Federal Court of Australia

Baskerville, in the matter of HX Food Group (Aus) Pty Ltd (in liq) [2026] FCA 817

ORDERS

PENAL NOTICE

UPON THE PLAINTIFF, THROUGH HIS COUNSEL, GIVING THE USUAL

UNDERTAKING AS TO DAMAGES, AND UNDERTAKING TO START A

PROCEEDING IN RELATION TO THE SUBJECT MATTER OF THE

APPLICATION WITHIN 14 DAYS, THE COURT ORDERS THAT:

1.    Until 12:00 pm AEST on 8 July 2026 or further earlier order, OK International Pty Ltd ACN 657 944 557 (OK International) be restrained, whether by itself, its servants, agents, officers or otherwise, from withdrawing, transferring, paying away, dealing with, disposing of, diminishing, encumbering or otherwise parting with possession of or control over any funds standing to the credit of any bank account in its name or under its direct or indirect control, including the following banks:

(a)    Commonwealth Bank of Australia (ABN 48 123 123 124);

(b)    National Australia Bank Limited (ABN 12 004 044 937);

(c)    Bank of China Limited (ABN 29 002 979 955);

(d)    “Guomin Bank” (Kookmin Bank), South Korean Corporate Registration Number 124-81-13357;

(e)    HSBC Bank Australia Limited (ABN 48 006 434 162); and

(f)    any account into which those funds, or any part of them, are transferred after the making of these orders.

2.    The plaintiff shall forthwith serve on OK International copies of this order and, to the extent not already done, copies of the interlocutory application and supporting affidavit material.

3.    Any party has leave to apply to the Court, on two days’ notice, to vary, alter or set aside any of the orders made herein.

4.    The plaintiff’s costs of the application be reserved.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    By this application, Mr Christopher Baskerville, the liquidator of HX Food Group (Aus) Pty Ltd (HXFG), seeks an interlocutory injunction restraining a related company, OK International Pty Ltd (OK), from transferring funds out of several bank accounts. The application was brought ex parte and on an urgent basis. For the reasons which follow, the application should be granted.

Background

2    HXFG was incorporated on 9 June 2015 and traded in the export of grains from Australia to China. Mr Fuqing Zhao (Mr F Zhao) has been its director since incorporation. His son, Mr Dong Zhao, was also a director, but resigned on 22 April 2025.

3    On 13 June 2025, Mr Baskerville was appointed as a liquidator of HXFG by resolution of its members pursuant to s 495 of the Corporations Act 2001 (Cth) (Corporations Act).

4    OK International Pty Ltd (OK) was incorporated on 10 March 2022. Mr F Zhao has been its sole director since that time.

5    It appears that HXFG and OK entered into some form of arrangement, reflected in a written agreement entitled, “Service Agreement”, by which OK would receive payments from Chinese customers who purchased grain from HXFG and remit those funds to HXFG intermittently. Prima facie, that arrangement appears unusual, though there may be a reasonable commercial explanation for structuring the business in this way.

6    HXFG has been rendered insolvent and public examinations have been conducted by Mr Baskerville. Relevantly, Mr F Zhao was examined as to the relationship between HXFG and OK, and particularly the state of their accounts. It is unnecessary for present purposes to consider the examination in detail; it suffices to note that Mr F Zhao’s answers which raise concerns are set out in Mr Baskerville’s affidavit.

7    In general terms, Mr Baskerville is concerned by the vagueness of Mr F Zhao’s responses to questions about the financial relationship between HXFG and OK. He is concerned about the identity of the assets of each company and, in particular, the amount of funds received by OK for or on behalf of HXFG pursuant to the Service Agreement.

8    These are matters which are, or ought to be, within the knowledge of the common director of each company. Notwithstanding that, Mr F Zhao’s responses to direct questions about HXFG’s accounts were often that he did not know the answer, and the substantive answers he did give were ambiguous. Although the Court must take into account the fact that his evidence was given through an interpreter, the transcript is sufficient to support, prima facie, the liquidator’s concern that Mr F Zhao was not forthcoming as to the relationship between HXFG and OK nor as to the state of their respective accounts.

9    Further, on 17 November 2025, a Registrar of this Court made orders pursuant to s 597(9) of the Corporations Act (the November Orders), requiring the production by OK of several categories of documents, including invoices, bank statements, accounting records, ledgers and other financial records. The liquidator considers that OK’s compliance with that order has been “materially deficient”, because, in his view, it has not produced any financial records that would account for moneys received by it for HXFG, pursuant to the Service Agreement, since 1 January 2025. That is a matter of great concern and is to be taken into account when considering this application.

10    Overall, the liquidator considers that, in the light of Mr F Zhao’s apparent reticence to answer questions relating to the accounts of HXFG and OK in the public examination proceedings, and OK’s non-compliance with the November Orders, there is a material risk that OK could dissipate its assets by remitting funds to China. That concern is justified and informs the Court’s exercise of discretion to grant the injunctive relief sought.

Relevant principles

11    The power of this Court to grant an injunction of the type sought lies, inter alia, in s 23 of the Federal Court of Australia Act 1976 (Cth), which permits the Court to make orders, including interlocutory orders, of such kinds as it thinks appropriate. That is but one source of the Court’s power; courts have long recognised an inherent power to grant injunctions to protect a party’s interests pending the determination of proceedings: Jackson v Sterling Industries Ltd (1987) 162 CLR 612, 618 – 619.

12    The principles guiding this Court in respect of the power to grant interlocutory injunctive relief were summarised by Gummow and Hayne JJ in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 81 – 82 [65] as follows:

[65]    The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:

“The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.”

By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:

“How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.”

13    Notwithstanding that the relief sought by the present application is interim in nature, the principles governing interlocutory injunctions provide an appropriate framework within which to determine whether relief should be granted.

14    Accordingly, given the way in which the application was advanced, the question to be determined is whether the liquidator has established a prima facie case and whether the balance of convenience favours the grant of an injunction. In undertaking that assessment, it is necessary to consider the respective rights of the parties at the time of the application, in order to determine whether it is in the interests of justice to grant the relief sought.

Prima facie case

15    As to the first consideration, Mr Coveney, in his written submissions on behalf of the liquidator, identified the underlying rationale for the requirement for a prima facie case as follows:

32.    A prima facie case is demonstrated in circumstances where, if the evidence before the Court remains as it is, there is a probability that, at the trial of the action, the applicant will be entitled to the relief that it seeks. The strength of that probability will depend on the nature of the case. To make out a prima facie case, the applicant need not establish that it is more probable than not that it will succeed at trial; merely that there is a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.

(Footnotes omitted).

16    The evidence shows there to be a real likelihood that the liquidator will be entitled to relief against OK if the matter proceeded to trial on the basis that it holds funds which, prima facie, belong to HXFG. Theoretically, it is conceivable that a debt, or an account of profits or damages, would be available if such relief were sought. It is also possible that OK holds the funds on trust for HXFG, such that the latter has a proprietary interest in them, notwithstanding that they are in the hands of the former.

17    However, a difficulty for the liquidator is that there are presently no proceedings on foot for the recovery of money from OK. The application was brought in existing proceedings concerning the issuing of summonses to certain persons for public examination and the production of documents. That is significant in the present context, because interim injunctions are ordinarily not available unless sought in aid of relief to be obtained in final proceedings. In the absence of such proceedings, it cannot be said that the interim injunction is sought to maintain the status quo so as to protect any rights to relief in proceedings before the Court.

18    This difficulty was ultimately circumvented by Mr Coveney, who, after two short adjournments, invoked r 7.01 of the Federal Court Rules 2011 (Cth), which makes provision for the granting of an injunction in urgent circumstances where a person intends to commence proceedings in the Court.

19    That provision was relatively recently applied by Horan J in Foley v Butchulla Aboriginal Corporation RNTBC [2025] FCA 1270. There, his Honour relied upon the general principles informing the grant of interlocutory injunctive relief, with the slight variation to the effect that the first consideration – whether there is a serious question to be tried – directs attention to the question intended to be the subject of the proceedings yet to be commenced.

20    In order to ensure the application of r 7.01, an undertaking was made on the liquidator’s behalf to, within 14 days of the hearing, commence proceedings in this Court seeking an account of profits in respect of the money in the hands of OK, a declaration of trust or debt, damages, or equitable compensation. A claim under s 588FF of the Corporations Act was also foreshadowed, in respect of certain transactions said to be voidable on the basis that HXFG continued to perform the Service Agreement whilst insolvent. It is the seeking of that latter relief which attracts the jurisdiction of this Court.

21    For the reasons given above, the liquidator has established a prima facie case against OK in relation to the recovery of moneys said to be owed to, or held on behalf of, HXFG. As to the latter claim, it may be inferred, at least at this stage, that the payments sought to be unwound – that is, the amounts received by OK but not yet remitted to HXFG – were made towards the end of HXFG’s operating period and it is possible that they occurred during the period of its insolvency. Although there is presently limited evidence on that question, it is sufficient in the circumstances.

22    Ultimately, given the existence of a prima facie case that monies held by OK are held for the benefit of HXFG, this element is satisfied.

Balance of convenience

23    The balance of convenience favours the grant of relief. The risk of dissipation of OK’s assets to China and the circumstances giving rise to that risk have been addressed above. In particular, the non-compliance with orders of the Court for the production of documents renders that risk real and substantial. Were it to materialise, it is unlikely that an order for damages against OK would be an adequate remedy.

24    There also appears to be no risk of substantial prejudice to OK by granting the orders sought, as it is not presently trading. In any event, the liquidator has offered an undertaking as to damages and has identified that it is valuable by reference to the money that he has recovered in the course of the administration of the winding up. He will retain those funds for the purpose of securing the undertaking given.

Conclusion

25    For those reasons, it is appropriate that the orders be made. In doing so, it should be recognised that ex parte interim injunctions are somewhat extraordinary remedies and the Court must be satisfied that it is appropriate in the circumstances that they be made.

26    Though the liquidator has met that threshold, it is important to note that the respondent has not been heard, and any findings or inferences drawn in these reasons are made without the benefit of the respondent having the opportunity to provide evidence and address the Court. That will occur in due course.

Note

27    These are the amended and revised reasons for judgment given on 16 June 2026. Whilst the reasons given above refine and develop those that were delivered ex tempore, the substance of what was said that day has not been changed nor has any other material change been made.

Associate:    

Dated:    25 June 2026