Luo v Zhai (No 1) [2014] FCA 1296

FEDERAL COURT OF AUSTRALIA

Luo v Zhai (No 1) [2014] FCA 1296 Citation: Luo v Zhai (No 1) [2014] FCA 1296

Parties: XIANGNAN LUO v SUTAO ZHAI and JANTOM FURNITURE PTY LTD ACN 092 171 634

File number: NSD 1035 of 2013

Judge: PERRAM J

Date of judgment: 27 November 2014

Catchwords: PRACTICE AND PROCEDURE – application for freezing orders against respondents and third parties – where delay in bringing application – where third parties have not been given opportunity to appear

Legislation: Federal Court Rules 2011 (Cth) r 7.34

Date of hearing: 19, 21 and 27 November 2014

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 43

Counsel for the Applicant: Mr C King

Solicitor for the Applicant: Australian International Lawyers

Counsel for the Respondents: Mr A Norrie and Mr D D'Souza

Solicitor for the Respondents: Jurisbridge Legal

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1035 of 2013

BETWEEN: XIANGNAN LUO

Applicant

AND: SUTAO ZHAI

First Respondent

JANTOM FURNITURE PTY LTD ACN 092 171 634

Second Respondent

JUDGE: PERRAM J DATE OF ORDER: 27 NOVEMBER 2014 WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. Upon the applicant giving to the Court the undertakings referred to in Schedule A in the form of the Freezing Order attached, I make the following orders against each of the first and second respondents in the form of that order. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. FREEZING ORDER PENAL NOTICE TO: SUTAO ZHAI JANTOM FURNITURE PTY LTD ACN 092 171 634 IF YOU: (A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR (B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. (C) ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED. TO: SUTAO ZHAI JANTOM FURNITURE PTY LTD ACN 092 171 634 This is a 'freezing order' made against you on 27 November 2014 by the Honourable Justice Perram at a hearing after the Court was given the undertakings set out in Schedule A. THE COURT ORDERS: INTRODUCTION 1. Subject to the next paragraph, this order has effect up to and including the final determination of the Proceeding heard by His Honour Justice Perram on 14 and 15 October 2014. 3. Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified. 4. In this order: (a) 'applicant', if there is more than one applicant, includes all the applicants; (b) 'you', where there is more than one of you, includes all of you and includes you if you are a corporation; (c) 'third party' means a person other than you and the applicant; (d) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. 5. (a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions. (b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way. FREEZING OF ASSETS 6. (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$1,000,000.00 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount. (c) If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia ('ex-Australian assets'): (i) You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and (ii) You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount. 7. For the purposes of this order, (1) your assets include: (a) all your assets, whether or not they are in your name and whether they are solely or co-owned; (b) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions). (2) the value of your assets is the value of the interest you have individually in your assets. PROVISION OF INFORMATION 8. Subject to paragraph 9, you must: (a) to the best of your ability inform the applicant in writing of all your assets worldwide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets; (b) within three (3) days after being served with this order, swear and serve on the applicant an affidavit setting out the above information. (c) within three (3) days after being served with this order, swear and serve on the applicant an affidavit setting out all assets that have been dissipated since 14 August 2013. 9. (a) This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you: (i) have committed an offence against or arising under an Australian law or a law of a foreign country; or (ii) are liable to a civil penalty. (b) This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object that to object to you complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively: (i) have committed an offence against or arising under an Australian law or a law of a foreign country; or (ii) are liable to a civil penalty. (c) You must: (i)disclose so much of the information required to be disclosed to which no objection is taken; and (ii) prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and (iii) file and serve on each other party a separate affidavit setting out the basis of the objection. at or before the further hearing on the return date (or within such further time as the Court may allow), notify the applicant in writing that you or all the persons referred to in (b) wish to take such objection and identify the extent of the objection; EXCEPTIONS TO THIS ORDER 10. This order does not prohibit you from: (a) paying up to $2,200.00 a week for your ordinary living expenses; (b) paying up to $10,000.00 for your reasonable legal expenses; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation. 11. You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly. 12. (a) This order will cease to have effect if you: (i) pay the sum of AUD$1,000,000 into Court; or (ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicant as agreed in writing between them; or (iii) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court. (b) Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency. (c) If this order ceases to have effect pursuant (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact. COSTS 13. The costs of this application are reserved. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT 14. Set off by banks This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order. 15. Bank withdrawals by the respondent No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order. 16. Persons outside Australia (a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia. (b) The terms of this order will affect the following persons outside Australia: (i) you and your directors, officers, employees and agents (except banks and financial institutions); (ii) any person (including a bank or financial institution) who: (A ) is subject to the jurisdiction of this Court; and (B ) has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and (C ) is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and (iii) any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person's assets. 17. Assets located outside Australia Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party's application, reasonable written notice of the making of the application is given to the applicant. SCHEDULE A UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT 1) The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order. 2) As soon as practicable, the applicant will file and serve upon the respondents copies of this order. 3) As soon as practicable, the applicants will cause anyone notified of this order to be given a copy of it. 4) The applicant will pay the reasonable costs of anyone other than the respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondents' assets. 5) If this order ceases to have effect the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who they have reasonable grounds for supposing may act upon this order, that it has ceased to have effect. 6) The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. 7) The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondents or the respondents' assets.