditor of INS Australia, made an application for INS Australia to be wound up in insolvency.

25 On 20 December 2021, INS Australia was wound up, and the Liquidator was appointed as the liquidator of INS Australia.

26 On or about 3 March 2022, Julia Chan served on the Liquidator a Form 535 formal proof of debt pursuant to regulation 5.6.49(2) of the Corporations Regulations 2001 (Cth), claiming an amount of $1,116,115 by way of a director’s loan in the winding up of INS Australia (Director Loan Proof of Debt).

27 On or about 7 June 2023, the Liquidator served on Julia Chan a Form 537 notice of rejection of proof of debt pursuant to regulation 5.6.54(1) of the Corporations Regulations, rejecting the Director Loan Proof of Debt.

B.9.     Commencement of these proceedings

28 On 21 June 2023, the plaintiffs filed an originating process seeking in prayer 1 an order that the Liquidator’s rejection of the Director Loan Proof of Debt be reversed and that Julia Chan be admitted to proof in the amount of $1,116,115 or such other amount as to the Court may seem fit.

29 On 2 October 2025, the plaintiffs filed an amended originating process pursuant to leave of the Court, removing the claims in paragraphs 2 to 3 of the originating process (with the effect that Mr Lau no longer has an active claim in the proceedings but remains as the second cross respondent) and amending the amount in which they sought for Julia Chan to be admitted to proof from $1,116,115 to $2,040,922.

B.10.     Banking records and financial statements of INS Hong Kong

30 Julia Chan produced to the Court a limited number of financial records of INS Hong Kong in response to a notice to produce issued by INS Australia and the Liquidator. The documents sought in the notice to produce included all the banking records and financial statements of INS Hong Kong for the period from 6 July 2016 to 10 October 2025.

31 The banking records produced by Julia Chan were the bank statements of the HSBC Business Direct HKD Current, HKD Savings and Foreign Currency Savings accounts for INS Hong Kong in the period from 21 April 2016 to 20 November 2021 (HSBC Bank Statements).

32 The HSBC Bank Statements record various deposits made by Karen Chan to the INS Hong Kong HSBC HKD Savings account (HKD Savings Accou nt). I explain the potential relevance of these deposits at ]- ] below.

33 The financial statements produced by Julia Chan were limited to a one-page statement of financial position as at 31 March for INS Hong Kong for each year from 2015 to 2022 (INS HK financial statement extracts). The INS HK financial statement extracts did not include the Notes to the current assets and current liabilities entries in the extracts or the balance of the financial statements.

34 The INS HK financial statement extracts record the following figures in HKD for cash at bank and amounts due from shareholders or a director:

| Date | Cash at Bank

HKD | Due from shareholders

HKD | Due from a director

HKD |
| 31.3.15 | 58,183 | 34,577 | - |
| 31.3.16 | 2,063,636 | 34,577 | - |
| 31.3.17 | 1,092,125 | 34,577 | - |
| 31.3.18 | 2,576,930 | 34,577 | - |
| 31.3.19 | 1,415,981 | 34,577 | - |
| 31.3.20 | 14,046 | 34,577 | - |
| 31.3.21 | 1,743, 222 | 34,577 | - |
| 31.3.22 | 2,835,966 | 34,577 | - |
35 I note that the exchange rate between HKD and AUD in the period from 2015 to 2022, as recorded in the INS HK banking records fluctuated between 4.892607 and 6.042805 HKD to 1 AUD.

36 The INS HK financial statement extracts record the following figures in HKD for (a) trade payables (that were stated to be “due to a related company” in the first four INS HK financial statement extracts), (b) amounts due to directors, and (c) amounts due to shareholders:

| Date | Trade payables

HKD | Due to shareholders

HKD | Due to director s

HKD |
| 31.3.15 | - | - | 99,653 |
| 31.3.16 | 2,092,849 | - | 212,880 |
| 31.3.17 | 1,134,085 | - | 380,438 |
| 31.3.18 | 2,689,574 | 380,438 | - |
| 31.3.19 | 958,214 | 395,878 | - |
| 31.3.20 | - | 1,436,473 | - |
| 31.3.21 | - | 5,946,473 | - |
| 31.3.22 | 178,019 | 6,563,407 | - |
37 The INS HK financial statement extracts do not record any significant amounts owing to shareholders in HKD until the extracts as at (noting the AUD equivalents are to the nearest conversion date identified in the INS HK banking records):

(a) 31 March 2020 in an amount of HKD1,436,473 (approx. $293,601 at the exchange rate recorded in the HK banking records as at 21 April 2020 of 4.892607);

(b) 31 March 2021 to an amount of HKD5,946,473 (approx. $986,144 at the exchange rate recorded in the HK banking records as at 20 March 2021 of 6.030027);

(c) 31 March 2022 in an amount of HKD6,563,407 (approx. $1,277,432 at the exchange rate recorded in the HK banking records as at 20 November 2021 of 5.137968).

C.     Legal Principles

38 Regulation 5.6.54(2) of the Corporations Regulations provides that a person may appeal against the rejection of a formal proof of debt or claim within the time specified in the notice of the grounds of rejection or, if the Court allows, any further period.

39 An appeal against a liquidator’s rejection of a proof of debt is heard by the court de novo: Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 340-341 (Brennan and Dawson JJ). The fundamental question asked by the court is whether the claim sought to be made by the plaintiff is a “true liability” enforceable against the company in liquidation according to law: In the matter of David Gregory Young in his capacity as liquidator of Great Wall Resources Pty Ltd (in liquidation) ACN 080 224 808 and the Corporations Act; Capocchiano v Young [2013] NSWSC 879 at 46; 5G Developments Pty Ltd (in liq) v Massie, 5G Developments Pty Ltd (in liq) [2021] FCA 791 at [146]-147.

40 Notwithstanding the hearing de novo, the onus of proof rests on the plaintiff to prove that the proof of debt should not have been rejected. If this onus is not discharged and the court is unable to conclude “either way” whether the proof should be admitted, the liquidator’s decision should stand: Great Wall Resources at 46; Westpac Banking Corporation v Totterdell (1998) 20 WAR 150 at 154 (Ipp J).

41 The standard of proof is “no less than” the standard of proof before a judge and the debt must be “legally enforceable”. The principles applicable to determining the enforceability of the debt are the same as the principles applied in actions brought by a creditor directly against the company: Burness (as trustees of the Bankrupt Estate of Lymberatos) v Brown [2009] FCA 1041 at 8 citing Tanning at 338-339 (Brennan and Dawson J).

D.     The evidence of the lay witnesses

D.1.     The plaintiff’s evidence

D.1.1     The evidence of Julia Chan must be treated with significant caution

42 Julia Chan swore six affidavits in the proceeding and was cross-examined.

43 Julia Chan was not an impressive witness. At times, her evidence appeared to be rehearsed, she generally adopted a confrontational approach to her cross-examiner. She had a pronounced tendency to provide direct and precise answers to questions that appeared to advance her case but professed to have no or little recollection of matters that might have been perceived by her not to assist her case. The latter category included any knowledge of (a) the fact that her email address had been used as the contact email address for INS Hong Kong on its Hong Kong NAR1 Annual Return to the Companies Registry, and (b) the extent of the shareholding that she and Mr Lau had in INS Hong Kong. It is implausible that Julia Chan, given the significance of the movement of funds from INS Hong Kong to INS Australia to the proceeding, did not know that she had a 30% shareholding in INS Hong Kong, and her sister Karen Chan only had a 2% shareholding.

44 The evidence given by Julia Chan when challenged by counsel for the Liquidator as to why she had backdated a commercial lease document and provided it to the Liquidator was particularly unsatisfactory. After acknowledging in a rehearsed manner on multiple occasions that “I was wrong” to have backdated the lease, Julia Chan then gave the following evidence when asked by the Court as to why she understood that she “was wrong” to have backdated the lease:

HIS HONOUR: Why were you wrong?---I was wrong thinking because I have the same agent that knowing we want to move in, after the last – the agent is the same agent – is the agent I use for managing the property is the rental agents. So we purchased the property through him, so he knew from the beginning we wanted to move in. So the reason I asked him not to sell to someone else, because he know from when we purchase the property our intention was moving in. So – and he –when he gave us the key, we have met there with the layout designer as well, so he always know, like, we want to move in and he know the whole story. That’s why I asked him, that’s why he was willing to sign to – on this document because he knew we always wanted to move in.

HIS HONOUR: So I’m just asking you, why do you think it was wrong - - -?---I was wrong.

HIS HONOUR: – – to provide this document to the liquidator?---Then I was wrong is because like in the legal term I sign after – when this document sign, or I think I was wrong is like I didn’t understand this document need to be signed before 1 May, but to me, if this is a document, is not – I was wrong is because, like, I just think, like, I got – let me start again. Sorry. I said I was wrong, it’s because like it doesn’t seems to be okay in the legal term to sign on that day. So then I think I was wrong, but then if you ask me, like, if there was a lease between the company and myself as a landlord, I would always say, it’s always a lease. I shouldn’t have maybe, like, to have a document. Just forget about the document. Just go to the liquidator and say, like, there is a lease, but then the thing is when my proof of claim, I need to have a document, a paper.

45 Her evidence was also inconsistent in material respects. Julia Chan gave the following evidence when challenged as to her knowledge of figures in the Director Loan Account:

Is that figure, it was important to you, was it not?---Because it’s like, we never expected that we would be liquidated one day, so whatever money in the company is still my money. So I didn’t really like pay attention to see like how much money is in the director loan account and how to come to that figures, because I don’t know how to construct that number.

What I’m putting to you is that each year you checked the director’s loan account entry in the financial statements of the company?---No.

You didn’t?---No.

46 But earlier, when pressed in cross-examination as to why she believed she was entitled to withdraw $500,000 from an INS Australia account on 13 September 2019, Julia Chan had responded:

The withdrawal of the $500,000 to my belief it was the director loan. I took out that $500,000. I recall it was because like it was over $600,000 in the director loan account. That’s why I make that withdrawal.

47 I was only able to place any material weight on the evidence given by Julia Chan to the extent that it was consistent with contemporary documents and the inherent logic of events or otherwise against interest.

D.1.2.     The evidence of Karen Chan must also be treated with significant caution

48 Karen Chan swore one affidavit in the proceeding and was cross-examined by video link with the assistance of an interpreter. She found cross-examination a challenging experience. She had a pronounced tendency to be combative or non-responsive in answering questions. At times, her evidence was internally contradictory or inconsistent with the evidence given by Julia Chan. No substantive explanation was provided for the very late provision of her affidavit, only 10 days before the commencement of the hearing.

49 The following extract from the cross-examination of Karen Chan, when she was challenged as to how a transfer recorded in an INS Australia bank statements as a payment from INS Hong Kong of $86,990 for “LUCAS PAPAW PURCHASE” was a loan to Julia Chan, provides a useful illustration of her approach to giving evidence, in particular, the extent to which she was prepared to provide explanations independently of any apparent recollection of matters or give evidence that was implausible:

MR BAIRD: And that payment was for the purchase of product, Lucas’ Papaw product; right?

THE INTERPRETER: I don’t remember. This is Julia’s bank statement. I have never seen it before so I can’t answer the question.

MR BAIRD: When you sent moneys from the INS Hong Kong account to the INS Australian account, you put a description on the transfer, didn’t you?

THE INTERPRETER: So there was the description there. I forgot to remove it. So it was there until I removed it. In terms of what the moneys were for, I need to check one by one.

…

MR BAIRD: There’s nothing in that description which refers to a loan from your sister, is there – a loan to your sister, is there?

THE INTERPRETER: Because that was a long time ago and when I loaned money to Julia it had been going on for long time and we didn’t make any note to record that and my company was not big enough to have so much money. So a lot of the money was just our money.

MR BAIRD: When you say “just our money”, whose money are you referring to?

THE INTERPRETER: So I put the money in the company account and I also operated that account. But some of the money was from her husband just for the – her daily expenses. But sometimes he was not in Hong Kong or he was not able to do the transfer so I would do the transfer for – for him. So to make it simple, some of the money was from her husband, just for the – for her daily expenses. So I was the person who did the transfers. So sometimes it was David’s money, but I did the transfer for him first, and then maybe I would collect the money from him or from Julia at the later time.

MR BAIRD: Are you saying that some part of the moneys that you transferred on 28 August 2018 were moneys that came from Mr David Lau?

THE INTERPRETER: I can’t answer this question at the moment because I need to check, but there’s a lot of times when Julia asked me to transfer money, that was my money that I used to transfer to her.

MR BAIRD: When you made the transfer on 28 August 2018, was that something that you did because Mr David Lau asked you to do it?

THE INTERPRETER: I’m not sure. I can’t answer this question.

MR BAIRD: Mr David Lau was also a director of INS Hong Kong?

THE INTERPRETER: Correct.

MR BAIRD: And did you from time to time follow his instructions?

THE INTERPRETER: No.

MR BAIRD: And did he ever give you instructions to transfer money from INS Hong Kong account to INS Australia?

THE INTERPRETER: Never.

MR BAIRD: Why did you say that some of the money that you transferred was Mr David Lau’s?

THE INTERPRETER: Because sometimes after I – after I did the transfer, I would ask him to pay me back.

50 I accept that from 10 September 2018, the bank statements of INS Australia did not include any more “LUCAS PAPAW PURCHASE” notations, notwithstanding that INS Hong Kong received invoices after that date from INS Australia. Nevertheless, that does not detract from the implausibility of Karen Chan’s evidence that references to “LUCAS PAPAW PURCHASE” were simply an oversight, and that Karen Chan had, in some unexplained fashion, failed to remove it from an INS Australia bank statement, which she had earlier claimed that she had “never seen” before.

51 Equally concerning was her claim that some of the money she transferred from INS Hong Kong to INS Australia was provided by Mr Lau “for her daily expenses”, she did the transfers for him because he was not in Hong Kong, Mr Lau never gave her any instructions to transfer money from INS Hong Kong to INS Australia, and she believed the money transferred had been provided by Mr Lau because after she transferred the money, she “would ask him to pay [her] back”. Plainly, if the money was provided by Mr Lau, Karen Chan could not plausibly have been asking him to pay it back.

52 It is possible, even perhaps likely, that some of the apparent implausibility in Karen Chan’s evidence arose because of interpretation issues exacerbated by having to give evidence over video link. Irrespective of the reason, however, I was only able to give little weight to her evidence, except to the extent it was corroborated by contemporaneous documents and was consistent with the inherent logic of events or was against the interests of Julia Chan.

D.2.     The Liquidator’s evidence

D.2.1.     The evidence of the Liquidator can be accepted

53 The Liquidator swore three affidavits in the proceeding. He was cross-examined.

54 His cross-examination was largely limited to the circumstances in which he had caused a spreadsheet summarising purchases by INS Australia from Lucas Papaw to be prepared. The Liquidator explained the colour shading that had been added to the spreadsheet and confirmed that he had relied on information that he had been provided by Lucas Papaw. The Liquidator also confirmed that he had not undertaken any reconstruction of the cashflow of INS Australia across the period of the Lucas Papaw spreadsheet because INS Australia “had no records that were reliable” but acknowledged he had access to “some bank statements”.

55 The Liquidator answered questions that were put to him directly and without hesitation. I am satisfied that his evidence can be accepted.

E.     The evidence of the Forensic Accountants

56 Both parties relied on expert reports from forensic accountants. The plaintiffs relied on Mr Daniel Hains of Vincents, and the Liquidator relied on Mr David Stephens, a director of Benjamin & Stephens (together, experts). The Liquidator had previously served a report prepared by another forensic accountant, Mr Steven David Ponsonby of Forensic Accounting Pty Ltd.

57 The experts prepared individual reports, attended a joint expert conference, and prepared a joint expert report. Mr Stephens also prepared a supplementary report following further discussions with Mr Hains that was finalised on the first day of the hearing of the proceeding (Stephens supplementary report). On the same day, the experts prepared a supplementary joint expert report.

58 As submitted by counsel for the Liquidator, the experts gave careful, clear and concise evidence. They agreed on all accounting principles and each other’s calculations, given the conclusions each had reached and the assumptions each had made. They were instrumental in significantly narrowing the scope of the issues in dispute between the parties. I found their evidence of considerable assistance.

59 The experts agreed that the ledger records of INS Australia that they were provided with, that purported to be the company’s financial accounts, were materially incomplete and did not reconcile to the supporting transaction records of the company, including bank statements and invoices. They agreed that the books and records of the company that they had been provided did not accurately record and explain the transactions of INS Australia, in particular, the Director Loan Account.

60 The experts included an updated summary of their reconstruction of the Director Loan Account in the supplementary joint expert report.

61 The experts agreed that as at 20 December 2021, the date the Liquidator was appointed to INS Australia, the Director Loan Account should have recorded a debit balance of $996,085, subject to any adjustments to take into account the Related Party Contribution and the Credit Card Payments (see ] below). They calculated that the debit balance comprised agreed net payments made to Julia Chan from INS Australia of $1,754,800, less $758,715 in funds that were provided by Karen Chan from her personal bank account and passed through the INS HKD Account and other INS Australia accounts and then paid into The Rocks Loan Facility and the Darling Point Loan Facility (Karen Chan C ontribution). The experts agreed that the advances constituting the Karen Chan Contribution should be included as deductions in the assessment of the net balance owing to, or owed by, Julia Chan on the Director Loan Account.

62 The experts, however, did not agree on whether transfers in an aggregate amount of $46,622 from the bank accounts of INS Australia to the Credit Card account were for expenses of the company and should therefore be excluded from the Director Loan Account (Credit Card Payments). Mr Stephens was not satisfied that the further information provided by Julia Chan in her sixth affidavit that was filed on 10 October 2025 was sufficient to enable him to assess the extent to which the transactions on the Credit Card account were substantially for the benefit of INS Australia and therefore should be excluded. Mr Hains considered that given the experts agreed that INS Australia’s general ledger records, including descriptions of bank transfers, cannot be relied upon, and in the absence of any records for the Credit Card account, the Credit Card Payments cannot be included in the Director Loan Account.

63 The experts agreed that the banking records of INS Australia reported the receipt by the company of a total of $5,553,192 from INS Hong Kong, and the sales invoices issued by INS Australia to INS Hong Kong annexed to Julia Chan’s affidavit of 4 April 2025 totalled $2,516,090. They do not agree whether the difference of $3,037,102, being the Related Party Contribution, represents a capital contribution made to INS Australia by or on behalf of Julia Chan to the company and, therefore, should be credited to the Director Loan Account.

64 Mr Hains considers that the Related Party Contribution can be treated as a capital contribution made by, or on behalf of Julia Chan, to INS Australia, given the affidavit evidence of Julia Chan and Karen Chan.

65 Mr Stephens considers that the information he has been provided with is insufficient to conclude that the Related Party Contribution is a capital contribution by Julia Chan because whether the sales invoices provided by Julia Chan are complete is material to the assessment of the implied loan balance represented by the Related Party Contribution but there was insufficient information to determine whether they are complete.

66 The updated summary of the Director Loan Account included in the supplementary joint experts report at [15] otherwise calculated that if the Related Party Contribution was treated as a capital contribution by Julia Chan to INS Australia, an amount of $2,041,016 would be payable to Julia Chan on the Director Loan Account, on the assumption that the Credit Card Payment was not debited to the Director Loan Account.

F.     What was the legal status of the related party contributions?

67 Julia Chan submits that the Court can rely on the evidence of both herself and her sister, Karen Chan, to find that the advances that constitute the Related Party Contribution were, in substance, loans from Karen Chan to Julia Chan (sisterly loan theory). She submits that the only plausible explanation is that the Related Party Contribution was advanced on a “sister to sister” basis at the direction of Julia Chan and “hence contributed by” Julia Chan to INS Australia and it is the only conclusion open on the evidence before the Court.

68 Julia Chan contends there is no evidentiary basis for any of the three theories advanced by the Liquidator in his opening submissions.

F.1.     The three alternative theories advanced by the liquidator in opening can be disregarded

69 The three alternative theories advanced by the Liquidator in opening to explain the Related Party Contribution were not persuasive and were only faintly pressed by the Liquidator in closing submissions.

70 First, the liquidator had contended the Related Party Contribution may be explicable on the basis that Julia Chan failed to annexe to her affidavits all the invoices that were issued by INS Australia to INS Hong Kong. The contention does not arise above supposition and conjecture. There is no evidence to suggest that Julia Chan had not located and annexed to her fifth affidavit all invoices issued by INS Australia to INS Hong Kong. It does not rise above a theoretical possibility and can be disregarded.

71 Second, the Liquidator had contended that the Related Party Contribution may be explicable on the basis that INS Australia supplied Lucas Papaw and other products to INS Hong Kong without issuing an invoice for those products. Again, the contention does not arise above supposition and conjecture. There is no evidence to suggest that any goods were supplied by INS Australia to INS Hong Kong without an accompanying invoice. Julia Chan may have paid little attention to the preparation of financial statements, but there was nothing to suggest that she was not able to operate a business effectively. The supply of goods without seeking payment would be antithetical to the most elementary principles of operating a business. Moreover, it is an inherently unlikely explanation because in the absence of any invoice it is not apparent how INS Hong Kong could have made any payments for the products. It also does not rise above a theoretical possibility and can be disregarded.

72 Third, the Liquidator had contended that the Related Party Contribution may be explicable on the basis that they (a) represented the gross sales of the products acquired by INS Hong Kong and INS Australia, and (b) were remitted as gross sales by INS Hong Kong to INS Australia rather than INS Hong Kong paying the amounts on the invoices issued by INS Australia. There was no evidence that suggested such an arrangement had been entered into and it was emphatically and persuasively rejected by Julia Chan when it was put to her in cross-examination. As for the first two theories advanced by the Liquidator, it does not rise above a theoretical possibility and can also be disregarded.

73 The onus, however, remains on Julia Chan to establish that the advances from INS Hong Kong to INS Australia were capital contributions made by her, or on her behalf, to INS Australia on the Director Loan Account. A rejection of, or decision not to press, the alternative theories advanced by the Liquidator in opening does not carry with it any inference or presumption that Julia Chan has satisfied that onus.

F.2.     The sisterly loan theory cannot be accepted

74 Julia Chan submits the most correct and natural starting point to determine the legal status of the Related Party Contribution is her sisterly relationship with Karen Chan. She submits that it was a relationship between two sisters in different parts of the world in which one sister needed money during the vicissitudes of a global pandemic, and the loss of an exclusive agreement with Lucas Papaw, in order to continue to operate a business that had been operating since 2001 but had gone global in 2016 without any accompanying increase in corporate governance.

75 Julia Chan further submits, and I accept, that there is no evidentiary basis to find that the Related Party Contribution constituted loans from Karen Chan to INS Australia or a gift from either Karen Chan or INS Hong Kong to INS Australia.

76 More problematic is Julia Chan’s submission that the evidence does not establish that the Related Party Contribution constituted loans from INS Hong Kong to INS Australia that INS Hong Kong “has casually overlooked and forgotten to submit a proof of debt for”. The submission ignores the stark reality facing Julia Chan. It is not in her interests for the Related Party Contribution to be a loan from INS Hong Kong to INS Australia. Given the cross claim brought by the Liquidator against Julia Chan for the amount alleged to be outstanding on the Director Loan Account, it is very much in Julia Chan’s interest that the Related Party Contribution be treated as a credit on the Director Loan Account – not loans from INS Hong Kong to INS Australia. If they were treated as credits on the Director Loan Account, that is loans by Julia Chan to INS Australia, it flows from the experts’ calculations that she would be a creditor of INS Australia for $2,041,016 (see ] above). Conversely, if it were concluded that they were not loans made by Julia Chan to INS Australia, the experts agree that Julia Chan would be a debtor of INS Australia in an amount of $996,085 (given the Liquidator does not press for recovery of the Credit Card Payments).

77 Julia Chan bears the onus of establishing on the balance of probabilities that the Related Party Contribution can be treated as a loan made to her by Karen Chan, which she then advanced to INS Australia on the Director Loan Account. Nevertheless, in assessing whether Julia Chan has satisfied that onus, it is relevant to have regard to possible alternative explanations. As discussed above, I am not satisfied that any of the three alternative explanations for the Related Party Contribution advanced by the Liquidator are plausible.

78 Contrary to the contention advanced by Julia Chan in her closing written submissions, however, I do not accept that the only plausible explanation is that the Related Party Contribution was advanced on a “sister to sister” basis at the direction of Julia Chan and “hence contributed” by Julia Chan to INS Australia.

79 Rather, I consider that a significantly more likely and compelling explanation for the Related Party Contribution, as ultimately advanced by the Liquidator, was that the Related Party Contribution constituted funds of INS Hong Kong that were advanced by INS Hong Kong to INS Australia. Counsel for the Liquidator, in his oral closing submissions, submitted that consistently with Occam’s Razor, namely that among competing hypotheses of equal likelihood, the one with the fewest assumptions should be selected, would be applicable and in that sense could be applied. In this case, however, no resort is necessary to Occam’s Razor. For the following reasons, the sisterly loan theory is inherently implausible and has not been established by Julia Chan to the requisite standard.

F.2.1.     No documentary support

80 First, the evidence given by Julia Chan and Karen Chan that the Related Party Contribution constituted a loan made by Karen Chan to Julia Chan at the direction of Julia Chan and then, in turn, advanced by Julia Chan to INS Australia is not supported by any contemporaneous records or documents. Given the failure by Julia Chan to maintain appropriate or complete financial records for INS Australia, it is perhaps not surprising that there are no financial records recording the alleged loans advanced by Julia Chan to INS Australia. More surprising is the complete absence of any record of any communication, whether by way of email, WeChat or any other social media platform, concerning any request by Julia Chan for a personal loan from Karen Chan.

81 The absence of any contemporaneous records or documents to substantiate or corroborate the sisterly loan theory is particularly significant given the limited weight I can give to the testimonial evidence of Julia Chan and Karen Chan.

F.2.2.     Explanation only advanced belatedly and in responsive to Liquidator’s amended points of cross claim

82 Second, the weight to be given to the evidence given by Julia Chan and Karen Chan on which the sisterly loan theory is based is significantly reduced because it only emerged in response to the amended points of cross claim filed by the Liquidator and INS Australia on 19 December 2024.

83 In the period prior to 19 December 2024, Julia Chan had sworn four affidavits in the proceeding. In her first three affidavits, she had relied on the closing balance of $1,277,447.43 recorded in the Director Loan Account as at the end of FY 2022 in the general ledger of INS Australia, less unpaid rent of $161,333, as the basis for the Director Loan Proof of Debt she had provided to the Liquidator in the amount of $1,116,115.

84 In her fourth affidavit sworn of 13 September 2024, Julia Chan responded to the points of cross claim filed by the Liquidator and INS Australia on 11 June 2024, in particular the transactions set out in the points of cross claim at [12] and [14] concerning payments made from the INS Business Account to her personal loan facilities secured over The Rocks Property and the Darling Point Property.

85 Julia Chan provided the following explanation in her fourth affidavit for the payments made with respect to The Rocks Property:

My husband, sister and I had been discussing investing in Sydney property. In 2019, it was decided that the Rocks Property would be purchased for $1,300,000. The purpose of the Personal Rocks Account, being a loan facility of $910,000, was to fund that purchase. I had many conversations with my sister about the investment and she agreed to transfer some of her money to assist with the investment. I recall that around the time my sister communicated with me, to the effect, that she was unable to transfer HKD directly to an AUD account because COVID meant that she was unable to attend a branch in Hong Kong. However, it was possible for my sister to transfer HKD to the INS HKD Account without having to physically attend a branch in Hong Kong. As such, it was decided that the money she wanted to pay towards the investment was to be transferred into the INS HKD Account.

86 Julia Chan provided the following explanation for the payment of $100,000 on 13 September 2019 from the INS Business Account to the Darling Point Loan Facility:

Although I do not have any present recollection of the intention I had on 13 September 2019 , I think it was likely, having regard to my usual practice, that I transferred the $100,000 on 13 September 2019 after realising that there was surplus cash in the INS Business Account and that there were no outstanding obligations owed by the Company to any suppliers for the time being. I also do not recall checking the balance of the Company director loan account to determine how much the Company owed me at the time, however, I recall having a belief throughout 2020 that the amount the Company owed me as the amount of funds I had injected into the Company was greater than the amount of money the Company had repaid to us. I also recall that I initially made a mistake in paying my Personal CBA Account and the payment was intended for the INS Business Account, thus I shortly thereafter made a correction by transferring $100,000 into the INS Business Account.

87 In her fifth affidavit sworn on 4 April 2025, Julia Chan first advanced the sisterly loan explanation for the Related Party Contribution and abandoned any reliance on the balance recorded in the general ledger for the Director Loan Account. Julia Chan provided the following explanation in her affidavit for her change of position:

I did not give evidence on these matters earlier because at the time of making my last affidavit on 13 September 2024, the Liquidator's cross-claim only complained of specific payments made that he calls the "Rocks Payments" and "Darling Point Payment". My 13 September 2024 affidavit sought to explain these payments. The amended cross-claim filed on 19 December 2024 makes a further complaint that I owe the Company money and it is now necessary for me to put on this further evidence. I also understand from the expert evidence served by the Liquidator (see paragraphs 3.3 to 3.10 of the report of Steven David Ponsonby dated 18 December 2024) that he now says that my accountant's director loan ledger cannot be relied on. I do not know why my accountant did not properly record the transactions in the Company's records.

88 Julia Chan attached a schedule to her affidavit listing 68 payments made from INS Hong Kong to INS Australia between June 2016 and October 2021 in an aggregate amount of $5,528,397.02 (INS Hong Kong Receipts), of which $2,516,090.70 related to the INS Australia Invoices. Julia Chan claimed that the balance of $3,012,306.32 represented the “total amount of money loaned from my sister which I used for the Company’s purposes”. The experts ultimately agreed in the supplementary joint expert report that the correct figures, based on their review of the bank statements of INS Australia were $5,553,192 for the INS Hong Kong Receipts, giving rise to a figure for the Related Party Contribution of $3,037,102 ($5,553,192 - $2,516,090).

89 Julia Chan provided the following explanation for the transfer of the balance of the advances comprising the Related Party Contribution:

12.    From time to time, as I have explained in my previous affidavits, the Company required injections of cash to continue operations and pay its obligations. My sister provided a source of funds to assist me in providing the Company with cash flow.

13.    My usual practice was to call my sister and explain the Company was tight on cash flow and ask how much money she could spare to assist me. My sister would often agree to assist because we were family. I understand that she would review her available funds and confirm what she could transfer. The transfer to the Company would take a few days.

14.    As the director of the Company, I borrowed these funds from my sister in my personal capacity, and directed my sister to inject them into the Company as part of the director loan account. This arrangement was to ensure the Company maintained sufficient cash flow to meet its obligations and continue operations.

…

16.    I understand from discussions with my sister that she has always expected repayment of the funds she lent to me and deposited into the Company at my request. I have always told my sister that I could not repay her until I received the director loan amount after this proceeding concludes and the Company liquidation is finalised.

17.    The balance of all transactions in the Payments Schedule paid to the INS Business Account (which were not applied towards invoices) represent loans from INS Hong Kong to me.

90 The late provision of the sisterly loan explanation has all the hallmarks of a reconstruction to answer evidence and contentions advanced by an opposing party in the course of a proceeding. Other than through carelessness or oversight, it is not apparent why the sisterly loan explanation was not advanced at the outset of the proceeding. It is remarkable that Julia Chan could have commenced the proceeding on the basis that the balance outstanding to her in the Director Loan Account was $1,277,447.43, as recorded in the Director Loan Account in the general ledger of INS Australia, as at the end of FY 2022, but by her fifth affidavit claimed the balance owing to her from the Director Loan Account was in excess of $2,000,000. I accept that Julia Chan might not have appreciated the financial records of INS Australia prepared by her accountant were incomplete and could not be relied upon. It is difficult, however, to accept that she might not have realised that Karen Chan had lent her more than $3,000,000 by the making of the Related Party Contribution, in addition to the $758,715 that Karen Chan had advanced to her as the Karen Chan Contribution in relation to The Rocks Property and the Darling Point Property.

F.2.3.     Distinguishable from Karen Chan Contribution

91 Third, the amounts comprising the Related Party Contribution, unlike the amounts comprising the Karen Chan Contribution, were not advanced by Karen Chan by way of a transfer from her personal bank account to INS Australia. The distinction is significant. As explained above at ], the experts agree that the Karen Chan Contribution represented personal loans from Karen Chan to Julia Chan that were simply passed through the INS HKD Account and other INS Australia accounts to The Rocks Loan Facility and the Darling Point Loan Facility.

92 The sisterly loan theory might explain the Karen Chan Contribution. It cannot explain the Related Party Contribution.

F.2.4.     No coherent explanation for alleged source of funds

93 Fourth, and relatedly, Karen Chan was not able to provide any coherent or plausible explanation of how the Court might be satisfied that the Related Party Contribution constituted her funds rather than the funds of INS Hong Kong. The following evidence given by Karen Chan in cross-examination was unconvincing:

MR BAIRD: How did you come to have $3 million Australia to send to your sister between 2016 and 2021?

[objection to question overruled]

MR BAIRD: Translate the question again, please, Madam Interpreter.

THE INTERPRETER: So the money included my money, money from family members and from her husband. So the money transferred to Julia was mostly from these sources.

MR BAIRD: How much of it was your personal money, Ms Chan?

THE INTERPRETER: So the money for the property was from my account and there was some transfers after I made the transfers, I asked family members for that to get the money back. So I need to do some calculation.

MR BAIRD: Which family members?

THE INTERPRETER: So somebody was from my husband – so some money was from my husband, but I can say that was also my money, and some money was from David. So over those years, the money transferred to Julia amounted to $3 million Australian and for my property, it was HK$4.2 million.

MR BAIRD: HK$4.2 million is about 750 Australian; right?

THE INTERPRETER: Correct.

MR BAIRD: So I’m asking questions only about the $3 million Australian. I’m asking questions only about the $3 million Australian. That was not all your own money, was it, Ms Chan?

THE INTERPRETER: Correct.

94 It is readily apparent, however, from the HSBC Bank Statements, that from time to time Karen Chan made deposits, generally in amounts of HKD500,000 from her personal account into the HKD Savings Account of INS Hong Kong and then those deposits were typically withdrawn in those amounts on the same day or shortly thereafter. It is also apparent that many of those deposits and withdrawals can be matched, by inference, to corresponding deposits in a schedule prepared by Mr Stephens in which he listed all the payments to INS Australia constituting the Related Party Contribution. I set out below those deposits made by Karen Chan that appear to be included in the amounts constituting the Related Party Contribution in an aggregate amount of $671,630 (Karen Chan deposits):

| Deposit by Karen Chan i nto HKD Savings Account

HKD | | Withdrawal from HKD Savings Account

HKD | | Receipt by INS Australia

AUD | |
| Date | Amount | Date | Amount | Date | Amount |
| 10.12.20 | 500,000 | 10.12.20 | 500,000 | 11.12.20 | 85,304 |
| 14.12.20 | 500,000 | 14.12.20 | 500,000 | 15.12.20 | 85,280 |
| 22.12.20 | 500,000 | 22.12.20 | 500,000 | 23.12.20 | 85,392 |
| 11.01.21 | 500,000 | 11.01.21 | 500,000 | 11.01.21 | 82,690 |
| 16.02.21 | 500,000 | 23.02.21 | 500,000 | 24.02.21 | 81,476 |
| 23.02.21 | 500,000 | 25.02.21 | 500,000 | 26.02.21 | 82,337 |
| 08.03.21 | 500,000 | 09.03.21 | 500,000 | 09.03.21 | 83,991 |
| 28.06.21 | 500,000 | 29.06.21 | 500,000 | 29.06.21 | 85,160 |
| Total | 4,000,000 | Total | 4,000,000 | Total | 671,630 |
95 For present purposes, however, any capital contribution or loan that Karen Chan may have made to INS Hong Kong to enable INS Hong Kong to make some of the advances constituting the Related Party Contribution cannot relevantly establish that the Karen Chan deposits can be treated as a capital contribution by Julia Chan to INS Australia on the Director Loan Account.

96 Further, I infer, pursuant to the rule in Jones v Dunkel (1959) 101 CLR 298, in the unexplained absence of Mr Lau who could readily be expected to give evidence both of any contribution that he made to INS Hong Kong and the source more generally of funds for INS Hong Kong, that his evidence would not have assisted Julia Chan and this allows the Court more readily to draw the inference that there were no such transfers of funds into the bank accounts of INS Hong Kong, other than the Karen Chan deposits.

97 Moreover, it is implausible, given the frequency with which Julia Chan moved funds between her personal accounts and those of INS Australia to address cash flow shortfalls, that she would have requested her husband to transfer funds to her sister in Hong Kong (or INS Hong Kong) in order for her then to direct her sister to transfer the funds back, via INS Hong Kong, to INS Australia.

98 It is telling that Julia Chan did not suggest in her evidence that Mr Lau or anyone other than Karen Chan was the source of the Related Party Contribution. To the contrary, her evidence was that her usual practice was to call Karen Chan and explain that INS Australia was tight on cash flow and ask her how much money “she could spare to assist me”, Karen Chan would “often agree to assist because we were family”, and Julia Chan understood that Karen Chan “would review her available funds and confirm what she could transfer”.

99 It is equally telling that in her affidavit sworn only 10 days before the commencement of the hearing, Karen Chan made no reference to funds being provided by Mr Lau or any other family member to enable her to make the Related Party Contribution by INS Hong Kong. Rather, she simply claimed that:

From time to time, Julia also telephoned me requesting financial assistance for INS AU. I understood from these calls that Julia needed funds to maintain INS AU cash flow. When Julia called, I generally provided funds from INS HK without question because she is my sister, and I wanted to support her. It was not our practice to have formal written agreements documenting these arrangements as it is not customary within our family to require such documentation. Nor was it my practice to charge interest to my sister.

F.2.5.     The more probable source of the Related Party Contribution

100 Fifth, to the extent that it might be considered relevant the probable source of the Related Party Contribution, other than the Karen Chan deposits, is that it was the proceeds of sales of Lucas Papaw and other products by INS Hong Kong. INS Hong Kong acquired significant quantities of Lucas Papaw and other products from INS Australia for on sale into the Hong Kong market and had apparently been doing that successfully for some years. Given Julia Chan had a significant shareholding in INS Hong Kong, as did Mr Lau and her brother, Kam. Karen Chan only had a 2% shareholding and was a joint director of INS Hong Kong, it is consistent with the inherent logic of events that Julia Chan would have seen INS Hong Kong as an available source of funds to address the cash flow requirements of INS Australia.

101 It was largely common ground, and I accept, that the Related Party Contribution was transferred from INS Hong Kong to INS Australia at the direction of Julia Chan. Contrary to submissions advanced by Julia Chan, that does not give rise to any implication that their transfer should be found to be an advance of funds from Julia Chan to INS Australia on the Director Loan Account. INS Hong Kong could readily be inferred to be a discrete legal entity in the same manner that INS Australia was a discrete legal entity, with its own assets and liabilities and its own creditors and debtors. Transfers of funds between related companies cannot simply, be retrospectively recharacterised as advances made by directors to a company on a director loan account.

F.2.6.     There is no outstanding liability to Julia Chan on the Director Loan Account

102 For the foregoing reasons I do not accept that the claim sought to be made by Julia Chan against INS Australia pursuant to the Director Loan Proof of Debt is a “true liability” enforceable by her against the company in liquidation according to law.

G.     The Further Amended cross claim

103 INS Australia and the Liquidator now seek in the further amended notice of cross claim an order that Julia Chan pay to INS Australia the sum of $996,085 or such other sum as the Court may determine. In view of my finding above that the Related Party Contribution did not constitute advances made by Julia Chan, or on her behalf, to INS Australia on the Director Loan Account, I am satisfied, consistently with the agreement reached between the experts in the supplementary joint expert report, that the amount outstanding on the Director Loan Account is $996,095 (agreed net payments to Julia Chan from INS Australia of $1,754,800 less the Karen Chan Contribution of $758,715).

104 It would follow that there should be judgment in favour of the Liquidator on the further amended notice of cross claim in that amount. I note, however, that the Liquidator had stated in his closing written submissions that he had limited the amount sought in the amended notice of cross claim to an amount of $500,000 with respect to the payment of that amount to The Rocks Loan Facility and the debit balance of the Director Loan Account as at 20 December 2021 limited to $391,738.85, which, in aggregate, equals $891,738.85.

105 INS Australia and the Liquidator also seek a declaration in the further amended notice of cross claim that INS Australia holds an equitable charge or lien over The Rocks Property, securing the sum of $500,000. The previous claims, however, that Julia Chan had breached her statutory duties pursuant to s 181(1), 182(1) and/or 184(1) of the Corporations Act 2001 (Cth) or her fiduciary or common law duties owed to INS Australia by making, or causing to be made, payments from the bank accounts of INS Australia to The Rocks Loan Facility and the Darling Point Loan Facility have been abandoned in the further amended notice of cross claim, and the declaration that had been sought that Julia Chan and Mr Lau held these payments upon constructive trust for INS Australia has also been abandoned.

H.     Disposition

106 The amended originating process is to be dismissed.

107 I will otherwise direct the parties to seek to reach agreement on orders to give effect to my findings in relation to the further amended cross claim, and on costs with respect to both the dismissal of the amended originating process and the further amended cross claim, and failing agreement to provide competing proposed orders and submissions in support of their respective positions.

| I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley. |
Associate:

Dated: 24 April 2026