Commissioner of Taxation v Li

1. The matter be listed for a case management hearing on a date to be fixed.
2. Costs be reserved

(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.

This is a "freezing order" made against you on 19 December 2025 by Justice Dowling at a hearing after the Court was given the undertakings set out in Schedule A to this order.

1. Subject to the next paragraph, this order has effect up to and including the hearing of the originating application.

1. 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.

(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.

(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.

(a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of the property located at 8 Rogers Close, Berwick, VICTORIA 3806 (certificate of title Volume 11947 Folio 868) (previously known as Lot 4030/Stage 4, 94-104 Homestead Road, Berwick Victoria 3806).

(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 6(a) above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

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.

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.

(a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia.

(b) The terms of this order will affect the following persons outside Australia:

(i) you and your directors, officers, employees and agents (except banks and financial institutions);

(ii) any person (including a bank or financial institution) who:

1. is subject to the jurisdiction of this Court; and

1. has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and

1. is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and

(iii) any other person (including a bank or financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person's assets.

1. The Applicant undertakes to submit to such orders (if any) as the Court may consider to be just for 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 cause anyone notified of this order to be given a copy of it.

1. The Applicant will pay the reasonable costs of anyone other than the Respondent which have been incurred as a result of this order.

1. If this order ceases to have effect 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.

1. 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 of Australia other than this proceeding.

1. The Applicant will not, 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.

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

(Delivered ex tempore, revised from transcript)

1. The applicant, the Commissioner of Taxation has filed an Originating Application which seeks a civil penalty against the respondent, Ms Fengqin Li, for contravention of s 96 of the Foreign Acquisitions and Takeovers Act 1975 (Cth). The Commissioner alleges a failure to comply with conditions imposed by the Treasurer on the respondent requiring the construction of one or more dwellings within four years of approval on the land purchased by her.
2. On an urgent interlocutory basis, the Commissioner seeks a freezing order pursuant to rr 7.32 and 7.35 of the Federal Courts Rules 2011 (Cth) against the respondent. The Commissioner also seeks a substituted service order.
3. The application is supported by an affidavit of Mr Frith dated 15 December 2025 (Frith affidavit) and an affidavit of Ms Rapson dated 19 December 2025 (Rapson affidavit). The Commissioner also provided and relied upon written submissions dated 19 December 2025 and made oral submissions at the hearing.
4. The respondent is on notice of the application and the interlocutory relief sought pursuant to s 135A of the Act. That provision affects service on the respondent for notices in respect of a proceeding to recover an amount of a fee or penalty for the purposes of the Act, where:

(1) the Secretary to the Treasury, the Treasurer or the Commissioner, after making reasonable enquiries, is unable to find the person, or is satisfied that the person is not in Australia; and

(2) the document or a sealed copy of it is posted in a letter addressed to the person at any address of the person in Australia or in a foreign country (including the person's place of business or residence), or any electronic address of the person (including a personal or business electronic address of the person), that is last known to the Secretary, Treasurer or Commissioner.

1. The Commissioner sent the respondent by email the Originating Application, Concise Statement and Frith affidavit in accordance with s 135A. The Originating Application contained within it the application for interlocutory relief. The Commissioner relied upon the same email address to advise the respondent of the hearing date.
2. For the reasons set out below, I am satisfied it is appropriate to make the freezing orders and the substituted service orders in substantially the form sought by the Commissioner.

1. The relevant background is described in the written submissions of the Commissioner and the affidavits of Mr Frith and Ms Japson. On the evidence before me I make the following findings.
2. The respondent is not a citizen or permanent resident of Australia. On 13 July 2016, the respondent was granted a subclass 600 tourist visa and has not re-entered Australia since her departure from Australia on 5 August 2016.
3. The records of the Department of Home Affairs Movement Details for the respondent's immigration evidence that the respondent is not in Australia, and has not entered Australia since 19 July 2016.
4. On 25 January 2016, the respondent entered into a Contract of Sale for the acquisition of Lot 4030/Stage 4, 94-104 Homestead Road, Berwick Victoria 3806, now known as 8 Rogers Close, Berwick VIC 3806, which at the time of sale was a 401m2 vacant parcel of land (Berwick Property).
5. The respondent's acquisition of the interest in the Berwick Property was subject to conditions imposed under a no objection notification issued by the Treasurer on 3 March 2016 pursuant to s 74 of the Act, which included a condition to construct one or more dwellings on the Berwick Property within four years of the date of the no objection notification.
6. On 4 March 2020, the four-year condition period by which to construct a dwelling on the Berwick Property expired.
7. No application for a variation to the no objection notification has been received from the respondent in relation to the Berwick Property.
8. To date, no building permit, planning permit, or construction activity has been recorded against the Berwick Property in any Australian Taxation Office (ATO), or publicly available Victorian land information systems.
9. As at 12 December 2025, the land remains vacant. The respondent has not taken steps since 2016 to build a dwelling on the land. The process taken by the Commissioner to assess the valuation of the Berwick Property is described in the Frith affidavit. I will return to that valuation below.
10. As discussed above, the respondent is on notice of the application and the interlocutory relief sought in it by operation of s 135A of the Act. The Rapson affidavit describes that Ms Rapson, being the Commissioner's representative, emailed the respondent on 15 December 2025 and 17 December 2025, called the respondent on 16 December 2025 and posted the relevant documents to the respondent on 17 December 2025.

1. The Court's power to make a freezing order is found in rr 7.32 and 7.35 of the Rules.
2. Relevant authorities considering the Rules establish that the Commissioner, in order to obtain a freezing order against the respondent, must establish:

(1) a good arguable case for the final relief sought: Insolvency Guardian Melbourne Pty Ltd v Carlei [2016] FCA 72; 111 ACSR 236 at [16] (Edelman J); Touch for Health Pty Ltd as Trustee for Knight Superannuation Fund v Property Mentors Australia Pty Ltd [2024] FCA 275 at [26] (Neskovcin J);

(2) that there is a "danger" or "real risk" that a judgment debt will go unsatisfied because assets are removed from the jurisdiction or disposed of in some way: Deputy Commissioner of Taxation v Hua Wang Bank [2010] FCA 1014; 273 ALR 194 at [8] (Kenny J); Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321-2 (Gleeson CJ with whom Meagher JA generally agreed); and

(3) that the interests of justice or balance of convenience favour the making of the freezing order: Hua Wang Bank at [13]; Touch for Health at [31].

1. I note also that Practice Note GPN-FRZG directs that the value of assets covered by any freezing order should not exceed the likely maximum amount of the claim, including interest and costs.

1. In Deputy Commissioner of Taxation v Greenfield Electrical Services Pty Ltd [2016] FCA 653; 103 ATR 327 Flick J said the following at [7] with respect to what is required to establish a "good arguable case", quoting Edmonds J in Curtis v NID Pty Ltd [2010] FCA 1072 at [6]:

the requirement imposed by r 7.35(1)(b) that an applicant have 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"

Conditions in no objection notifications

(1) A person who is given a no objection notification under section 74 (no objection notification imposing conditions) relating to a residential land acquisition must not contravene a condition (except a condition mentioned in section 97) specified in the notification.

1. The question of liability under s 96(1) is straightforward in the circumstances of this case. The Commissioner's burden is to show the existence of a no objection notification imposing the condition and that the condition was not met.
2. The no objection notification was issued to the respondent on 3 March 2016 expressly stating that the land is vacant and providing the condition to build a dwelling within four years. That four-year period was reached on 4 March 2020. There is no evidence that any building, siteworks, or permit applications took place. The Commissioner's searches confirm that the land remains vacant.
3. In my view, the Commissioner has established that there is clearly a good arguable case.

1. In Deputy Commissioner of Taxation v Ghaly [2016] FCA 707; 103 ATR 376, Perry J stated the following at [29] in relation to what needs to be considered to determine whether there is a risk of dissipation of assets which justify a freezing order:

Depending upon the circumstances, the interests of justice may support the grant of a freezing order to prevent dissipation of assets pending the hearing of an action even though the risk of dissipation is less probable than not; nor is evidence of any intention to dissipate necessarily required ... Rather, what must be established is "a sufficient likelihood of risk which in the circumstances of the particular case justifies an asset preservation order"

(Emphasis added. Citations removed.)

1. In the present circumstances, I am satisfied that there is a sufficient risk of dissipation for the following reasons.
2. First, the respondent is a foreign national and resides overseas.
3. Second, the respondent has indicated her intention to sell the Berwick Property without development due to insufficient funds. The Commissioner relies on evidence that the respondent communicated that intention to officers of the ATO on 19 August 2021, 31 January 2023 and 9 February 2023.
4. Third, there is some history of non-compliance by the respondent with Australian legal obligations. The Commissioner points to an unpaid infringement notice in respect of the Berwick Property and failures to lodge vacancy returns for a property in Mascot, New South Wales. The Commissioner combines that history with the alleged non-compliance with obligations under the Act in this case.
5. Fourth, the respondent has the means to dissipate the assets. That is, the respondent is the sole proprietor of the Berwick Property which is presently unencumbered. The respondent could take steps to sell or encumber all or part of the Berwick Property if not restrained.
6. Fifth, the Commissioner has made numerous attempts to contact the respondent since July 2021 in relation to the Berwick property. As at 19 December 2025, the respondent has not been in contact with the ATO since 2023. I accept that this shows some disregard by the respondent for compliance and cooperation with Australian authorities.

WHERE DO THE INTERESTS OF JUSTICE AND BALANCE OF CONVENIENCE LIE?

1. I accept that restraining dealings with the Berwick Property would not materially prejudice the respondent.
2. The Berwick Property is vacant residential land, apparently held for investment only and no occupation or ongoing income stream apparently depends upon it.
3. I accept that the making of the freezing order in respect of the Berwick Property would occasion no real prejudice or hardship to the respondent. The Berwick Property is, on the evidence before me, a vacant parcel of residential land held passively as an investment. It is not occupied by the respondent (who resides out of Australia), no income is apparently derived from it, and there is no suggestion that the respondent depends upon the Berwick Property for housing, livelihood, or the conduct of any business.

DOES THE VALUE OF ASSET COVERED BY FREEZING ORDER EXCEED THE PENALTY?

1. Section 96(3)-(4) of the Act relevantly provides:

Civil penalty provisions

(3) A person who contravenes subsection (1), (1A) or (2) is liable to a civil penalty.

(4) The maximum penalty for the contravention is the greatest of the following:

(a) double the amount of the capital gain that was made or would be made on the disposal of the interest in the relevant residential land;

(b) 50% of the consideration for the acquisition of that interest;

(c) 50% of the market value of that interest.

Note: For how to work out the capital gain, see section 98.

1. Thus, for each contravention of s 96(1) of the Act, the Court may fix civil penalties by reference to the statutory ceiling in s 96(4).
2. Mr Frith's affidavit describes that the Commissioner estimates the current market value of the Berwick Property to be $582,646. The Commissioner sets out the means by which that estimate was calculated. I accept for present purposes that estimate.
3. The contract consideration for the Berwick Property was $296,000. Under the first alternative under s 96(4), double the amount of capital gain would be $573,292. That is an amount greater than the two alternative limbs under s 96(4). Accordingly, the maximum penalty under s 96(4) is $573,292.
4. The Commissioner submitted that he would seek a penalty at or near the maximum. I am satisfied that the amount of $573,292, being the maximum value of the penalty, is commensurate to the estimated market value of the property being $582,646, noting that once costs are incurred, the maximum penalty together with those costs will likely match or exceed the current market value of the property.
5. In those circumstances, I accept that the proposed order is neither excessive nor oppressive. I accept that the proportionality of the relief sought is in the interests of justice.

1. The Commissioner seeks an order consistent with the example order contained within the Practice Note.
2. The only asset to which the proposed order is directed is the Berwick Property. The proposed order also provides that "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." I am satisfied that this enables the respondent to seek a variation to the order, should it become appropriate, at short notice.
3. Consistent with Schedule A of Annexure A to the Practice Note, the proposed order contains an undertaking to submit to such orders (if any) as the Court may consider to be just for payment of compensation. I am satisfied that the undertaking is given by the Commissioner and that its form is appropriate.

1. The Commissioner applies under r 10.24 of the Rules for orders for substituted service. He accepts that whilst he has the ability to serve notices pursuant to s 135A of the Act, he says it is not practicable to serve in accordance with that provision every document in the proceeding because it is not practicable for the Commissioner to make a determination under s 135A each time a document is to be served.
2. Extensive attempts to contact and serve the respondent are set out in Ms Rapson's affidavit.
3. I am satisfied in all of the circumstances before me that service in the usual manner is not practicable under the Rules, and there are some practical difficulties with requiring the Commissioner to comply with s 135A on each occasion a document is required to be served in this proceeding. I am satisfied it is appropriate to make the substituted service order in substantially the form as sought by the Commissioner. I consider that any potential unfairness to the respondent in making that order is mitigated by the respondent having liberty to apply "at any time" to vary or discharge the order, and that pursuant to the Practice Note, such applications will normally be treated by the Court as urgent.

1. In all of those circumstances, I grant the interlocutory relief in substantially the form sought by the Commissioner.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Dowling.