Service Foods Limited v Wang
[2024] NZHC 1396
•31 May 2024
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2023-419-289
[2024] NZHC 1396
IN THE MATTER of the tort of conversion, dishonest assistance and unjust enrichment BETWEEN
SERVICE FOODS LIMITED
Plaintiff
AND
QING WANG
First Defendant
G&C TRADING LIMITED
Second DefendantGIANT ME LIMITED
Third Defendant
LITTLE ME LIMITED
Fourth Defendant
Hearing: 21 May 2024 Appearances:
K Crossland and S Langston for Plaintiff
E Anderson and S Poborowski for First and Second Defendants
Judgment:
31 May 2024
JUDGMENT OF GORDON J
This judgment was delivered by me on 31 May 2024 at 11 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Shieff Angland, Auckland
Braun Bond & Lomas, Hamilton
SERVICE FOODS LTD v WANG [2024] NZHC 1396 [31 May 2024]
[1] This is an application by Service Foods Ltd (Service Foods) to continue freezing orders made on 6 November 2023 against the first and second defendants Qing Wang and G&C Trading Ltd (G&C Trading) respectively, which were varied by consent on 12 December 2023 and then extended on 8 February 2024 and again on 20 March 2024.
[2] Mrs Wang and G&C Trading initially agreed to an extension of the freezing orders but by 19 March 2024 no longer consented and an order made on 20 March 2024 limited their extension to the hearing on 21 May 2024.
[3] In summary, Services Foods says that there is an arguable case against Mrs Wang and G&C Trading. It says there is evidence showing that Mrs Wang’s husband, Gongqian (George) Liu, misappropriated stock from his employer, Service Foods, and that he used G&C Trading, of which Mrs Wang is the sole director and a shareholder, to channel the profits of his misappropriation.
[4] Further, Service Foods says that the nature of the allegations; Mrs Wang’s failure to disclose certain information; and the fact that she is an overseas citizen, together establishes that there is a real risk of dissipation. Finally, Service Foods says the balance of convenience favours the continuation of the orders as varied.
[5] In opposition, Mrs Wang and G&C Trading say there is no arguable claim against them; there is no risk of dissipation; and the balance of convenience favours the orders lapsing.
[6] There is no issue that Mrs Wang and G&C Trading have assets to which the freezing order can attach.
Background
[7] Service Foods operates as a food service distributor across 17 branches. It employs over 775 team members and operates over 200 trucks nationally. It manages a range of over 10,000 Stock Keeping Units across dry, frozen, and chilled meat, produce and seafood products. It has a wide customer base including cafés, restaurants, hotels and independent retail outlets.
[8] Service Foods alleges that Mr Liu misappropriated its stock and, with the assistance of Mrs Wang and G&C Trading, sold and gifted that stock to third parties. The loss currently identified by Service Foods is $2,856,538.42. Service Foods’ case is that G&C Trading was the vehicle into which Mr Liu directed profits from transactions in which he distributed the Service Foods’ stock he had stolen to third parties. Service Foods pleads that Mrs Wang and G&C Trading dishonestly assisted Mr Liu in misappropriating Service Foods’ stock. The causes of action are in dishonest assistance, conversion and unjust enrichment.
[9] There are two further defendants. The third defendant is Giant Me Ltd (Giant Me). Giant Me was incorporated on 4 March 2022. On incorporation, G&C Trading held 50 per cent of the shares in Giant Me with the remainder held by Yixiao Sun, a 30 per cent shareholder of Little Me Ltd. Giant Me is a customer of Service Foods. When it makes an order, Service Foods delivers the stock to a business called Avalon Clearance Store (Avalon Clearance). It appears that Giant Me trades under that name.1
[10] The fourth defendant is Little Me Ltd (Little Me). It carries out business as a Thai restaurant under the name “Thai Aroma”. Yixiao Sun is the sole director of Little Me and, as noted above, a 30 per cent shareholder of Little Me and 50 per cent shareholder of Giant Me.
[11] There was a fifth defendant, Chinese Meat Processor Ltd (CMP). CMP operates a butchers shop in Hamilton and trades under the name “Honest Butchery”. It sells meat products to wholesalers and the public. Its sole director is Jian Li.
[12] There was also a sixth defendant, Yipin Restaurant Ltd (Yipin). Yipin operates as a Chinese restaurant in Hamilton under the name “Shanghai Chinese Restaurant”. Jianchun Yang is the sole director of Yipin. Service Foods is one of Yipin’s suppliers.
[13] Service Foods discontinued its claim against CMP and Yipin in exchange for Mr Li and Mr Yang respectively providing affidavit evidence.
1 In his affidavit of 31 October 2023 Aneil Balar, a director of Service Foods, says it is possible that G&C Trading also trades under the name Avalon Clearance. That is because, in Service Foods’ software system, Giant Me is registered as trading as G&C Trading Ltd.
[14] Service Foods has commenced these High Court proceedings in parallel with proceedings in the Employment Court against Mr Liu. The Employment Court granted a freezing order over Mr Liu’s assets. The order was varied to enable Mr Liu to operate a transactional account. Mr Liu then applied to discharge the order. That application was heard in the Employment Court on 13 May 2024. Counsel advise that the Employment Court continued the order for another four months. The decision was a results decision with reasons to follow.
[15] Counsel further advise that there has been an application to recall the decision continuing the freezing order. The Court understands that an affidavit from Mr Li of CMP was filed in the Employment Court that was in similar terms to his affidavit in this Court. A statement in that affidavit is now demonstrated to be incorrect based on an acknowledgement by Aneil Balar, a director of Service Foods, in his updating affidavit filed in this Court, affirmed 20 May 2024. He says that a statement in his 31 October 2023 affidavit relative to Mr Li’s company is incorrect. Apparently there is a similar acknowledgement in the Employment Court. I will address that issue in due course.
The law
[16] The law in relation to freezing orders is well understood. Rule 32.2 of the High Court Rules 2016 provides:
32.2 Freezing order
(1)The court may make an order (a freezing order), on or without notice to a respondent in accordance with this Part.
(2)A freezing order may restrain a respondent from removing any assets located in or outside New Zealand or from disposing of, dealing with, or diminishing the value of, those assets.
…
[17]The elements which must be satisfied are:
(a)The applicant has a good arguable case on its substantive claim: the allegations in the claim must be capable of tenable argument and be supported by sufficient evidence, bearing in mind the early stage at
which the application is likely to be brought.2 The good arguable case test does not require the plaintiff to establish a prima facie case as disputed questions of fact cannot be readily resolved on affidavit evidence.3
(b)There are assets of the respondent, either inside or outside New Zealand, to which the orders can apply.
(c)There is a real risk that the respondent might dissipate or dispose of the value of their assets, so as to render them “judgment-proof”. Merely asserting a belief that a defendant might dissipate its assets, unsupported by solid grounds justifying that belief, is insufficient. On the other hand, however, affirmative proof of likelihood of dissipation or of nefarious intent, is not necessary.4
[18] Finally, the Court should consider whether the balance of convenience (or overall justice of the circumstance including foreseeable hardships to the parties) favours the continuation of the freezing order.5
Is there a good arguable case?
[19] Ms Anderson, counsel for Mrs Wang and G&C Trading, submits that Service Foods has not demonstrated that stock is missing. She says Service Foods has not provided information about stock takes during the relevant period. Further, she says that there is no direct evidence that stock is not where the stock management system records that it is. It follows, she says, that there is no evidence that Service Foods has suffered any loss.
[20] Ms Anderson submits even if it is accepted (which it is not) that there is an arguable case against Mr Liu and/or G&C Trading, there is a significant lack of
2 Hannay v Mount [2011] NZCA 530 at [20]–[22].
3 Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 at [41].
4 Bank of New Zealand v Hawkins (1989) 1 PRNZ 454 (HC) at 454.
5 Bank of New Zealand v Hawkins, above n 4, at 452.
evidence that Mrs Wang was complicit or turned a blind eye. She says the Court is invited by Service Foods to speculate on Mrs Wang’s involvement.
[21] As to G&C Trading, Ms Anderson says that the only evidence that Service Foods has produced which is relevant to G&C Trading is the evidence of Mr Li and Mr Yang of CMP and Yipin respectively. But she says that their evidence does not show any wrongdoing by Mrs Wang or G&C Trading. She submits that at best the affidavits say that Mr Liu sold stock to their respective companies and invoices were rendered from G&C Trading (and paid accordingly). Ms Anderson also says that the evidence for Service Foods does not establish that the meat supplied to Mr Li and Mr Yang’s businesses was Service Foods’ stock.
[22] Service Foods has filed affidavits from the following: Mr Balar; Aaron Frost, the General Manager of the Service Foods Hamilton branch; Gagandeep Singh, Ramvir Singh, and Amrinder Singh, delivery drivers for Service Foods; and Ding Zhang, an employee of Service Foods Hamilton branch who also made deliveries from time to time. As well, there are the affidavits from Mr Li and Mr Yang, which I have already mentioned.
[23] In summary, the evidence is that on 1 April 2019, Service Foods employed Mr Liu as an operations manager for its distribution warehouse in Hamilton. In this role Mr Liu looked after the drivers, replenished stock on the warehouse floor and chiller room and would often be the go-to person on anything related to operations. Mr Frost says he considered him his right hand man and he relied on him. Mr Liu had physical access to and control over stock located in Service Foods’ Hamilton branch; he gave directions to drivers who delivered Service Foods’ products to customers and had access to Service Foods’ SAGE Enterprise Resource Planning (ERP) software system.
[24] On 16 March 2021 Mr Liu incorporated G&C Trading. Mrs Wang was, and continues to be, the sole director. On incorporation Mr Liu held 10 per cent of the shares in G&C Trading. Since then the shareholding of G&C Trading has changed more than once. On 4 May 2022 Mr Liu transferred his shareholding to Mrs Wang; on 27 October 2022 Mrs Wang transferred 40 per cent of her shareholding to Mr Liu;
and on 9 July 2023 Mr Liu transferred his shareholding to Mrs Wang. The address details of the company and Mrs Wang were also altered from their Hamilton address to an Auckland address.
[25] In late September 2023 Service Foods discovered multiple irregular transactions involving Mr Liu’s user ID in its SAGE software system. There were 609 entries made by Mr Liu altering stock movements from the Hamilton branch to the Auckland branch so that stock losses (in record only) were recorded as occurring in the Auckland branch, enabling the physical stock to remain in the Hamilton branch. Service Foods says that from there, Mr Liu was able to sell or gift that “surplus” stock to third parties without that loss being caught in the Hamilton branch.
[26] On other occasions Mr Liu altered shipping quantities of stock going to the third and fourth defendants (Giant Me, and Little Me) and the former sixth defendant (Yipin) to a zero or lesser amount than what was delivered to those defendants. This meant that these companies received Service Foods’ stock free-of-charge (at least from Service Foods).
[27] Mr Frost says the stock losses were not picked up in Hamilton because they were largely in Auckland. After the irregular transactions were discovered he checked the Hamilton warehouse and found that the volume of meat stored far exceeded the amount that the Hamilton branch would sell. For example, there was about 500 kilos of product but Service Foods would sell about 50 or 100 kilos per month. Service Foods would never have got through it all before it expired. He says for one type of product the only customer that would purchase it was Avalon Clearance, but not in the quantities (as far as Service Foods’ records were concerned) stored in Hamilton. That indicated to him that Avalon Clearance was likely receiving some product free-of-charge.
[28] The delivery drivers all state that Mr Liu asked them to make deliveries without paperwork including deliveries to Avalon Clearance and Thai Aroma. Both Ramvir Singh and Amrinder Singh say they also made such deliveries to the “Honest Butcher” (as opposed to the “Honest Butchery”). There is no suggestion that there is another business called the “Honest Butcher”. I have, therefore, treated these
references as typographical errors and taken their references to the “Honest Butcher” to mean the “Honest Butchery”. This delivery procedure was against Service Foods’ processes and likely meant that the customers were not being charged by Service Foods for the deliveries.
[29] Mr Frost also says that on one occasion he raised with Mr Liu a car that he was driving, an Audi RS 6, which apparently has a market value of $220,000. Mr Frost says that Mr Liu said it was a friend’s car and he was looking after it while his friend was overseas. The vehicle is, in fact, owned by G&C Trading.
[30]When Mr Liu commenced his employment with Service Foods his salary was
$63,000. By the time his employment was terminated it had risen to $85,000. In September 2022 Service Foods received notification from Inland Revenue that Mr Liu’s then current tax code (M) was incorrect and it needed to be changed to SA (the secondary tax code for total earnings over $180,000). This could only have occurred if Mr Liu’s salary at Service Foods was less than a secondary source of income.
[31] At a meeting on 4 October 2023 to discuss irregular transactions Mr Liu explained this by saying he had a secondary job at Novotel as a chef working 20-30 hours per week. Service Foods was sceptical about this and noted that income earned from that secondary employment (if that was the case) would be insufficient to cause a change of Mr Liu’s tax code to SA. The inference that Service Foods drew was that Mr Liu’s income from his misappropriation was sufficiently great to cause his total income to be over $180,000 and his income at Service Foods to become secondary.
[32] Subsequent financial investigations confirmed that inference with the financial accounts and bank account statements of G&C Trading indicating many payments to Mr Liu. The 2023 financial accounts for G&C Trading record a shareholder salary of
$100,000 for Mr Liu.
[33] Mr Liu denied any wrongdoing in the 4 October 2023 meeting with Service Foods. In my view there are many red flags in Mr Liu’s responses in the transcript of
the interview. He initially said he was not involved in Avalon Clearance or Thai Aroma (the trading name of Little Me and a company associated with Avalon Clearance). When company extracts showing his previous shareholding in G&C Trading and its shareholding in Giant Me were shown to Mr Liu, he acknowledged his previous ownership but said he had removed himself. Mr Liu said he hoped that his relationship with Avalon Clearance and Thai Aroma would allow him to earn “extra pocket money”. There was also the following in the interview:
(a)He believed another or others were using his log in, but provided no basis for that belief.
(b)When asked who Qing Wang was, Mr Liu responded that Qing Wang was a “friend of the Thai owner” (he did not say she was his wife).6
(c)He was asked further about a Companies Office document. It was identified by the person questioning him that there was a new shareholder shown with the name “George Liu” and he was asked if it was him. He acknowledged it was. It was then noted that 40 shares had been allocated to him and Qing Wang had reduced “his” share by 40 shares and given them to him. Mr Liu said “I don’t know anything about this”. Again, he did not identify Qing Wang as his wife.
(d)He denied receiving any money from G&C Trading (I will address below payments from the G&C Trading bank account made to “g.liu” which total $855,362.54 for the 30 month period from May 2021 to October 2023).
(e)It was put to him that the pattern of changes in Service Foods’ system had stopped immediately after Mr Liu had received a letter dated 27 September 2023 from Service Foods advising that Service Foods was investigating a number of irregular records. Mr Liu offered no explanation for that.
6 It appears that at this point Mr Liu was shown a Companies Office document as he was asked not only who was Qing Wang but also “who’s this person here, is that you George”?
(f)When asked whether his wife was involved with any of “the businesses” Mr Liu said: “no”, that she was “just a mum” and “she don’t do anything else”.
(g)When asked what car he had, he said it was just a second-hand Audi A4. He did not mention the Audi RS 6 with a market value of over
$200,000 owned by G&C Trading, which he was seen driving on at least one occasion.
[34] Mr Crossland submits that Mrs Wang, as the sole director of G&C Trading, either must have known or turned a blind eye to Mr Liu’s conduct. He refers to the evidence of stock being delivered to Avalon Clearance without invoices, contrary to the proper procedure. It will be recalled that Avalon Clearance is the trading name of Giant Me and that G&C Trading held 50 per cent of the shares in Giant Me.
[35] Mr Crossland also notes that during Mr Liu’s employment, despite earning a maximum salary of $85,000 from Service Foods, Mr Liu and Mrs Wang (as well as owning their own home) purchased the following investment properties:
(a)In October 2021 they purchased a property in Chartwell, Hamilton. The current estimated value of this property on the website homes.co.nz is $920,000.
(b)In July 2023 they purchased a property in Rototuna North, Hamilton. The current estimated value of this property on the website homes.co.nz is $1.55 million.
[36] While there are mortgages over these two properties and over their third property, the family home, together totalling $2,300,727.40, nevertheless, mortgages require servicing by way of interest payments and potentially principal repayments.
[37] Mr Crossland also refers to the evidence that for the 30 months from May 2021 to October 2023 the bank account statements for G&C Trading record withdrawals with the description “g.liu” in the second field. Additional descriptions after “g.liu”
in the fourth field include “dividends”, “commission”, “withdraw” and “wages”. The total amount of withdrawals that contain the description “g.liu” comes to $855,362.54.
[38] This total represents an average monthly payment from G&C Trading to “g.liu” of $28,512.08 (an average per week of $6,579.71 or average per annum of
$342,145.00). As a director of G&C Trading, Mrs Wang is Mr Liu’s employer. Mr Crossland submits Mrs Wang must have known of her husband’s activities. At the very least, there is wilful blindness, which is sufficient for dishonest assistance.
[39] I turn to consider whether any evidence in opposition undermines or weakens the evidence I have referred to and relied upon by Service Foods.
[40] Mrs Wang says there is nothing in Service Foods’ evidence to show that either she or G&C Trading were involved in any of the alleged conduct. However, there is the following: as already discussed G&C Trading is a 50 per cent shareholder in the third defendant, Giant Me. Service Food’s case is that Giant Me, trading as Avalon Clearance, received misappropriated Service Foods’ stock and deliveries were made often without paperwork.
[41] Further, in her affidavit Mrs Wang claims that G&C Trading merely provided a platform through which third parties sold stock to customers for which G&C Trading collected commission. Mr Liu, similarly in his evidence filed in the Employment Court,7 states: “G&C did not ever, and still does not, own or handle stock, it only provided a platform for clients to sell their produce”. In other words, G&C Trading was only ever ‘clipping the ticket’.
[42] Those statements by Mrs Wang and Mr Liu are not supported by the contemporaneous documents. First, G&C Trading’s bank account statements show payments from entities including CMP and Yipin (formerly the fifth and sixth defendants). During the approximately 31 month period from April 2021 to October 2023 the deposits made into the bank account for G&C Trading total $2,112,416.43.8 Of that total, $981,598.96 is attributed to “Chinese Meat/The Honest Butcher”9 and
7 One page of his Employment Court affidavit was produced in evidence.
8 This figure takes into account two unrelated deposits which were in the nature of refunds.
9 I will again take that as a reference to the “Honest Butchery”.
$106,641.48 to Yipin Restaurant. Those individual amounts and the overall total are excessive sums for commission payments (which Mrs Wang claims usually range between 15–20 per cent of the total sale price).
[43] Further, in their affidavits Mr Li and Mr Yang, directors of those companies, give evidence of their purchase of meat through Mr Liu and G&C Trading. They both state they paid G&C Trading for the delivery and purchase of meat. They were not paying G&C Trading a commission. Their statements are supported by contemporaneous invoices issued by G&C Trading. Further, one of the exhibits to Mr Yang’s affidavit is a message from Mr Liu blaming supply disruption on switching to a new warehouse. Also, there is evidence from Mr Balar that the photographs of the meat supplied to CMP and Yipin is meat sourced from the same supplier that Service Foods uses.
[44] I mention at this point the error in Mr Balar’s affidavit dated 31 October 2023. In an updating affidavit of 20 May 2024 Mr Balar states as follows:
4Paragraphs 5.30 to 5.33 of my affidavit dated 31 October 2023 states that, between 13 November 2019 to 27 January 2023, Mr Liu altered shipping quantities of stock orders by Chinese Meat Processor Limited to zero or a lesser figure to that which was delivered. This statement forms part of the statement of claim. It is based on the spreadsheet annexed as exhibit 19 to my affidavit dated 31 October 2023, which lists products that have been order [sic] but have had their quantities zeroed or reduced. While the spreadsheet is correct, my affidavit incorrectly records that these transactions were orders from Chinese Meat Processor Limited trading as "Honest Butchery" .
5Instead, the spreadsheet relates to orders placed by another company (L&E Trading 2016 Limited, trading as "The Butchery House". …
[45] In addition, Mr Balar annexes to his updating affidavit a copy of a screenshot of Service Foods’ software system which records the invoices issued to CMP, trading as the Honest Butchery. That shows that there were six orders on dates between 30 May 2019 and 13 October 2020 with the shipping date being either on the order date or the day after the order date. Two of those deliveries were from the Auckland branch and four from the Hamilton branch. That evidence contradicts the evidence of Mr Li, who says that CMP has never ordered products from Service Foods. The Court
understands that it is this issue that has resulted in the recall application in the Employment Court referred to in [15] above.
[46] While this issue will need to be clarified in due course in this proceeding, I do not consider it detracts from other evidence given by Mr Li. His evidence as to the delivery of meat (without invoices from Service Foods) is supported by the evidence of the Service Foods delivery drivers. Further, WeChat messages between Mr Li and Mr Liu annexed to Mr Li’s affidavit about the supply of meat and dates for delivery, do not fully coincide with the dates in the orders referred to in the exhibit annexed to Mr Balar’s updating affidavit.
[47] Finally, I note that Mrs Wang has elected not to produce invoices to evidence the claims of commission charged and she has not produced any internal records demonstrating reconciliation of supply costs and commission calculations to support her assertion G&C Trading was working simply on a commission basis and did not supply product. Additionally, she has elected not to provide any evidence from Mr Liu. In the circumstances, given the evidence that is filed on behalf of Service Foods, it would be expected to see such evidence.
[48] Having regard to all the evidence I have referred to above, I accept Service Foods has demonstrated a good arguable case that G&C Trading sourced meat, being meat misappropriated from Service Foods, and supplied it to various customers.
[49] In addition, I consider the evidence satisfies the good arguable case test in relation to Mrs Wang as director and shareholder of G&C Trading. The case for Mrs Wang and G&C Trading is that Mrs Wang has no knowledge of Mr Liu’s conduct. However, Mr Liu was an employee of G&C Trading. He was paid wages and received other payments together totalling $855,362.54 over a 30 month period. Based on those bank records, Mr Liu is the only employee. He lives in the same house as Mrs Wang. As the sole director, she is required to monitor the operations of the company. It is untenable to say the Court cannot draw an inference of dishonest assistance. Mr Liu’s knowledge is attributed to the company. The company’s knowledge is Mrs Wang’s knowledge.
Are there assets to which the freezing orders may apply?
[50] This is not in issue, and no submissions were made on this part of the test. Mrs Wang and G&C Trading clearly have assets to which the freezing orders can attach. For Mrs Wang there are the three residential properties jointly owned with Mr Liu. For G&C Trading there is the Audi RS 6 registered in G&C Trading’s name. There are also bank accounts for each.
Dissipation of assets
[51] Ms Anderson submits that Service Foods has not identified any evidence to demonstrate that there is a real risk that Mrs Wang and G&C Trading would dissipate assets. In relation to Mrs Wang, Ms Anderson says that she is connected and committed to her life in New Zealand with her family. Further, most of Mrs Wang’s assets are jointly owned with Mr Liu, and as such will remain frozen under the freezing order against Mr Liu.
[52] Ms Anderson submits that Mrs Wang and G&C Trading have been accommodating and cooperative with Service Foods, such as by previously consenting to the renewal of the freezing order. Mrs Wang also offered, on 19 January 2024, to give Service Foods security (by way of caveat) over properties jointly owned by her and Mr Liu in exchange for bringing the freezing orders to an end. Ms Anderson submits these actions show a willingness on behalf of Mrs Wang and Mr Liu to be pragmatic and see the litigation through.
[53] Mr Crossland submits there is prima facie evidence showing that Mr Liu, who had been a trusted employee of Service Foods for almost four years, with the assistance of G&C Trading and Mrs Wang, systematically stole stock from Service Foods and sold/distributed it during his employment. Mr Crossland notes that Mrs Wang also failed to disclose in her affidavit filed as part of the ancillary orders that the Avalon Clearance business (of which G&C Trading has an interest in by virtue of its shareholding in Giant Me) had been sold two months prior to her affidavit. She has refused to provide information regarding its sale other than a redacted copy of the sale and purchase agreement. It is not known what happened to the sale proceeds.
[54] She and Mr Liu have also refused to provide any information on Hesstory Ltd, a company that Mr Liu is now a director of and which it appears that he and/or Mrs Wang purchased through a trust.
[55] There was also a payment made by G&C Trading to Mr Liu on 25 March 2024 for $1,200. This payment was made without Service Foods consent, which was required on the varied terms of the freezing order. Mrs Wang has filed an updating affidavit sworn 20 May 2024 saying that this was a mistake on her part and Mr Liu’s part. She says they thought they were able to pay expenses and for work that Mr Liu is doing to keep G&C Trading operating. She says she now understands that they are not able to do this without Service Foods’ permission and they have subsequently repaid the money into the bank account.
[56] Finally, Mr Crossland submits that the scale of the alleged theft is large and Mrs Wang and Mr Liu are Chinese citizens. He acknowledges the fact of that citizenship does not in itself show a risk of dissipation, but he says it heightens the risk present from the nature of the allegations and the fact that they have not been completely forthcoming in their evidence, and what evidence they have offered is contradicted by contemporaneous documents. Accordingly, he submits that unless restrained, there is a danger that Mrs Wang and G&C Trading may dissipate their assets before trial.
[57]I accept Mr Crossland’s submissions. I consider this aspect of the test satisfied.
Balance of convenience
[58] Mrs Wang refers to the possibility of reputational damage. Even accepting that the Chinese business community operates by word of mouth I do not consider there is a robust linkage between the alleged reputational damage and the existence of freezing orders.
[59] G&C Trading is still able to operate and pay its expenses (albeit that it is required to get consent from Service Foods in advance of making payments).
[60] Mrs Wang says it was the freezing order that stopped G&C Trading’s business. However, as Mr Crossland points out, there is evidence before the Court that indicates that G&C Trading’s business stopped before the freezing orders were made. There are WeChat messages annexed to the affidavits of Mr Yang and Mr Li in early October 2023 before the freezing orders were made, in which Mr Liu made various statements about why he could not supply stock, including that he was setting up a new warehouse.
[61] I acknowledge that there may be a lengthy time before the proceeding is heard. However, as noted above, G&C Trading can continue trading.
[62] Further, I do not consider that the fact that there is presently a freezing order against Mr Liu’s assets made by the Employment Court is a sufficient reason for this Court itself not to extend the current orders, even if the majority of Mrs Wang’s assets are jointly owned with Mr Liu. The order in the Employment Court is only for a four month period and there is also an application for the Court to recall its decision making the order.
[63] Finally, I do not consider the offer of a caveat over the three jointly owned properties is a sufficient alternative. While a caveat would prevent borrowing from new lenders being secured against the three properties, there would be nothing to stop Mr Liu and Mrs Wang increasing their borrowings secured by the three existing mortgages and thus erode the equity in their three residential properties.
[64] I am satisfied that the orders, as varied, against Mrs Wang and G&C Trading should be continued until further order of the Court.
Result/orders
[65] When this matter was called on 20 March 2024, the Court made an order continuing the existing freezing orders to 21 May 2024, the date of the hearing. At the end of the hearing, having reserved my decision, I continued the orders until the date of this judgment.
[66] I now make an order continuing the freezing orders, as varied, against both Mrs Wang and G&C Trading until further order of this Court.
Costs
[67] I did not hear from the parties on costs. Accordingly, costs are reserved. Service Foods as the successful party is prima facie entitled to costs. I encourage the parties to agree costs and if that can be achieved then a joint memorandum is to be filed within 20 working days of the date of this judgment.
[68] If costs cannot be agreed then Service Foods is to file and serve its memorandum within five working days of the date for the joint memorandum. Mrs Wang and G&C Trading are to file and serve their memorandum within five working days of the date of service of Service Foods’ memorandum.
[69] Memoranda are to be no more than four pages excluding attachments. I will determine costs on the papers.
Gordon J
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