FEDERAL COURT OF AUSTRALIA
Shirota v Liu (No 2) [2024] FCA 187
File number(s): NSD 885 of 2023 Judgment of: JACKMAN J Date of judgment: 29 February 2024 Catchwords: PRACTICE AND PROCEDURE – interlocutory application for freezing orders – where impending sale of property beneficially owned by respondents – application successful Legislation: Federal Court Rules 2011 (Cth) rr 7.33, 7.35 Cases cited: Shirota v Liu [2023] FCA 1429 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 20 Date of hearing: 29 February 2024 Counsel for the Applicants: Mr J Hewitt SC and Mr C Clarke Solicitor for the Applicants: Sunfield Chambers Solicitors & Associates Counsel for the First Respondent: Mr C Freeman Solicitor for the First Respondent: Goodwin & Co Lawyers Counsel for the First Interested Party: Mr S Hu Solicitor for the First Interested Party: Amberlake Lawyers Counsel for the Second Interested Party: Ms Z Hu Solicitor for the Second Interested Party: Dentons ORDERS
NSD 885 of 2023 BETWEEN: KAZUKI SHIROTA
First Applicant
YOSHIKO SHIROTA
Second Applicant
AND: ZHIDONG LIU
First Respondent
YUAN ZHOU
Second Respondent
AP FINANCIAL SERVICES GROUP LIMITED
Third Respondent
PACHIRA INVESTMENTS PTY LTD ACN 611 291 028
First Interested Party
PRIME CAPITAL SECURITIES PTY LTD ACN 623 195 871
Second Interested Party
ORDER MADE BY:
JACKMAN J
DATE OF ORDER:
29 FEBRUARY 2024
THE COURT ORDERS THAT:
Upon the applicants, by their counsel, giving the undertakings set out in schedule A to the interlocutory application dated 26 February 2024:
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’, 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.
3.If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.
4.If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.
5.Subject to further order of this Court:
(a)In respect of the property at 4 Drovers Way Lindfield NSW 2070 (the Lindfield Property), Pachira Investments Pty Ltd ACN 611 291 028 (Pachira) must not:
(i)enter into any agreement for the sale of the property;
(ii)cause or permit the transfer of the mortgage over the property registered by Prime Capital Securities Pty Ltd ACN 623 195 871 (Prime);
(iii)further encumber the property,
unless…
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- AGLC
- Shirota v Liu (No 2) [2024] FCA 187
- Case
- [2024] FCA 187
- Decision Date
CaseChat Overview and Summary
The court was required to determine whether the applicants had demonstrated a sufficient risk of prejudice to their interests if the sale of the properties and shares proceeded without the imposition of freezing orders. The applicants needed to show that there was a serious issue to be tried and that the balance of convenience favoured the granting of the orders. The court considered the nature of the applicants' claims, the evidence provided regarding the value of the assets, and the potential for dissipation of assets by the respondents.
After considering the evidence and submissions, the court found that the applicants had demonstrated a serious issue to be tried and that the balance of convenience favoured the grant of the orders. The court was satisfied that the applicants had shown a real risk that the respondents would dissipate their assets, thereby prejudicing the applicants' interests. The court also noted that the respondents had not provided adequate assurances to protect the applicants' interests.
Accordingly, the court granted the applicants' interlocutory application, issuing freezing orders that prevented the respondents from selling certain properties and shares without prior notice to the applicants. The court also ordered that the proceeds of any sale be held in a trust account until further order of the court. The court made these orders subject to the applicants providing certain undertakings, including an undertaking as to costs.
Orders
Orders of the court
Upon the applicants, by their counsel, giving the undertakings set out in schedule A to the interlocutory application dated 26 February 2024:
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’, 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.
3. If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.
4. If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.
5. Subject to further order of this Court:
(a) In respect of the property at 4 Drovers Way Lindfield NSW 2070 (the Lindfield Property), Pachira Investments Pty Ltd ACN 611 291 028 (Pachira) must not:
(i) enter into any agreement for the sale of the property;
(ii) cause or permit the transfer of the mortgage over the property registered by Prime Capital Securities Pty Ltd ACN 623 195 871 (Prime);
(iii) further encumber the property,
unless Pachira provides the applicants with at least three (3) business days prior notice in writing.
(b) If Prime enters into a contract for the sale of the Lindfield Property:
(i) Within two (2) business days, Prime is to provide the applicants with a copy of the exchanged contract via email to the applicants' solicitors at Dickson.luo@schambers.com.au.
(ii) Prime is to provide the applicants (via email to the applicants' solicitors at Dickson.luo@schambers.com.au) with written notice three (3) business days prior to the settlement of sale of the Lindfield Property attaching a copy of the proposed settlement statement including the amount to be paid from the sale proceeds for the discharge of the mortgage over the Lindfield Property held by Prime.
(c) Upon the sale of the Lindfield Property:
(i) if Prime is the recipient of the proceeds of sale, then Prime must pay the proceeds of sale, after paying for reasonable expenses incurred for the purpose of the sale and discharging the mortgage over the property held by Prime, into an interest-bearing account in the name of Sunfield Chambers Solicitors & Associates to be held on trust for Pachira (with Pachira identified as the beneficiary) until further order of the court.
(ii) if Pachira is the recipient of the proceeds of sale, then Pachira must pay the proceeds of sale, after paying for reasonable expenses incurred for the purpose of the sale and discharging the mortgage over the property held by Prime, into an interest-bearing account in the name of Sunfield Chambers Solicitors & Associates to be held on trust for Pachira (with Pachira identified as the beneficiary) until further order of the court.
(d) No one is to access the account referred to in paragraph 8(c) above without further order of the court.
(e) In respect of any shares Zhidong Liu holds in Pachira, including shares held beneficially, Zhidong Liu must not:
(i) enter into any agreement for the sale of the shares;
(ii) otherwise deal with his shares or cause or permit anyone else to deal with his shares, including without limitation by encumbering your shares;
unless he provides the applicants with at least three (3) business days prior notice in writing.
(f) In respect of any interest Zhidong Liu has in the Pachira Unit Trust, including any beneficial interest, Zhidong Liu must not:
(i) enter into any agreement for the sale of his interest;
(ii) otherwise deal with his interest or cause or permit anyone else to deal with his interest, including without limitation by encumbering your interest;
unless he provides the applicants with at least three (3) business days prior notice in writing.
(g) In respect of any shares Yuan Zhou holds in Pachira, including shares held beneficially, Yuan Zhou must not:
(i) enter into any agreement for the sale of the shares;
(ii) otherwise deal with his shares or cause or permit anyone else to deal with his shares, including without limitation by encumbering your shares,
unless he provides the applicants with at least three (3) business days prior notice in writing.
(h) In respect of any interest Yuan Zhou has in the Pachira Unit Trust, including any beneficial interest, Yuan Zhou must not:
(i) enter into any agreement for the sale of his interest;
(ii) otherwise deal with his interest or cause or permit anyone else to deal with his interest, including without limitation by encumbering your interest,
unless he provides the applicants with at least three (3) business days prior notice in writing.
6. For the purposes of paragraphs 5(a) and 5(e) to 5(h) above, notice is to be provided by email to the applicants’ solicitors at dickson.luo@schambers.com.au.
7. Subject to paragraph 8, Yuan Zhou and Pachira must, within 10 working days of this order being made (or within such further time as the Court may allow) provide the applicants with copies of all communications sent or received concerning any proposal to sell the Lindfield Property.
8. Paragraph 9 applies if you wish to object to complying with paragraph 7 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(a) have committed an offence against or arising under an Australian law or a law of a foreign country; or
(b) are liable to a civil penalty.
9. You must:
(a) disclose so much of the information required to be disclosed to which no objection is taken; and
(b) 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
(c) file and serve on each other party a separate affidavit setting out the basis of the objection.
10. This order will cease to have effect if you:
(a) pay the sum of $9,000,000 into Court; or
(b) 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
(c) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.
11. 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.
12. If this order ceases to have effect pursuant to 10 above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact.
13. The costs of the interlocutory application dated 26 February 2024 be costs in the cause.
14. 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. 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.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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