Pilato, in the matter of the Scorpion and the Frog Pty Ltd (in liq) [2026] FCA 98

This Federal Court decision was a procedural but commercially important step in a broader dispute about trust assets. The liquidator of The Scorpion and the Frog Pty Ltd asked the court for orders that would let him deal with property said to belong to a trust called Number Stations. A beneficiary, Ms Lorena Fernandez Collazo, sought to intervene and argued that the same assets were already central to family law property proceedings in the Federal Circuit and Family Court of Australia (Division 2).

The court allowed Ms Collazo to intervene, accepted that the two matters substantially overlapped, and said transfer to the Federal Circuit and Family Court of Australia (Division 2) was appropriate in principle. But the court did not make the transfer order immediately. It said the required consultation process between the courts had to happen first. In the meantime, the liquidator was restrained from taking further steps concerning the trust assets except what was necessary to preserve them.

The company was incorporated on 3 February 2017. Since incorporation, Mr Kelan Reg Casey had been its sole director and shareholder. According to the liquidator, the company appeared to have carried on business solely in its capacity as trustee of Number Stations. In the company's books and records, the liquidator found an unsigned trust deed dated 3 February 2017. He believed the deed was effective from that date because the business had been operated consistently with it, but he had not received a signed copy despite requesting one.

That missing executed deed was not a minor paperwork issue. It sat at the centre of the practical dispute. The liquidator's position was that the deed named Mr Casey as appointor, named Ms Collazo and the children as beneficiaries, and provided that the company ceased to hold office as trustee once it entered liquidation, becoming only a bare trustee of the trust assets. The liquidator considered the trust assets were confined to various properties in New South Wales and Victoria, with only one apparently tenanted.

The liquidator had been appointed on 28 March 2025. He then sought Federal Court orders to regularise the administration of the trust position. He wanted directions that he was justified in treating the company as having acted solely as trustee, appointment as receiver and manager of the trust property, confirmation that he could deal with the trust property under Parts 5.5 and 5.6 of the Corporations Act, and approval to pay remuneration, costs and expenses from trust assets.

Ms Collazo's position was very different. She said there were already family law proceedings on foot between her and her former husband, Mr Casey, in which she sought property orders concerning the same trust assets. Those proposed orders included that she be declared sole trustee of various properties, realise the trust assets, pay debts associated with the trust and divide any surplus between herself and Mr Casey in particular proportions. She said the trust property represented all or substantially all of the joint property of the marriage.

After the liquidation, Ms Collazo contacted the liquidator seeking clarification about how to regularise the trust's affairs. She said she volunteered to repay the debt owed by the company and asked for a payout figure. She also said she wished to be appointed as new trustee. The judgment records that she claimed to have exercised powers to appoint a new trustee, called a meeting on 25 April 2025 and appointed Bestiary Pty Ltd as the new trustee. The liquidator rejected that position, taking the view that the change was invalid because she was not the appointor and he knew of no basis on which she could exercise appointor powers.

There was also correspondence in which Ms Collazo raised concerns about protection of the trust assets, the company's financial position, Mr Casey's continued access to funds said to be trust funds, and what she said was an overstatement of liabilities in the statutory report to creditors. The court did not finally decide those underlying disputes in this judgment, but they help explain why the forum question mattered so much.

The judgment dealt with two immediate questions. First, should Ms Collazo be allowed to participate in the Federal Court proceeding? She had sought joinder or, alternatively, leave to intervene. Second, should the Federal Court proceeding be transferred to the Federal Circuit and Family Court of Australia (Division 2) under s 32AB of the Federal Court of Australia Act because related family law proceedings were already on foot there?

Those questions were procedural, but they had obvious commercial consequences. If the liquidator's application continued in the Federal Court and succeeded first, Ms Collazo said she could effectively lose the chance to seek appointment as trustee in the family law case. The court therefore had to decide not who was right on the ultimate trust dispute, but which court should deal with the overlapping controversy and what should happen to the trust assets in the meantime.

The judge identified the statutory matters relevant to transfer. They included whether proceedings in respect of an associated matter were pending in the Federal Circuit and Family Court of Australia, whether that court had sufficient resources to hear and determine the proceeding, and whether transfer would serve the administration of justice. The liquidator opposed transfer. His concerns included the need for proper investigations into the trust, arguments about jurisdiction and available relief, possible extra costs, and the proposition that an individual who did not owe duties to the court would be unlikely to be appointed trustee of assets subject to an insolvent estate.

The court also had to account for the transfer procedure itself. The rules required consultation before any transfer order could be made. So even if the judge considered transfer appropriate, the court could not simply order it on the spot without that process occurring.

The court granted Ms Collazo leave to intervene under r 9.12 of the Federal Court Rules 2011. It was satisfied that there were proceedings in respect of an associated matter pending in the Federal Circuit and Family Court of Australia (Division 2). The judge said the factual substratum of the family law property claims substantially overlapped with the facts relevant to the liquidator's application.

The court also found that the Federal Circuit and Family Court of Australia (Division 2) had sufficient resources to hear and determine the matter. The liquidator's application was described as relatively straightforward. Although the orders sought were commonly made in the Federal Court, the judge did not consider the matter so complex or demanding that it could not be dealt with in the other court.

On the administration of justice, the court favoured transfer. The judge gave several reasons. A central one was that Ms Collazo's application to be appointed trustee was not hopeless or untenable and had a real prospect of success. If the Federal Court matter proceeded first, she could be deprived of the opportunity to pursue that relief in the family law proceedings. The court also noted submissions that the family law matter was ready to be heard, that no additional costs would be incurred if transfer occurred, and that the liquidator's right of indemnity out of the trust assets would not be affected by transfer.

The judge further noted evidence that the liquidator's estimated remuneration was about $70,000 plus GST and disbursements, which Ms Collazo said was about 10% of the trust assets. The court accepted that if Ms Collazo were appointed trustee, further costs might be minimised, leaving a greater pool for creditors and any surplus for beneficiaries. The judgment also referred to evidence that the trust's main creditor did not oppose the appointment of Ms Collazo or another third party as trustee.

Even so, the court did not make an immediate transfer order. The reasons and orders make clear that the required consultation process had to occur first. The judge said he would inform the Chief Justice of the Federal Court of the proposed transfer so that consultation with the Chief Judge of the Federal Circuit and Family Court of Australia (Division 2) could take place. The judgment also records later corrections replacing references to r 27.02 with r 27.01.

Pending further order, the liquidator was ordered to take no further step in the liquidation in respect of the trust assets other than what was required to preserve them. Costs of the interlocutory application were ordered to be costs in the proceeding. So the practical result was intervention granted, transfer proposed but not yet effected, and a pause on substantive liquidation steps affecting the trust assets.

For business owners, this case is a strong reminder that a company-trust structure can become difficult and expensive to manage once insolvency starts. If the company acted only as trustee, the liquidator may need court assistance before dealing with trust property. If the trust deed is unsigned, missing or disputed, that uncertainty can affect almost every next step, including who has appointor powers, whether a replacement trustee was validly appointed, and whether the company remains trustee or only a bare trustee.

The case also shows that trust disputes do not stay neatly within one legal area. Here, the same assets were central to both insolvency administration and family law property proceedings. The court was prepared to stop the insolvency process from moving ahead, except for preservation, because doing so could otherwise cut across a live claim in another court. That is a practical warning for any business owner whose trust assets are tied up with personal relationship disputes, succession issues or other parallel proceedings.

Another practical point is the importance of the transfer process itself. The judge considered transfer appropriate, but still could not make the transfer order immediately because the rules required consultation between the courts. That means forum changes can involve their own delay and procedure. If your advisers are considering a transfer application, they need to plan for that process rather than assuming it can be completed in one hearing.

Finally, this case underlines the commercial cost of poor records. The judgment repeatedly returns to the unsigned trust deed and the absence of a signed copy despite request. Even where parties say everyone acted consistently with the deed, missing execution can create uncertainty at exactly the moment when certainty matters most.

The company was incorporated on 3 February 2017. The liquidator was appointed on 28 March 2025. The Federal Court proceeding was commenced by originating process dated 1 October 2025. Ms Collazo's family law proceeding had been commenced earlier, on 2 October 2024, and remained on foot because the proposed property orders had not yet been determined. The interlocutory application by Ms Collazo was dated 11 February 2026, heard on 12 February 2026, with reasons published on 16 February 2026.

The judgment records that later corrections were made on 16 March 2026 to references in the catchwords and court notes, replacing r 27.02 with r 27.01. The decision explained here is therefore best understood as an interlocutory case-management ruling with interim preservation consequences, not the end of the underlying trust or family property dispute.

This page is based on the Federal Court of Australia judgment in Pilato, in the matter of the Scorpion and the Frog Pty Ltd (in liq) [2026] FCA 98. The reasons support a detailed explanation of the liquidator's application, Ms Collazo's intervention application, the proposed transfer, the court's reasoning under s 32AB, and the interim restraint on further liquidation steps concerning the trust assets.

The judgment does not provide the final resolution of the trust dispute, the liquidation, or the family law property proceedings. It also does not finally determine the validity of the unsigned trust deed or the claimed appointment of a replacement trustee. Readers should therefore treat this case as guidance on procedure, forum and interim asset control rather than a final answer on the parties' substantive rights.