Firmtech Aluminium Pty Ltd v Xie - [2022] NSWSC 1031

Supreme Court

New South Wales

Medium Neutral Citation: Firmtech Aluminium Pty Ltd v Xie [2022] NSWSC 1031
Hearing dates: 28 July 2022
Decision date: 28 July 2022
Jurisdiction: Equity
Before: Meek J
Decision:
Freezing orders made

Catchwords:
CIVIL PROCEDURE — Interim preservation — distinction between an asset preservation order and an injunction to preserve an asset
CIVIL PROCEDURE — Interim preservation — Freezing orders — alleged scheme making use of a corporations to misappropriate or divert funds, property or corporate opportunities from its proper channels — application of principle in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 that evidence in relation to the establishment of a prima facie case can also support the inference of a risk of dissipation of assets — Onus of establishing risk on applicant — Ex parte freezing orders ought be of limited duration with an early as practical return date — Applicant duty of full and frank disclosure

Legislation Cited:
Corporations Act 2001 (Cth), ss 180, 181, 182, 232, 236, 237, 241, 1317H
Uniform Civil Procedure Rules 2005 (NSW), Pt 25 Div 2

Cases Cited:
Allsop Investments Pty Ltd v Jerkovic (No 2) [2022] NSWSC 7
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Drama Unit Pty Ltd v Timothy James Cook as Administrator of Fearndale Holdings Pty Ltd [2019] NSWCA 276
Goulburn International PL v GEMI 160 Pty Ltd [2021] NSWSC 796
Ip v Chiang [2019] NSWSC 1549
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319

Texts Cited:
Practice Note SC Gen 14

Category: Procedural rulings
Parties: Firmtech Aluminium Pty Ltd (First Plaintiff)
Zhaohui Xu (Second Plaintiff)
Xiaoyan Xie (First Defendant)
Jiamin Zhang (Second Defendant)
Firmtech Aluminum Pty Ltd (Third Defendant)
Logikal Façade Solutions Pty Ltd (Fourth Defendant)
JKZ (Australia) Pty Ltd (Fifth Defendant)
Firmtech Group Pty Ltd (Sixth Defendant)
LGK Holdings Pty Ltd (Seventh Defendant)
Western Spring Projects Pty Ltd (Eighth Defendant)
Z & X Investment Holding Pty Ltd (Nineth Defendant)
Haj (Australia) Pty Ltd (Tenth Defendant)
JHN Projects Pty Ltd (Eleventh Defendant)
Representation:
Counsel:
A Ogborne / P Lin (Second Plaintiff / Applicant)
Solicitors:
Pope & Spinks (Second Plaintiff / Applicant)

File Number(s): 2022/221710

Ex Tempore Judgment

HIS HONOUR: The application before the Court is a summons seeking a raft of orders, the most urgent of which are freezing orders. The first plaintiff, (Firmtech), is a company which is involved in manufacture and distribution of aluminium products. The second plaintiff (Mr Xu) is a director of Firmtech and a fifty percent shareholder. The first defendant (Ms Xie) is the sole director of all of the defendant companies. The second defendant (Mr Zhang) is the other director and fifty percent shareholder of Firmtech.
Slightly confusingly, but explained on the evidence, is the fact that one of the defendant companies is another company with a name very similar to Firmtech, the only difference being that Firmtech has two i's in the word “Aluminium” and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NSWSC 1031
Decision Date: 28 July 2022

CaseChat Overview and Summary

Firmtech Aluminium Pty Ltd brought proceedings against Xie, alleging that Xie had engaged in a scheme to misappropriate funds and divert property from its proper channels. The dispute was heard in the Federal Court of Australia. The primary issue before the court was whether the applicant had established a risk of dissipation of assets sufficient to justify the grant of an ex parte freezing order, and whether the distinction between an asset preservation order and an injunction to preserve an asset was relevant in the context of such applications.

The court considered the principles set out in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, which held that evidence sufficient to establish a prima facie case could also support the inference of a risk of dissipation of assets. The court emphasised that the onus was on the applicant to establish the risk of dissipation. The court further noted that ex parte freezing orders should be of limited duration, with an early return date set where practicable, and that the applicant had a duty to make full and frank disclosure of all material facts.

In this case, the court found that the applicant had discharged the onus of establishing a risk of dissipation of assets, as the evidence presented was sufficient to infer that there was a real risk that the defendant would dissipate the assets if the order was not granted. The court also concluded that the distinction between an asset preservation order and an injunction was not determinative in this context, as the primary concern was the preservation of assets to ensure a fair outcome in the proceedings. Accordingly, the court granted the application for an ex parte freezing order, subject to the conditions outlined above.

The final orders included a freezing order restraining Xie from disposing of or dealing with specified assets, with an early return date set to allow the defendant to make representations. The court also imposed a duty on the applicant to make full and frank disclosure of all material facts in relation to the application.

Orders