Self Care Corporation Pty Ltd v Green Forest International Pty Ltd
[2021] FCCA 129
•5 February 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Self Care Corporation Pty Ltd v Green Forest International Pty Ltd [2021] FCCA 129
File number(s): SYG 2771 of 2019 Judgment of: JUDGE BAIRD Date of judgment: 5 February 2021 Catchwords: PRACTICE AND PROCEDURE - application in a case brought by the fourteenth respondent to discharge previous orders for surrender of passport - whether the Court should discharge the order - principles discussed - application allowed, subject to conditions Legislation: Corporations Act 2001 (Cth) ss.1323(1)(j) – (k) Cases cited: Australian Securities and Investments Commission v Wiggins, Renard Jones [1998] FCA 1727; (1998) 90 FCR 314
Bayer A.G v Winter & Others [1986] 1 WLR 497
Talacko v Talacko [2010] FCAFC 54; (2010) 183 FCR 311; (2010) 268 ALR 266
Number of paragraphs: 84 Date of last submission/s: 28 September 2020 Date of hearing: 23 July 2020 and 28 September 2020 Place: Sydney Counsel for the Applicants Mr J Hennessy SC Solicitor for the Applicants: Gilbert + Tobin Counsel for the Fourteenth Respondent: Mr M Heath Solicitor for the Fourteenth Respondent: Matthews Folbigg ORDERS
SYG 2771 of 2019 BETWEEN: SELF CARE CORPORATION PTY LTD
First Applicant
SELF CARE IP HOLDINGS PTY LTD
Second Applicant
AND: GREEN FOREST INTERNATIONAL PTY LTD
First Respondent
YAOAN CHEN
Second Respondent
YILIN TRADING PTY LTD (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
JUDGE BAIRD
DATE OF ORDER:
5 FEBRUARY 2021
THE COURT ORDERS THAT:
1.The applicants and the fourteenth respondent are to bring in short minutes of order giving effect to these reasons by 10 February 2021.
2.Any debate about orders be dealt with at the case management hearing on 17 February 2021.
3.Stands over for further hearing any question of costs at 10:15am on 17 February 2021.
REASONS FOR JUDGMENT
JUDGE BAIRD
INTRODUCTION
This is an application by the fourteenth respondent, Mr Yulin Wang, for the return of his passport (Passport Return), surrendered and since held by his legal representatives pursuant to an ex‑parte order of the Court made on 18 March 2020 (March Passport Order), and varied as to the identity of the legal representatives by order made by consent on 14 August 2020. The March Passport Order has a consequential effect that Mr Yulin Wang is restrained from travelling outside Australia for so long as the order remains in effect.
At the time of the March Passport Order, Mr Yulin Wang was not party to the proceeding, however by orders of the Court made on 10 March 2020 (Third Freezing Order), his bank accounts and Australian assets had been frozen up to the Sum of A$5,102,750, and he had been ordered to provide an assets disclosure affidavit. Mr Yulin Wang affirmed an asset disclosure affidavit on 24 March 2020 (Yulin Wang #1). By orders made 23 July 2020, he was joined to the proceeding as the fourteenth respondent.
Mr Yulin Wang is a Chinese citizen, born in the People’s Republic of China, and is currently resident in Australia. He is now 64 years old. He moved to Australia in about 2010, apparently following his wife, Ms Yiping Yang (the ninth respondent), and their son, Kefei (Emilio) Wang (the fifth respondent), each of whom was also born in China, is a Chinese citizen, and was resident in Australia from about 2009 until relatively recently. Ms Yang is now 62 years old, and Emilio Wang is about 34 years old. In circumstances I expand upon below, Emilio Wang and Ms Yang each departed Australia for China, Emilio Wang on about 31 January 2020, and Ms Yang on about 24 February 2020.
The May Application
Mr Yulin Wang seeks the Passport Return further to an application in a case dated 15 May 2020 and filed on 19 May 2020 (May Application) on behalf of himself, and Ms Yang. At filing, the May Application was supported by affidavits made by each of them. When filed, the Application also sought orders to discharge or vary the asset freezing orders earlier made by the Court against each of them, which applications to discharge or vary have since been abandoned. On 28 September 2020 (September hearing), I made orders dismissing the abandoned paragraphs of the May Application, and Ms Yang’s application for relief. The Application proceeded on behalf of Mr Yulin Wang only.
The May Application first came on for hearing before me on the afternoon of 23 July 2020, when time was taken with argument about whether the Court should permit cross‑examination of Mr Yulin Wang and Ms Yang, and its extent, and argument seeking to set aside notices to produce addressed to them. The hearing did not conclude, and the May Application was adjourned part‑heard to the September hearing.
Up until the September hearing Mr Yulin Wang and Ms Yang had indicated their intentions to read and rely on their affidavits filed in support of the May Application. At the 23 July hearing both Mr Yulin Wang and Ms Yang personally appeared (by audio-visual means - Mr Yulin Wang from Brisbane, and Ms Yang apparently from Shanghai) in anticipation of being required for cross‑examination on the hearing of the May Application. At the September hearing, however, Mr Heath, counsel for Mr Yulin Wang, informed the Court that Mr Yulin Wang would not be relying on the filed affidavits (I interpose here to record that Mr Hennessy SC, counsel for the applicants - the Self Care Companies, tendered the affidavits).
At the September hearing Mr Heath submitted that as a matter of the application of principle, if it was previously appropriate to order the surrender of Mr Yulin Wang’s passport and thereby restrict his travel, the continuance of the order requiring surrender of passport is no longer appropriate. His client no longer pressed any factual bases for the Passport Return – such as supporting his wife during anticipated hospitalisation in China. Thus, the position pursued by Mr Yulin Wang at the September hearing is a significant change from the earlier, factual, bases on which the May Application for the Passport Return orders was brought, and argument foreshadowed on 23 July 2020.
BACKGROUND – THE PARTIES AND THE SUBSTANTIVE PROCEEDING
It is appropriate at this juncture to provide some background about the proceeding and relevant parties.
The applicants and the freezeframe products
The first applicant, Self Care Corporation Pty Ltd, is a personal care consumer product company that develops, distributes and markets cosmeceutical skincare products many of which are distributed and sold under the primary brand “freezeframe”. The second applicant, Self Care IP Holdings Pty Ltd, is the intellectual property holding company for certain trade marks relating to the business of Self Care, and the licensor of certain trade marks to Self Care. Together I refer to the applicants as the Self Care Companies.
The Self Care Companies allege that more than 30 products are marketed under the “freezeframe” primary brand (the freezeframe products, also referred to in the proceeding as the “freezeframe Products”); the freezeframe products are manufactured and packaged in Australia, distributed, offered for sale and sold in Australia via mainstream pharmacies and online, and exported for sale through authorised distributors. Since 2010, freezeframe products have been distributed by or on behalf of Self Care outside Australia, including in China, Hong Kong, Singapore and the United Kingdom.
One of the freezeframe products is a clinical skincare (eye cream) product called freezeframe REVITALEYES. The name “FREEZE FRAME”, and other of the freezeframe products’ names, including “freezeframe revitalEYES” are protected by Australian registered trade marks owned by one or other of the Self Care Companies. Self Care is also the registered proprietor of a number of Chinese registered trade marks for the names of freezeframe products. Self Care claims copyright in, and ownership of, literary and artistic works embodied in freezeframe products’ packaging including logo, artwork, and product inserts, and depictions on its website and in other advertising.
Relevant respondents
The respondents can be described as comprising a number of groups of related and associated entities and individuals.
Emilio Wang
Emilio Wang has been party to the proceeding since its commencement on 25 October 2019. He is subject to restraining orders and to the First Freezing Orders I describe below at [29]. Emilio Wang is or was at material times the sole director or a director of each of the third respondent, Yilin Trading Pty Ltd, the fourth respondent, Freezeframe China Co Pty Ltd (in liquidation), and the seventh respondent, EPAQ International Pty Ltd, and of the Hong Kong incorporated company, Freezeframe Co. Ltd (Freezeframe HK), and alleged to be involved in the day to day management and operations of each of them, the eighth respondent, Quanjian Pty Ltd, and the twelfth respondent, Zuren International Pty Ltd. In turn, the thirteenth respondent, Emilio Wang’s wife, Siqi Huo, is the owner and director of Zuren, and alleged to be involved its day to day management.
Emilio Wang is a business associate of the sixth respondent, Mr Pascal Skelin. With Emilio Wang, Mr Skelin is a director of each of Freezeframe China Co and EPAQ International. Mr Skelin was also formerly the sole director of Freezeframe HK, before Emilio Wang became the sole director.
Ms Yiping Yang
Ms Yang was joined to the proceeding as the ninth respondent on 23 July 2020, when Mr Yulin Wang was joined as a party. Ms Yang is subject to the Second Freezing Orders I describe below at [33]. Ms Yang is the former owner and director of Quanjian (until 16 March 2018, when the tenth respondent became the sole owner and director of that company), and is alleged to be involved in the day to day management of each of Yilin Trading, Freezeframe China Co, Quanjian, and Zuren.
Mr Yulin Wang
Mr Yulin Wang is the sole director and owner of Quanjian Holdings Pty Ltd, an Australian incorporated company. Quanjian Holdings is the sole shareholder of Yilin Trading (the third respondent, the sole director and secretary of which is Emilio Wang), and a shareholder (as to 49 percent) of EPAQ International Holdings Pty Ltd (of which Emilio Wang and Mr Skelin are the directors). In turn, EPAQ International Holdings is the sole shareholder of Freezeframe China Co (the fourth respondent), which respondent company Emilio Wang, Mr Skelin, and Mr Yulin Wang placed in liquidation in January 2020 (see below at [31]). Freezeframe China Co is also the sole shareholder of Freezeframe HK, of which Emilio Wang is, and Mr Skelin was, a director.
Self Care Companies’ allegations in the proceeding
Broadly speaking, and non-exhaustively, this proceeding concerns allegations by the Self Care Companies against 16 respondents (comprising bodies corporate and individuals) variously of infringements of the Self Care Companies’ intellectual property rights (trade mark and copyright) in relation to freezeframe products, authorisation of such infringements, passing off, breaches of confidence, breaches of fiduciary duties, and/or by certain alleged conduct engaging in misleading and deceptive conduct under s.18 of the Australian Consumer Law, being party to a common design, being involved in, and being knowingly concerned in, and liable for, various of such activities. That alleged conduct comprises one or more of:
(a)the manufacture, distribution, marketing, sale and/or supply of counterfeits of freezeframe products in Australia and/or in China;
(b)the purchase for resale, sale, supply and distribution of possibly genuine freezeframe products in Australia and/or in China inconsistently with the rights and/or limitations on rights of distribution granted by Self Care, and/or in breach of an agency agreement; and
(c)conduct relating to registrations for freezeframe products with the Chinese Food and Drug Administration (CFDA).
The Self Care Companies inter alia allege the above identified bodies corporate and individuals are involved variously in the supply and arrangements for the supply of cosmetics and other personal care products (including freezeframe products and counterfeit freezeframe products) in Australia and/or China.
The Self Care Companies allege that in about October 2016, at the request of Emilio Wang and/or Mr Skelin, following their introduction to Self Care’s chief executive, Self Care appointed EPAQ International (of which they were the directors) as its non-exclusive agent, and from around March 2017, as its non‑exclusive representative agent via its designated local affiliate Freezeframe HK, to market and supply freezeframe products in China on behalf of Self Care. From about February 2018, Freezeframe China Co replaced EPAQ International as the purchaser of the products under this agency agreement.
Further to the above, until about April 2019, Self Care supplied freezeframe products (including the REVITALEYES product) first to EPAQ International, and thence to Freezeframe China Co, including at substantial discount prices, and authorised them to sell and distribute the supplied freezeframe products in China. As part of those arrangements, and further to representations the Self Care Companies allege Emilio Wang and Mr Skelin made to Self Care, inter alia Self Care appointed Freezeframe HK as its China representative office, and in order to maximise sales of freezeframe products in China by Freezeframe China Co, EPAQ International, and Freezeframe HK, Self Care supplied confidential information to them and to Emilio Wang and Mr Skelin for specific purposes, ceased its own sales directly to customers in China, and limited its sales in Australia of bulk stock that could be purchased by third parties and resold in China. Self Care alleges that it gave no authorisation to any of the respondents or their associates to sell or distribute the products supplied pursuant to the agency arrangement in Australia, or to manufacture the products.
The Self Care Companies allege that in or around January or February 2019 the commercial relationship between Self Care and Emilio Wang, Mr Skelin, EPAQ International, Freezeframe China Co and Freezeframe HK broke down, and in around March 2019 Self Care ceased all supply of freezeframe products to those persons and entities.
Subsequently, investigations were conducted on behalf of Self Care which revealed that alleged counterfeit versions of the freezeframe products were being sold and distributed in Australia and China, and also re-exported from Australia to China, and that freezeframe products designated for China have been re-exported for covert resale in Australia.
The Self Care Companies seek declaratory, and injunctive relief, and pecuniary relief, including by way of compensatory damages, or an account of profits, additional damages, and, as against certain respondents equitable damages or compensation.
Specifically, in relation to the allegations made in relation to Mr Yulin Wang, in addition to the declarations and permanent injunctions sought against all the respondents (and thus, including Mr Yulin Wang) further to the allegations broadly summarised above, the Self Care Companies seek declarations that he (with Ms Yang, Emilio Wang, and Mr Skelin) is liable for breaches of fiduciary duties owed to the Self Care Companies. The Self Care Companies also seek orders that he (and each of Ms Yang, Emilio Wang, Mr Skelin, and certain other respondents) take all necessary steps to deliver up to the Self Care Companies copies of all original documents and certificates relating to registrations for freezeframe products with the CFDA.
The Self Care Companies claim that their losses are very substantial, and based on their investigations, and information disclosed and documents produced in response to various orders and read and/or tendered in Court have foreshadowed to the Court since at least 12 February 2020 that their compensatory damages alone will exceed A$5 million.
Some interlocutory steps in the proceeding
This proceeding was commenced on 25 October 2019 by way of urgent application for ex-parte relief against the first to sixth respondents (including Yilin Trading, Freezeframe China Co, Emilio Wang, and Mr Skelin).
That day I made orders restraining Emilio Wang and the 5 other respondents then named from dealing in freezeframe products, and counterfeit freezeframe products, from destroying records, orders requiring each of them to provide records and deliver up certain electronic storage devices to the applicants’ solicitors for investigation by an independent engaged computer expert, and orders that the restrained respondents make Norwich Pharmacal affidavits deposing as to their respective current and past holdings of freezeframe products, and customers, and when and how the respondents obtained possession of the products.
During November and December 2019, various interlocutory hearings took place and orders were made, including orders which facilitated the Self Care Companies’ access to documents recovered from electronic storage devices produced by certain of the restrained respondents.
First Freezing Orders
On 17 December 2019, I made asset freezing orders and disclosure orders against the third to seventh respondents - Yilin Trading, Freezeframe China Co, Emilio Wang, Mr Skelin, and EPAQ International (which company had been joined on 8 November 2019) (First Freezing Orders), in Emilio Wang’s case freezing moneys in identified accounts and his Australian assets up to an unencumbered total of A$1 million.
The then lawyers for Emilio Wang filed an address for service on 18 December 2019. On 24 December 2019, Emilio Wang affirmed an asset disclosure affidavit in purported compliance with the First Freezing Orders in his personal capacity, and as the director of Yilin Trading, and EPAQ International. He made a second affidavit affirmed on 29 January 2020. It was subsequently revealed that Emilio Wang’s asset disclosure affidavit was incomplete.
On 30 January 2020, the Court permitted limited cross-examination of each of Emilio Wang and Mr Skelin as to the adequacy of their asset disclosure affidavits. Although not disclosed to the Court on that date, Emilio Wang and Mr Skelin had each petitioned for bankruptcy. The Court was subsequently informed that a trustee in bankruptcy of the estate of Emilio Wang had been appointed on 29 January 2020. A trustee in bankruptcy of the estate of Mr Skelin was appointed on 18 February 2020. Further, on 15 January 2020, Emilio Wang and Mr Skelin (then directors of the company), and Mr Yulin Wang (a shareholder in another company, in turn the sole shareholder of Freezeframe China Co) had put Freezeframe China Co into liquidation.
Emilio Wang gave no indication to the Court, and did not inform his then lawyers, of the steps he had taken which are referred to above. Immediately after appearing in Court on 30 January 2020, Emilio Wang departed Australia, purportedly for China. Under cross-examination Emilio Wang volunteered the explanation that his father Mr Yulin Wang had lent him the money to buy a $4.6 million shareholding in a company he referred to as “Yuyi Network Technology Co. Ltd” (which company the evidence subsequently before the Court – including on the September hearing shows is formally named in English “Shanghai Yuyi Network Technology Co. Ltd” and is the company that is subject to the Second Freezing Orders I refer to below at [33/34]). Although under cross‑examination Emilio Wang had assured the Court that he would produce, or make arrangements prior to his departure for the production of, certain documents and electronic devices, no such production has occurred. Since then he has not participated in the conduct of the proceeding, and his lawyers have withdrawn their appearance.
Second Freezing Orders
On 12 February 2020, on application by the Self Care Companies, I made asset freezing orders up to the Sum and disclosure orders against Ms Yang, her brother (and Emilio Wang’s uncle), Mr Yixiang Yang, and two Chinese companies – Shanghai Yuyi Network Technology Co. Ltd and Shanghai Yilin Trading Co. Ltd - (Second Freezing Orders). The Second Freezing Orders were sought against the then third parties to ensure the efficacy of the First Freezing Orders. The Second Freezing Orders were made on evidence that funds from accounts held by Emilio Wang and Freezeframe China Co had been transferred to Ms Yang and other of the third parties after the commencement of this proceeding.
In accordance with the Second Freezing Orders, the orders and other Court documents were served on the relevant third parties on 13 February 2020, including, in relation to Ms Yang, on properties registered in her name at Cooper Street, Rochedale, Queensland (Cooper Street property), and Figtree Pocket, Queensland, and also (an hour earlier) on the real estate listing agent of the Cooper Street property. The Cooper Street property is also the registered office address and principal place of business for Yilin Trading, Freezeframe China Co, and EPAQ International.
Ms Yang’s conduct, limited asset disclosure and undisclosed financial transactions
Ms Yang affirmed an asset disclosure affidavit dated 19 February 2020 (First Yang affidavit) in which, inter alia, she attested that she resided at an address in Rochedale, Queensland (Rochedale residence). Ms Yang also attested that “I only bank with the NAB” (that is, National Australia Bank Limited (NAB)).
On 20 February 2020, pursuant to orders I made on 19 February 2020, documents were produced by NAB. Further to transactions disclosed in the produced documents, the orders were then served on Suncorp Metway Limited. In response, documents were produced by Suncorp, including copies of screen captures of CCTV footage relating to certain transactions effected at Suncorp’s bank branches at Sunnybank, Queensland (Sunnybank branch), and Mt Gravatt, Queensland (Mt Gravatt branch) which were shown to be by or at the direction of Mr Yulin Wang and Ms Yang.
The material produced variously from NAB and Suncorp, including the CCTV footage, and the results of other evidence placed before the Court, inter alia reveals that:
(a)Ms Yang obtained 2 bank cheques together totalling A$6,745,600 made out in her name for funds from a bank account she held at NAB, the first cheque on 28 January 2020, in the amount of A$5.1 million, and the second cheque on 4 February 2020, in the amount of A$1,645,600;
(b)each bank cheque was presented to Suncorp’s Sunnybank branch on the date obtained by Ms Yang and paid into a newly established Suncorp bank account in Ms Yang’s name (Suncorp Account #1);
(c)on about 4 February 2020, A$2.1 million was transferred outside Australia via Webtrade International Pty Ltd (a currency remitter with a significant presence in China), and to an account in China;
(d)on 13 February 2020, commencing approximately 2 hours after service of the Second Freezing Orders on the Cooper Street property real estate listing agent, and an hour after service on the Cooper Street property, Mr Yulin Wang and Ms Yang attended first the Sunnybank branch, and then approximately an hour later, the Mt Gravatt branch. With Mr Yulin Wang appearing to take primary responsibility for interacting with the bank tellers whilst Ms Yang attended to a young child accompanying her, they effected the following transactions:
(i)at Sunnybank branch, a transfer payment request dated 13 February 2020 in the amount of A$4.6 million from Ms Yang’s Suncorp Account #1 to Webtrade, and then a cash withdrawal of $10,000 from that account;
(ii)at the Mt Gravatt branch, a cash withdrawal of $10,000 from Ms Yang’s Suncorp Account #1;
(e)the next day, 14 February 2020, they effected further cash withdrawals from Ms Yang’s Suncorp Account #1, first at Sunnybank branch, of A$10,000, and secondly, at Mt Gravatt branch, of A$5,000.
At a case management conference before me held on 20 February 2020, at which Ms Yang was legally represented, counsel for the Self Care Companies informed the Court of apparent deficiencies in the First Yang affidavit. For example, Ms Yang did not disclose, when referring to her bank accounts, that some A$6.7 million had passed into, and then out of, certain of her accounts, any bank accounts held with Suncorp, or any of the cash withdrawals or transfers.
On 29 February 2020, in China, Ms Yang affirmed a second affidavit, filed 2 March 2020 (Second Yang affidavit), in which she attested that on about 24 February 2020 she had flown to China and was admitted into the Shanghai Tenth People’s Hospital for assessment and treatment. Ms Yang appears to have remained in China.
In the Second Yang affidavit Ms Yang gave an explanation for the transfer out of her NAB and Suncorp accounts of some, but not all, of the amounts I have referred to above. She says that in October 2019 she sold to Emilio Wang her shares in a Chinese company –“Yuyi Network Technology Co. Ltd” (that is, Shanghai Yuyi Network Technology Co. Ltd – see [33???] above), and that in November 2019 she received some A$4,678,017.40 in 4 payments into one of her NAB accounts. She says she wanted to repay “the loan” as soon as she could to minimise any interest payments, and transferred A$5.1 million into her Suncorp Account #1, and thence to “the nominated bank account of Yixiang Yang in order to meet my obligations under” a loan agreement made between “Yuyi Network Technology Co. Ltd” and another Chinese company.
At the September hearing the Self Care Companies read affidavits recording results of investigations that call into question the veracity of Ms Yang’s explanation. By reference to the above transactions, and the chronology of Court events and actions I have described, I observe that Ms Yang:
(i)received A$4.4 million (rounded) within a week of the Court injuncting Emilio Wang, and Yilin Trading on 25 October 2019 (see [33] above);
(ii)on about 28 January 2020, and 4 February 2020, moved A$6.7 million by way of bank cheques into Suncorp accounts she had just opened, and then moved A$2.1 million overseas – which transactions were effected shortly after the First Freezing Orders were made against Emilio Wang and others, and straddling the time Emilio Wang was ordered to attend Court for cross-examination about the adequacy of his asset disclosure affidavit, appeared, and then immediately flew to Brisbane and departed Australia for China; and
(iii)on her evidence, transferred A$5.1 million out of the jurisdiction to Yixiang Yang the day the Second Freezing Orders were served on her properties and real estate listing agent.
Ms Yang’s actions and their timing are, prima facie, remarkable, and in the light of the orders of the Court made in relation to her and her son, Emilio Wang, and in the light of his conduct, are concerning.
Contempt application
On 9 March 2020, the Self Care Companies filed an application in a case which charged Mr Yulin Wang, Ms Yang, and Emilio Wang with contempt, based on their actions in connection with the transfers I have described above, and which the Self Care Companies contend are in breach of the Second Freezing Orders. A date for the hearing of that contempt application has not yet been set. Counsel now contends it should be heard after the hearing of the substantive proceeding. Mr Heath, Mr Yulin Wang’s counsel, submits that the contempt application will involve matters that are at issue in the substantive proceeding.
I observe here that I canvassed with both parties’ counsel the possibility that the contempt application could be heard and determined by another judge, and possibly, subject to any judge being available, that that could be a matter that occurred before the hearing and determination of the substantive proceeding. Whilst, however, there may have been some enthusiasm for the proposal when I earlier canvassed it, by the time of the September hearing any enthusiasm had dissipated.
Third Freezing Order (Order relating to Mr Yulin Wang)
On 10 March 2020, I made the Third Freezing Order. I was satisfied that it was appropriate to make the orders against Mr Yulin Wang to support the efficacy of the Second Freezing Orders (and thus the First Freezing Orders). The evidence before the Court to which I have referred above satisfied me that Mr Yulin Wang, at a minimum, aided and abetted Ms Yang in the transfer and withdrawal of considerable funds, which actions, on their face, are in breach of the Second Freezing Orders. The photographic CCTV evidence satisfied me that Mr Yulin Wang assumed primary responsibility for engaging in the transfer and withdrawal of the funds at the Sunnybank and Mt Gravatt branches on 13 and 14 February 2020.
In support of the application for the order, Mr Williams, solicitor for the Self Care Companies, gave evidence of reverse proprietor searches conducted for Mr Yulin Wang on the Queensland Land Titles Register, and investigations that revealed Mr Yulin Wang was living at the Rochedale residence, in possession of a Mercedes-Benz E200, registered in his name, and that he appears to have been a joint tenant of property in Queensland.
The Third Freezing Orders included an order requiring Mr Yulin Wang to make an asset disclosure affidavit by 17 March 2020. Whilst he did not comply with the timetable ordered, his then solicitors made available a draft affidavit to the Self Care Companies’ legal representatives.
March Passport Order
On 18 March 2020, the Self Care Companies applied to the Court for the March Passport Order, expressing concern at the apparent inadequacy of Mr Yulin Wang’s proposed asset disclosure (as disclosed in the draft affidavit). In support of their application, the Self Care Companies contended that if Mr Yulin Wang was prepared to be a party to the transfer of moneys in apparent breach of the Second Freezing Orders, it may be reasonably inferred that he is prepared not to comply with Court orders if he is able to leave Australia. In his affidavit dated 18 March 2020 in support of their application, Mr Williams set out the Self Care Companies’ concerns and position, based on the affidavit evidence before the Court, including as follows:
[26]Yulin Wang does not appear to have sufficient assets in Australia to continue to fund his lifestyle. If he relies on Yiping Yang, he will have an incentive to return to China. The documents produced by Webtrade indicate that she has substantial cash in bank accounts in China in her name and in the name of another person whose surname is Yang (and may be a relative). Yulin Wang has been observed to have been involved in the transfers to this second account ... His interest in making these transfers has not been explained. The [Self Care Companies] are very concerned that he has some undisclosed entitlement to those funds (noting … his involvement in the corporate structure which includes the Third, Fourth and Seventh Respondents) which they will be unable to establish if he leaves the country and they are unable to cross-examine him about his disclosure affidavit.
Mr Williams deposed:
[30]The Applicants understand that this is an extraordinary order being sought to prevent Yulin Wang from leaving Australia until further order. The circumstances of this case, and in particular the defiance of Court orders demonstrated to date by Yulin Wang and his wife and son, is extraordinary. The Applicants seek the orders to ensure that they are not frustrated in their ability to investigate what assets Yulin Wang has in Australia and his role in the transfer of the substantial amounts by Yiping Yang to bank accounts outside Australia, as well as joining him to these proceedings.
[31]I do not expect there to be any material prejudice if Yulin Wang is (at least) temporarily prevented from leaving Australia. Yulin Wang has disclosed no business interests in China to which he is required to attend (consistent with him asserting he does not own any assets anywhere else in the world). If he has travel plans, these have not been disclosed to the Applicants. …
[33]If there is a dispute based on the further orders sought by the Applicants for leave to cross-examine Yulin Wang about his asset disclosure affidavit and/or the production of documents by him, this can be determined by the Court without the risk that Yulin Wang will leave the country in the meantime. Similarly, the final determination of this proceeding (with Yulin Wang as a party) and the hearing of the Applicants' contempt application against him may be dealt with without Yulin Wang leaving the country.
Thus the Self Care Companies submitted to the Court that they held grave concerns that Mr Yulin Wang would leave Australia unless restrained from doing so, and identified a pattern of behaviour by his family members whereupon receipt of Court’s orders they remove themselves from the jurisdiction, and that they have apparently secured their ability to live in China by means of transfer of funds from the jurisdiction in breach of two sets of freezing orders made in this proceeding.
The March Passport Order included an order re-listing the matter 2 days later, giving time to allow any application by Mr Yulin Wang, including as to the ongoing custody of his passport. There was no such application at that time. The passport was duly delivered to Mr Yulin Wang’s lawyers.
Around this time and shortly thereafter, the COVID-19 pandemic was declared, and, domestically, Australia effected lockdown.
THE MAY APPLICATION
Legal principles relevant to the present application
There is no dispute between the parties that the Court has power to restrain a person from leaving the jurisdiction before judgment, relevantly to Mr Yulin Wang’s circumstances, as an ancillary order in aid of an asset freezing order.
Mr Heath submits that the exercise of such a power should be rare, even where substantial grounds exist for its exercise. He has drawn my attention to several decisions and commentary which emphasise that any such order should be of limited duration – for example, as said by Fox LJ in Bayer A.G v Winter & Others [1986] 1 WLR 497 at 503:
It is an interference with the liberty of the subject, so that the period should be no longer than is necessary to enable the plaintiffs to serve the Mareva and Anton Piller orders which they have obtained, and endeavour to obtain from the defendant the information which is referred to in those orders …
see also, Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 623; general discussion in Biscoe et al, Freezing and Search Orders and Anton Piller Orders, (2008) at 3.45 ff, and cases discussed therein.
In the Federal Court of Australia interlocutory decision of Australian Securities and Investments Commission v Wiggins, Renard Jones [1998] FCA 1727; (1998) 90 FCR 314 at 320, Finkelstein J, commenting on an analogous power under the Corporations Act 2001 (Cth) – s.1323(1)(j) and (k) – to require delivery up of a passport and prohibit departure from Australia provided it is shown that it is “either necessary or desirable to do so for the purpose of protecting the interests of an aggrieved person”, observed that:
In my view the power to restrain a person from leaving the jurisdiction or requiring a person to deliver up his passport, which would have the same effect, is a power that should be exercised with great caution. I regard any restriction on a person's individual freedom of movement from one country to another as being a sufficiently serious interference with that person's personal rights and liberties that the power to impose the restriction should be exercised only in the most clear case. Thus, in circumstances such as the present where the orders are sought for the purposes of assisting a current investigation that is being conducted by the ASIC, unless it is shown that the investigation cannot properly or effectively be conducted in the absence of the person, the orders should not be made.
In Wiggins, His Honour was concerned that the orders that ASIC sought could require Mr Wiggins to remain in Australia for months, perhaps even a year or so, pending the determination of the originating application. He observed that the evidence before him fell far short of showing that it was either necessary or desirable for Mr Wiggins to remain in the jurisdiction for that period. In lieu of the injunctions that ASIC sought, his Honour accepted an undertaking from Mr Wiggins’ solicitor to retain the passport (for a shorter period than sought by ASIC), to enable ASIC to take certain investigative steps, including exercise of other statutory powers that may require the continued presence of Mr Wiggins in the jurisdiction. His Honour left open the possibility that ASIC could seek a further order requiring Mr Wiggins to remain in Australia beyond the one‑month period restrained. It is not clear from the material before me whether any further application was made, or if so, its outcome.
In a bankruptcy context, the Full Court of the Federal Court in Talacko v Talacko [2010] FCAFC 54; (2010) 183 FCR 311 at 326, observed of the weighing of considerations of the importance of the right to be free to travel against the prospect that the purposes of the Bankruptcy Act 1966 (Cth) would be defeated, or the bankruptcy be rendered nugatory if travel was not restrained, that:
The weighing of such considerations in the course of the exercise of judicial discretion is a task with which Courts are charged on many occasions.
The cases to which my attention was drawn demonstrate that the exercise of the Court's discretion is dependent on the evidence placed before it, and the particular circumstances of the matter.
The circumstances before the Court
I have set out above in the context of the proceeding some of the corporate and personal interrelationships, and conduct and actions (including financial transactions) of close members of Mr Yulin Wang’s family, and conduct and actions in which he appears to have participated.
In support of the application for Passport Return, Mr Heath, counsel for the fourteenth respondent, Mr Yulin Wang, tendered passages from Mr Williams’ affidavit dated 18 March 2020 and referred to various transcripts. He did not read or tender any other evidence.
Resisting the application for passport return, Mr Hennessy SC, senior counsel for the Self Care Companies, read Mr Williams’ affidavits of 9 March 2020, 18 March 2020, and 21 September 2020, the affidavit of Mark William Olsen of 24 June 2020, and tendered the affidavits of Ms Yang and Mr Yulin Wang referred to above, being their respective asset disclosure affidavits and affidavits filed in support of the May Application. He also referred to various transcripts and tendered a solicitor’s retainer letter.
Mr Yulin Wang’s assets disclosure
In Yulin Wang #1 (see [2] above), Mr Yulin Wang says he speaks no English but is fluent in Mandarin Chinese. He says in the period 2010-2013, he set up and ran a convenience store in Brisbane, and he has been retired since 2013. Mr Yulin Wang attests to having few assets, not substantial, the Mercedes, and that he set up a personal self-managed superannuation fund, of which fund Quanjian Holdings is the trustee. He states that on 15 January 2020, he transferred $540,000 to his wife’s NAB account for her to use to pay off a loan. Aside from the minimal assets disclosed, Mr Yulin Wang says he has no other assets or bank accounts located anywhere else in the world.
The evidence before the Court adduced by the Self Care Companies, however, also shows that Mr Yulin Wang appears to be in possession of a 2017 Maserati Levante, and that such vehicles have a current resale guide in the range of $139,990 to $179,990. Further, the evidence of funds transfer by members of Mr Yulin Wang’s close relatives and the involvement of Mr Yulin Wang is extensive, and has never been contradicted, nor explained by Mr Yulin Wang.
I note that on the evidence now before the Court, there is no suggestion by Mr Yulin Wang that he has any business operations that require his attendance in China (c.f., the assertions made by Mr Wiggins). Mr Yulin Wang does not press the personal reasons he and Ms Yang previously propounded in support of the May Application.
Submissions on behalf of Mr Yulin Wang
As I have outlined above (at [13] – [14]), and in seeking to apply the above principles, Mr Heath submits:
(a)whilst not disputing that the Court has power or that it may have been appropriate to order surrender of Mr Yulin Wang’s passport and travel restraint in aid of the asset freezing order, any such surrender and restraint should be for a limited time, and, in the present case, there is no time limit given on either the passport surrender or the restraint. Whilst a final hearing date has been set, there will likely be a considerable period before the proceeding is concluded;
(b)the Self Care Companies already have “their foot on the money”, or more precisely, any moneys in Accounts and any Australian assets (each as defined in the Third Freezing Order) held by Mr Yulin Wang up to the Sum. In addition, they have the benefit of the freezing order obtained against Ms Yang.
Whilst Mr Heath also criticises the Self Care Companies’ claim as being “as yet unquantified”, as I have observed above, a substantial claim has been foreshadowed and is ascertainable from material disclosed by various of the respondents in affidavits in response to Norwich Pharmacal orders, and produced by other persons. The present timetable provides that the Self Care Companies’ accounting expert file and serve their evidence in the immediate future;
(c)to date (as at the September hearing), the Self Care Companies had not sought to cross‑examine Mr Yulin Wang as to deficiencies in his asset disclosure affidavit;
(d)the effect of the reasons advanced by the Self Care Companies for the passport surrender risks going beyond the limited duration of such orders envisaged by the courts, and “carries the risk of abuse by becoming a form of leverage to compel a result”.
Mr Heath submits that either the passport should be released forthwith, or it should be released within a fixed time, and soon.
Whilst Mr Heath points to the Self Care Companies (as at the September hearing) not yet having cross-examined Mr Yulin Wang, or it appears formally made any separate application to do so, I observe that until the September hearing, Mr Yulin Wang and Ms Yang had indicated they would read their supporting affidavits, the Self Care Companies had put Mr Yulin Wang and Ms Yang on notice that they were required for cross-examination, and (as I describe above) when the application was before the Court on 23 July 2020 both Mr Yulin Wang and Ms Yang appeared by video-link in anticipation of being required for cross‑examination.
Mr Heath also observes first that Mr Yulin Wang did not oppose being joined to the proceeding as a party after a draft pleading was served on him, and he has, indeed, been joined, secondly, that there has been more than sufficient time for the investigative tasks envisaged by the Self Care Companies to have been carried out, and, thirdly, there has been some production in relation to a notice to produce.
Mr Heath says he is concerned that there may be occasions that Mr Yulin Wang will need to show his passport to some person or governmental authority. He has not provided, however, any concrete example of when this circumstance might arise. I am not prepared to speculate on whether there is any occasion where Mr Yulin Wang might require his passport to show to some governmental authority.
Submissions on behalf of the Self Care Companies
Mr Hennessy SC submits that it is important first, to frame the application for Passport Return. It must be viewed within the context in which the First, Second and Third Freezing Orders and the March Passport Order were made, the conduct of Emilio Wang and Ms Yang I have outlined above, and having regard to the basis on which the May Application was initially brought by Ms Yang and Mr Yulin Wang.
He submits that, as filed, the May Application inter alia sought discharge or variation of the Second and Third Freezing Orders. Mr Yulin Wang sought discharge or variation of the Order made against him on the basis that his bank accounts were not “tainted”, and that he had “no interest” in the accounts and properties of Ms Yang. As in part argued at the 23 July hearing, the May Application sought variation of the amounts exempted from the Second and Third Freezing Orders for expenses. No such contentions are now pressed.
Secondly, at the part-hearing of the May Application on 23 July 2020, the return of Mr Yulin Wang’s passport was linked to discharge of the Third Freezing Order. The affidavit evidence in support from Mr Yulin Wang was that he sought to join Ms Yang in China to support her during her operation (which she describes as surgery for “Acute Coronary Syndrome”), and that he was dependent on her for his living expenses, having no assets in the jurisdiction, and having transferred $540,000 of his superannuation to his wife earlier in 2020.
Mr Hennessy SC submits that the evidence of Mr Olsen read on behalf of the Self Care Companies calls into serious question the claims of Ms Yang and Mr Yulin Wang. Mr Olsen holds a management position in relation to intellectual property protection for the Self Care Companies, is based in Hong Kong, and is a fluent Mandarin speaker. Mr Olsen’s evidence calls into question:
(a)whether the significant funds that have been transferred by Ms Yang outside Australia ($6.7 million) are indeed repayment of a "loan"; and
(b)Ms Yang’s health claims, and the medical evidence she has put in support of the need for an operation, which, it transpires, requires her attendance at a hospital located over 1000 kilometres from Shanghai (where she claims to reside), and by a doctor whom the evidence indicates is, at most, an alternative health practitioner.
The Self Care Companies say that as time has passed they have become further concerned that Mr Yulin Wang has some undisclosed entitlement to the funds that have been either transferred to China or other undisclosed funds, noting the transfers of money I have described above, and to discrepancies in Mr Yulin Wang’s assets disclosure: whilst previously there was evidence that Mr Yulin Wang had an entitlement to a Mercedes 200E sedan, it now appears that there is also an undisclosed Maserati of which he appears to have possession.
Mr Hennessy SC also draws attention to the former claim by Mr Yulin Wang’s counsel that there should not be any concern that Mr Yulin Wang was a flight risk, because he had sworn that he fully intended to return for the hearing. However, Mr Hennessy SC observes, none of that evidence is now read by Mr Heath (although tendered by the Self Care Companies), indeed, the May Application is now put on a “skinny” basis.
Mr Hennessy SC urges me, in the strongest terms, that given the factual context, Mr Yulin Wang's attempt to withdraw from the evidence he had filed in support of the May Application and not face cross‑examination on material non‑disclosure is an extreme circumstance, and nothing in the authorities to which Mr Heath has directed my attention approaches the extreme factual circumstances before me. In short, the Self Care Companies submit no other relief than continuing to withhold Mr Yulin Wang’s passport will suffice.
CONSIDERATION
As the Full Court has articulated in Talacko, in the exercise of my discretion, I must engage in a weighing and balancing exercise. I consider that the concerns expressed in Bayer AG and in Wiggins, and the older authorities referred to in His Honour Justice Biscoe’s commentary, remain relevant and applicable. It is clear that orders such as the March Passport Order in the present case cannot continue on foot for such time as to become in a practical sense, detention in Australia. I accept the issue for my consideration comes down to whether, in the present circumstances, it is now appropriate in the exercise of my discretion, that the March Passport Order continue, be varied, or be discharged, and that Mr Yulin Wang’s solicitors be released from their undertaking to hold Mr Yulin Wang's passport.
Mr Yulin Wang has been unable to travel outside Australia using his surrendered passport since March 2020. Mr Yulin Wang’s wife and son appear to be in China, and they have given no indication of any intention to return to Australia in the near or further future. The movement of substantial funds into Ms Yang’s Australian accounts and then outside this jurisdiction is consistent with that lack of intention. It is reasonable to suppose that Mr Yulin Wang, if free to travel, would do so, and would follow his wife and son to China, and remain with them.
As a practical matter, because of the COVID-19 pandemic, and Australia’s restrictions on international travel since March 2020, the ability of most persons ordinarily permanently resident in Australia to travel overseas for personal reasons, at least if they wished to return to Australia in the near to medium future, has been extremely limited, and continues to be limited. This actuality, however, does not, in my opinion, provide a reason to continue to require the surrender of Mr Yulin Wang’s passport beyond such time as is reasonably required to investigate the completeness of Mr Yulin Wang’s asset disclosure, and full compliance with the Third Freezing Order, and that of entities in which he has or had an interest.
On the other hand, the evidence relied upon by the Self Care Companies persuades me that in Yulin Wang #1, Mr Yulin Wang did not appear to make full and complete disclosure in compliance with the Third Freezing Order. I am concerned, and deeply, as to the apparent contradictions in the evidence to which Mr Hennessy SC has drawn my attention.
As I foreshadowed at the resumed hearing in September 2020, whilst the March Passport Order should not remain on foot indefinitely, I consider that as a pre‑condition to the return of his passport, Mr Yulin Wang should submit to cross‑examination by the Self Care Companies on the adequacy of his asset disclosure affidavit, the extent of his compliance with the Third Freezing Order, and the compliance with orders to which companies of which he is, or was, an officer and/or shareholder, or otherwise holds or held an interest, are subject, and the compliance of entities in which those companies, in turn, hold or held an interest, and his involvement in the transfers of funds by his wife and son. So too, I consider that it is reasonable he should be cross-examined as to his affidavit filed in support of the May Application, and disclosures therein. That cross-examination cannot, however, be open ended.
Since the September hearing, and as foreshadowed, Mr Yulin Wang has made himself available for cross-examination, some cross-examination has occurred, and that cross‑examination will resume imminently.
Balancing application of the legal principles to which I have adverted, the evidence before me, the submissions of both counsel, and the passage of time, I consider that Mr Yulin Wang’s passport should be returned to him within a short time, and thereupon he and his solicitors should be released from continuance of the March Passport Order. That time should be reasonably sufficient to allow the Self Care Companies to complete the current cross-examination of Mr Yulin Wang on the adequacy of his asset disclosure, his participation in the transfer of funds outside the jurisdiction, and as I have said above. Additionally, that time should be sufficient to allow for the production of documents identified in the course of that cross-examination as able to be sourced by Mr Yulin Wang, or on his behalf.
It is appropriate in these circumstances that I direct the applicants and the fourteenth respondent bring in proposed short minutes reflecting my conclusions, and the matter be stood over should there be any dispute as to the orders.
I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Baird. Associate:
Dated: 5 February 2021
SCHEDULE OF PARTIES
SYG 2771 of 2019 Respondents
Fourth Respondent:
FREEZEFRAME CHINA CO PTY LTD
Fifth Respondent:
KEFEI WANG
Sixth Respondent:
PASCAL SKELIN
Seventh Respondent:
EPAQ INTERNATIONAL PTY LTD
Eighth Respondent:
QUANJIAN PTY LTD
Ninth Respondent:
YIPING YANG
Tenth Respondent:
TAOYU PAN
Eleventh Respondent:
KEFEI WANG
Twelfth Respondent:
ZUREN INTERNATIONAL PTY LTD
Thirteenth Respondent:
SIQI HUO
Fourteenth Respondent:
YULIN WANG
Fifteenth Respondent:
E-GO CHANNEL PTY LTD
Sixteenth Respondent:
AUSTRALIAN VITAMIN PLUS PTY LTD
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