BEIJING JOSEPH INVESTMENT CO LTD -v- STARR WORLD INVESTMENT LTD [2015] WASC 110 (27 March 2015)

4 The defendants to the proceedings were identified as Starr World Investment Ltd (in some papers described as Starry World Investment Ltd) as first defendant, Cauldron Energy Ltd (a company incorporated in Australia) as second defendant, Shengjie (Anson) Huang as third defendant and Anthony Sage as fourth defendant. Mr Shen's affidavit filed on 12 October 2014 identified the second defendant as a company incorporated in Western Australia and listed on the Australian Stock Exchange. He deposed that the second and third plaintiffs and the first defendant were registered shareholders of the second defendant.

5 The relief claimed in the summons was an order that, until further order or pending final resolution of the proceedings, the defendants be restrained from dealing with shares of the second defendant owned or held in the name of the first defendant, or money paid by the plaintiffs or first defendant for those shares. An order was also sought restraining the defendants, until further order or final resolution of the proceedings, from enforcing or acting upon the demand for subscription fees. A declaration was sought that all and any shares held by or in the name of the first defendant in the second defendant are held on trust for the plaintiffs. The summons also sought damages and equitable compensation against the first, second and third defendants, further relief or other relief as the court thinks fit and costs.

6 On 12 October 2014, Lindsay J made orders which included an order (order 4) that, upon the plaintiffs and Mr Shen giving to the court the usual undertaking as to damages, the first, second and third defendants be restrained from:

(a) dealing with shares in the second defendant ... owned by, or held in the name of, the first defendant...

(b) dealing with funds held by the [second] defendant being, or being comprised of, any subscription sum paid by or on behalf of the plaintiffs ... for shares in the second defendant

(c) enforcing, or acting upon, the demand for subscription fees dated 2 October 2014 made by the second defendant (by the fourth defendant acting as executive chairman of the second defendant) on the first and second plaintiffs.

7 The injunction granted by Lindsay J operated up to 5.00 pm (Sydney time) on 15 October 2014 or further order of the court.

8 On 14 October 2014, the second and fourth defendants gave notice of a motion for orders which included an order discharging the injunction referred to above, dismissing the action against the fourth defendant and a transfer of the proceedings to this court pursuant to the Jurisdiction of Courts (Crossvesting) Act 1987 (NSW) (NSW Crossvesting Act). Alternatively, orders were sought for security for the undertaking as to damages and variations of the injunction.

9 On 15 October 2014, Pembroke J made orders discharging orders 4(b) and 4(c) made on 12 October 2013, and extending order 4(a) until further order of the court on the plaintiffs giving the usual undertaking as to damages. As against the second and fourth defendants, order 4(a) was varied so that it restrained them from:

Registering any transfer, dealing or encumbrance of any shares in the second defendant in the name of Starry World Investment Ltd.

10 Pembroke J stood over the second and fourth defendants' application for a transfer of the proceedings and security for the undertaking as to damages to 5 November 2014, and stood over the balance of the application in the defendants' notice of motion until further order. Costs were reserved.

11 During the course of the proceedings in the Supreme Court of New South Wales, the plaintiffs provided undertakings, as security for their undertaking as to damages, not to deal with any shares or options they held in the second defendant.

12 The application for transfer was heard by Robb J on 5 November 2014. A large volume of affidavit material was filed either in support of or opposition to that application. At the conclusion of the hearing Robb J reserved his decision.

13 On 11 December 2014, Robb J delivered his reserved decision on the second and fourth defendants' application for transfer,[1] and ordered the proceedings forthwith be transferred to this court pursuant to s 5(2) of the NSW Crossvesting Act. The plaintiffs were ordered to pay the second and fourth defendants' costs of the notice of motion filed on 14 October 2014.

14 At the time of the transfer order the first and third defendants had not been served with the originating summons. It appeared that service would need to be effected on those defendants outside Australia.

15 The matter came before me for directions on 4 February 2015. At that time I made various programming orders. Order 1 required the plaintiffs to file and serve any application for leave to serve the first and third defendants outside Australia by 9 February 2015, and listed that application for hearing on 18 February 2015.

16 Orders 4 6 provided for the filing of a statement of claim by 18 February 2015, defences and any counterclaim by 4 March 2015 and any reply and defence to counterclaim by 18 March 2015.

17 The plaintiffs did not file any application to serve the first and third defendants outside Australia. However, the parties asked that the matter still be called on 18 February 2015.

18 On 17 February 2015, the plaintiffs filed a notice purporting to wholly discontinue their action against all defendants.

19 On 18 February 2015, the second and fourth defendants indicated that they sought an opportunity to challenge the efficacy of the notice of discontinuance filed without leave. I made programming orders and listed that question for hearing today.

20 The present case appears to potentially engage this court's original jurisdiction in a number of different ways.

21 If, as seemed likely when the transfer application was argued before Robb J,[2] the plaintiffs' claim concerns a civil matter arising under the Corporations Act 2001 (Cth) or other provisions of the corporations legislation, it engages the federal jurisdiction conferred on this court by s 1337B(2)(a) of the Corporations Act. If the claim is a matter arising under the Corporations Act or some other Commonwealth law, then federal jurisdiction may also be conferred by s 39(2) of the Judiciary Act 1903 (Cth). If the claim, concerning dealings with shares in a company taken to be registered in Western Australia, does not engage federal jurisdiction then it would fall within this court's general nonfederal jurisdiction conferred by s 16 of the Supreme Court Act 1935 (WA).

22 It is unnecessary for present purposes to finally determine whether this court is exercising federal or nonfederal jurisdiction. In the absence of a clearer formulation of the plaintiffs' claim, the resolution of that question may be difficult. The point of the above analysis is to indicate that the authority of this court to determine the plaintiffs' claim does not depend on the conferral of jurisdiction in respect of New South Wales 'State matters' by s 4(3) of the NSW Crossvesting Act. Further, to the extent that the case is in federal jurisdiction, it could not be the subject of crossvested jurisdiction at all.[3]

23 Section 11(1) of the NSW Crossvesting Act, and s 11(1) of the Jurisdiction of Courts (Crossvesting) Act 1987 (WA) (WA Crossvesting Act) make various choice of law provisions where:

it appears to a court that the court will, or will be likely to, in determining a matter for determination in a proceeding, be exercising jurisdiction conferred by this Act or by a law of the Commonwealth or a State relating to crossvesting of jurisdiction.

24 In the present case, while the proceedings have been transferred to this court under the NSW Crossvesting Act, in determining the transferred proceedings this court is not, in my view, exercising jurisdiction under the crossvesting legislation. Rather, this court will be either exercising federal jurisdiction conferred by s 1337B(2)(a) of the Corporations Act; s 39(2) of the Judiciary Act; or nonfederal jurisdiction conferred by s 16 of the Supreme Court Act. In the present case, it does not appear to me that this court will be, or will be likely to be, exercising jurisdiction under the NSW Crossvesting Act. It follows that s 11(1) of the NSW and WA Crossvesting Acts do not control the choice of law rules in this case. In any event, the plaintiff accepts that if s 11(1)(c) were engaged then the Rules of the Supreme Court 1971 (WA) (Rules) would be the appropriate choice of procedural provision.

25 Section 9(b) of the WA Crossvesting Act provides that this court may hear and determine a proceeding transferred to this court under a provision of a law of a State relating to crossvesting of jurisdiction. Section 11(3) of that Act requires that I deal with the proceedings as if, subject to any order of this court, the steps that had been taken in the proceedings in the Supreme Court of New South Wales (including the making of an order), or similar steps, had been taken in this court.

26 Subject to the operation of s 9(b) and s 11(3) of the WA Crossvesting Act, the principal procedural rules applicable to the proceedings now that they are in this court are those contained in the Supreme Court Act and the Rules. Assuming the matter to be in federal jurisdiction, those rules would be applied by r 1.3(2) of the Supreme Court (Corporations) (WA) Rules 2004 (WA) made under s 23 of the Corporations (Ancillary Provisions) Act 2001 (WA).

27 In discontinuing the proceedings, the plaintiffs rely on O 23 r 2(1) of the Rules, which relevantly provides:

The plaintiff may, at any time before receipt of the defendant's defence, or after the receipt thereof before taking any other step in the action, by notice in writing, wholly discontinue his action against all or any of the defendants ... and thereupon he shall pay such defendant's costs of the action.

28 O 23 r 2(3) of the Rules provides that, 'save as in this rule otherwise provided', it shall not be competent for the plaintiff to discontinue an action without leave of the Court.

29 The reference to an 'action' in these provisions of the Rules comprehends 'a civil proceeding commenced by writ or in such other manner as may be prescribed by rules of court, but does not include any criminal proceeding'.[4]

30 The Court's leave to discontinue the current proceedings has neither been sought nor obtained. The efficacy of the notice of discontinuance therefore depends on the discontinuance which it purports to effect being authorised by O 23 r 2(1) of the Rules.

31 I consider that O 23 r 2(1) should be construed as applying only to actions in which the Rules provide for the filing and service of a defence without further order, in which the court has not dispensed with that requirement. Generally, these will be only actions commenced by writ, where the Rules themselves provide for the filing of pleadings.

32 The operation of O 23 r 2(1) of the Rules was considered by Martin CJ in Heartlink Ltd v Jones.[5] In that case, proceedings were commenced in this court by originating process supported by an affidavit, seeking the removal of liquidators of a company. Directions were made for the filing of affidavits in opposition to the application, and for the application then to be listed for hearing. Substantial affidavits were exchanged. An order for security for costs was made by consent and the applicant paid money into court. The applicant then filed a notice of discontinuance without leave.

33 Martin CJ held that the notice of discontinuance was not effective, and that O 23 r 2(1) did not authorise the discontinuance of the proceedings in that case without the leave of the court. After referring to the history of the provision, Martin CJ concluded that the rule only applied 'to which actions in which pleadings are to be exchanged', and the application before him was not such an application.

34 Martin CJ also endorsed the liquidator's 'alternative' submission that the Rules should be construed as precluding discontinuance without leave once the parties have joined issue - whether by service of a defence or other process, such as the exchange of affidavits. However, I do not consider Martin CJ to have been stating an independent rule at this point. Rather, he identified a general policy of the Rules, which was achieved by construing O 23 r 2(1) as applying only to actions in which pleadings are to be exchanged.

35 I agree with Martin CJ's reasons for reaching that conclusion.

36 Further, the proper construction of O 23 r 2(1) must take account of the general structure of the Rules and the context in which O 23 r 2(1) appears. Order 23 falls within that part of the Rules which deal generally with actions commenced by writ. The rules provide for the issue and service of writs of summons (O 5 O 10); judgment in default of an appearance to a writ (O 13); summary judgment in actions begun by writs (O 14); the endorsement of a statement of claim on a writ or the service of a statement of claim in an action commenced by writ (O 20 r 1); the filing of other pleadings including a defence to a statement of claim (O 20 r 4); the default of pleadings (O 22) and discontinuance (O 23).

37 Where O 23 r 2(1) refers in that context to what '[t]he plaintiff' may do at any time before receipt of the defendant's defence', it should be taken to be referring to a plaintiff referred to in the earlier rules dealing with actions by writs of summons, in which the filing of a defence is required by the Rules themselves. It is also implicit that, in the reference to what the plaintiff may do before the receipt of the defendant's defence, the court has not dispensed with the requirement for the filing of a defence.

38 Of course, the court, in the exercise of the case management powers in O 4A r 2(1) and r 2(2)(d), may direct that pleadings be filed in any proceedings. I do not consider that the prospect that pleadings might be ordered is sufficient to engage O 23 r 2(1) of the Rules, and I did not understand counsel for the plaintiffs to submit that this was sufficient. That rule must be construed having regard to its evident purpose of providing for an action to be brought to an end at an early stage of proceedings. If O 23 r 2(1) were construed as applying to proceedings in which a defence could be required by or under the Rules, then it would apply to all actions. The consequence would be that actions in which no pleadings were actually required could be discontinued without leave at any time, however much expense and inconvenience the defendant has been put to and regardless of the extent to which the defendant was prejudiced by the discontinuance.

39 If O 23 r 2(1) only applied to actions in which pleadings had actually been ordered, then the rule could not be engaged at the early stages of some proceedings prior to pleadings being ordered, which is precisely the period to which the policy of the rule is directed. I do not favour a construction in which O 23 r 2(1) would not operate at an early stage of the proceedings.

40 I would also not construe O 23 r 2(1) as applying to proceedings commenced by writ in which the requirement for pleadings or a defence has been dispensed with pursuant to O 4A r 2(2)(c) of the Rules. The curious and unfair results which would follow, in cases where pleadings were dispensed with, count against such a construction. It can hardly be thought that a plaintiff in such a case could discontinue after the judge had published reasons for a decision adverse to the plaintiff but before orders giving judgment for the defendant were formally made.

41 The effect of my construction of O 23 r 2(1) is, therefore, that it only permits discontinuance of an action without leave where the Rules themselves require the filing of a defence (ie, that the action has been commenced by writ of summons) and the court has not dispensed with the requirement for the filing of a defence. In my view that refinement is consistent with Martin CJ's conclusion that O 23 r 2(1) only applies to cases 'in which pleadings are to be exchanged'.

42 As I have noted, the present proceedings were commenced by summons in the Supreme Court of New South Wales. Under r 6.2 of the Uniform Civil Procedure Rules 2005 (NSW), proceedings in that court may be commenced either by filing a statement of claim or a summons. Rule 6.3 and r 6.4 provide for the circumstances in which different kinds of originating process are required. Speaking very broadly, the kinds of action which must be commenced by statement of claim are those which, in this court, would be commenced by writ of summons. Part 14, which applies only to proceedings commenced by statement of claim or in which a statement of claim has been filed, sets a time for the filing of a defence where there is no order for trial without pleadings.

43 I accept that the New South Wales Supreme Court could have ordered the filing of pleadings under r 2.1 and r 2.3(a) of the Uniform Civil Procedure Rules. Counsel for the plaintiffs also contends that, in New South Wales, a party may choose to file a statement of claim in a proceeding commenced by summons without a court order. I also note evidence in the affidavit of Mr Shen sworn on 16 March 2015, and not contradicted by the second and fourth defendants, that pleadings would ordinarily be ordered in a case of the present kind in New South Wales. However, pleadings are not required in proceedings commenced by summons by the Uniform Civil Procedure Rules themselves.

44 I also note, in passing, that r 21.1 of the Uniform Civil Procedure Rules would only have permitted the plaintiffs to discontinue the present proceedings while they were pending in the Supreme Court of New South Wales with the consent of each other active party in the proceedings or with the leave of the court.

45 As I have noted, s 11(3) of the WA Crossvesting Act requires that I deal with these proceedings as if, subject to any order of this court, the filing of a summons in the Supreme Court of New South Wales, or a similar step, had been taken in this court. Having regard to the provisions of the Uniform Civil Procedure Rules to which I have referred, I consider the filing of a summons in that court to be similar to the filing of an originating summons in this court. It is closer to the filing of an originating summons than it is to the filing of a writ of summons, in terms of the kinds of action which may be commenced by the relevant kinds of originating process (recognising that the correspondence is not exact) and the procedural consequences following from the use of the different kinds of originating process.

46 As the summons in the present case is not taken to be a writ of summons, and neither the Rules nor the Uniform Civil Procedure Rules themselves require a defence to be filed in the present case, O 23 r 2(1) did not apply to authorise the plaintiffs to discontinue the present proceedings without the leave of the court. That conclusion is not altered by the existence of a power in this court and the Supreme Court of New South Wales to require a defence to be filed, or by the fact that the power had been exercised in this court prior to the proceedings being purportedly discontinued.

47 For these reasons I would declare that the current proceedings have not been discontinued. If the plaintiffs wish to discontinue the proceedings then they require the leave of the court.

[1] Beijing Joseph Investment Co Ltd v Starr World Investment Ltd [2014] NSWSC 1925.

[2] See ts 7 at p 17 of the fifth affidavit of Dalitso Banda sworn 5 March 2014.

[3] See the definition of 'State matter' in s 3(1) of the NSW Crossvesting Act and s 4(1)(b) of the Jurisdiction of Courts (Crossvesting) Act 1987 (Cth).

[4] Section 4 of the Supreme Court Act read with s 44(1) of the Interpretation Act 1984 (WA).

[5] [2007] WASC 254.