FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Ranguta Limited [2022] FCA 1572

ORDERS

FREEZING ORDERS

PENAL NOTICE

TO: Ranguta Ltd

This is a 'freezing order' made against you on 21 December 2022 by the Federal Court of Australia 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 NOTES THAT:

1.    The undertakings dated 19 December 2022 given by the applicant in accordance with Schedule A are accepted by the Court.

THE COURT ORDERS THAT:

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 5.00 pm AWST on 22 December 2022.

2.    Subject to paragraph 3, these orders have effect up to 5.00 pm AWST on 19 January 2023 (the Return Date). On the Return Date at 10.15 am AWST a further hearing will be convened in respect of this order.

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 $4,626,976.04 (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,

(a)    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)    without limitation, the following shareholdings and optionholdings:

(b)    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 10 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 AUD $100,000 for your reasonable legal expenses;

(b)    paying amounts to the applicant in respect of your taxation liabilities;

(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, provided that you do not remove any of your Australian assets from Australia unless the unencumbered value of your Australian assets would, after the removal, exceed the Relevant Amount; and

(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 10 working days written notice of the particulars of the obligation.

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 AUD $4,626,976.04 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 to paragraph 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.

16.    Notices under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth)

Nothing in this order shall prevent any third party complying with the terms of a notice issued by the Commissioner of Taxation to the third party pursuant to s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) in respect of any money which the third party may owe or may later owe to you.

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

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 effect the applicant will promptly take all reasonable steps to inform in writing anyone 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

AFFIDAVIT RELIED ON

Name of deponent            Date affidavit made

Yi Deng                19 December 2022

NAME AND ADDRESS OF APPLICANT'S LAWYERS

The applicant's lawyers are:

Place:        K&L Gates

Email:        Andrew.Chambers@klgates.com

Ref:        JG.AJC.7390795.00192

ORDERS

THE COURT ORDERS THAT:

1.    Prior service of the interlocutory application dated 20 December 2022 is dispensed with and the application is returnable immediately.

2.    Pursuant to r 10.43 of the Federal Court Rules 2011 (Cth), the applicant has leave to serve the following documents (Documents) on the respondent out of Australia in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965 (Hague Convention):

(a)    the originating application;

(b)    the interlocutory application;

(c)    these orders;

(d)    the other orders made in this matter on 21 December 2022 and titled Freezing Orders;

(e)    the affidavit of Yi Deng sworn on 19 December 2022;

(f)    Exhibit YD-2, except that in relation to:

(i)    paragraph 3(a) of these orders, the applicant may provide a web address by which the recipient may download a copy of Exhibit YD-2; and

(ii)    paragraphs 3(b) to 3(d) of these orders, the applicant may provide a copy of Exhibit YD-2 on a USB drive; and

(g)    the written submissions filed in support of the interlocutory application.

3.    Pursuant to rr 10.24 and 10.49 of the Rules, personal service of the Documents is dispensed with and, in lieu of personal service, and subject to paragraphs 2(f)(i) and 2(f)(ii) above, the Documents may be served by taking the following steps by 5.00 pm AWST on 22 December 2022:

(a)    emailing them to tempio@biznetvigator.com;

(b)    sending them by international post (express) to Vistra Corporate Services Centre, Wickhams Cay II, Road Town Tortola, VG1110, British Virgin Islands;

(c)    sending them by international post (express) to Suite 202, 2nd Floor 6-8 Pottinger Street, Central Hong Kong; and

(d)    sending them by international post (express) to Suite E, 10/F Greenmont Court, Greenvale Village, Discovery Bay, Lantau Island, Hong Kong.

4.    To the extent necessary, the Court dispenses under r 1.34 of the Rules with the requirement in r 10.49 that service in accordance with a convention, the Hague Convention or the law of a foreign country is first unsuccessful.

5.    Service of the Documents in accordance with paragraph 3 above is deemed good and sufficient service of the Documents on the respondent.

6.    By 5.00 pm AWST on 22 December 2022, the applicant must serve these orders and the Freezing Orders on Euroz Hartleys Limited by sending a copy by post to, or leaving a copy at, its registered address.

7.    As soon as practicable, the applicant must serve the transcript of the hearing of 21 December 2022 on the respondent by the same means provided for in paragraph 3 above.

8.    The matter is listed for a directions hearing at 10.15 am on 19 January 2023.

9.    The costs of the interlocutory application are reserved.

10.    The parties have liberty to apply on giving 48 hours' written notice.

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

ORDERS

FREEZING ORDERS

PENAL NOTICE

TO: Golden Dawn Ltd

This is a 'freezing order' made against you on 21 December 2022 by the Federal Court of Australia 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 NOTES THAT:

1.    The undertakings dated 19 December 2022 given by the applicant in accordance with Schedule A are accepted by the Court.

THE COURT ORDERS THAT:

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 5.00 pm AWST on 22 December 2022.

2.    Subject to paragraph 3, these orders have effect up to 5.00 pm AWST on 19 January 2023 (the Return Date). On the Return Date at 10.15 am AWST a further hearing will be convened in respect of this order.

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 $2,147,163.47 (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,

(a)    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)    without limitation, the following shareholdings and optionholdings:

(b)    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 10 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 AUD $100,000 for your reasonable legal expenses;

(b)    paying amounts to the applicant in respect of your taxation liabilities;

(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, provided that you do not remove any of your Australian assets from Australia unless the unencumbered value of your Australian assets would, after the removal, exceed the Relevant Amount; and

(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 10 working days written notice of the particulars of the obligation.

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 AUD $2,147,163.47 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 to paragraph 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.

16.    Notices under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth)

Nothing in this order shall prevent any third party complying with the terms of a notice issued by the Commissioner of Taxation to the third party pursuant to s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) in respect of any money which the third party may owe or may later owe to you.

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

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 effect the applicant will promptly take all reasonable steps to inform in writing anyone 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

AFFIDAVIT RELIED ON

Name of deponent            Date affidavit made

Yi Deng                19 December 2022

NAME AND ADDRESS OF APPLICANT'S LAWYERS

The applicant's lawyers are:

Place:        K&L Gates

Email:        Andrew.Chambers@klgates.com

Ref:        JG.AJC.7390795.00192

ORDERS

THE COURT ORDERS THAT:

1.    Prior service of the interlocutory application dated 20 December 2022 is dispensed with and the application is returnable immediately.

2.    Pursuant to r 10.43 of the Federal Court Rules 2011 (Cth), the applicant has leave to serve the following documents (Documents) on the respondent out of Australia in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965 (Hague Convention):

(a)    the originating application;

(b)    the interlocutory application;

(c)    these orders;

(d)    the other orders made in this matter on 21 December 2022 and titled Freezing Orders;

(e)    the affidavit of Yi Deng sworn on 19 December 2022;

(f)    Exhibit YD-1, except that in relation to:

(i)    paragraph 3(a) of these orders, the applicant may provide a web address by which the recipient may download a copy of Exhibit YD-1; and

(ii)    paragraphs 3(b) to 3(d) of these orders, the applicant may provide a copy of Exhibit YD-1 on a USB drive; and

(g)    the written submissions filed in support of the interlocutory application.

3.    Pursuant to rr 10.24 and 10.49 of the Rules, personal service of the Documents is dispensed with and, in lieu of personal service, and subject to paragraphs 2(f)(i) and 2(f)(ii) above, the Documents may be served by taking the following steps by 5.00 pm AWST on 22 December 2022:

(a)    emailing them to robwall@jeb.com.hk and tempio@biznetvigator.com;

(b)    sending them by international post (express) to Suite 202, 2F, 6-8 Pottinger Street, Central Hong Kong;

(c)    sending them by international post (express) to Suite E, 10/F Greenmont Court, Greenvale Village, Discovery Bay, Lantau Island, Hong Kong; and

(d)    sending them by international post (express) to Apartment 11, 5/F, Block B, Repulse Bay Apartment, 101 Repulse Bay Road, Repulse Bay, Hong Kong.

4.    To the extent necessary, the Court dispenses under r 1.34 of the Rules with the requirement in r 10.49 that service in accordance with a convention, the Hague Convention or the law of a foreign country is first unsuccessful.

5.    Service of the Documents in accordance with paragraph 3 above is deemed good and sufficient service of the Documents on the respondent.

6.    By 5.00 pm AWST on 22 December 2022, the applicant must serve these orders and the Freezing Orders on Euroz Hartleys Limited by sending a copy by post to, or leaving a copy at, its registered address.

7.    As soon as practicable, the applicant must serve the transcript of the hearing of 21 December 2022 on the respondent by the same means provided for in paragraph 3 above.

8.    The matter is listed for a directions hearing at 10.15 am on 19 January 2023.

9.    The costs of the interlocutory application are reserved.

10.    The parties have liberty to apply on giving 48 hours' written notice.

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

REASONS FOR JUDGMENT

JACKSON J:

1    On 21 December 2022, on the application of the Deputy Commissioner of Taxation, I made orders freezing the Australian assets of two companies, Ranguta Limited and Golden Dawn Limited, and orders for substituted service. The application was made ex parte and the orders are limited in duration to a further return date, at which it will be open to the respondents to apply to vary or set them aside. In those circumstances it may have been appropriate not to give reasons. However I publish these reasons, mainly because of issues that arose in connection with substituted service overseas.

Factual background

2    An affidavit of an officer of the Australian Taxation Office (ATO), Yi Deng, was in evidence in each of the matters. In the absence of contrary evidence or opposition, Mr Deng's affidavits established the following matters for the purposes of the ex parte hearing.

3    Ranguta was incorporated in the British Virgin Islands and has a registered office there. Golden Dawn was incorporated in the Special Administrative Region of Hong Kong in the Peoples Republic of China. Both companies have offices in Hong Kong.

4    The sole director of both companies is Dominic Sum. He is a Chinese national. He appears to live in Hong Kong. There was no evidence of Mr Sum's presence in or travel into or out of Australia at any time.

5    Mr Sum is also the sole shareholder of Ranguta. The sole shareholder of Golden Dawn is Robert Wall. Mr Wall is or may have been an Australian citizen, but he too appears to live in Hong Kong. There was evidence of Mr Wall's movements into and out of Australia which indicated that he last left the country in March 2020.

6    Both of the companies appear to have made frequent trades of securities on the Australian Securities Exchange. In the case of Ranguta this took place from September 2007 until at least June 2022. In the case of Golden Dawn, the relevant period was July 2014 to June 2020. In most (but not all) years, the share trading activities have earned the companies profits. For Ranguta, these total about $5 million (gross) and for Golden Dawn, it is about $3 million (also gross, all references are to Australian dollars).

7    However, neither company has registered with the Australian Securities and Investments Commission, or registered as a taxpayer in Australia, or lodged an Australian tax return or paid any Australian tax.

8    The ATO conducted an audit of the affairs of each of the respondents. It did so without notice to them, being concerned that notice might lead to dissipation of assets. So the respondents have had no opportunity to put evidence or submissions to the ATO about their taxation affairs. The outcome of the audits were notices of assessment assessing Ranguta to be liable for income tax, penalties and interest (to 6 December 2022) of a total of $4,626,976.04. For Golden Dawn the assessed amount totals $2,147,163.47 (with the interest calculated to 13 October 2022). These are the liabilities that are the basis of the Deputy Commissioner's claim against the respondents in the originating application for each proceeding.

9    Each of the respondents has traded in securities through the broker Euroz Hartleys. Golden Dawn has a Foreign Bank Electronic Payment Agreement (made in 2015) with Euroz Hartleys which requires the broker to pay all settlement proceeds from transactions to a bank account with HSBC in Hong Kong. A more recent written instruction from Mr Sum to Euroz Hartleys confirms this requirement. No such agreement with Ranguta was in evidence, but a similar written instruction to remit proceeds to a different HSBC bank account was.

10    There is evidence that each of the respondents regularly transferred large sums of money into and out of Australia, with the destination accounts for transfers out being the respective Hong Kong bank accounts already mentioned.

11    No real property is registered in the name of either respondent, according to searches of a property database. According to records obtained from Euroz Hartleys, as at 15 December 2022 Ranguta held securities in Australia with a market value of approximately $7 million, and as at 10 October 2022 Golden Dawn held securities in an approximate value of $1.7 million. Golden Dawn also had funds to its credit in Euroz Hartleys' client trust account in the sum of $50,000, but that was some time ago (February 2022). The ATO is not aware that the respondents have any other assets in Australia. It has not sought to discover whether the respondents have any funds on deposit with any Australian banks.

12    The relevant notices of assessment were posted to each respondent by express international post on 19 December 2022, so as at 21 December 2022 their awareness that they had been assessed to be liable for tax, penalties and interest in the sums given above was imminent.

Freezing orders

13    The Deputy Commissioner applied for freezing and ancillary orders under Division 7.4 of the Federal Court Rules 2011 (Cth). Under that division the applicant must establish, relevantly here:

(a)    that it has a good arguable case on an accrued cause of action that is justiciable in this Court (r 7.35(1)(b)); and

(b)    having regard to all the circumstances, that there is a danger that a prospective judgment will be wholly or partly unsatisfied because the assets of the prospective judgment debtor are removed from Australia or from a place inside or outside Australia, or disposed of, dealt with or diminished in value (r 7.35(4)).

14    I was satisfied as to each of those requirements. The first is straightforward. Under s 350-10(1), item 2 of Schedule 1 of the Taxation Administration Act 1953 (Cth), the production of a notice of assessment under a taxation law is conclusive evidence that the assessment was properly made and that the amounts and particulars of the assessment are correct (save in relevant proceedings for review or appeal of the assessment). So the issue of the notices of assessment here mean that the Deputy Commissioner has at least a good arguable case that each of the respondents is liable to him in the amounts shown on the notice. Since those liabilities arise under taxation legislation made by the Commonwealth Parliament, they fall within the jurisdiction of this Court, at least because of s 39B(1A)(c) of the Judiciary Act 1903 (Cth).

15    The second of the above requirements will be met if the applicant establishes a danger that a prospective judgment will be unsatisfied because of removal or diminution of assets as described in r 7.35(4): Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liq) [2018] WASCA 174; (2018) 53 WAR 201 at [40]-[41] (Buss P, Murphy and Mitchell JJA). The risk or danger must be real or substantial, as opposed to a remote, speculative or theoretical possibility. The applicant must prove on the balance of probabilities facts from which the court can infer a risk or danger of that kind, but it is not necessary to prove that it is more probable than not that the assets will be dealt with in such a way that a judgment will be unsatisfied: Duro Felguera at [43]. At [44] the Court of Appeal said (footnotes removed):

Ultimately, it is a question for evaluation by the issuing court as to whether the degree of the danger or risk is sufficient to justify an order in the terms which the court is asked to make. In making that evaluative assessment, the court will bear in mind that a freezing order is a drastic remedy which imposes a severe restriction on a respondent's right to deal with its assets, and that the purpose of the order is not to provide security for a judgment which the applicant hopes to obtain and fears might not be satisfied.

16    With those principles in mind, on the facts summarised above, and others I will mention shortly, I was satisfied in relation to each respondent that there was a real and substantial risk that if freezing orders were not made, any judgment the Deputy Commissioner might obtain against the respondent would go unsatisfied, at least in part, because the respondent had removed assets from Australia. The facts that led me to that conclusion were the following.

(1)    Each respondent is domiciled overseas, in the case of Ranguta in the British Virgin Islands and Hong Kong, and in the case of Golden Dawn in Hong Kong. So, apparently, are their shareholders and sole director, both of whom appear to live in Hong Kong.

(2)    Neither respondent has any other substantial connection with Australia, other than the activity of trading and holding Australian securities. There is no reason to think that Mr Wall's apparent historical connection with the country is of any moment now.

(3)    The only known property of the respondents located in Australia is in the form of securities traded on the ASX, which are, presumably, easily convertible into money.

(4)    The respondents already have a long standing practice of transferring out of Australia to Hong Kong substantial sums, including proceeds from the sale of securities and, perhaps, money from other sources. It appears that there are standing instructions to their broker to transfer sale proceeds to Hong Kong.

(5)    The taxation debts claimed from each respondent are substantial. Receiving the notices of assessment and a claim from the Deputy Commissioner in those substantial sums will provide a strong incentive to realise the remaining securities and transfer the proceeds offshore.

(6)    The fact that each respondent appears to have made no effort to submit itself to the taxation laws of Australia increases the likelihood that it will act in that way.

(7)    If assets are transferred offshore, leaving less assets by value than the amounts claimed, any judgment may well be unsatisfied in whole or in part.

17    That last point should be elaborated. There was no evidence of the law that applies in the places of incorporation and apparent domicile of the respondents, British Virgin Islands or Hong Kong. In general, where foreign law is not proved it will be presumed to be the same as the law of Australia: Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 at [119] (Heydon JA, Spigelman CJ and Sheller JA agreeing). The law of Australia is that foreign revenue debts will not be enforced in Australia: Ayres v Evans (1981) 39 ALR 129 at 130-131, 139-141. I therefore proceed on the basis that the Deputy Commissioner would find it difficult, at least, to enforce any judgment of this Court in any of the jurisdictions in which the respondents were incorporated or are domiciled. So if assets the respondents hold in Australia are removed or diminished in value, that will give rise to a real risk that the judgment will go unsatisfied because of difficulty in enforcing it in other relevant jurisdictions.

18    In my view, the matters just outlined gave rise to sufficient danger so as to justify freezing orders. Each of the freezing orders sought and made were in the terms of the example form of orders annexed to the Court's Freezing Orders Practice Note (GPN-FRZG), although there was one potentially material departure discussed further below. The freezing orders are limited in time, being returnable on 19 January 2023 and expiring at the end of that day. Given the time of year, that is as early as is practicable. The nature of the respondents' trading activities and the nature of the known assets in Australia give no cause to think that they, or any person, will suffer significant prejudice if they are unable to sell those assets and transfer the money overseas within that time. If that is wrong, there is liberty to apply on 48 hours' notice. The orders are limited to the amounts notified in the notices of assessment; the respondents will be able to sell assets and transfer them outside Australia as long as that does not cause the value of the remaining assets to drop below those amounts. They provide for exceptions to pay legal expenses, to discharge bona fide existing obligations, and to deal with or dispose of assets in the ordinary course of business.

19    The potentially material departure from the usual form related to that last point. Since it is arguably in the ordinary course of the business of the respondents to sell securities and transfer the proceeds to Hong Kong, it would potentially undermine the orders to leave the wording of the exception in general terms. I therefore determined that it was appropriate to stipulate that the proceeds could not be removed from Australia unless the unencumbered value of the Australian assets would, after the removal, exceed the total amounts shown in the relevant notices of assessment (plus calculated interest). Once again, if that causes hardship, there will be liberty to apply.

Principles regarding leave to serve outside Australia and substituted service

20    The Deputy Commissioner also sought orders for substituted service of the originating application and other court documents, including the freezing orders. He submitted that the orders needed to be served on the respondents as soon as possible to ensure that they did not unknowingly breach them. But service needs to be effected in the British Virgin Islands (for Ranguta) and Hong Kong (for both respondents). Both of those places fall under the jurisdiction of nations that, along with Australia, are parties to the Hague Convention (Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters). So on the face of things, service of the documents needed to be effected in accordance with that convention. But that would require, in broad terms, a request to be made of a relevant authority in each place, and for that authority to then serve the respondents. There was evidence as to that process in Mr Deng's affidavits, from which it may be inferred that it could take a few months. The Deputy Commissioner sought orders permitting him instead to serve the respondents by email and by courier, right away.

21    The Deputy Commissioner recognised, correctly, that before seeking substituted service it was necessary, or at least appropriate, to seek leave under r 10.43 of the Rules to serve outside the jurisdiction: see Commissioner of Taxation v Zeitouni [2013] FCA 1011 at [26] (Katzmann J). In accordance with r 10.43(2), he applied for leave to serve the documents in accordance with the Hague Convention. But then at the same time he applied for substituted service other than in accordance with that convention.

22    The Deputy Commissioner's submissions did not initially address the possible tension between the different orders sought. They cited cases in which it was held that the importance of ensuring that freezing orders are brought to the respondents' attention as quickly as possible can mean that personal service in accordance with the rules is not practicable, that being a requirement of the general rule concerning substituted service, r 10.24: Zeitouni at [77]; Deputy Commissioner of Taxation v Huang [2019] FCA 1537 at [93]-[95] (Katzmann J), citing Commissioner of Taxation v Regent Pacific Group Limited [2013] FCA 36 at [26] (Siopis J). However those cases did not address the interaction between that imperative and the considerations of international comity which underlie the usual requirement to observe the Hague Convention when serving documents overseas (or another applicable convention, or the laws of the country where service is to be effected).

23    Also, while the Deputy Commissioner put his application under r 10.24, it was not clear that this was the right provision. That rule, which as has been mentioned is of general application, provides:

If it is not practicable to serve a document on a person in a way required by these Rules, a party may apply to the Court without notice for an order:

(a)    substituting another method of service; or

(b)    specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or

(c)    specifying that the document is taken to have been served:

(i)    on the happening of a specified event; or

(ii)    at the end of a specified time.

24    But there is also r 10.49, which is found in Part 10.4, concerning service outside Australia:

If service was not successful on a person in a foreign country, in accordance with a convention, the Hague Convention or the law of a foreign country, a party may apply to the Court without notice for an order:

(a)    substituting another method of service; or

(b)    specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or

(c)    specifying that the document is taken to have been served:

(i)    on the happening of a specified event; or

(ii)    at the end of a specified time.

25    It is arguable that the more specific applicability of r 10.49 might exclude the application of r 10.24 in this case.

26    Ultimately, these questions can be resolved by applying the following principles:

(1)    Both r 10.24 and r 10.49 can provide a basis for ordering substituted service overseas; the latter does not apply to the exclusion of the former: see Humane Society International Inc v Kyodo Senpaku Kaisha Ltd [2007] FCA 124 at [6]-[7] (Allsop J) and Australian Competition and Consumer Commission v Kokos International Pty Ltd [2007] FCA 2035 at [18] (French J), both concerning predecessor rules; Ford, in the matter of Careers Australia Group Ltd (in liq) v Mansfield [2022] FCA 173 at [32], [52] (O'Bryan J).

(2)    Under r 1.34 the Court has power to dispense with the requirement in r 10.49 that service on a person in a foreign country was not successful: Australian Information Commission v Facebook Inc [2020] FCA 531 (AIC v Facebook) at [66] (Thawley J); Careers Australia Group at [32]. While international comity underlies that requirement, a rare example of when it might be appropriate to dispense with it is 'a case where there is real urgency for service and where the evidence suggests an impossibility or serious impracticability in service by the means contemplated in the Convention': Park (Trustee) v Tschannen (Bankrupt) [2016] FCA 137 at [16], [18] (Edelman J).

(3)    Such urgency can also justify an order for substituted service under r 10.24: see [23] above.

(4)    International comity is a consideration against ordering substituted service, because the orders may subvert the applicable agreed regime for service outside the jurisdiction. That is a matter that may be taken into account: AIC v Facebook at [72]. But it is not necessarily conclusive. In AIC v Facebook, Thawley J ordered substituted service nevertheless (due to the exigencies of the COVID-19 pandemic): see [75]. See also O'Bryan J's discussion of the interaction between comity and the overarching purpose of the civil practice and procedure rules in Careers Australia Group at [33].

Application of principles regarding orders for service

27    Under r 10.43(3), an application for leave to serve outside Australia:

… must be accompanied by an affidavit stating:

(a)    the name of the foreign country where the person to be served is or is likely to be; and

(b)    the proposed method of service; and

(c)    that the proposed method of service is permitted by:

(i)    if a convention applies - the convention; or

(ii)    if the Hague Convention applies - the Hague Convention; or

(iii)    in any other case - the law of the foreign country.

28    The affidavits of Mr Deng complied with these requirements, save that they did not state that the proposed method of service was permitted by the Hague Convention. In the end, though, the interlocutory application was modified to seek service of the physical documents, not by courier, but by express post. I was satisfied that this was in accordance with the Hague Convention, as article 10(a) states that it does not in interfere with 'the freedom to send judicial documents, by postal channels, directly to persons abroad' provided the State of destination does not object. There was evidence that neither the United Kingdom nor the Peoples Republic of China object. I will return to the subject of email service briefly below.

29    Rule 10.43(4) requires that before leave to serve may be granted under r 10.43(2):

… the party must satisfy the Court that:

(a)    the Court has jurisdiction in the proceeding; and

(b)    the proceeding is of a kind mentioned in rule 10.42; and

(c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

30    Each of these requirements were satisfied here. Those in (a) and (c) have already been addressed, in effect, above. As for r 10.42 it mentions, among others, proceedings where the cause of action arises in Australia (item 1) and proceedings based on a contravention of an Act that is committed in Australia (item 12), a proceeding in relation to the construction, effect or enforcement of an Act (item 14), or a proceeding seeking any relief or remedy under an Act (item 15). Clearly the present proceeding falls into at least one of those categories.

31    There was no reason to exercise the residual discretion not to grant leave to serve the proceeding outside Australia: see Connelly (liquidator), in the matter of CIMC Rolling Stock Australia Pty Ltd (in liq) v One Rail Australia (FLA) Pty Ltd (No 3) [2021] FCA 1183 at [66]-[67] (Downes J). So it was appropriate to grant leave.

32    As for substituted service, obviously it would be unsatisfactory if the freezing orders remained unserved for months. There was evidence that the postal addresses and email addresses to be used were likely to result in the documents being brought to the attention of the respondents, including Mr Sum. Since postal service is consistent with the Hague Convention, it is unlikely to offend against international comity.

33    As for email service, there are cases in which that has been authorised overseas: see Kukulka v Google LLC [2020] FCA 1229 at [9]-[18] (Anastassiou J), applying AIC v Facebook. Indeed, it may be doubted that some of the concerns that informed the drafting of the Hague Convention in 1965 are relevant to service by email, where it is arguable that the electronic documents are received wherever they are first downloaded or viewed on an electronic device by or on behalf of a respondent, which may happen anywhere in the world. But since no evidence or submissions were provided in relation to that, it is preferable not to make the orders on that basis. Assuming that email service still takes place in British Virgin Islands and/or Hong Kong (as the case may be), I was satisfied that the desirability of bringing the application and freezing orders to the respondents' attention as soon as possible warranted orders permitting substituted service by that method.

34    For those reasons, the orders of 21 December 2020 were made.

Associate:

Dated:    9 January 2023