Federal Court of Australia

Deputy Commissioner of Taxation v Wang [2020] FCA 1711

ORDERS

THE COURT ORDERS THAT:

1.    Leave is granted to the applicant to file in Court the following documents (Court Documents):

(a)    The originating application dated 23 November 2020.

(b)    The affidavit of Fiona Biltris dated 20 November 2020.

(c)    Exhibit FB-1 to the affidavit of Fiona Biltris dated 20 November 2020.

2.    The Originating Application is returnable instanter.

3.    Abridge the time for service of the documents in paragraph [1] above.

4.    That there be substituted service of the Court Documents.

(a)    The applicant is to take the following steps to bring the Court Documents to the attention of the first respondent:

(i)    On or before 12pm on Tuesday 24 November 2020, by delivering a copy of the Court Documents, marked to the attention of the first respondent, under cover of letter, to:

A.    875 Old Northern Road, Dural NSW 2158; and

B.    31 Addison Road, Ingleside, NSW 2101.

(ii)    On or before 12pm on Tuesday 24 November 2020, by sending an electronic copy of the Court Documents, marked to the attention of the first respondent, under cover of letter, to the email addresses:

A.    eric11@gg.com;

B.    eric@urubber.com;

C.    hisun@public.qd.sd.cn; and

wonderce@hotmail.com

(iii)    On or before 12pm on Tuesday 24 November 2020, by delivering a copy of the Court Documents, marked to the attention of Greg Reinhardt, under cover of letter:

A.    to the email address greg.reinhardt@nortonrosefulbright.com; and

B.    to Norton Rose Fulbright Australia, Level 5, 60 Martin Place, Sydney, Australia.

(iv)    On or before 12pm on Tuesday 24 November 2020, by delivering a copy of the Court Documents, under cover of letter:

A.    to the email address info@nimbus.financial; and

B.    Nimbus Financial, Suite 4, Level 3, 3 Spring Street, Sydney NSW 2000.

(v)    On or before 12pm on Tuesday 24 November 2020, notifying the first respondent by text message sent to 0481 333 381 that this proceeding has been commenced and that emails have been sent to the email addresses listed above at 4(a)(ii).

(b)    The applicant is to take the following steps to bring the Court Documents to the attention of the second respondent:

(i)    On or before 12pm on Tuesday 24 November 2020, by delivering a copy of the Court Documents, marked to the attention of the second respondent, under cover of letter, to 31 Addison Road, Ingleside, NSW 2101.

(ii)    On or before 12pm on Tuesday 24 November 2020, by sending an electronic copy of the Court Documents, marked to the attention of the second respondent, under cover of letter, to the email addresses:

A.    wonderce@hotmail.com;

B.    info@urubber.com; and

hisun@public.qd.sd.cn

(iii)    On or before 12pm on Tuesday 24 November 2020, by delivering a copy of the Court Documents, marked to the attention of Greg Reinhardt, under cover of letter:

A.    to the email address greg.reinhardt@nortonrosefulbright.com; and

B.    to Norton Rose Fulbright Australia, Level 5, 60 Martin Place, Sydney, Australia.

(iv)    On or before 12pm on Tuesday 24 November 2020, by delivering a copy of the Court Documents, under cover of letter:

A.    to the email address info@nimbus.financial; and

B.    Nimbus Financial, Suite 4, Level 3, 3 Spring Street, Sydney NSW 2000.

(v)    On or before 12pm on Tuesday 24 November 2020, notifying the second respondent by text message sent to 0450 922 147 that this proceeding has been commenced and that emails have been sent to the email addresses listed above at 4(b)(ii).

5.    Orders pursuant to rules 7.32 and 7.33 of the Federal Court Rules 2011 (Cth) against the first and second respondent in the terms set out in Annexure “A” and Annexure “B” to these reasons.

6.    The matter be listed for further directions on 3 December 2020 at 9:30am.

7.    Liberty to apply to the duty judge be granted on 24 hours' notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ABRAHAM J

1    The applicant, the Deputy Commissioner of Taxation (the Commissioner), has made an application on an ex parte basis pursuant to r 7.32 of the Federal Court Rules 2011 (Cth) (Rules), for a freezing order against CE Wang (first respondent) and Zhao Hui Shao (second respondent), who are husband and wife. On 23 November 2020, I made ex parte freezing orders against each respondent. These are my reasons for doing so.

2    The applicant relies on the affidavit of Fiona Biltris, affirmed 20 November 2020, and the documents to that affidavit in exhibit FB-1, who is authorised to speak for and on behalf of the Commissioner.

3    In a nutshell, the applicant relied upon claims based upon a debt that arises as a result of an audit conducted and assessments made under the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth). Notices of Amended Assessments dated 20 November 2020 have been issued to the first respondent in respect to the income assessment years ended 30 June 2008 to 30 June 2019 and Notices of Shortfall Penalty dated 20 November 2020 for the same income years, with total outstanding tax liability being approximately $31,717,768.96. Notices of Amended Assessments and Notices of Shortfall Penalty dated 20 November 2020 for the same period have been issued to the second respondent with total outstanding tax liability being in the amount of $31,767,420.58.

4    The Court has power to make a freezing order: see generally s 23 Federal Court of Australia Act 1976 (Cth), rr 7.31 – 7.38 of the Rules.

5    Relevantly, r 7.32 provides:

(1) The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.

6    Rule 7.35, sets out the circumstances in which that power, which of its nature is discretionary, is enlivened. It is in the relevantly following terms:

7.35 Order against judgment debtor or prospective judgment debtor or third party

(1) This rule applies if:

…

(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:

 (i)  the Court; or

 (ii)  for a cause of action to which subrule (3) applies—another court.

…

(4) The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:

(a) the judgment debtor, prospective judgment debtor or another person absconds;

 (b)  the assets of the judgment debtor, prospective judgment debtor or another person are:

 (i) removed from Australia or from a place inside or outside Australia; or

(ii)  disposed of, dealt with or diminished in value.

7    The applicant has the burden of satisfying the Court that he has a good arguable case, that this claim is justiciable in the Federal Court, and that there is a “danger” that the judgment which he seeks will be wholly or partly unsatisfied because of the removal of assets from Australia or from a place inside or outside Australia, or disposed of, dealt with, or diminished in value.

8    The principles relating to the making of a freezing order were recently summarised by Wigney J in Basi v Namitha Nakul Pty Ltd [2019] FCA 743 at [7] - [9]:

The purpose of a freezing order is to prevent an abuse or a frustration of the Court’s process by depriving an applicant of the fruits of any judgment obtained in the action: Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 625. It is “no light matter” to freeze a party’s assets and there is, accordingly, a need for the Court to exercise caution: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 324F. A freezing order is a “drastic remedy” which should not be lightly granted: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [51] citing Frigo v Culhari (unreported, NSW Court of Appeal 17 July 1998 at 10-11).

An applicant has a good arguable case if they have “a reasonably arguable case on legal as well as factual matters”: Cardile at [68]; Insolvency Guardian Melbourne Pty Ltd v Carlei (2016) 111 ACSR 236; [2016] FCA 72 at [18]. It has also been said that a “good arguable case” is one “which is more than barely capable of serious argument, and yet not necessarily one the judge considers would have better than a fifty per cent chance of success”: Curtis v NID Pty Ltd [2010] FCA 1072 at [6] citing Ninemia Maritime Corp v Trave Schiffahrtsgesselschaft mbH & Co KG (The Niedersachsen) [1983] Com LR 234 at 235 (affirmed on appeal: [1983] 1 WLR 1412); Deputy Commissioner of Taxation v Greenfield Electrical Services Pty Ltd (2016) 103 ATR 327; [2016] FCA 653 at [7].

Where a freezing order is sought on the basis of a danger of the dissipation of assets, it is not necessary for the Court to be satisfied that the risk of dissipation is more probable than not. Nor is it necessary for the applicant to adduce evidence of an intention on the part of the respondent to dissipate assets: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at [8]-[10]; Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) (2012) 90 ATR 711; [2012] FCA 1064 at [23]. The making of a freezing order involves a discretionary exercise of power. The Court retains a discretion to refuse relief even if the requirements in r 7.35 of the Rules are satisfied: Patterson at 321-322.

Good arguable case

9    The production of a notice of assessment is conclusive evidence that it was properly made and, except in proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) on a review or appeal relating to the assessment, that the amounts and particulars contained within it are correct: Taxation Administration Act 1953 (Cth) Sch 1, s 350-10(1), Item 2 and section 175 of the Income Tax Assessment Act 1936 (Cth). The same applies to amended assessments. The production of a notice of assessment gives rise to a present debt, not one that arises in future if payment is not made by the date specified in the notice: Commissioner of Taxation v Ornelas [2016] FCA 457 at [7](b).

10    It is not necessary for the Commissioner to show that the time for payment of the assessments has elapsed: Deputy Commissioner of Taxation (ACT) v Sharp (1988) 91 FLR 70 at 74; and see: Commissioner of Taxation v Growth Investment Fund SA [2014] FCA 780 at [7]-[13].

11    In Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194 at [14]-[16] Kenny J observed:

The Commissioner issued notices of assessment for unpaid income tax and notices of assessment for administrative penalties to each of the respondents on 12 August 2010. On the same day, the notices were sent by ordinary prepaid post to each of them, together with advice on the outcome of audits undertaken by the…ATO. Under s 255-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (‘TAA’), the Commissioner may sue in the Federal Court to recover any tax liability that is due and payable. Pursuant to s 204(1) of the Income Tax Assessment Act 1936 (Cth) (‘ITAA’) (and subject to the issue of service discussed below) the income tax liabilities were due and payable at the time the Commissioner instituted this proceeding in this Court. The administrative penalties were due when assessed and notices of the assessment served, although not payable until 10 September 2010: see Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1 at 16-17; TAA, s 298-15 of Sch 1.

Generally, a taxpayer cannot challenge the correctness of an assessment except under Part IVC of the TAA, that is, by making a taxation objection as prescribed and pursuing an appeals process under Pt IVC if the objection decision is unfavourable. In any proceeding other than a proceeding under Part IVC, the production of a notice of assessment, or a document under the hand of the Commissioner or a Deputy Commissioner purporting to be a copy of a notice of assessment, is conclusive evidence of the due making of the assessment and that the amount and all the particulars of the assessment are correct: s 177(1) of the ITAA and s 298-30(3) of Sch 1 to the TAA; also FJ Bloeman Pty Ltd v Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360 at 376 and Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146 at 157 and 166-7. The Commissioner has produced documents under his hand purporting to be copies of the notices of assessment. Thus, in a recovery proceeding such as the proceedings on foot or contemplated here, the correctness of the assessments in question is not an issue the court can consider. Once an assessed liability is due and payable, the Commissioner may move for judgment in reliance on the conclusive evidence provision of s 177(1)…

The result is that the Commissioner plainly satisfied the “good arguable case” requirement for obtaining a freezing order, although, in the case of the administrative penalties, the cause of action was prospective at the time the proceeding was instituted…

12    As the applicant submitted, those observations are apt in this case.

13    On the evidence presented, I was satisfied that the applicant had established a good arguable case within the meaning of r 7.35 in respect of each of the respondents.

Danger that prospective judgment will be unsatisfied

14    I was also satisfied, for the reasons given in the affidavit of Ms Biltris, that there is a danger that a prospective judgment against the respondents will be wholly or partly unsatisfied because the assets of the respondents will be removed, disposed of or diminished in value.

15    As the applicant submitted, each of the respondents have both the “means and the motive” to dissipate the relevant assets: Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) [2012] FCA 1064 (DCT v Chemical Trustee (No 4)) at [24]. The debt for each respondent is substantial. In DCT v Chemical Trustee (No 4) Perram J observed at [24]:

In my opinion, in this case there is a danger of dissipation. My reasoning for this conclusion begins with the observation that the amount of tax (and penalties and interest) is very large.

16    The applicant submitted that it does not rely on evidence of an intention by the respondents to dissipate assets, but that such evidence was not necessary: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at [10]; DCT v Chemical Trustee Ltd (No 4) at [23].

17    The circumstances in this case include, inter alia, that:

(1)    the Commissioner's audit concluded that the respondents' true income is far in excess of the income reported by them, such that they have substantially underreported their income across a sustained period, namely 12 consecutive income years, and consistent with the position in this respect, the respondents may take steps to avoid the payment of tax. The evidence points towards false, misleading or otherwise incomplete provision of information in relation to tax affairs demonstrated by under-declarations of income, false declarations in relation to offshore assets and to direct or indirect interest in foreign controlled companies and, in the case of the first respondent, in his interactions with the ATO. I note in this respect that evidence of apparent dishonesty in relation to tax affairs over a substantial period is capable of supporting the inference that the relevant taxpayer is not the sort of person who would, unless restrained, preserve assets intact so that they might be available to a judgment creditor: Deputy Commissioner of Taxation v Ghaly [2016] FCA 707 at [30];

(2)    the respondents have the means to dissipate their assets. In respect to the second respondent, a significant component of her asset base is in the form of real properties in Australia. In those circumstances, the risk is that the second respondent may be able to borrow against those properties in a manner which would frustrate the Commissioner. The applicant pointed out that while real property assets are not themselves relatively liquid in nature, steps may be taken by way of encumbering those assets such that they would be readily dissipated. This risk is particularly so where the respondents have existing relationships with multiple banks and a proven ability to borrow against the assets they own;

(3)    it is clear from the affidavit evidence that the respondents have significant financial connections outside of the jurisdiction, particularly in China, and that they have connections to entities and associated entities with commercial activities and access to bank accounts overseas. In this regard the applicant relied on evidence of the transfer of substantial funds from Hisun Rubber (of which the first respondent is sole director and shareholder) and China Hisun (an offshore entity associated with the respondents) to Australian bank accounts of the respondents, and the transfer of funds offshore by the respondents through their related entities. I note also that each of the respondents are signatories or have authority to operate bank accounts held in the name of others.

(4)    the first respondent has recently taken steps to dissipate assets he previously owned by transferring to the second respondent the interest in several residential properties in April 2020, and the interest in Jingshi Pty Ltd in January 2020, for no consideration. The applicant pointed out that a legal representative for the respondent indicated in early April to the Commissioner that there had been a recent separation between the respondents and there was to be a transfer of property as a result, however noting that the Commissioner has not found evidence of any Family Court proceedings in that respect.

18    After addressing the Court on matters in accordance with the applicant’s duty of candour the applicant submitted that in the circumstances (including those referred to above) the orders should be made, with it being submitted that the documents before the Court speak to “two individuals with complex financial back stories that have amassed quite a significant amount of financial interest in the course of their adult lives and have connections to a raft of bank accounts and related entities”.

19    On the evidence I am satisfied that the freezing orders should be made.

Balance of convenience

20    I was satisfied that the balance of convenience favours the making of the freezing orders sought. There is a real risk of dissipation in the absence of such an order. The form of the orders proposed by the applicant have a number of protections. The position of each of the respondents is protected by the Commissioner’s undertaking as to damages: Deputy Commissioner of Taxation v Ghaly [2016] FCA 707 at [35]. The proposed freezing order is limited, in terms, by reference to the size of the relevant taxation-related liabilities. The orders do not prohibit the respondents’ ability to meet their living expenses and reasonable legal expenses. The quantum of the taxation related liabilities is considerable, especially when measured against the known assets of each of the respondents: see Deputy Commissioner of Taxation v Greenfield Electrical Services Pty Ltd [2016] FCA 653 at [13].

Conclusion

21    Accordingly, I made the orders sought by the applicant.

Associate:

Dated:    

ANNEXURE A

Federal Court of Australia

District Registry: New South Wales

Division: General

Deputy Commissioner of Taxation

Applicant

CE Wang

First respondent

Zhao Hui Shao

Second respondent

PENAL NOTICE

TO:    CE Wang

This is a ‘freezing order’ made against you on 23 November 2020 by Justice Abraham at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order.

THE COURT ORDERS:

INTRODUCTION

(1)    (a)     The application for this order is made returnable immediately.

    (b)    The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 12pm on 24 November 2020.

(2)    Subject to the next paragraph, this order has effect up to and including 3 December 2020 (the Return Date). On the Return Date at 9:30 am there will be a further hearing in respect of this order before the Duty Judge.

(3)    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.

(4)    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.

(5)    (a)     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.

(b)     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.

FREEZING OF ASSETS

(6)    (a)     You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (Australian assets) up to the unencumbered value of AUD$31,717,768.96 (the Relevant Amount).

(b)     If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

(7)    For the purposes of this order,

(1)     your assets include:

(i)    all your assets, whether or not they are in your name and whether they are solely or co-owned;

(ii)    any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

(iii)    the following assets in particular:

(A)    any money in the bank accounts identified in Schedule C to these Orders.

(2)     the value of your assets is the value of the interest you have individually in your assets.

PROVISION OF INFORMATION

(8)    Subject to paragraph 9, you must:

(a)    at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets;

(b)    within 7 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.

(9)    (a)     This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(b)     This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(c)     You must:

(i)    disclose so much of the information required to be disclosed to which no objection is taken; and

(ii)    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

(iii)    file and serve on each other party a separate affidavit setting out the basis of the objection.

EXCEPTIONS TO THIS ORDER

(10)    This order does not prohibit you from:

(a)    paying up to $1000 per a week on your ordinary living expenses;

(b)    paying your reasonable legal expenses in connection with the application;

(c)    dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred;

(d)    in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation; and

(e)    paying the Deputy Commissioner of Taxation.

(11)    You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly.

(12)    (a)     This order will cease to have effect if you:

(i)    pay the sum of $31,717,768.96 into Court; or

(ii)    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

(iii)    provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.

(b)     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.

(c)     If this order ceases to have effect pursuant 12(a) above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

(13)    The costs of this application are reserved to the Court hearing the application on the Return Date.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

(14)    Set off by banks

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)    Bank withdrawals by the respondent

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.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

(1)    The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.

(2)    As soon as practicable, the applicant will file and serve upon the respondent copies of:

(a)    this order;

(b)    the application for this order for hearing on the return date;

(c)    the following material in so far as it was relied on by the applicant at the hearing when the order was made:

(i)    affidavits (or draft affidavits);

(ii)    exhibits capable of being copied;

(iii)    any written submission; and

(iv)    any other document that was provided to the Court.

(d)    a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;

(e)    the originating process, or, if none was filed, any draft originating process produced to the Court.

(3)    As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.

(4)    The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets.

(5)    If this order ceases to have effect1 the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.

(6)    The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.

(7)    The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.

SCHEDULE B

AFFIDAVITS RELIED ON

NAME AND ADDRESS OF APPLICANT'S LAWYERS

The applicant’s lawyers are:

Place: HWL EBSWORTH LAWYERS Level 14, Australia Square, 264 - 278 George Street, Sydney NSW 2000

Email: rmcgregor@hwle.com.au; snapadow@hwle.com.au

    Tel: 02 9334 8555

    Fax: 1300 369 656

    DX: 129 Sydney

SCHEDULE C

Bank account details of the first respondent

ANNEXURE B

Federal Court of Australia District Registry: New South Wales Division: General

Deputy Commissioner of Taxation

Applicant

CE Wang

First respondent

Zhao Hui Shao

Second respondent

PENAL NOTICE

TO:    Zhao Hui Shao

IF YOU (BEING THE PERSON BOUND BY THIS ORDER):

(A)     REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

(B)    DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,

    YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

TO:    Zhao Hui Shao

This is a ‘freezing order’ made against you on 23 November 2020 by Justice Abraham at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order.

THE COURT ORDERS:

INTRODUCTION

(1)    (a)     The application for this order is made returnable immediately.

(b)    The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 24 November 2020.

(2)    Subject to the next paragraph, this order has effect up to and including 3 December 2020 (the Return Date). On the Return Date at 9:30 am there will be a further hearing in respect of this order before the Duty Judge.

(3)    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.

(4)    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.

(5)    (a)     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.

(b)     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.

FREEZING OF ASSETS

(6)    (a)     You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (Australian assets) up to the unencumbered value of AUD$31,767,420.58 (the Relevant Amount).

(b)     If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

(7)    For the purposes of this order,

(1)     your assets include:

(i)    all your assets, whether or not they are in your name and whether they are solely or co-owned;

(ii)    any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

(iii)    the following assets in particular:

(A)    the property identified in Schedule C to these Orders or, if it has been sold, the net proceeds of the sale; and

(B)    any money in the bank accounts identified in Schedule D to these Orders.

(2)     the value of your assets is the value of the interest you have individually in your assets.

PROVISION OF INFORMATION

(8)    Subject to paragraph 9, you must:

(c)    at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets;

(d)    within 7 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.

(9)    (a)     This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(b)     This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(c)     You must:

(i)    disclose so much of the information required to be disclosed to which no objection is taken; and

(ii)    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

(iii)    file and serve on each other party a separate affidavit setting out the basis of the objection.

EXCEPTIONS TO THIS ORDER

(10)    This order does not prohibit you from:

(f)    paying up to $1000 per week on ordinary living expenses;

(g)    paying your reasonable legal expenses in connection with the application;

(h)    dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred;

(i)    in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation; and

(j)    paying the Deputy Commissioner of Taxation.

(11)    You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly.

(12)    (a)     This order will cease to have effect if you:

(iv)    pay the sum of $31,767,420.58 into Court; or

(v)    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

(vi)    provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.

(b)     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.

(c)     If this order ceases to have effect pursuant 12(a) above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

(13)    The costs of this application are reserved to the Court hearing the application on the Return Date.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

(14)    Set off by banks

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)    Bank withdrawals by the respondent

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.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

(1)    The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.

(2)    As soon as practicable, the applicant will file and serve upon the respondent copies of:

(a)    this order;

(b)    the application for this order for hearing on the Return Date;

(c)    the following material in so far as it was relied on by the applicant at the hearing when the order was made:

(i)    affidavits (or draft affidavits);

(ii)    exhibits capable of being copied;

(iii)    any written submission; and

(iv)    any other document that was provided to the Court.

(d)    a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;

(e)    the originating process, or, if none was filed, any draft originating process produced to the Court.

(3)    As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.

(4)    The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets.

(5)    If this order ceases to have effect2 the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.

(6)    The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.

(7)    The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.

SCHEDULE B

AFFIDAVITS RELIED ON

NAME AND ADDRESS OF APPLICANT'S LAWYERS

The applicant’s lawyers are:

Place: HWL EBSWORTH LAWYERS Level 14, Australia Square, 264 - 278 George Street, Sydney NSW 2000

Email: rmcgregor@hwle.com.au; snapadow@hwle.com.au

    Tel: 02 9334 8555

    Fax: 1300 369 656

    DX: 129 Sydney

SCHEDULE C

Property details

SCHEDULE D

Bank account details of Respondents

1. For example, if the respondent pays money into Court or provides security, as provided for in paragraph 12 of this example order.

2. For example, if the respondent pays money into Court or provides security, as provided for in paragraph 12 of this example order.