Yeo (Liquidator) v J & K Cheung Investments Pty Ltd, in the matter of JC & KC Investments Pty Ltd (in liq) [2026] FCA 397

This case sits in the early, urgent stage of an insolvency dispute. JC & KC Investments Pty Ltd operated the Siupak Plastic Bags business. After the company went into liquidation, its liquidator, Andrew Yeo, started substantive proceedings alleging claims under the Corporations Act, the Property Law Act 1958 (Vic) and common law and equitable principles. The pleaded claims included breach of officer duties, relief from voidable transactions, debt or monies had and received, and claims associated with Barnes v Addy.

But this judgment was not the final trial of those allegations. The immediate question was whether the Federal Court should make freezing orders to preserve assets before the main case could be heard. That distinction matters. A freezing order is about protecting the Court’s process and preserving recoverability. It is not a final finding that the respondents did anything wrong.

The commercial setting was a family-linked business structure. The operating company ran the plastic bag and packaging business from premises in Seaford. Those premises were owned by J & K Cheung Investments Pty Ltd, the first respondent. The second respondent, MW & Grace Investments Pty Ltd, was the company that acquired the business and assets on 2 December 2025, one day before the operating company was placed into liquidation.

The reasons set out a detailed prima facie timeline. JC & KC Investments Pty Ltd was incorporated in June 2015. It manufactured and supplied plastic bags and plastic packaging materials to customers including supermarkets, bakeries and other entities. The company had three employees named in the reasons: Kenneth Cheung, Monie Wong and Siu Cheung. Monie Wong was the administration and office manager and handled accounts receivable and payable, invoicing, BAS and tax returns.

The company traded from Unit 2, 2 Rutherford Road, Seaford. The registered proprietor of that property was J & K Cheung Investments Pty Ltd. The reasons record that the operating company entered into a lease of the Seaford premises with the property-owning company on or about 30 June 2025, although Kenneth Cheung told the liquidator that the business had occupied the premises and operated from there since 19 June 2015. The lease term was three years with two further terms of three years each, at rent of $108,000 per annum plus GST.

By mid-2025, the company was under significant tax pressure. On 30 July 2025, the Deputy Commissioner of Taxation issued a statutory demand for tax debts of $672,383.97. The company did not comply. On 8 October 2025, the Deputy Commissioner commenced winding-up proceedings in the Federal Court, with a hearing listed for 3 December 2025. The liquidator later deposed that, after conducting a solvency review, he had formed the opinion that the company was likely insolvent from at least 30 June 2023.

The key event occurred on 2 December 2025, the day before the liquidator’s appointment. On that day, the company entered into a business sale agreement with MW & Grace Investments Pty Ltd under which it sold its business and assets for $40,000. It also entered into a deed transferring its rights and obligations under the Seaford lease to that purchaser. The purchaser had been incorporated on the same day. Its sole shareholder, director and secretary was Monie Wong, who was also secretary of the seller and the sister of Kenneth Cheung, the seller’s sole director. The sale completed on the same day, and the seller’s bank statements showed two receipts of $20,000 on 2 and 3 December 2025.

The liquidator relied heavily on evidence suggesting a much higher value had recently been put on the business. On or about 24 October 2025, the company had engaged Trident Business and Corporate Sales to market and sell the business under an exclusive authority signed by Kenneth Cheung. The asking price was $230,000 plus stock at valuation. Then, in correspondence with the ATO’s solicitors on 17 November 2025, the company’s solicitor said the company operated a successful and profitable business, that there were more than 20 potential buyers, and that the expected sale price advised by the broker was over $275,000. Later correspondence recorded Kenneth Cheung estimating the business at $250,000 and the Seaford premises at $2.4 million with a bank mortgage of $600,000.

That combination of facts drove the urgency of the application: a company under tax and winding-up pressure, a sale one day before liquidation, a buyer incorporated on the day of sale, overlap between the seller’s officers and the buyer’s controller, and a sale price far below the figures recently put forward in sale discussions and creditor correspondence.

The legal issue was narrow but commercially important. The Court had to decide whether to grant ex parte freezing orders and ancillary relief against the first and second respondents. The Court explained that it had power to make freezing orders under section 23 of the Federal Court of Australia Act 1976 (Cth) and Division 7.4 of the Federal Court Rules 2011 (Cth). The stated purpose of a freezing order under the Rules is to prevent frustration or inhibition of the Court’s process by meeting a danger that a judgment or prospective judgment will be wholly or partly unsatisfied.

The Court then set out the established test. The applicant had to show: first, a good or reasonably arguable case; second, a danger that a prospective judgment would be wholly or partly unsatisfied because assets would be removed from Australia or disposed of, dealt with or diminished in value; and third, that the balance of convenience favoured granting the order.

That is an important point for business readers. The Court was not deciding whether the respondents were actually liable under the Corporations Act, whether the business sale was in fact a voidable transaction, or whether damages or equitable compensation would ultimately be awarded. The Court was deciding whether there was enough on a prima facie basis to justify temporary restraints so that any later judgment would still be worth something.

The Court also dealt with a procedural issue. At the hearing, the liquidator applied for an order joining JC & KC Investments Pty Ltd to the proceeding as a second applicant. Justice O’Bryan considered the company to be a necessary and proper party and made that order under rule 9.05.

Justice O’Bryan held that the liquidator had satisfied each element required for freezing relief and said orders would be made largely in the form sought. The Court therefore granted the interlocutory application and made separate freezing orders against the first and second respondents.

For the first respondent, J & K Cheung Investments Pty Ltd, the order restrained it from removing from Australia, disposing of, dealing with or diminishing the value of any of its Australian assets up to the unencumbered value of $1,217,700. The order defined unencumbered value as value free of mortgages, charges, liens or other encumbrances. If the unencumbered value of its Australian assets exceeded that amount, it could still deal with assets so long as the total unencumbered value remaining exceeded the relevant amount.

The Court also made ancillary disclosure orders against the first respondent. Subject to an objection procedure, it had to inform the applicant in writing of all its Australian assets, including value, location, encumbrances and the extent of its interest, and then swear and serve an affidavit with that information within 10 working days after service. The order included a mechanism for objections where disclosure might tend to prove an offence or civil penalty exposure. In that situation, some information could be delivered to the Court in a sealed envelope, with a separate affidavit setting out the basis of objection.

For the second respondent, MW & Grace Investments Pty Ltd, the order was narrower and targeted the proceeds of sale of the Siupak Plastic Bags business and other assets used by or sold as part of that business. It restrained the second respondent from removing from Australia or in any way disposing of, dealing with or diminishing the value of those proceeds or assets.

Both orders were made without notice to the respondents. The orders themselves say they were made at a hearing without notice and that service was abridged so the material had to be served by 9 April 2026. They were also temporary. Each order stated that it had effect up to and including Wednesday 15 April 2026, with a further hearing on the return date before Justice Button. The orders also expressly allowed any person served with or notified of the order to apply at any time to vary or discharge it.

The orders were not absolute shutdown orders. They included exceptions allowing dealings in the ordinary and proper course of business and payment of business expenses bona fide and properly incurred. The first respondent’s order also allowed payment of $20,000 on account of reasonable legal expenses and allowed entry into or completion of a contract for sale of the Seaford land on two working days’ written notice to the applicant of the contract terms. Both orders also allowed discharge of pre-existing contractual obligations in some circumstances on notice.

The orders further provided ways for the restraints to cease, including payment into Court, payment into a joint bank account in the names of the parties’ solicitors, or provision of agreed security. Importantly, the orders said that such payment or security would not give the applicant priority over other creditors if the respondent became insolvent.

One of the most practical features of this case is the penal notice attached to the freezing orders. The notice warned that if the person bound by the order refused or neglected to do an act required by the order, or disobeyed the order by doing something prohibited, that person would be liable to imprisonment, sequestration of property or other punishment. It also warned that any other person who knew of the order and helped or permitted a breach could be similarly punished. For business owners, that is the clearest signal that a freezing order is not something to treat as routine correspondence.

The case also shows how the Court calibrates preservation relief. The first respondent, which owned the Seaford premises, was subject to a monetary cap tied to the claimed exposure. The second respondent, which had acquired the business, was restrained specifically in relation to the sale proceeds and business assets. That tailoring reflects the purpose of freezing orders. They are designed to preserve the position, not to punish or to decide the whole dispute in advance.

For directors and owners, the commercial warning signs are familiar. If a company is under serious creditor pressure, especially tax debt pressure, and is considering a sale to a related party, the process must be defensible. A same-day incorporation of the buyer, overlap between the seller’s officers and the buyer’s controller, a price well below recent broker or management estimates, and completion immediately before liquidation are all facts likely to attract close scrutiny. None of those facts alone proves wrongdoing, but together they can justify urgent preservation orders.

This case is also a reminder that communications with creditors matter. The reasons record correspondence saying the business was successful and profitable, that there were more than 20 potential buyers, and that the expected sale price was over $275,000. When a later sale occurs for $40,000 to a related entity, those earlier statements can become highly significant in an interlocutory application.

If your business receives a freezing order, do not assume that every payment is prohibited and do not assume that every payment is allowed. Read the exact exceptions. Ordinary-course carve-outs are helpful, but they are not a blank cheque. Urgent legal advice is essential before moving money, completing a sale, paying related parties or changing asset positions. If your business is planning a sale while insolvency concerns exist, get advice before the transaction is documented or completed. The best protection is usually contemporaneous evidence: valuation material, board minutes, conflict disclosures, sale process records, and a clear explanation of why the transaction was commercially justified.