Huang v Deputy Commissioner of Taxation  FCAFC 141 (17 August 2020) concerned an appeal from Mr Huang against a decision in which the primary judge made freezing and asset disclosure orders which extended to assets outside of Australia in the People’s Republic of China (PRC) and Hong Kong.
Background: Mr and Mrs Huang lived in Australia for several years. On 4 December 2018, Mr Huang left Australia for the PRC and his wife left nine months later. Following an audit of his tax affairs, the Deputy Commissioner issued to Mr Huang notices of amended assessment for several financial years and a notice of assessment of shortfall penalty assessing Mr Huang as liable for a total amount of approximately $140 million.
Having commenced proceedings for the recovery of the debt, the Deputy Commissioner subsequently applied for and was granted summary judgment against Mr Huang for the full amount as well as freezing orders and asset disclosure orders against both Mr Huang and his wife in relation to assets both in and outside of Australia.
In the appeal before the Full Court, Mr Huang challenged the freezing and asset disclosure orders insofar as they concerned his overseas assets. The primary judge had extended the freezing and asset disclosure orders to the overseas jurisdictions on the basis that enforcement of the Australian judgment overseas was “not impossible”.
The appeal: The court (Besanko, Thawley and Stewart JJ) noted that the purpose of a freezing order as identified in r7.32 of the Federal Court Rules 2011 is the prevention of the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.
The court determined that the appropriate test is whether there is a “realistic possibility that any judgment obtained by the plaintiff can be enforced against assets of the defendant in the place to which the proposed order relates”. The court said that such a test is consistent with the approach taken by the courts in determining what must be shown in terms of the risk of the removal of assets or the disposal of assets, matters to which a freezing order is directed. The test of “not impossible” used by the primary judge set the bar too low.
The court held that there was no “realistic possibility” that the Deputy Commissioner’s judgment debt would be enforceable in the PRC or Hong Kong.
Accordingly, leave to appeal was granted and the appeal allowed with the effect that the freezing and asset disclosure orders were confined to the assets held in Australia.
Anthony Lo Surdo SC is a barrister, arbitrator and mediator at 12 Wentworth Selborne Chambers, Sydney, Lonsdale Chambers, Melbourne, and Outer Temple Chambers, London, Abu Dhabi and Dubai. Theresa Power is a barrister at 12 Wentworth Selborne Chambers, Sydney.