FEDERAL COURT OF AUSTRALIA
Zhang v Zhang (No 2) [2025] FCA 98
File number(s): VID 610 of 2023 Judgment of: NESKOVCIN J Date of judgment: 19 February 2025 Catchwords: PRACTICE AND PROCEDURE – freezing orders – where material change of circumstances since the application for freezing orders – whether circumstances justified variation of freezing orders to require payment into court – order made for payment into court Legislation: Corporations Act 2001 (Cth) s 1335
Federal Court Rules 2011 (Cth) rr 7.32, 7.33, 19.01
Cases cited: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44
Deputy Commissioner of Taxation v Shi (2021) 273 CLR 235; [2021] HCA 22
Dura (Australia) Constructions Pty Ltd (in liq) v Hue Boutique Living Pty Ltd (2014) 49 VR 86 at 98-99; [2014] VSCA 326
Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23
Millenium Federation Pty Ltd v Bigjig Pty Ltd [2000] 1 Qd R 275, [1998] QCA 432
Sleiman v Afeich [2005] NSWSC 1063
Viterra BV v Shandong Ruyi Technology Group Company Ltd [2022] FCA 215
Waters v Commonwealth of Australia [2017] FCA 312
Yukong Line Ltd of Korea v Rendsberg Investments Corp of Liberia [2001] 2 Lloyd’s Rep 113
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 54 Date of hearing: 18 February 2025 Counsel for the Applicants & Cross Respondents S Maiden KC and V Bell Solicitor for the Applicants & Cross Respondents Gilbert + Tobin Counsel for the First & Second Respondents & Cross Claimants D Pritchard SC and N Kabilafkas Solicitor for the First & Second Respondents & Cross-Claimants Juris Cor Legal
Table of Corrections 24 February 2025 In paragraph 9(a), the words “valued at” and the amount have been deleted. In paragraph 9(b), the dollar amount has been replaced with “over $100 million”. In paragraph 9(c), the dollar amount has been replaced with “several millions of dollars”. In paragraph 22, the first dollar amount on line three has been replaced with “over $100 million” and the second dollar amount has been replaced with “several millions of dollars”. In paragraph 33, the word “over” and the dollar amount on line three has been replaced with “several millions of dollars”. ORDERS
VID 610 of 2023 BETWEEN: JAMES TENGHUI ZHANG (and others named in the Schedule)
First ApplicantAND: YIHAO (ERIC) ZHANG (and others named in the Schedule)
First RespondentAND BETWEEN: YIHAO (ERIC) ZHANG (and another named in the Schedule)
First Cross-ClaimantAND: JAMES TENGHUI ZHANG (and others named in the Schedule)
First Cross-Respondent
ORDER MADE BY:
NESKOVCIN J
DATE OF ORDER:
19 FEBRUARY 2025
THE COURT ORDERS THAT:
1.Pursuant to r 7.33 of the Federal Court Rules2011 (Cth), by 4.00pm on 6 March 2025 the First Applicant disclose by way of affidavit his assets within Australia, giving their value, location and details (including any mortgages, charges or…
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- Case
- [2025] FCA 98
- Decision Date
CaseChat Overview and Summary
The court found that the circumstances had indeed materially changed since the original freezing orders were made. The disclosure affidavit submitted by James revealed that his total assets were significantly higher than the amount covered by the freezing orders, indicating a potential risk of dissipation of assets. The court considered it necessary to prevent James from disposing of his actual assets to frustrate the court's process. Therefore, the court granted the variation sought by the respondents, ordering James to pay up to AUD7,334,167.33 into court by a specified date. The court also required James to provide a further disclosure affidavit detailing his assets within Australia.
The final orders included a requirement for James to disclose his assets by way of affidavit, detailing their value, location, and any encumbrances, by 6 March 2025. Additionally, the freezing orders were varied to require James to pay into court up to AUD7,334,167.33 by 20 March 2025, with liberty to apply for payment out of court for purposes not prohibited by the orders. The court further directed that it would hear the parties in relation to costs.
Orders
Orders of the court
1. Pursuant to r 7.33 of the Federal Court Rules 2011 (Cth), by 4.00pm on 6 March 2025 the First Applicant disclose by way of affidavit his assets within Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of his interests in the assets.
2. Pursuant to rule 7.33 of the Rules, the Freezing Orders made on 6 October 2023 be varied to require the First Applicant, by 4.00pm on 20 March 2025, to pay into Court up to $7,334,167.33, to the extent that he is able to do so from his assets, pending the determination of the proceeding.
3. For the purposes of order 2, the First Applicant has liberty to apply for payment out of Court of money paid into Court, for any purpose not prohibited by order 4 of the Freezing Orders.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Whilst acknowledging the limited authorities and for reasons I will come to, in my assessment, the present circumstances are one of those “rare cases” which justify the making of the order sought to prevent a party from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court: Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23 at [7] (Deane J).Consideration As mentioned above, in his confidential affidavit of 22 October 2023 filed in compliance with Order 9 of the Freezing Orders, James gave evidence on oath, among other things, that at the time of making the affidavit he was the appointer / principal of 40 discretionary trusts with a combined net equity of over $100 million and he had loaned a total of several millions of dollars to ten of those trusts (James’ disclosure affidavit). The effect of James’ disclosure affidavit, taken with Order 9 of the Freezing Orders, was that James had said on oath that his total assets exceeded $100 million and greatly exceeded the Relevant Amount. I note that in a letter dated 24 November 2023, the applicants’ solicitors stated:We do not consider the trusts listed in paragraph 12 [of James’ disclosure affidavit] form part of Mr Zhang’s assets within Australia within the meaning of the freezing Order. However, we note that the definition of “assets” under the freezing Order is ambiguous (insofar as it refers to one’s power to control assets). As such the net values of those assets were disclosed to avoid potential dispute as to the our [sic] clients’ compliance with the Freezing Order. Notwithstanding that letter, the applicants’ written submissions for the purpose of the Revocation Application, at [34], stated on James’ behalf, that: …there is no realistic suggestion that James would be unable to pay any judgment in Eric’s favour. There is unchallenged evidence that the scale of James’ business interests are in the order of hundreds of millions of dollars, and the total value of real estate interests significantly exceeds the total indebtedness of the group. In Zhang No 1, in refusing the Revocation Application O’Callaghan stated at [51]:It was also submitted on behalf of James that the evidence contained in his disclosure affidavit shows that his wealth is so significant that the Court should not require him to put up security. Whether the evidence shows that is debatable. But, more relevantly for present purposes, the time to make that submission was before Beach J. The oral submissions that had been made to O’Callaghan J in relation to the discretionary trusts referred to in James’ disclosure affidavit were as follows:What one also sees from paragraph 12 onwards are various discretionary trusts associated with Mr Zhang’s family interests. It’s not said here on this evidence that he himself is a beneficiary, but he is, in paragraph 10, the appointor or principal of these trusts, and it’s on that basis, having the power or the control of those entities that he has disclosed these entities and their net equity. If your Honour turns through to the end of the table, just above paragraph 13, your Honour will see the very 15 substantial total net equity held in those trusts.Then at paragraph 14, there are – there is a list of loans which he personally has made to the corporate trustees of those trusts and he deposes to having made loans in the amounts set out in that table and at the bottom of this page 11 of the affidavit, one 20 sees the total entitlements of the loans which he has to his credit and, again, over the page, paragraph 15 there’s another loan of significant value, which is in his favour, as well.So there your Honour has the affidavit of Mr Zhang deposing to assets in his name and assets which he controls, which are very, very substantial, indeed, and support, in our submission, the inability or – yes, inability to properly draw an inference as to a threat of dissipation of assets arising from the transfer of half interest in his matrimonial home to his wife. His evidence shows that he is in Australia, having become a citizen more than a decade ago, building very substantial business and does not give rise to a threat of dissipation of interests. (emphasis added)