Huang v Deputy Commissioner of Taxation

Paragraph [10] of the Penal Notice 4 The Penal Notice that formed part of the orders by the primary judge provided in paragraph [10] for Mr Huang's weekly ordinary living expenses up to a certain amount and legal expenses to be excepted from the frozen assets. Mr Huang has proposed orders that maintain paragraph [10] in essentially the same form, but make it clear that the relevant expenses are excepted from the Australian assets, since those are the only assets that will remain frozen. 5 The Deputy Commissioner submits that given that Mr Huang will now have assets that are not frozen, being his Hong Kong and PRC assets, there is no basis for the relevant expenses to be excepted from the frozen assets - he can pay those expenses from his unfrozen foreign assets. The Deputy Commissioner proposes orders that delete those parts of paragraph [10] of the Penal Notice that provide for the relevant expenses to be excepted from the frozen assets. 6 Mr Huang has also requested that in the event that this Court, in the appeal, is going to decide this issue, which he characterises as the Deputy Commissioner's application to vary the orders of the primary judge, then there should be a further opportunity to make oral submissions. That is to say, Mr Huang opposes the issue being dealt with on the papers and on the basis of only the evidence that was before the primary judge. 7 In our view, the issue is best dealt with by a single judge in the Court's original jurisdiction. The issue was not squarely raised in the appeal and it may require evidence. That is because a decision on whether or not the amendment should be made may involve considering what, if any, prejudice it would cause Mr Huang. It is also not an efficient use of the judicial resources of the Court for the Full Court to deal with the issue, particularly when a further hearing and evidence would be required. That is a material consideration in view of s 37M(2)(b) of the Federal Court of Australia Act 1976 (Cth). The proposed variation of paragraph [10] of the Penal Notice is therefore best dealt with by way of interlocutory application to a single judge to vary existing interlocutory orders because of a material change in circumstances. That will allow the issue or issues at stake to be properly identified and any relevant evidence to be adduced.

Costs before the primary judge 8 The parties are agreed that the Deputy Commissioner should pay the costs of the appeal. However, they disagree on what should be done with the costs before the primary judge. In that regard, on the Deputy Commissioner's summary judgment application the primary judge awarded the Deputy Commissioner the "costs of the proceeding". That was by orders on 19 December 2019. Those costs would include the costs of the Deputy Commissioner's application for freezing orders and Mr Huang's opposition to those freezing orders, which costs were not expressly dealt with in the orders of 21 October 2019. 9 The Deputy Commissioner submits that the primary judge's costs order should be left undisturbed because, she submits, there were other issues argued below in addition to the issue that arose on appeal on which she says she was successful. However, she submits that if allowance is to be made for her loss on the issue that arose on appeal, then no more than 25% of Mr Huang's costs of and incidental to the hearing before the primary judge on 17 October 2019 would be justified. 10 Mr Huang submits that he should have 75% of the costs before the primary judge because that reflects an approximate split between the issue that arose on appeal and the other issues that were argued below. 11 It is apparent from the judgment of the primary judge that there were two issues before her Honour, namely whether the freezing orders should be continued as against Mr Huang in respect of his assets outside of Australia, in particular in Hong Kong and the PRC, and whether they should be continued against Mrs Huang at all. The latter issue concerned a property in Mosman that was bought by Mrs Huang with money apparently advanced by Mr Huang. In relation to that issue, which was clearly of a more confined nature than the foreign assets issue, the primary judge maintained the freezing orders. 12 Thus, before the primary judge the Deputy Commissioner was successful on both issues but on one of those issues, being the more demanding one, Mr Huang has now succeeded on appeal. In our view, an order that the Deputy Commissioner pay 50% of Mr Huang's costs of the hearing before the primary judge on 17 October 2019 including the costs of preparing submissions for that hearing will produce the fairest outcome. Although Mr Huang has now succeeded on the more demanding issue, the consequence of him being awarded costs in respect of that hearing means that the Deputy Commissioner will have no costs in respect of the smaller issue on which she succeeded. Thus, a 50% award in Mr Huang's favour, rather than the 75% award which he seeks, will most fairly reflect the parties' relative successes on the issues agitated below.

Set-off of costs awards 13 The Deputy Commissioner seeks an order setting-off the costs order against her in the appeal, and any costs order against her below, against the judgment sum and costs orders in her favour in the principal proceeding. She submits that no equity is achieved by requiring the Deputy Commissioner to pay Mr Huang's costs in circumstances where a significant judgment has been obtained against him and that judgment, together with costs orders in favour of the Deputy Commissioner, remain unsatisfied. 14 Mr Huang has made no submission with regard to the set-off that the Deputy Commissioner seeks. 15 This Court has the power to order a set-off of costs orders when it is equitable to do so. See Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812 at [11]-[14] per Perram J and Ritson v Commissioner of Police, New South Wales Police Force (No 2) [2019] FCA 1069 at [4] per Robertson J - this is an incidence of "the Court's inherent jurisdiction over its suitors", and it is consistent with the Court's broader discretion with regard to costs under s 43 of the Federal Court of Australia Act. The power includes the power to set-off a costs order against a judgment sum: Corbett v Nguyen (No 2) [2012] NSWSC 673 at [13] per Windeyer AJ citing Goldsbrough Mort & Co Ltd v Quinn [1910] HCA 20; 10 CLR 674. 16 In our view, for the reasons advanced by the Deputy Commissioner, it is equitable that the costs orders are set-off against each other and the principal judgment. The Deputy Commissioner was justified in seeking freezing orders, and she was successful in doing so at least insofar as Mr Huang's Australian assets are concerned. Further, she was successful in her application for summary judgment, which produced a judgment in her favour of more than $140 million, and she was successful in resisting Mr Huang's application for a stay of execution of the judgment. She was awarded the costs of the proceeding which reflects those successes. It would not be equitable to require her to pay Mr Huang's costs orders if the orders in her favour have not been satisfied. A set-off of orders is the most equitable result.

Conclusion 17 For the reasons set out above, the orders that should now be made are that Mr Huang have leave to appeal and that the appeal be allowed with costs, that the Penal Notice referred to in the orders of the Court on 21 October 2019 be varied to exclude Mr Huang's non-Australian assets from the freezing orders and in certain other consequential respects on which the parties were agreed, that the orders of the Court on 21 October 2019 be varied to include an order that the Deputy Commissioner pay 50% of Mr Huang's costs of the hearing on 17 October 2019 including the preparation of submissions for that hearing, and that the costs orders on appeal and before the primary judge be set-off against any orders in favour of the Deputy Commissioner. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Besanko, Thawley and Stewart.

Annexure A (CHANGRAN HUANG) PENAL NOTICE TO: CHANGRAN HUANG IF YOU: (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 TO ABSTAIN FROM DOING, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED. TO: CHANGRAN HUANG This is a 'freezing order' made against you on 21 October 2019 (as amended by the Court on appeal in proceeding NSD 1759/2019) at a hearing after the Court was given the undertakings set out in Schedule A to this order. THE COURT ORDERS: 2. Subject to the next paragraph, this order has effect until further 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' means the applicant in NSD1490/2019; (b) 'respondents' means the respondents in NSD1490/2019 and references to a particular respondent is a reference to that respondent in NSD1490/2019; (c) 'you', where there is more than one of you, includes all of you and includes you if you are a corporation; (d) 'third party' means a person other than you and the applicant; (e) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. (f) 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. (g) 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$140,607,780.88 ('the Relevant Amount') other than to make payment to the Commissioner of Taxation. (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 only: (i) all your Australian assets, whether or not they are in your name and whether they are solely or co-owned; (ii) any of your Australian assets which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (iii) the following assets in particular, the real property at: A. 31 Douglas Ave, Chatswood NSW 2067; B. Unit 5205, 438 Victoria Ave, Chatswood NSW 2067; and (b) the value of your assets is the value of the interest you have individually in your Australian assets. PROVISION OF INFORMATION 8. Subject to paragraph 9, you must at or before 11 November 2019 (or within such further time as the Court may allow) swear and serve on the applicant an affidavit setting out all of your assets within 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. 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 $10,000 a week from your Australian assets on your ordinary living expenses; (b) paying your reasonable legal expenses from your Australian assets provided that the solicitor for the First Respondent is to file and serve a certificate in the form of Schedule C setting out the amount of their legal expenses and disbursements reasonably incurred by the respondents in connection with these proceedings and any other proceedings in which the first respondent is involved by 25 October 2019, and each month thereafter; (c) dealing with or disposing of any of your Australian assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your Australian assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation. 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$140,823,109.76 into Court; or (ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor 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 (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT 13. 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. 14. 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. 15. Persons outside Australia (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: A. is subject to the jurisdiction of this Court; and B. has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and C. 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 of 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. 16. Assets located outside Australia Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you. 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 cause anyone notified of this order to be given a copy of it. (3) 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. (4) If this order ceases to have effect1 the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. (5) 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. (6) 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 NAME AND ADDRESS OF APPLICANT'S LEGAL REPRESENTATIVES The applicant's legal representatives are: c/- Craddock Murray Neumann Lawyers Pty Ltd Level 21, 227 Elizabeth Street SYDNEY NSW 2000 Telephone: (02) 8268 4000 Facsimile: (02) 8268 4001 Attention: Khaled Metlej SCHEDULE C CERTIFICATE No: NSD 1490 of 2019 Federal Court of Australia District Registry: New South Wales Division: General DEPUTY COMMISSIONER OF TAXATION Applicant CHANGRAN HUANG First Respondent JIEFANG HUANG Second Respondent

1. I, [insert name] , Solicitor for the First Respondent, certify that the amount of the legal expenses and disbursements incurred by the First Respondent in connection with this proceeding and any other proceedings in which the First Respondent is involved (the Proceedings) during the period between [insert relevant time period] is as follows: Name of Solicitor Hourly rate Number of hours spent Cost

2. I further certify that the amount of the disbursements incurred by the First Respondent in connection with the Proceedings during the period between [insert relevant time period] is as follows: Date Disbursement Cost [E.g. counsel's fees]

3. Having regard to the complexity of the issues in dispute and the nature of the work which has been undertaken, I consider these amounts to be reasonable. Date: [insert date] [SIGNED]
4. For example, if the respondent pays money into Court or provides security, as provided for in paragraph 12 of this Order.