Thomas Borthwick & Sons (Australia) Pty Ltd v Chi Wah Eric Yip

[2014] QDC 72

[2014] QDC 72

DISTRICT COURT OF QUEENSLAND

CIVIL JURISDICTION

JUDGE R S JONES

No 1182 of 2014

THOMAS BORTHWICK & SONS
(AUSTRALIA) PTY LTD  Applicant

and

CHI WAH ERIC YIP and ANOTHER  Respondent

BRISBANE

10.00 AM, THURSDAY, 3 APRIL 2014

EX TEMPORE JUDGMENT

HIS HONOUR:   This proceeding is concerned with an application for what is essentially a freezing order under rule 260A of the Uniform Civil Procedure Rules (UCPR).  Following submissions by Mr Somers, counsel for the applicant, I made orders in the terms sought with only a very minor change.  These are my reasons for making those orders.  The applicant is Thomas Borthwick & Sons (Australia) Pty Ltd.  The first respondent is one Chi Wah Eric Yip, and the second respondent is Mackay Accommodation Proprietary Limited, the second respondent being a company wholly owned and controlled by the first respondent.  Further, it appears that the second respondent may from time to time have conducted business under the name of Thomas Borthwick & Sons (Aust).  As can readily be seen, it is a name remarkably close to that of the applicant.  For reasons which will become clear, that of course is no coincidence.

The application for the freezing orders is ancillary to an application for damages brought urgently under rule 11(c) of the UCPR. The quantum of the damages sought is within the jurisdiction of this court.

In the affidavit of Mr Tonomura, the following facts are stated and allegations made.  Mr Tonomura is the group accountant manager of Nippon Meat Packers Australia Proprietary Limited.  The applicant in these proceedings is a wholly owned subsidiary of that company.  In his capacity as the group accounting manager of Nippon, he is responsible for a number of matters including overseeing the first applicant’s accounting staff, the design and implementation of internal control policy for Nippon and all its subsidiaries including the first applicant, and also for monitoring the accounting practices and records of Nippon and all its subsidiaries including the applicant. 

The first respondent was an employee of the applicant, employed in the capacity as administration manager.  It would appear that prior to that, for a short period of time, he had also been employed as a sub-contractor for reasons which are not necessary to go into here.  In his capacity as an administration manager of the applicant, the first respondent was responsible for, among other things, preparing information including profit and loss statements and balance sheets, managing the applicant’s accounts payable and accounts receivable and overall control over its payroll system, management and maintenance of the payroll.  His responsibilities also extended to involvement in human resources for salary and staff, including the maintenance of employee records. 

On or about 28 February 2014, what appeared to be a number of irregularities came to the attention of another person employed by Nippon and eventually this information was passed on to Mr Tonomura.  Mr Tonomura spoke with the first respondent on 6 March 2014 in respect of these irregularities and as a consequence of that discussion, the first respondent’s employment with the applicant was terminated on the same day.  Since that date, there has been ongoing internal and external auditing going on, investigating a number of apparent irregularities that occurred whilst the first respondent was in control of the various financial aspects of the applicant referred to above.

The affidavit of Mr Tonomura swears to what were essentially three methods of fraud that it is asserted the first respondent used to have moneys the property of the applicant channelled into a number of accounts under the control of the first respondent.  These included creating a number of false employees and entering their names into the payroll register.  They are referred to by Mr Tonomura as ghost employees.  He also included payments to other non-existent employees referred to by Mr Tonomura as past employee payments.  When I say non-existent, I mean not employed by the company at the time the payments were made. 

Mr Tonomura also identifies a number of what he describes as “unlawful payments” whereby the first respondent would have moneys the property of the applicant channelled into various accounts controlled by him.  I should note here that when I say controlled they were accounts that were, in fact, created by him in the first place.  These other unauthorised payments involved a number of transactions involving relatively small amounts with overpayments to himself for holiday entitlements, but also there were significant amounts including, for example, a payroll tax refund of in excess of $81,000 which was directed into one of his accounts.  Often these payments were claimed under the guise of the trading name of the second respondent.

In the affidavit of Mr Tonomura a summary has been prepared which summarises the various transactions to which I’ve referred.  The calculated amount of moneys channelled into accounts established and controlled by the first respondent totals $413,545.15 as of today’s date.  As I say, investigations are ongoing.  In total, 10 accounts established by the first respondent have so far been identified.  One of those accounts is with the Bank of China (Hong Kong) Limited.  By reference to various authorities that I don’t intend to set out in these reasons, broadly speaking, I need to be sufficiently satisfied to a number of matters.  First, that the applicant has an existing cause of action within the jurisdiction of the court.  I’m clearly satisfied that that is the case.  Next, there can be little room for doubt that the first respondent has assets within Australia. 

Also, on the affidavit material before me, including the exhibits attached thereto, I am satisfied that the applicant has a good, arguable case against the first and second respondent in the sense that, in my view, it has been established that the applicant has established a solid prima facie case against those parties.  The evidence of Mr Tonomura is highly incriminating.  Given the level of the alleged fraud involved, involving, as it did, dishonesty at a very high level and involving, as it did, a sophisticated scheme designed to channel funds through various accounts and thereby disguise the fraudulent behaviour, I am also satisfied that there is an unacceptable risk, or, to put it another way, a real danger that the first respondent would attempt to remove his assets from the jurisdiction of the court and thereby subject the applicant to an unacceptable risk that any eventual judgment in it’s favour would not be able to be satisfied. 

There can be no question of any delay on the part of the applicant.  They have reacted to these matters in a very timely fashion.  The undertaking as to damages should also, in my opinion, offer adequate protection for other third parties such as the banks that have mortgages over the real property owned by the first respondent.  In the ordinary course of events, one would not expect their interests in those properties to be affected by the proposed orders.

Apart from the nature of the dishonesty alleged against the first respondent, other matters have also led me to determine those matters in favour of the applicant.  In the affidavit of Mr Tonomura, it is identified that to the best of his knowledge the first respondent is currently unemployed and prior to working with the first respondent he had worked in New Zealand and Hong Kong and is, in fact – was, up until more recently, a permanent resident of New Zealand.  He also holds what is described as a Hong Kong special administrative region passport.  He resides in Australia under a regional sponsored migration scheme visa.  It would also appear that he has placed one of his properties on the market for sale. 

I should finally note that the orders prevent the first respondent from paying moneys out of or disposing of assets of two companies being Yip Family Business Proprietary Limited and Sydney Street Mall Consultant Proprietary Limited save for and except for in the ordinary course of those companies’ businesses.  Those companies have not yet been linked to any fraudulent acts on the part of the first respondent.  However, the first respondent’s conduct has, as I’ve said, only been recently uncovered as late as 28 February of this year and both an internal and external audits are being conducted. 

Given these factors and the extent and nature of the alleged fraud to which I’ve already referred and what would appear to be the readiness of the first respondent to create and use companies for means of channelling funds into various accounts, I consider it appropriate to include those two companies in the orders in circumstances where their ability to trade should not be affected by the orders, and the undertaking as to damages would extend to cover any undeserved losses those companies might suffer as a consequence of the operation of these orders.

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