Creative Promotions Pty Ltd v Wu
[2022] FCA 1150
•21 September 2022
FEDERAL COURT OF AUSTRALIA
Creative Promotions Pty Ltd v Wu [2022] FCA 1150
File number(s): NSD 797 of 2022 Judgment of: THAWLEY J Date of judgment: 21 September 2022 Date of publication of reasons: 12 October 2022 Catchwords: PRACTICE AND PROCEDURE – ex parte application for freezing order – whether prima facie case for relief exists – whether there exists danger of risk of dissipation of property in order to frustrate a prospective judgment – whether balance of convenience favours orders sought - application granted Legislation: Corporations Act 2001 (Cth) ss 79, 182
Federal Court of Australia Act 1976 (Cth) s 23
Federal Court Rules 2011 (Cth) Div 7.4
Division: General Division Registry: New South Wales National Practice Area: Other Federal Jurisdiction Number of paragraphs: 13 Date of hearing: 21 September 2022 Counsel for the Applicant: Mr S Hartford-Davis Solicitor for the Applicant: Clayton Utz ORDERS
NSD 797 of 2022 BETWEEN: CREATIVE PROMOTIONS PTY LTD ACN 057 222 278
Applicant
AND: DI WU
First Respondent
HONG SHAO
Second Respondent
ORDER MADE BY:
THAWLEY J
DATE OF ORDER:
21 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.Leave be granted to the applicant to file in Court:
a.Affidavit of Mark Joel Isaacs affirmed 21 September 2022; and
b.Affidavit of Barbara Jo-Anne Isaacs affirmed 21 September 2022.
Service
2.The time for service of the Originating Application be abridged to 5.00pm on 22 September 2022.
3.The applicant serve on the respondents:
a.the Originating Application filed on 20 September 2022;
b.the Affidavit of Mark Joel Isaacs affirmed on 21 September 2022 (along with Exhibit MJI-1);
c.the Affidavit of Barbara Jo-Anne Isaacs affirmed on 21 September 2022 (along with Exhibit BJI-1); and
d.a copy of these orders,
by 5.00pm on 22 September 2022.
Freezing orders
4.There be freezing and ancillary orders against the respondents in the form of orders attached as Annexure A.
Leave to file and serve subpoenas
5.Pursuant to rule 24.01 of the Federal Court Rules 2011 (Cth) the applicant have leave to issue a subpoena to produce documents on:
a.National Australia Bank Limited substantially in the form set out in Annexure “B” to the Originating Application, returnable on 19 October 2022;
b.Westpac Banking Corporation substantially in the form set out in Annexure “C” to the Originating Application, returnable on 19 October 2022;
c.HSBC Bank Australia Limited substantially in the form set out in Annexure “D” to the Originating Application, returnable on 19 October 2022;
d.Bank of China Limited (Australian offices) substantially in the form set out in Annexure “E” to the Originating Application, returnable on 19 October 2022;
e.Bank of China (Australia) Limited substantially in the form set out in Annexure “F” to the Originating Application, returnable on 19 October 2022;
f.Western Union Business Solutions (Australia) Pty Limited ABN 24 150 129 749 substantially in the form set out in Annexure "G" to the Originating Application, returnable on 19 October 2022.
Listing
6.The matter be listed for further hearing on 21 October 2022 before the Duty Judge, or as otherwise advised by the Court.
7.The parties have liberty to apply on 24 hours’ notice.
ANNEXURE A
PENAL NOTICE – FREEZING ORDER
TO: DI WU
HONG SHAO
IF YOU (BEING THE PERSON BOUND BY THIS ORDER):
(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: DI WU
HONG SHAO
This is a 'freezing order' made against you on 21 September 2022 by Justice Thawley at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order.
THE COURT ORDERS THAT:
INTRODUCTION
1.(a) The application for this order is made returnable immediately.
(b)The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 5 PM 22 September 2022.
2.Subject to the next paragraph, this order has effect up to and including 21 October 2022 (the Return Date). On the Return Date at 21 October 2022 there will be a further hearing in respect of this order before the Duty Judge or as advised by the Court.
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 any director, officer, partner, employee, agent or other 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 any director, officer, partner, employee, agent or other 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$2,551,762.24 (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,
(a)your assets include:
(i) all your assets, whether or not they are in your name and whether they are solely or co-owned;
(ii) 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
(iii) the following assets in particular:
A.the property known as 40 Pleasant Avenue, East Lindfield NSW 2070, with title reference Lot 11 of Section 2 in Deposited Plan 758373 or, if it has been sold, the net proceeds of the sale;
B.any money in the following bank accounts:
1)BSB 112-879, account number 028777727 in the name of Di Wu held with St George Bank;
2)BSB 082-171, account number 200237475 in the names of Di Wu and Hong Shao held with the National Australia Bank;
3)BSB 082-171, account number 200942326 in the names of Di Wu and Hong Shao held with the National Australia Bank;
4)BSB 082-171, account number 917498533 in the names of Di Wu and Hong Shao with the National Australia Bank.
5)BSB 342-018, account number 139691412 in the name of Hong Shao held with HSBC Bank Australia; and
6)account number 100001400983008 / local account number 900011603 in the name of Hong Shao held with Bank of China;
7)account number 100001400979965 in the name of Hong Shao held with Bank of China.
(b)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)at or before the further hearing on the Return Date (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 world wide, 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; and
(b)within 10 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.
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 to your 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.
EXCEPTIONS TO THIS ORDER
10.This order does not prohibit you from:
(a)paying up to $2,000 a week on your ordinary living expenses;
(b)paying $100,000 on your reasonable legal expenses of these proceedings;
(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 subparagraphs 10(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 2 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$2,551,762.24 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 to paragraph 12(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 to the Court hearing the application on the Return Date.
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 16(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 or 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 cause to be filed and served upon the respondent copies of:
(a)this order;
(b)the application for this order for hearing on the Return Date;
(c)the following material in so far as it was relied on by the applicant at the hearing when the order was made:
(i) affidavits (or draft affidavits);
(ii) exhibits capable of being copied (other than confidential exhibits);
(iii) any written submission; and
(iv) any other document that was provided to the Court.
(d)a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;
(e)the originating process, or, if none was filed, any draft originating process produced to the Court.
3.As soon as practicable, the applicant 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 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.
5.If this order ceases to have effect, the applicant will promptly take all reasonable steps to inform in writing anyone 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.
6.The applicant will not, without leave of the Court or as otherwise required by law, 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 respondent or the respondent's assets.
SCHEDULE B
AFFIDAVITS RELIED ON
Name of deponent Date affidavit made
1.Mark Joel Isaacs 21 September 2022
2.Barbara Jo-Anne Isaacs 21 September 2022
NAME AND ADDRESS OF APPLICANT'S SOLICITORS
The applicant's solicitors are:
Clayton Utz
Level 15, 1 Bligh StreetSydney NSW 2000
Attention: Jonathan Slater
[email protected]+61 2 9353 4715
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from transcript)THAWLEY J:
By an originating application filed on 20 September 2022, the applicant seeks relief against the first respondent, Mr Wu, and his wife, the second respondent, Mrs Shao.
The originating application seeks declarations including that:
(1)Mr Wu breached his employment contract and contravened s 182 of the Corporations Act2001 (Cth);
(2)Mrs Shao was “involved in” Mr Wu’s contraventions of s 182 of the Corporations Act within the meaning of s 79 of the Corporations Act; and
(3)Mrs Shao contravened s 182(2) of the Corporations Act.
The originating application also sought interlocutory relief, including the making of freezing orders. The interlocutory application for freezing orders and certain other interlocutory relief was heard on an ex parte basis today.
The evidence on the application reveals the following background. This account of the facts, as disclosed by the evidence, is made solely for the purpose of determining whether the interlocutory ex parte relief should be granted.
Creative Promotions is in the business of developing and distributing promotional and advertising products and solutions to its clients. It is a family-owned business with five employees and annual revenue of about three to four million dollars.
Mr Wu was employed by Creative Promotions for approximately 15 years from late 2005 until 31 August 2022. Throughout his employment, Mr Wu held the position of Overseas Production Assistant with responsibility for managing and coordinating orders with overseas suppliers. In that capacity, he had responsibilities for that part of Creative Promotions’ business which required it to procure products from overseas suppliers, primarily based in China.
Since early August 2022, the directors of Creative Promotions, Mr Mark Joel Isaacs and Mrs Barbara Jo-Anne Isaacs, have engaged in an investigation into approximately 220 “jobs” between 2016 and 2022 in which Mr Wu was involved in the procurement of goods from overseas suppliers. The investigation was laborious. Mr and Mrs Isaacs believe that they have uncovered a systematic fraud extending at least since 2012 and involving the theft of approximately AU$2.5 million. The investigation is ongoing. It is unnecessary to set out in detail the various conclusions reached by Mr and Mrs Isaacs. It is sufficient to observe that evidence has been adduced which indicates, at a prima facie level and if not otherwise explained and answered, that various genuine invoices have been digitally altered and that some false invoices have been created.
The evidence also indicates, at a prima facie level, that amounts were paid from the applicant’s funds to an account in China with the Bank of China to an account-holder named Cheng Yunfei. The evidence indicates, at a prima facie level, that Mr Wu may have created an employment contract between Creative Promotions and Cheng Yunfei. According to Mr Isaacs, no such person has ever been employed by the Creative Promotions. The evidence also indicates that foreign currency payments totalling almost US$550,000 has been made from Creative Promotions’ Australian bank accounts to a Bank of China account in the name of Cheng Yunfei.
The evidence indicates that a series of payments have been made from a Bank of China account in the name of Cheng Yunfei to a US dollar account at a Bank of China branch in Australia in the name of Mrs Shao. The evidence shows that Mrs Shao has made a series of payments from her US dollar Bank of China account in Australia to an Australian dollar Bank of China account in Australia and that various payments have been made out of the Australian dollar Bank of China account into a joint account in the name of Mrs Shao and Mr Wu. Some of the entries in the bank accounts statements suggest that some of these funds were used in relation to the house which Mrs Shao and Mr Wu appear to have owned at the time.
The evidence on this application also indicates that, when Mr Wu became aware of the investigation which Mr and Mrs Isaacs had commenced, he: (a) deleted the contents of his email account; (b) deleted a folder entitled Di Wu, on the company’s “P drive” folder; and (c) accessed a database and made substantial alterations to cost sheets. The evidence indicates that, when Mr Wu was asked to return his company laptop, he stated that it had been stolen. Mr Isaacs provided evidence that he considers certain physical archives have disappeared from the office of Creative Promotions.
It is against that background that Creative Promotions seeks freezing and ancillary orders against Mr Wu and Mrs Shao. The form of the freezing orders broadly follows the Freezing Orders Practice Note (GPN-FRZG).
The Court’s power to make freezing orders derives from s 23 of the Federal Court of Australia Act1976 (Cth) and Div 7.4 of the Federal Court Rules 2011 (Cth). In summary, an applicant must show:
(1)a prima facie case for relief;
(2)that there is a danger that the prospective judgment will be wholly or partly unsatisfied because the assets of the prospective judgment creditors will be disposed of, dealt with or diminished in value; and
(3)that the balance of convenience favours granting the order.
I am satisfied of each of those matters on the evidence which has been adduced on this application. For those reasons, I make the orders sought by the applicant.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley. Associate:
Dated: 21 September 2022
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