Service Foods claims it lost $2.8 million with stock pilfered from its Hamilton warehouse and alleges former employee Gongqin Liu orchestrated the thefts, onselling to retail outlets through a company controlled by his spouse Qing Wang.
The High Court imposed freezing orders over three properties owned by the couple pending civil action by Service Foods Ltd to recover its claimed losses.
Mr Liu and Ms Wang were willing to allow Service Foods to lodge caveats on each title to protect its position pending a court hearing, an offer rejected by the High Court; a caveat alone would not stop them from eroding equity in their three residential properties with further borrowing against mortgages already registered.
The High Court was told all three properties currently carry secured debt totalling $2.3 million.
To obtain freezing orders, Service Foods had to prove an arguable case that Gongqin Liu, otherwise known as George Liu, and his spouse Qing Wang were party to a scheme defrauding Service Foods.
Service Foods is a substantial business. It operates across seventeen branches with some 775 staff and a fleet of over 200 trucks delivering meat and seafood products to restaurants, hotels and retail outlets.
Mr Liu started work at Service Food’s Hamilton branch in 2019, becoming its distribution warehouse operations manager.
Four years later, an audit identified irregular inventory transactions previously recorded on Mr Liu’s user ID. Some 700 stock items were reallocated from Hamilton branch to Auckland branch. With no onwards sale record for these items, the loss fell on Auckland, not Hamilton.
A follow up Hamilton stocktake found high levels of meat in store, well in excess of amounts sold within the next month by which time ‘use by’ dates would have expired.
Alert levels were raised when Service Foods received Inland Revenue notification of a necessary change to Mr Liu’s tax code, signalling his annual taxable income now exceeded $180,000. At the time, his Service Foods salary was $85,000.
Previously, his manager had expressed surprise that Mr Liu was driving an Audi RS6, a vehicle that would have cost some $220,000. Mr Liu waved away the inquiry by stating he was minding the car for a friend who was currently overseas.
Further inquiries identified truck drivers had been delivering some stock to specific customers without the usual paperwork. A new account, G&C Trading Ltd, was prominent.
When asked to explain who was the person named as Qing Wang in control of G&C, Mr Liu did not disclose that she was his spouse.
Evidence was given that G&C Trading Ltd banking records have a ‘g.liu’ receiving regular payments averaging $342,100 per annum across several years.
Upholding the freezing orders, Justice Gordon said Service Foods has demonstrated a good arguable case that G&C Trading sourced misappropriated meat from Service Foods supplying it to various customers.
Separately, Service Foods is suing Mr Liu in the Employment Court.
A number of businesses which dealt with G&C Trading provided evidence to assist Service Foods freezing order application.
Service Foods Ltd v. Wang – High Court (31.05.24)
24.141