Zhongcheng Holdings Pty Ltd v Grand Orchid 21 Pty Ltd, in the matter of Grand Orchid 21 Pty Ltd [2020] FCA 35

Zhongcheng Holdings Pty Ltd v Grand Orchid 21 Pty Ltd, in the matter of Grand Orchid 21 Pty Ltd [2020] FCA 35

The Court made the s 424 direction because Zhongcheng Holdings was the mortgagee in possession and controller of the property, affected parties had been joined and did not oppose the application, authorities supported a limited direction that a sale is not unlawful only because the purchaser is related to the controller, and the untested evidence indicated the proposed $5,000,000 sale to Victory Investment Development Pty Ltd appeared to be at or above market value after reasonable sale efforts had failed and the Helixian offers were too speculative to displace that view.

Jurisdiction
Australia
Judgment Date
30 January 2020
Procedural Posture
Application for Direction Under S 424 of the Corporations Act 2001 (cth) / Hearing of Unopposed Application for Directions
Outcome
Application granted; direction made under s 424 of the Corporations Act 2001 (Cth).
Legal Topics
['controller of Corporation Property' 'mortgagee in Possession' 'power of Sale' 'related Entity Transaction' 'market Value' 'directions Under S 424 of the Corporations Act 2001 (cth)']
['corporations' 'commercial and Corporations' 'commercial Contracts, Banking, Finance and Insurance'] ['controller of Corporation Property' 'mortgagee in Possession' 'power of Sale' 'related Entity Transaction' 'market Value' 'directions Under S 424 of the Corporations Act 2001 (cth)']

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Procedural Posture

Application for Direction Under S 424 of the Corporations Act 2001 (cth) / Hearing of Unopposed Application for Directions

Legal Issues

  1. 1 ['Whether the Court should direct under s 424 of the Corporations Act 2001 (Cth) that entry into and completion of the contract for sale of land between the first plaintiff and the second plaintiff is not unlawful solely by reason of the relationship between them.' 'Whether the relationship between the purchaser and controller contravened the mortgagee principle.' 'Whether the proposed sale appeared, on the current untested evidence, to be at or more than market value for the purposes of assessing whether the limited direction should be made.']

Ratio Decidendi

The Court made the s 424 direction because Zhongcheng Holdings was the mortgagee in possession and controller of the property, affected parties had been joined and did not oppose the application, authorities supported a limited direction that a sale is not unlawful only because the purchaser is related to the controller, and the untested evidence indicated the proposed $5,000,000 sale to Victory Investment Development Pty Ltd appeared to be at or above market value after reasonable sale efforts had failed and the Helixian offers were too speculative to displace that view.

Court Disposition

Application granted; direction made under s 424 of the Corporations Act 2001 (Cth).

Orders

  • ['Entry into and completion of the contract for sale of land between the first plaintiff and the second plaintiff, a copy of which is at tab 1 of exhibit "ZZ1" to the affidavit of Zhonglai Zhao affirmed on 2 October 2019, is not unlawful solely by reason of the relationship between the first plaintiff and the second...