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[2021] FCA 593
Federal Court of Australia
2021-06-02
O'Bryan J, Fusion J
Original judgment source is linked above.
PENAL NOTICE TO: FUSION J PTY LTD (ACN 607 541 202); IALPHAL PTY LTD (ACN 622 742 527); P&H LUXURY TRAVEL PTY LTD (ACN 637 953 925); and ROYAL INTELLIGENT DISTRIBUTION LOGISTICS PTY LTD (ACN 625 558 278) IF YOU (BEING THE PERSON BOUND BY THIS ORDER): (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.
TO: FUSION J PTY LTD (ACN 607 541 202); IALPHAL PTY LTD (ACN 622 742 527); P&H LUXURY TRAVEL PTY LTD (ACN 637 953 925); and ROYAL INTELLIGENT DISTRIBUTION LOGISTICS PTY LTD (ACN 625 558 278) ("RESPONDENTS") This is a 'freezing order' made against you (the respondents) on 2 June 2021 by Justice O'Bryan 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 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 4pm on Thursday 3 June 2021. (2) Subject to the next paragraph, this order has effect up to and including Monday 7 June 2021 (the Return Date). On the Return Date at 2.15pm there will be a further hearing in respect of this order before the Duty Judge. (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) 'plaintiff', if there is more than one plaintiff, includes all the plaintiffs; (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 plaintiff. (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) 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 or outside Australia. (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); (iii) in respect of FUSION J PTY LTD (ACN 607 541 202), the following assets in particular: (A) the assets of your business known as Fusion J carried on at Unit 309, 499 St Kilda Road, Melbourne VIC 3004 or, if any or all of the assets have been sold, the net proceeds of the sale; and (B) any money in account numbered 230551203 with BSB 013 132 held in the name of Fusion J Pty Ltd at ANZ Bank (Bourke St Mall Branch); (iv) in respect of IALPHAL PTY LTD (ACN 622 742 527), the following assets in particular: (A) the assets of your business known as Ialphal carried on at 55-65 Sky Rd E, Melbourne Airport VIC 3045 or, if any or all of the assets have been sold, the net proceeds of the sale; and (B) any money in account numbered 231267124 with BSB 013 006 held in the name of Ialphal Pty Ltd at ANZ Bank (Melbourne (388 Collins) Branch); (v) in respect of P&H LUXURY TRAVEL PTY LTD (ACN 637 953 925), the following assets in particular: (A) the assets of your business known as P&H Luxury Travel carried on at '2', 202-220 Ferntree Gully Road, Clayton VIC 3168 or, if any or all of the assets have been sold, the net proceeds of the sale; and (B) any money in account numbered 473685011 with BSB 013 128 held in the name of P&H Luxury Travel Pty Ltd at ANZ Bank (Melbourne (Royal) Branch); and (vi) in respect of ROYAL INTELLIGENT DISTRIBUTION LOGISTICS PTY LTD (ACN 625 558 278), the following assets in particular: (A) the assets of your business known as RID carried on at Unit 2, 242 Glenlyon Road Brunswick East VIC 3057 or, if any or all of the assets have been sold, the net proceeds of the sale; and (B) any money in account numbered 417073694 with BSB 013 225 held in the name of Royal Intelligent Distribution Logistics Pty Ltd at ANZ Bank (Box Hill Branch); (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 plaintiff in writing of: (i) all your assets world-wide, 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; (ii) the purpose for which all amounts received by you from the plaintiff, Royal Express Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed), were received in the period 13 September 2019 to 15 March 2021 and, if any amounts were received on account of services provided by you to the plaintiff, details of the services provided including copies of any invoices rendered; (iii) in respect of Ialphal Pty Ltd, the purpose for which you: (A) received the sum of $696,140.67 by way of bank transfer from the plaintiff on 19 January 2021; and (B) transferred the sum of $696,140.67 by way of bank transfer to the plaintiff on 20 January 2021. (iv) the current location of all amounts received by you from the plaintiff and, if the current location of the funds is not known to you, details as to where and when you paid those funds, and for what purpose. (b) within 10 working days after being served with this order, swear and serve on the plaintiff 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 your reasonable legal expenses; (b) 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; and (c) in relation to matters not falling within (a) or (b), 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 plaintiff, if possible, at least two working days written notice of the particulars of the obligation. (11) You and the plaintiff may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the plaintiff 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 plaintiff and you, and the Court may order that the exceptions are varied accordingly. COSTS (12) The costs of this application are reserved to the Court hearing the application on the Return Date. PERSONS OTHER THAN THE PLAINTIFF AND RESPONDENTS (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 respondents 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, provided that in the case of any future order of a court of that country or state made on your or the third party's application, reasonable written notice of the making of the application is given to the plaintiff. 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 PLAINTIFF (1) The plaintiff 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 plaintiff will file and serve upon the respondents 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 plaintiff 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 plaintiff will cause anyone notified of this order to be given a copy of it. (4) The plaintiff will pay the reasonable costs of anyone other than the respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondents' assets. (5) If this order ceases to have effect the plaintiff 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. (6) The plaintiff 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 or any separate proceeding commenced against the respondents as contemplated by paragraph (8) below. (7) The plaintiff 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 respondents or the respondents' assets. (8) The plaintiff must bring proceedings against the respondents in relation to the subject matter of this application, whether by joinder to the present proceeding or by the commencement of a separate proceeding, within 14 days of the date of this order. SCHEDULE B AFFIDAVITS RELIED ON Name of deponent Date affidavit made (1) Salvatore Algeri 28 May 2021 (2) Salvatore Algeri 1 June 2021
NAME AND ADDRESS OF PLAINTIFF'S LAWYERS The plaintiff's lawyers are: Allens Level 37, 101 Collins Street, Melbourne VIC 3000 Tel: (03) 9613 8561 Fax: (03) 9614 4661 Email: Matthew.Whittle@allens.com.au
Introduction 1 By interlocutory process dated 1 June 2021, the plaintiff made an ex parte application for freezing orders and ancillary orders against Fusion J Pty Ltd (Fusion J), Ialphal Pty Ltd (Ialphal), P&H Luxury Travel Pty Ltd (P&H Luxury) and Royal Intelligent Distribution Logistics Pty Ltd (Royal Intelligent) (together, respondents). The interlocutory application was supported by an affidavit of Salvatore Algeri also dated 1 June 2021. The application was returnable before me as duty judge. 2 This is the second interlocutory application made by the plaintiff for freezing orders in this proceeding. The first application was made on 28 May 2021 in respect of the present defendants to the proceeding, Mr Di Huang, Ms Mengqiu Ji and Royal International Logistics Pty Ltd (Royal International). I made the orders sought by the plaintiff and published reasons in Royal Express Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) v Huang [2021] FCA 585 (Royal Express (No 1)). Those reasons provide the background to this application and I will not repeat the matters there set out. 3 The respondents to the present application for freezing orders are the "Debtor Companies" as referred to in Royal Express (No 1). The plaintiff has not given notice of this application to the respondents as there is a risk of further dissipation of assets. 4 The respondents are not a party to this proceeding. The plaintiff informed the Court that it intends to bring proceedings against the respondents alleging (at least) knowing involvement in contraventions of ss 181 and 182 of the Corporations Act 2001 (Cth) by the first and second defendants. The relief proposed to be sought by the plaintiff against the respondents include damages or compensation and/or an account. In accordance with Rule 7.01(3) of the Federal Court Rules 2011 (Cth), the plaintiff has given an undertaking to the Court to join the respondents as defendants to this proceeding, or commence a separate proceeding against the defendants, within 14 days of the making of orders. 5 For the reasons given below, I am satisfied that it is appropriate to make the orders sought by the plaintiff.
Reasonably arguable case 6 The following facts are established, on a prima facie basis, by the affidavit of Mr Algeri sworn 1 June 2021.
Invoices issued to the respondents 7 The investigations that have been undertaken by the Receivers to date reveal that a total of 19,800 invoices were issued by the plaintiff to 503 different debtors that were financed by the Invoice Finance Facility held by the plaintiff with National Australia Bank (NAB). The cumulative total of amounts invoiced pursuant to those invoices is $141,673,423.60. The average invoice amount is $7,155.22. Approximately 89% of the invoices were issued by the plaintiff on the respondents. 8 Between June 2019 and August 2019, five invoices were issued by the plaintiff for amounts between $50,000 and $60,000 (high value invoices). Beginning in September 2019, there was a substantial increase in the number of high value invoices. 9 The Receivers have analysed a sample of 166 of the high value invoices for which some apparent supporting documentation has been located. The investigations to date have involved: (a) reviewing NAB's records of invoices submitted to it pursuant to the Invoice Finance Facility; (b) reviewing invoices located amongst the plaintiff's records; (c) reviewing the proof of delivery document relating to the invoice located amongst the plaintiff's records; (d) making direct enquiries with air carriers; and (e) reconciling data held by the International Air Transport Association (IATA). 10 Having regard to those investigations, Mr Algeri deposed that the Receivers consider that, of the 166 high value invoices in the sample analysed, 157 invoices appear to be illegitimate. The reasons for suspecting that the invoices are illegitimate can be categorised as follows: (a) for 107 of the invoices which referred to air waybills ostensibly issued by China Airways, the Receivers have not been able to match the air waybill numbers to records maintained by China Airways or IATA; (b) for 27 of the invoices which referred to air waybills ostensibly issued by China Airways, the Receivers have not been able to match the air waybill numbers to records maintained by IATA (but have been able to match the air waybill numbers to records maintained by China Airways); (c) for 15 of the invoices which referred to air waybills ostensibly issued by various other carriers, the Receivers have not been able to match the air waybill numbers to records maintained by IATA; (d) for 6 of the invoices, the Receivers have been unable to match the air waybills reference numbers to any known carrier and therefore have been unable to match the numbers to records maintained by IATA; and (e) for 2 of the invoices which referred to air waybills ostensibly issued by FedEx for international freight, FedEx has informed the Receivers that it has never provided international freight services to the plaintiff. 11 Mr Algeri gave evidence in relation to a specific invoice issued to each of the respondents to illustrate the reasons that the Receivers have concluded that the majority of high value invoices issued by the plaintiff appear to be illegitimate. The evidence shows that high value invoices have been issued purportedly in relation to international air transport services where the pick-up and delivery addresses are both within Australia and only a short distance apart, where the pick-up and delivery time are the same notional time (midnight on a given day), where the pick-up addresses are locations, such as small offices, which cannot store large quantities of cargo and where the addresses of the respondents recorded on the invoices do not accord with ASIC records and are variously the personal address of the second defendant (Ms Ji), the premises of the Park Hyatt Hotel, Melbourne, and other residential addresses.
Transfer of funds from the plaintiff to the respondents 12 Mr Algeri deposed that the Receivers have obtained access to bank statements for several bank accounts held by the plaintiff with Australia and New Zealand Banking Group Limited (ANZ), including two which are identified by the account numbers xxx-xx594 and xxx-xx432 (redacted for confidentiality). The Receivers have also obtained access to records maintained by NAB which show transfers of funds credited to the balance of the plaintiff's NAB account associated with the Invoice Finance Facility. 13 On the basis of the foregoing information, the Receivers have identified that many of the amounts transferred out of the plaintiff's ANZ accounts have flowed into accounts held in the name of the respondents. The Receivers are aware of the following bank accounts held in the name of the respondents: (a) for Ialphal - the account numbered xxxxxx124 with BSB 013 006 held in the name of Ialphal; (b) for P&H Luxury - the account numbered xxxxxx011 with BSB 013 128 held in the name of P&H Luxury; (c) for Fusion J - the account numbered xxxxxx203 with BSB 013 132 held in the name of Fusion J; and (d) for Royal Intelligent - the account numbered xxxxxx694 with BSB 013 225 held in the name of Royal Intelligent. 14 The following table below summarises the total amounts that have flowed out of the plaintiff's ANZ accounts into accounts held in the name of the respondents and the number of individual transactions making up those totals: Recipient Total payments Number of transactions Ialphal $21,433,796.87 68 P&H Luxury $6,558,618.15 27 Fusion J $5,306,297.88 11 Royal Intelligent $17,642,858.39 68
15 The Receivers' analysis of the plaintiff's financial transactions provides evidence that invoices funded by the Invoice Finance Facility with NAB have been transferred through various accounts controlled by the plaintiff and the respondents, before being partially transferred back to the credit of the NAB account associated with the Invoice Finance Facility. 16 The Receivers are not aware of any commercial basis on which the plaintiff has transferred large sums of money to the respondents, in circumstances where: (a) the respondents are ostensibly customers of the plaintiff and have issued letters purportedly confirming that they are indebted to the plaintiff; and (b) the director of the plaintiff, Mr Huang, has provided a Report on Company Activities and Property in respect of the plaintiff which states that the respondents are debtors to the plaintiff.
Conclusion on first issue 17 I am satisfied on the basis of the evidence before me that there is a good arguable case that: (a) the respondents are parties to transactions with the plaintiff that are based on false invoices; (b) the respondents are knowingly involved in those false transactions because they have signed letters asserting that they are indebted to the plaintiff (which debts purportedly relate to the false invoices); and (c) the respondents have received large sums of money from the plaintiff for which there is no commercial explanation, having regard to the fact that the debtor companies ostensibly acquire services from the plaintiff. 18 On that basis, there is a good arguable case that the respondents have received funds from the plaintiff arising from contraventions of ss 181 and 182 of the Corporations Act 2001 (Cth) by the first and second defendants and are involved in those contraventions.
Reasonable apprehension that assets will be dissipated 19 The evidence adduced by the plaintiff, as outlined above, establishes a reasonably arguable case that the respondents have been engaged in a scheme of dishonest behaviour involving the issue of false invoices and unjustified transfers of money. In my view, the conduct engaged in by the respondents establishes a danger or real risk that their assets will be dealt with in a way which would prevent the plaintiff from recovering judgment.
Balance of convenience 20 I consider that the balance of convenience favours the making of the orders for the reasons expressed in Royal Express (No 1).
Ancillary orders 21 The plaintiff also sought ancillary orders requiring each of the respondents, at or before the further hearing on the return date (or within such further time as the Court may allow), to the best of their ability inform the plaintiff in writing of: (a) all their assets world-wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of their interest in the assets; (b) the purpose for which all amounts received by them from the plaintiff were received in the period 13 September 2019 to 15 March 2021 and, if any amounts were received on account of services provided by the respondent to the plaintiff, details of the services provided including copies of any invoices rendered; (c) in respect of Ialphal, the purpose for which it: (i) received the sum of $696,140.67 by way of bank transfer from the plaintiff on 19 January 2021; and (ii) transferred the sum of $696,140.67 by way of bank transfer to the plaintiff on 20 January 2021; and (d) the current location of all amounts received by them from the plaintiff and, if the current location of the funds is not known to them, details as to where and when they paid those funds, and for what purpose. 22 The plaintiff also sought an order that the respondents, within 10 working days after being served with the order, swear and serve on the plaintiff an affidavit setting out the above information. 23 I am satisfied that it is appropriate to make the proposed ancillary orders because the orders will assist the plaintiff in identifying all of the assets of the respondents, including the existence of assets overseas, and thereby assist in preventing the dissipation of assets. The orders will also assist in the tracing of funds which appear to have been misappropriated.
Conclusion 24 In conclusion, I am satisfied that it is appropriate to make freezing orders largely in the form proposed by the plaintiff at the hearing on 2 June 2021. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.
Royal Express Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed)
Huang, in the matter of Royal Express Pty Ltd