Forever Winner International Development Australia Pty Ltd v Shenzhen Xinhe Hongshi Investment and Consultancy Co Ltd [2026] FCA 167

This Federal Court decision concerned a freezing order made against an Australian company that was not itself the defendant in the main proceeding. The main proceeding was brought by a Chinese creditor seeking recognition of a Chinese judgment and the winding up of another Chinese company in Australia. The non-party company, FWIDA, had just sold its main Victorian asset and was holding net sale proceeds of about $10.833 million.

The creditor said FWIDA owed a matching debt to the defendant company and that the sale proceeds needed to be preserved before they could be moved. Stewart J made the freezing order. FWIDA then sought leave to appeal. Beach J refused leave, meaning the freezing order stayed in place.

The case is important because it explains how the Federal Court approaches freezing orders against third parties under s 23 of the Federal Court of Australia Act 1976 (Cth) and Division 7.4 of the Federal Court Rules 2011 (Cth). It also shows that the Court will look closely at related-party debts, recent asset sales and group restructures when deciding whether there is a real enforcement risk.

The commercial background began with litigation in China. Shenzhen Xinhe Hongshi Investment and Consultancy Co Ltd obtained judgment against Shandong Ruyi Technology Group Co Ltd in the Shenzhen Municipal Intermediate People’s Court on 31 December 2021. The Australian reasons say that by the time of the Federal Court proceeding, the debt was equivalent to more than $85 million after interest and some modest recoveries.

Shenzhen then came to the Federal Court of Australia. It sought orders recognising the foreign judgment and winding up Shandong Ruyi under s 583 of the Corporations Act on the basis that Shandong Ruyi was a Part 5.7 body unable to pay its debts. That principal proceeding was listed for final hearing in April 2026 before Stewart J.

FWIDA was not the defendant in that principal proceeding, but it was closely connected to the defendant. FWIDA was incorporated in Australia in 2011 and had originally been wholly owned by Shandong Ruyi. In April 2022, after the Chinese judgment had already been given, Shandong Ruyi transferred its shareholding in FWIDA to Dynamic Day Enterprises Ltd, a British Virgin Islands company. Ms Chenran Qiu was the sole director and shareholder of Dynamic Day, and she was also FWIDA’s sole director and secretary.

FWIDA’s main asset was the Larundel Estate in regional Victoria, made up of six parcels of land used for a farming business. In September 2025, FWIDA sold the estate in an apparently arm’s-length transaction for $17.5 million. After costs and repayment of NAB debt, FWIDA received net sale proceeds of at least $10.833 million. The Court noted that FWIDA had little else by way of significant assets.

That sale changed the practical position. Instead of a hard-to-realise farming property, FWIDA now held cash. Shenzhen applied for a freezing order to stop FWIDA from removing from Australia, disposing of, dealing with or diminishing the value of its Australian assets up to $10,832,620. That figure was not random. It matched the alleged loan debt said to be owed by FWIDA to Shandong Ruyi.

The evidence on that debt was significant. FWIDA’s financial report for the year ended 31 December 2022 recorded a related-party non-interest bearing loan payable on demand in favour of Shandong Ruyi. The report was signed by Ms Qiu as director on 30 April 2024. In December 2024, Ms Qiu swore an affidavit stating that the shareholder loan account in FWIDA stood in credit to Shandong Ruyi in the sum of $10,832,620 and remained owing. Mr Yafu Qiu also swore that the same balance remained owing.

Only after the freezing application was brought did FWIDA seek to cast doubt on that position. It relied on an affidavit from Mr Wayne Materne, CEO of Lempriere (Australia) Pty Ltd, another company in the group that provided accounting, tax and treasury services to FWIDA. He said a detailed reconciliation was underway and that a significant portion of the loan balance might have been provided by entities other than Shandong Ruyi. Beach J regarded that late attempt to create uncertainty as suspect and opaque.

The Court also referred to a broader pattern of transactions involving related entities and Ms Qiu. These included the transfer of FWIDA shares to Dynamic Day for no recorded consideration, transfers of shares in Lempriere-related entities, and assignment of valuable loan receivables for no identified consideration. Beach J said Ms Qiu’s involvement in those arrangements was suspect and that this history was pertinent to the risk of dissipation.

Beach J began by setting out the source of power. Section 23 of the Federal Court of Australia Act gives the Court power to make interlocutory orders it thinks appropriate. Division 7.4 of the Federal Court Rules contains the specific freezing-order regime.

Rule 7.32(1) states that the Court may make a freezing order for the purpose of preventing the frustration or inhibition of the Court’s process by meeting a danger that a judgment or prospective judgment will be wholly or partly unsatisfied. Rule 7.34 makes clear that a freezing order can be made against a person even if that person is not a party to the substantive proceeding.

Rule 7.35 then sets out more specific requirements. In this case, it was common ground that the threshold bases in r 7.35 were met because there was a sufficient prospect that the Chinese judgment would be enforced by the Federal Court, and the winding-up case was also not contested at that threshold level.

The key provision for a third party was r 7.35(5). Relevantly, the Court may make a freezing order against a third party if, having regard to all the circumstances, either of two pathways is satisfied. The first pathway, in r 7.35(5)(a), concerns danger that a judgment will go unsatisfied because the third party holds, uses, controls or influences assets of the judgment debtor or prospective judgment debtor. The second pathway, in r 7.35(5)(b), concerns whether a process in the Court is or may ultimately be available under which the third party may be obliged to disgorge assets or contribute toward satisfying the judgment.

The creditor principally relied on r 7.35(5)(b). Two possible future court processes were identified. First, if Shenzhen obtained judgment in Australia, it might seek a garnishee order attaching FWIDA’s debt to Shandong Ruyi. Second, if Shandong Ruyi were wound up, a liquidator would have power and an obligation at least to consider getting in the debt owed by FWIDA to Shandong Ruyi.

An important point in the reasons is the relationship between r 7.32 and r 7.35(5)(b). Rule 7.35(5)(b) does not itself expressly repeat the language of danger found in r 7.32. But Beach J agreed with Stewart J that this did not really change the practical analysis. Whether danger is a strict requirement through the operation of r 7.32, or at least a highly relevant discretionary factor, the question of danger still has to be considered. Beach J agreed with Stewart J’s view that it would be inconceivable for a freezing order to be granted where there was no danger that a judgment or prospective judgment would be wholly or partly unsatisfied.

It is important to separate the two stages of the case. Stewart J was the judge who made the freezing order on 19 November 2025. Beach J was not deciding the freezing application afresh. He was deciding whether FWIDA should be given leave to appeal from Stewart J’s interlocutory decision.

That distinction mattered because leave to appeal is discretionary. Beach J said the usual considerations are whether the decision is attended with sufficient doubt to warrant reconsideration on appeal and whether substantial injustice would result if leave were refused, assuming the decision were wrong. He also explained that where the issue concerns the exercise of a discretionary power, the appellate standard from House v The King applies. In other words, it is not enough simply to argue that another judge might have reached a different view. The applicant must show error of the recognised appellate kind, such as acting on a wrong principle, mistaking the facts, ignoring a relevant consideration, relying on an irrelevant consideration, or reaching an unreasonable or plainly unjust result.

Beach J held that FWIDA had not shown the sufficient doubt required. He said Stewart J made no error of legal principle and had surveyed the relevant factual material and drawn appropriate inferences. He rejected FWIDA’s complaint that there was no evidence for findings of risk or that the findings were incoherent, describing that complaint as arising from an unfair reading of Stewart J’s reasons.

Beach J also held that FWIDA had not shown real prejudice, let alone substantial injustice, if leave were refused. That was another reason to refuse leave.

On the facts, Beach J drew heavily from Stewart J’s findings. Those findings included that FWIDA appeared to owe the debt to Shandong Ruyi, that FWIDA had just converted its main asset into cash, that it had little else of significance, and that there was evidence of transactions involving related entities and Ms Qiu that were relevant to dissipation risk. Beach J also noted that FWIDA’s own evidence trying to question the debt emerged only after the freezing application and was weakly explained.

Beach J further agreed with Stewart J’s treatment of the BVI undertaking given by Dynamic Day. That undertaking did not solve the problem. It was interim only, it was given by Dynamic Day rather than FWIDA, it was not given to the Federal Court, and it could not be enforced there. So it did not remove the risk that FWIDA itself might distribute the sale proceeds.

Beach J refused FWIDA’s application for leave to appeal and ordered FWIDA to pay Shenzhen’s costs of and incidental to the leave application. The immediate consequence was that Stewart J’s freezing order remained in place.

The reasons make several points that matter beyond the result. First, the Court accepted that freezing relief can be directed to a third party where the Rules permit it and the circumstances justify it. Second, the Court accepted that the creditor had identified possible future court processes capable of reaching the value represented by FWIDA’s alleged debt to Shandong Ruyi. Those processes were not speculative in the abstract. They were concrete legal mechanisms recognised by the Rules and the Court’s powers, namely garnishee relief and recovery action by a liquidator if winding up occurred.

Third, the Court accepted that the question of danger had to be addressed. Beach J agreed with Stewart J that, whether as a strict requirement or at least as a highly relevant discretionary factor, the Court had to consider whether there was a danger that the judgment or prospective judgment would be wholly or partly unsatisfied. On the evidence, that concern was justified.

The reasons show that the Court was influenced by the overall pattern rather than any single fact in isolation. FWIDA had sold its main asset and was holding cash. The amount of cash closely matched the debt said to be owed to the defendant. FWIDA’s own financial report and affidavits had recorded that debt as owing and payable on demand. The later attempt to question the debt was not persuasive. There was also evidence of earlier transfers of shares and receivables for no identified consideration, with Ms Qiu involved in those arrangements. Taken together, those matters supported preserving the sale proceeds.

For business owners, the case is not about every related-party transaction being improper. It is about what happens when a creditor can point to a practical enforcement pathway and a real risk that value may disappear before the Court can reach it. The Court will look at the commercial reality of the group structure, not just the formal labels attached to each company.

If your company owes money to a related entity, your own accounts may become central evidence. Here, the Court relied on FWIDA’s financial report and sworn affidavits stating that the debt remained owing. Once those records existed, a later suggestion that the debt might actually be owed to someone else was difficult to advance persuasively without strong supporting material. Businesses should assume that signed accounts, board-approved records and sworn evidence will be taken seriously.

The case also shows the risk of moving assets after a major sale when litigation is active. A business may think it is simply dealing with its own sale proceeds. But if those proceeds correspond to a debt owed to a company facing enforcement or insolvency proceedings, the Court may treat the funds as needing preservation. That is especially so where the company has few other assets and there is evidence of prior restructures or transfers that make recovery harder.

Another practical point is that offshore undertakings or parallel foreign proceedings may not protect an Australian company from local freezing relief. In this case, Dynamic Day had given an undertaking in the BVI not to diminish the value of its shares in FWIDA. But that did not bind FWIDA in the Federal Court or remove the risk that FWIDA itself might distribute the money.

For directors and finance teams, the safest approach is disciplined documentation. If funds move between related entities, record who advanced them, on what terms, whether they are repayable on demand, what consideration was paid, and why the transaction occurred. If a restructure is undertaken after a major judgment or while creditor pressure is building, expect the Court to ask hard questions.

The Chinese judgment was obtained on 31 December 2021. FWIDA’s shares were transferred from Shandong Ruyi to Dynamic Day on 28 April 2022. FWIDA sold the Larundel Estate on 17 September 2025, and Shenzhen applied for the freezing order on 21 October 2025. Stewart J made the freezing order on 19 November 2025. Beach J heard and determined the leave application on 20 February 2026, with reasons published on 26 February 2026.

The principal proceeding for recognition of the foreign judgment and winding up of Shandong Ruyi was said to be listed for final hearing in April 2026. This case note deals only with the interlocutory leave application and the freezing-order issues addressed in Beach J’s reasons.