Australian Securities and Investment Commission v Aviation 3030 Pty Ltd

UPON HAKLY LAO, CHONG HUY TAING AND THE FIRST DEFENDANT UNDERTAKING TO THE COURT THAT:

1. Until 4:30PM on 26 March 2019 or further order, the first defendant (Aviation), whether by itself, its directors, employees, servants, or agents (including its solicitors) will not: (a) transfer or in any way dispose of, deal with, or cause or permit to be transferred or in any way disposed of or dealt with, any asset of Aviation, including the land described in certificate of title Volume 08778 Folio 181, being Lot 1 on Plan of Subdivision 084675, and known as 756 Aviation Road, Point Cook, Victoria 3030 (Aviation Land); (b) charge, mortgage, encumber or use as security howsoever, or cause or permit to be charged, mortgaged, encumbered or used as security howsoever, any asset of Aviation, including the Aviation Land; unless Aviation has provided at least five business days' prior written notice to the plaintiff (ASIC), with the following exceptions namely that Aviation shall be entitled without notice to ASIC to: (c) enter into and give effect to the sale of the Aviation Land to Dahua Group Melbourne Number 4 Pty Ltd (Dahua) pursuant to a contract of sale dated 25 October 2018 between Aviation (as vendor) and Dahua (as purchaser); (d) enter into any transaction insofar as such transaction is in relation to an amount less than $25,000 individually, or $50,000 in aggregate over a seven day period; (e) meet its reasonable legal expenses incurred in connection with Federal Court proceeding VID1223/2018, Federal Court proceeding VID1460/2016 and for legal expenses incurred in relation to the sale of the Aviation Land; (f) pay the reasonable costs of the selling agents that trade as Colliers International and Biggin & Scott Land in connection with the sale of the Aviation Land. AND UPON HAKLY LAO, CHONG HUY TAING, THE FIRST DEFENDANT AND DLA PIPER UNDERTAKING TO THE COURT THAT:
2. Until 4:30PM on 26 March 2019 or further order: (a) all proceeds of the sale of the Aviation Land shall be paid into an account maintained by DLA Piper (the DLA Piper Trust Account); (b) no monies will be withdrawn, transferred or otherwise paid out of the DLA Piper Trust Account, except for the payment of a transaction as permitted by paragraph 1 above; (c) DLA Piper will provide to ASIC on a weekly basis a current statement of all transactions in relation to the DLA Piper Trust Account. THE COURT ORDERS FURTHER THAT:
3. Orders 1 to 5 and 7 above (inclusive) be stayed, until 4:30PM on 26 March 2019.
4. The plaintiff shall file and serve any application (and supporting affidavit material, if any) it is instructed to make to vary order 7 above, by 4:30PM on 21 March 2019.
5. The parties given leave under r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth) by order made on 29 October 2018 be granted leave to file and serve any written submissions and supporting affidavit material (if any) as to costs, by 4:30PM on 21 March 2019.
6. The defendants shall file and serve any submissions and affidavit material (if any) by way of reply in relation to costs, by midday on 25 March 2019.
7. Pursuant to s 198G(3) of the Corporations Act, Hakly Lao and Chong Huy Taing be granted leave to apply for a stay of orders 1 to 5 and 7 above (inclusive) on behalf of the defendants.
8. Liberty to apply.
9. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

O'CALLAGHAN J: 1 Yesterday, I pronounced certain winding up orders in this proceeding: see Australian Securities and Investment Commission v Aviation 3030 Pty Ltd [2019] FCA 377. 2 After I did so, counsel for the defendants made an application for a short stay of the winding up orders. I granted the application. 3 Because of the public interest involved, I will now briefly explain why. 4 The court has the power to order such a stay as an incident to its general power to control its own proceedings, as well as pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) and r 36.08(2) of the Federal Court Rules 2011 (Cth). 5 The interim stay was sought for a period of 7 days so that the defendants may consider the court's reasons, obtain advice as to possible appeal grounds and prospects, and decide whether they will pursue an appeal. 6 Counsel for the defendants, Mr J S Graham, undertook on behalf of the defendants and Mr Lao and Mr Taing to extend existing undertakings (set out above) for that 7 day period. 7 The principles governing the exercise of the Court's discretion to order a stay of winding up orders were summarised by Reeves J in Deputy Commissioner of Taxation v Ansett Resources & Industries Pty Ltd (2010) 79 ACSR 347 at [11]-[12]: ... [I]t is clear, in my view, that I have the power under s 23 of the Federal Court Act 1976 (Cth) to order a stay of the winding-up order pending an appeal to the Full Court. The grant of such a stay is a matter for the discretion of the court in all the circumstances of the case: see HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 at [47]-[48] (HVAC) per French J. Furthermore, the principles applicable to this stay application are the same as those that apply under the Rules of Court to the stay of any order of the court pending an appeal: see Kalifair Pty Ltd v Digi-Tech (Aust) Ltd (2002) 55 NSWLR 737 at [18] (Kalifair); Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd (2004) 209 ALR 86 at [17] (Masri); and Gronow, McPherson's Law of Company Liquidation (Lawbook Co, subscription service) at [16.190]. Under the Federal Court Rules, the normal principles are these. First, it is not necessary to demonstrate some "special" or "exceptional" reason for the stay: see Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66 and HVAC at [48]. Secondly, there is an onus on the applicant to make out a reason or appropriate case for the discretion to be exercised in its favour: see HVAC at [48] and Ng v Van Der Velde [2010] FCA 89 at [20] and [21] (Ng). Thirdly, the fact that an appeal will be rendered nugatory if a stay is not granted, is usually regarded as a substantial factor in favour of a stay. This, in turn, requires some assessment to be made to the prospects of success on the appeal: see, variously, Alexander v Cambridge Credit Corp Ltd (receivers appointed) (1985) 2 NSWLR 685 at 695; Kalifair at [18]; Masriat [17]; HVAC at [49(b)] and Ng at [21]. That assessment has been described as: "a preliminary non­speculative assessment of whether the appellant by the grounds of appeal has raised an arguable case ... [involving] ... a low threshold of arguability": see Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd [2008] FCA 1867 at [40] per Greenwood J and Ng at [36]. Fourthly, if the grounds of appeal disclose an arguable case, it is necessary to consider where the balance of convenience lies. See Kalifair at [18] and Masri at [17] … 8 ASIC did not oppose the short stay sought by the defendants, nor did the investors for whom Dr Bigos appeared. 9 In my view, where the regulator (and the group of investors who supported ASIC's position in this proceeding) did not oppose it, and having regard to the principles summarised by Reeves J in Deputy Commissioner of Taxation v Ansett Resources & Industries Pty Ltd, set out above, it was appropriate to grant the short stay sought, subject to the undertakings counsel gave on behalf of the defendants and Messrs Lao and Taing. 10 The parties also agreed on directions for the filing of further submissions about costs, which are also incorporated into the orders that appear above. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan.

SCHEDULE OF PARTIES VID 1223 of 2018 Defendants Fourth Defendant: AVIATION 3030 HENG LY PTY LTD Fifth Defendant: POINT COOK AVIATION 3030 PTY LTD Sixth Defendant: AVIATION 3030 HL PTY LTD Investor Group: SIERRA NEVADA MANAGEMENT PTY LTD AS TRUSTEE FOR THE DEVA FAMILY TRUST JS FOTIA PTY LTD AS TRUSTEE FOR JS FOTIA SUPERFUND HARBORLINK WEALTH PTY LTD AS TRUSTEE FOR THE ZOU FAMILY TRUST AND ZOUMOK PTY LTD AS TRUSTEE FOR THE ZOU & MOK FAMILY SUPERANNUATION FUND SERGIO VALENTINO AND DARRYL WILLIAMS SANG AUNG HONG ZHANG AS TRUSTEE FOR SUN'S FAMILY TRUST YUANTONG PTY LTD AS TRUSTEE FOR THE YUANTONG FAMILY TRUST HENG AUNG YOKE NGOH WONG CEN@TEK PTY LTD HAI YING OU AND JIAN PING SUN JESSIE LUXTON, COLIN LUXTON, JUN ZHU, YING ZHU AND FE PANG MA