FEDERAL COURT OF AUSTRALIA Vantage Holdings Pty Ltd v Huang (No 3) [2015] FCA 383 Citation: Vantage Holdings Pty Ltd v Huang (No 3) [2015] FCA 383 Parties: VANTAGE HOLDINGS PTY LTD (ACN 097 178 240) v YONG HUANG (AKA PETER HUANG) File number: QUD 127 of 2013 Judge: COLLIER J Date of judgment: 23 April 2015 Catchwords: PRACTICE AND PROCEDURE – interim application for freezing orders – rr 7.32, 7.34 and 7.35 Federal Court Rules 2011 (Cth) – whether order for adjournment appropriate – principles in Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250 discussed and applied – whether freezing orders appropriate against third parties – apparent dissipation of real property assets – whether undertakings as to damages by applicant has value – whether "carve outs" from freezing orders appropriate Legislation: Corporations Act 2001 (Cth) ss 588G(2), 588M Federal Court Rules 2011 (Cth) rr 7.32, 7.34, 7.35 Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Cambridge Credit Corporation Limited (Receiver Appointed) v Surfers' Paradise Forests Limited (1977) Qd R 261 Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 80 ATR 449 Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250 K.C. Park Safe (Brisbane) Pty Ltd v Cairns City Council [1997] 1 Qd R 497 SBA Music Pty Ltd v Hall [2014] FCA 1038 Vantage Holdings Pty Ltd v Huang [2015] FCA 155 Date of hearing: 22 April 2015 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 25 Counsel for the Applicant: Mr MK Stunden Solicitor for the Applicant: Mills Oakley Lawyers Counsel for the Respondent: Mr GD Beacham with Ms F Chen Solicitor for the Respondent: Yong Legal and Immigration Services Pty Ltd IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 127 of 2013 BETWEEN: VANTAGE HOLDINGS PTY LTD (ACN 097 178 240) Applicant AND: YONG HUANG (AKA PETER HUANG) Respondent JUDGE: COLLIER J DATE OF ORDER: 23 APRIL 2015 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. Pursuant to rr 7.32, 7.34 and 7.35 of the Federal Court rules 2011 (Cth) a freezing order be made against the respondent, JHC Mum Pty Ltd ACN 132 838 316 as trustee for the JHC Mum Unit Trust, and DZY Pty Ltd ACN 167 517 973 as trustee for the DZY Family Trust in the terms specified in Annexure A to these Orders. 2. There be liberty to apply. 3. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE A PENAL NOTICE TO: YONG HUANG (AKA PETER HUANG) JHC MUM PTY LTD ACN 132 838 316 as trustee for the JHC MUM UNIT TRUST DZY PTY LTD ACN 167 517 973 as trustee for the DZY FAMILY TRUST 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. 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: YONG HUANG (AKA PETER HUANG) JHC MUM PTY LTD ACN 132 838 316 as trustee for the JHC MUM UNIT TRUST DZY PTY LTD ACN 167 517 973 as trustee for the DZY FAMILY TRUST DATE ORDER MADE: 23 April 2015 This is a 'freezing order' made against you and the other parties on the date set out above by Justice Collier after the Court was given the undertakings set out in Schedule A to this order. THE COURT ORDERS: INTRODUCTION 1. 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. 2. In this order: (a) 'applicant', means the Applicant; (b) 'you', means the Respondent; (c) 'the other parties', means JHC Mum Pty Ltd ACN 132 838 316 as trustee for the JHC Mum Unit Trust and DZY Pty Ltd ACN 167 517 973 as trustee for the DZY Family Trust; (d) 'third party' means a person other than you and the applicant; (e) 'Specified Properties' means the properties identified in Schedule B to this order; and (f) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. 3. (a) If you and/or the other parties are ordered to do something, you and/or the other parties 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 and/or the other parties are ordered not to do something, you and/or the other parties 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 4. (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$2,500,000 ('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) The other parties must not remove from Australia or in any way dispose of, deal with or diminish the value of any of the Specified Properties up to the unencumbered value of the Relevant Amount, or if any of the Specified Properties have already been sold or are sold pursuant to an exception set out in paragraph 8 of this order, the net proceeds of the sale. 5. 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); and (c) the following assets in particular: (i) the properties set out in Schedule C attached hereto or, if they have already been sold or are sold pursuant to an exception set out in paragraph 8 of this order, your share of the net proceeds of the sale; and (ii) your shareholding in Yong Group of Companies Pty Ltd ACN 077 197 276, (2) the value of your assets is the value of the interest you have individually in your assets. PROVISION OF INFORMATION 6. Subject to paragraph 7, you must: (a) within 10 working days of the date of this order (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets in Australia, 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 10 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information. 7. (a) This paragraph (7) applies if you are not a corporation and you wish to object to complying with paragraph 6 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 (7) also applies if you are a corporation and all of the persons who are able to comply with paragraph 6 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 6 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. EXCEPTIONS TO THIS ORDER 8. This order does not prohibit: (a) you from paying up to $1,000 a week on your ordinary living expenses; (b) you from paying your reasonable legal expenses, up to a maximum amount of $200,000 from the date of this order, except by leave of the Court; (c) you from dealing with or disposing of any of your assets, or the other parties from you from dealing with or disposing of the Specified Properties, in the ordinary and proper course of your business (or in the case of the other parties, their respective businesses), 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, or the other parties dealing with or disposing of the Specified Properties, in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you (or the other parties in respect of the Specified Properties) give the applicant at least two working days written notice of the particulars of the obligation. 9. You and the applicant (and/or the other parties) may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you or the other parties 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/or the other parties), and the Court may order that the exceptions are varied accordingly. 10. (a) This order will cease to have effect if you: (i) pay the sum of $2,500,000 into Court; or (ii) pay that sum into a joint bank account in the name of your lawyer and the lawyer 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 11. Costs reserved. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT 12. 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. 13. 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. 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 cause anyone notified of this order to be given a copy of it. (3) The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. (4) If this order ceases to have effect (for example, if the respondent pays money into Court or provides security, as provided for in paragraph 10 of this Order) the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. (5) 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. (6) 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 respondent or the respondent's assets. SCHEDULE B SPECIFIED PROPERTIES 1. The real property situated at 36 Ewing Road, Logan Central in the State of Queensland, with title reference 13778092, or any subdivision thereof, currently held in the name of JHC Mum Pty Ltd ACN 132 838 316 as trustee for the JHC Mum Unit Trust; and 2. The real property situated at 5 Hayden Street, Riverview in the State of Queensland, with title reference 14207131, or any subdivision thereof, currently held in the name of DZY Pty Ltd ACN 167 517 973 as trustee for the DZY Family Trust. SCHEDULE C LIST OF PROPERTIES Title Ref Owner/s Address 14158245 Yong Huang and Yuan Zhang 23 Karabil Street, Kingston QLD 14883150 Yong Huang and Yuan Zhang 6 Brutus Street, Kingston QLD 50800452, Yong Huang and Yuan Zhang 4 and 6 Hansells Parade, Riverview QLD 50800453 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 127 of 2013 BETWEEN: VANTAGE HOLDINGS PTY LTD (ACN 097 178 240) Applicant AND: YONG HUANG (AKA PETER HUANG) Respondent JUDGE: COLLIER J DATE: 23 APRIL 2015 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The applicant ("Vantage") has sought an urgent hearing for its interlocutory application, which was filed yesterday, the 22 April 2015. In that interlocutory application Vantage seeks the following orders: 1. Pursuant to Rules 7.32 and 7.34 of the Federal Court Rules 2011, that a freezing order as against the Respondent, JHC Mum Pty Ltd ACN 132 838 316 as trustee for the JHC Mum Unit Trust and DZY Pty Ltd ACN 167 517 973 as trustee for the DZY Family Trust be made in the terms of the draft order annexed hereto, subject to such changes as the Court considers necessary and appropriate. 2. That the Respondent pay the Applicant's costs of and incidental to this application on the indemnity basis, alternatively on the standard basis. 3. Such further or other orders as the Court deems fit. 2 The substantive proceedings have before the Court for some time. An originating application was filed by Vantage on 4 March 2013. Subsequently Vantage filed an amended originating application on 4 February 2015. In summary, Vantage, a creditor of JHC Development Group Pty Ltd ACN 082 315 393 (in liquidation), has sought orders pursuant to s 588G(2) and s 588M of the Corporations Act 2001 (Cth) against Mr Huang – the director of the company – in respect of debts owed by that company to Vantage. I note that this litigation has been hard fought, including vacation of the trial dates, current part hearing of the proceedings, and several interlocutory applications presently in the Court. Application for adjournment 3 At the hearing Mr Beacham for the respondent, Mr Huang, sought an adjournment of the hearing on the basis of the precipitousness of the interlocutory application. An order that a matter be adjourned in particular circumstances is an exercise of the Court's discretion: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [5]; I declined to order an adjournment in this case because: In light of the urgency of the hearing, it is clear that the applicant seeks relief only on an interim basis. That the applicant recognises the limitation of any relief granted in the present circumstances is clear from submissions of Mr Stunden for Vantage at the hearing, particularly to the effect that should I be minded to grant interim relief the respondent would seek directions to have the matter heard on a full interlocutory basis (transcript p 2 ll 19-23). Although I accept that there was very limited time or capacity for the respondent to prepare for the hearing, it is also clear that the respondent was not taken completely unawares by the application. In this respect I note that: o Mr William Sun, the solicitor for Mr Huang, was able to assemble an affidavit in excess of 300 pages to meet the interlocutory application; an affidavit which was filed prior to the hearing today; and o in his affidavit sworn on 21 April 2015 Mr Smouha, the solicitor for Vantage, gave evidence of correspondence between the parties since 17 April 2015 in which Mr Smouha foreshadowed that Vantage would be applying to the Court for freezing orders. 4 I now turn to the issue whether Vantage has substantiated its claim for interim relief. Interim relief by way of freezing orders 5 Vantage relies on r 7.32 and r 7.34 of the Federal Court Rules 2011 (Cth) ("Federal Court Rules"). These rules provide as follows: 7.32 Freezing order (1) The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied. (2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets. Note: Without notice is defined in the Dictionary. … 7.34 Order may be against person not a party to proceeding The Court may make a freezing order or an ancillary order against a person even if the person is not a party in a proceeding in which substantive relief is sought against the respondent. 6 Further, Vantage relies on r 7.35 which relevantly provides: 7.35 Order against judgment debtor or prospective judgment debtor or third party (1) This rule applies if: … (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the Court; or (ii) for a cause of action to which subrule (3) applies—another court. … (4) The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur: … (b) the assets of the judgment debtor, prospective judgment debtor or another person are: (i) removed from Australia or from a place inside or outside Australia; or (ii) disposed of, dealt with or diminished in value. (5) The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that: … (b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment. (6) Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so. 7 The reason for the reliance by Vantage on both rules is that the interlocutory relief sought is against not only the respondent Mr Huang, but against JHC Mum Pty Ltd and DZY Pty Ltd, being two trustee companies in which Mr Huang has an interest but which are not parties to these proceedings. Submissions of Vantage Holdings 8 The key reason for the urgency of the interlocutory application by Vantage Holdings is that, in summary, it claims that Mr Huang has deliberately dissipated or transferred assets to defeat any success Vantage may have at trial. The effect of this, it claims, is that if Vantage is successful at trial in June 2015, such victory would be hollow in the absence of assets against which a judgment could be enforced. 9 In this respect, and relying on the decision in Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250 at [35], Vantage claims that it can substantiate a case for freezing orders by reference to three limbs of r 7.35, namely: 1. That the applicant has a good or reasonably arguable case on both the law and the facts. 2. That there is a danger that a prospective judgment will be wholly or partially unsatisfied because the assets of the prospective debtor will have been disposed of or their value diminished. This limb has two parts: a. The identification of the relevant assets; and b. Establishing whether there is a real danger of the prospective judgment being unsatisfied. 3. That the balance of convenience favours the grant of the freezing orders. 10 In relation to the first limb Vantage submits, in summary that it is not in dispute that the applicant has a bona fide claim, with a prospect of success. 11 In relation to the second limb Vantage relies on the affidavit sworn 22 April 2015 of Mr Shane O'Brien, the Managing Director of Vantage. In that affidavit Mr O'Brien swore that in a telephone conversation with Mr Huang on 17 March 2015, Mr Huang: 4. … said words to the effect that: (a) he would not be affected business wise or financially if he loses the case; (b) he had no land in his name for the applicant to 'get from him'; and (c) he will restructure his group, so that he becomes a 'passive investor'. 12 Mr O'Brien swore in his affidavit, in summary, that as a result of the said telephone conversation, he became concerned about Mr Huang's asset position and caused the applicant to instruct its solicitors to conduct searches of Mr Huang's assets. 13 In relation to the searches conducted by Vantage's solicitors of Mr Huang's assets, Vantage relies on the affidavit of Mr Levi Smouha sworn 21 April 2015 to the effect that: Mr Huang held an interest in fourteen properties in Queensland at the commencement of these proceedings. Mr Huang has, since the commencement of these proceedings, sold ten of the fourteen properties in which he held an interest, and significantly has not acquired and retained any additional real properties in Queensland in his name during that time. Four properties in which Mr Huang still holds an interest are presently on the market for sale, with one of those properties – at 23 Karabil Street, Kingston in Queensland – being currently "under offer". There is evidence before the Court that settlement of the contract of sale of this property is expected to take place on 1 May 2015. Since Mr Huang's application for security for costs was refused on 4 March 2015 (Vantage Holdings Pty Ltd v Huang [2015] FCA 155) Mr Huang has sold a number of properties, including two properties to JHC Mum Pty Ltd ("JHC Mum") and DZY Pty Ltd ("DZY"). The property transferred to JHC Mum was 36 Ewing Road, Logan Central for a consideration of $360,000 and the property transferred to DZY Pty Ltd was 5 Hayden Street, Riverview for a consideration of $160,000. The transfers of the properties to JHC Mum and DZY were at undervalue. That this is so is apparent from a property schedule annexed to the affidavit of Mr Huang sworn herein on 28 August 2014 in which Mr Huang deposed that the Logan Central Property was worth $600,000 and the Riverview property was worth $270,000. The remaining properties Mr Huang owns as a joint tenant with his wife, and are encumbered. Of the remaining properties, property searches annexed to Mr Smouha's affidavit indicate that: o the total estimated value of those properties is approximately $896,000; o Mr Huang's share of equity in those property can be estimated at approximately $393,000; and o Mr Huang's share of equity in the two properties recently sold to JHC Mum and DZY can be estimated at approximately $389,000. 14 In relation to the third limb Vantage submits that the balance of convenience favours it because: Vantage and its directors Mr Shane O'Brien and Mr Glenn Carmichael have all offered undertakings as to damages. The undertakings of Mr Carmichael and Mr O'Brien have value in the order of $230,000 to $255,000, as Mr Carmichael has equity in a real property in Queensland in the nature of $160,000 to $185,000 and Mr O'Brien has offered to provide a bank guarantee to support his undertaking to the value of $70,000. Mr Huang is adequately protected by these undertakings. There is a real risk that Mr Huang will dissipate his remaining assets. There is no requirement for there to be evidence of a positive intention on the part of Mr Huang to frustrate judgment in order for the freezing orders to be made: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 80 ATR 449 at [10]. Vantage's claim has faced constant opposition from Mr Huang and as a result Vantage has already incurred costs of approximately $500,000 in this proceeding. There is a real risk that if relief is not granted Vantage will be left with an unenforceable judgment. Vantage seeks a freezing order only until further order of the Court. The trial is currently listed to commence on 2 June 2015. The proposed freezing orders provide the usual "carve outs", which allow Mr Huang to continue his business and maintain his general living standards to what Vantage submits to be a reasonable level. Submissions of Mr Huang 15 Mr Huang strongly opposed the relief sought by Vantage pursuant to this interlocutory application. In summary Mr Beacham for Mr Huang submitted as follows: A freezing order is an exceptional interlocutory remedy which involves a significant interference in the personal affairs of a person or entity: SBA Music Pty Ltd v Hall [2014] FCA 1038 at [15]. This urgent application for freezing orders has been brought at short notice notwithstanding that, according his own evidence, Mr O'Brien has been concerned at the possible dissipation of assets since 17 March 2015. The material before the court suggests rather that the applicant has adopted a relatively leisurely pace in seeking this relief. Urgent interim relief is not warranted on these facts. Although Mr Huang has sold a significant number of properties, the evidence of Mr Sun is that those properties were actually on the market for a long time. Mr Huang is a property developer in the business of purchasing and selling real property. The Court should require more compelling evidence than an alleged conversation between Mr Huang and Mr O'Brien to justify the intervention of freezing orders. In any event, an innocent interpretation can be placed upon the comments of Mr Huang to Mr O'Brien on 17 March 2015. At the hearing Mr Beacham submitted as follows in respect of the conversation to which Mr O'Brien deposed at paragraph 4 of his affidavit: MR BEACHAM: Paragraph 4. So he says, allegedly, that he would not be affected business-wise or financially if he loses the case. Not a statement that he intends to go about dissipating assets in any untoward way; a statement of fact. Perhaps a statement that – well, we don't know. Subparagraph (b) seems to be the one that they rely upon. HER HONOUR: I think (c) is also relied upon by the applicants. MR BEACHAM: Can I come to (c). He had no land in his name for the applicant to get from him. That does not suggest that – and it's obviously incorrect for a start, because he does. He still does. But he doesn't say he's going to get rid of it, and ..., he will restructure his group so that he becomes a passive investor. The point about that, your Honour, is again he doesn't say he's going to dissipate assets. The point about that is, that the compelling inference about what he's talking about there is that it doesn't matter to Mr Huang, or that it's not going to interfere with Mr Huang if he goes bankrupt, because he will become a passive person in his corporate group. So, in other words, he's not talking about his assets; he's talking about the role that he will play in his corporate group. It is clear from Mr Smouha's affidavit of 21 April 2015 that most of the properties sold by Mr Huang have been to unrelated persons or entities. There is a serious issue as to whether the undertakings offered by Vantage are of real value. The onus lies with Vantage to establish that the undertakings offered have value: K.C. Park Safe (Brisbane) Pty Ltd v Cairns City Council [1997] 1 Qd R 497 at 506. The quality of an undertaking is an issue to be considered in determining the balance of convenience: Cambridge Credit Corporation Limited (Receiver Appointed) v Surfers' Paradise Forests Limited (1977) Qd R 261 at 263-264. There is no evidence before the Court that the sale of properties by Mr Huang to JHC Mum and DZY were at undervalue. In any event, if the Court were minded to grant an interim injunction, the injunction should be limited to restraint of Mr Huang's share of the proceeds of sale of properties. There is no justification for relief against JHC Mum or DZY. Consideration 16 In the recent decision Vasiliades Gordon J set out useful principles concerning the operation of r 7.35 of the Federal Court Rules and matters the Court can relevantly take into account in determining whether freezing orders are warranted, both against a party to litigation and third parties. In particular her Honour observed as follows: 35 There are three limbs in relation to imposing a freezing order on a prospective judgment debtor in the circumstances of the present case. First, the Court must be satisfied that the applicant has a good or reasonably arguable case on both the law and the facts: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [68] and Rule 7.35(1) of the FCR. Second, there must be a danger that a prospective judgment will be wholly or partly unsatisfied because the assets of the prospective judgment debtor or another person are removed from Australia or from a place inside or outside Australia or the assets are disposed of, dealt with or diminished in value: Rule 7.35(4) of the FCR. Finally, the balance of convenience must favour the granting of the orders: BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 at [22] and the cases there cited. 36 Other relevant principles may be summarised as follows: (1) The freezing order is not intended to operate as a form of security in advance: Cardile at [51]; Goumas v McIntosh [2002] NSWSC 713 at [23]; (2) A freezing order may be granted even though there is no evidence of the respondent's positive intention to frustrate a judgment: Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014 at [10]; (3) However, there must be facts from which the Court can infer a real risk or danger that the respondent will dispose of or otherwise deal with his assets in a way that the applicant will not be able to satisfy any judgment obtained against the respondent: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; Third Chandris Shipping Corporation v Unimarine S.A. [1979] QB 645; Hua Wang Bank Berhad at [8]; (4) Depending on the circumstances, the interests of justice may support the grant of a freezing order to prevent the dissipation of assets pending the hearing of an action, even though the risk of dissipation is less probable than not: Patterson at 325; Hua Wang Bank Berhad at [9]; and (5) The Court may take into account the prior conduct of a respondent, the value of the prospective judgment and the assets or income available to the respondent to satisfy that judgment. Although the Court must be cautious before making freezing orders, it must be borne in mind that their very purpose is "to ensure that assets are not alienated so as to avoid or frustrate the [C]ourt process": Deputy Commissioner of Taxation v Gashi (2010) 27 VR 127 at [33] citing Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd [2009] VSC 418 at [34]. 37 Where a freezing order or an ancillary order is sought against a third party, the second limb described at [35] above is different: Rule 7.35(5) of the FCR. The Court must be satisfied, having regard to all the circumstances, that: (1) there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because: (a) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or (b) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or (2) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment of the Court, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment. 17 In this case, having regard to the three limbs of r 7.35 to which her Honour referred in Vasiliades, I am satisfied that freezing orders ought be made against Mr Huang, JHC Mum and DZY. I have reached this view for the following reasons. 18 First, I do not accept the submission that there is no justification for making orders against JHC Mum and DZY. On the evidence before the Court these companies are clearly associated with, and most likely under the control of, Mr Huang. Indeed Mr Huang appears to be a controlling shareholder and director of JHC Mum, whereas his wife is the sole shareholder of DZY. To the extent that Mr Huang has caused property to be transferred to these companies it is clear that these properties remain under his, or his wife's, control. Further, while the evidence suggesting that the properties were transferred to JHC Mum and DZY at an undervalue is, in my view, thin, as pointed out by Mr Stunden this evidence was that of Mr Huang in respect of his own properties. I am prepared to accept this evidence, at this stage, as supportive of the orders sought against JHC Mum and DZY by Vantage. 19 Second, while Mr Huang may be in the business of property development, and while there is evidence before the Court to support a finding that properties sold by him had been on the market for some time, I consider it cause for concern that, as pointed out by Mr Stunden for Vantage, Mr Huang has not acquired properties to replace those he has sold. I consider that the apparent diminution of Mr Huang's real estate portfolio in Queensland is suggestive of a process of dissipation of assets, which could have the effect of frustrating any successful judgment of Vantage against him. 20 Third, no submission was put to me on behalf of Mr Huang that the conversation with Mr O'Brien, as deposed by Mr O'Brien, actually did not take place. There is an outstanding issue as to whether the conversation was without prejudice (transcript p 7 ll 14-29), however the fact of the conversation does not appear to be in dispute. At this interim stage I am prepared to accept the evidence of Mr O'Brien that Mr Huang made the comments deposed by Mr O'Brien in paragraph 4 of his affidavit. With respect, I do not accept the submissions on behalf of Mr Huang that the comments should be attributed a neutral complexion. I consider it reasonable to draw an inference not only that the comments of Mr Huang were made to Mr O'Brien, but that those comments indicated a strategy of Mr Huang to ensure that any success of Vantage in this litigation would be hollow. 21 Fourth, while I note Mr Beacham's submission concerning the passage of four weeks from the conversation between Mr Huang and Mr O'Brien and yesterday's hearing, I do not think it precludes Vantage from claiming urgency in respect of this application. It does not appear to be in dispute that the sale of Mr Huang's property at 23 Karabil Street, Kingston is expected to settle on 1 May 2015, which is a little over a week away. Further, I note that a considerable amount of material has been assembled by the legal representatives for Vantage in support of this application, which has clearly taken some time and resources. 22 Fifth, I note Mr Beacham's submission concerning the value of the undertakings as to damage offered by Vantage. There is no evidence before the Court to indicate what, if any, damage Mr Huang could suffer from the imposition of freezing orders. There is evidence however as to the apparent value of the undertakings. In this context I consider that Mr Beacham's submission that the quality of the undertakings is part of the assessment of balance of convenience has merit. On the material before me, there appears to be a risk that the applicant, if successful at trial, may nonetheless have a hollow victory. Even if the timing of his alienation of assets is completely coincidental, there is evidence that Mr Huang has transferred away extensive assets since these proceedings were commenced. On balance I consider that the value of the undertakings offered by Vantage are reasonable, measured against the risk of receiving a judgment which it cannot enforce and the fact that the trial is now less than two months away. 23 Sixth, I accept Mr Beacham's submission that any restraint on Mr Huang so far as concerns his share of assets, be specifically limited to his share of assets. In my view it is appropriate to make orders which reflect this position. 24 Seventh, the specific amounts submitted by Vantage as being reasonable as "carve outs", that is moneys available to Mr Huang by way of ordinary living expenses (up to $1,000 per week) and reasonable legal expenses (up to a maximum amount of $200,000 except by leave of the Court) appear to me to be somewhat arbitrary. I note, however, that the draft freezing order proposed by Vantage does not specifically prevent Mr Huang dealing with or disposing of his assets in the ordinary course of his business, or discharging obligations bona fide and properly incurred in respect of the four properties in which Mr Huang retains an interest subject to notice to Vantage. I also note that the draft order proposed by Vantage contemplates that the amounts specified in the "carve outs" be varied. Certainly Mr Huang did not submit that the specific amounts for living expenses and legal expenses were inadequate. With some hesitation I am prepared to make the freezing orders including the specific amounts "carved out", to which I have referred. I will do so however, on the basis that there be specific liberty to apply. 25 Finally, while Vantage seeks costs in the interlocutory application filed 22 April 2015, the terms of the freezing orders contemplate that costs be reserved. In my view, at this stage, it is a better course to order that costs be reserved. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate: Dated: 23 April 2015