Chen and others v The Australian Shaanxi Chamber of Commerce Incorporated and Others

Stay of proceedings which are an abuse of process

1. The power to order a stay of proceedings is provided for in s 67 of the Civil Procedure Act 2005 (NSW). The Supreme Court also has inherent jurisdiction to stay proceedings which are an abuse of process (Clyne v Bar Association (NSW) (1960) 104 CLR 186 at 201; Williams v Spautz (1992) 174 CLR 509 at 518 (Spautz)).
2. However a permanent stay of proceedings is an exceptional remedy and the applicant bears the heavy onus of proving an abuse of process (Spautz at 529; see also TR v Director of Public Prosecutions [2020] NSWSC 255 at [44] and the cases cited there).
3. In UBS AG v Tyne [2018] HCA 45; 265 CLR 77 Kiefel CJ, Bell and Keane JJ stated (at [1]): This appeal is concerned with the power to permanently stay proceedings as an abuse of the process of the court. The varied circumstances in which the use of the court's processes will amount to an abuse, notwithstanding that the use is consistent with the literal application of its rules, do not lend themselves to exhaustive statement. Either of two conditions enlivens the power: where the use of the court's procedures occasions unjustifiable oppression to a party, or where the use serves to bring the administration of justice into disrepute. [citations omitted]
4. Similarly in PNJ v The Queen [2009] HCA 6; 83 ALJR 384 French CJ, Gummow, Hayne, Crennan and Kiefel JJ held (at [3]): It is not possible to describe exhaustively what will constitute an abuse of process. It may be accepted, however, that many cases of abuse of process will exhibit at least one of three characteristics: (a) the invoking of a court's processes for an illegitimate or collateral purpose; (b) the use of the court's procedures would be unjustifiably oppressive to a party ;or (c) the use of the court's procedures would bring the administration of justice into disrepute.
5. Where it is alleged that a party is invoking a court's processes for an improper purpose the improper purpose must amount to the predominant, although not sole, purpose of the moving party (Spautz at 529).

Frivolous and vexatious proceedings

1. If it appears to the court that proceedings are frivolous or vexatious the court may order that the proceedings be dismissed (UCPR r 13.4(a)).
2. A matter that is 'frivolous' is one that is 'without substance, groundless or fanciful' (Thurlow v Thurlow [2015] NSWSC 1323 at [13]).
3. With respect to 'vexatious' proceedings Roden J said in Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491: There have, of course, been many cases in which relevant vexation has been found in the motivation of the litigant. A recent instance in this Court, when s 84 was under consideration, was Attorney General for New South Wales v Solomon (1987) 8 NSWLR 667, where it was held that litigation is vexatious if it is brought for collateral or ulterior purposes, or if it is not a bona fide attempt to have the questions in dispute adjudicated. It seems then that litigation may properly be regarded as vexatious for present purposes on either objective or subjective grounds. I believe that the test may be expressed in the following terms: 1. Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought. 2. They are vexatious if they are brought for collateral purposes, and not for the purpose of having the court adjudicate on the issues to which they give rise. 3. They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless. 4. In order to fall within the terms of s 84 [Supreme Court Act 1970 (NSW), since repealed]: (a) proceedings in categories 1 and 2 must also be instituted without reasonable ground (proceedings in category 3 necessarily satisfy that requirement); (b) the proceedings must have been "habitually and persistently" instituted by the litigant.

Abuse of process

1. The defendants submit that the plaintiffs' threat in the 5 June 2020 letter to make allegations of criminal misconduct unless the defendants agreed to settlement on the terms proposed, which included the payment of money, was a form of extortion and amounts to the use of the proceedings for an improper purpose, and the proceedings should be stayed accordingly. They submit that none of the allegations made by the plaintiffs could result in a liability on their part to pay damages to the plaintiffs.
2. The defendants submit the 5 June 2020 letter should be understood in the context of the Concerns Notice and other 'early warning' signs, including two letters the plaintiffs' solicitors sent to the second defendant on 7 and 16 August 2019, in which they complained of alleged defects in the notices for the AGM and warned that Committee members should be aware of sections 91 and 32 of the Associations Incorporations Act which if contravened can lead to penalties or imprisonment.
3. The defendants submit the plaintiffs did not have any evidence to support the allegations contained in the 5 June 2020 letter, which they say compounds the impropriety of the ultimatum. They also submit that since that 'failed extortion attempt' the predominant purpose of the plaintiffs, as demonstrated by the steps they have taken in the litigation, has been to gather evidence of impropriety against the defendants, which is a further abuse, or continuation of the abuse, of the court's processes.
4. The defendants submit that apart from the declaratory relief the effect of the relief sought by the plaintiffs is to achieve independently conducted elections. The defendants submit they have never resisted that outcome and the fact that the offer of fresh elections has been continually resisted supports the proposition that the predominant purpose of the proceedings lies outside the attainment of relief.

Vexatious proceedings

1. The defendants submit the plaintiff's conduct is also unduly oppressive and vexatious for the following reasons: a. The proceedings have been used to harass the defendants, in particular the second and third defendants; b. The defendants are current or former officeholders of a voluntary not for profit organisation; c. The defendants are being put to considerable legal expense to defend these proceedings; d. The defendants have offered fresh elections on numerous occasions, which offer has not been accepted by the Plaintiffs; e. The plaintiffs have made numerous attempts to obtain disclosure in the proceedings in a cynical attempt to find evidence of criminal or other impropriety on the part of the defendants; f. The plaintiffs have threatened the defendants that if they do not settle on proposed terms the plaintiffs will make allegations of criminal impropriety; g. The plaintiffs have attempted (albeit unsuccessfully) to injunct the third defendant from performing his functions as President; h. The plaintiffs have done little to prosecute the litigation in a timely way, the impugned meeting being over 12 months ago.

Plaintiff/respondents' submissions

1. In response to both of the defendants' claims the plaintiffs submit the challenge they make to the validity of the election has consistently been central to the proceedings. In particular they submit that the relief sought in the further amended statement of claim focuses entirely upon the impugned election and cannot be suggested to be directed to any alleged ulterior or collateral purposes.
2. The plaintiffs submit the challenge they make to the election has been properly made and focuses upon defects in the notices issued to members of the first defendant.
3. The plaintiffs deny the proceedings have been used to harass the defendants. They dispute the matter referred to above at 38 in that KWL Lawyers do not act for all of the defendants and the attitudes of the seventh, eighth, tenth, fourteenth and fifteenth defendants to fresh elections are unknown.
4. The plaintiffs submit the main impasse between the parties appears to concern the declaration sought by the plaintiffs concerning the alleged impugned election. The plaintiffs say the declaration is the primary relief they seek, a new election regime being consequent upon a declaration being made by the court. It is the plaintiffs' position that a declaration is required in order for any new election regime to be implemented, particularly where the consent of all defendants to an election regime has not been obtained.
5. The plaintiffs submit they are within their rights to seek disclosure and injunctive relief and have only made one application for disclosure and one application for injunctive relief (both of which were refused).
6. Further the plaintiffs dispute they have done little to prosecute the litigation in a timely way. They commenced the proceedings on 14 February 2020 following failed attempts at mediation and arbitration (having sought to comply with dispute resolution clauses in the Association's constitution) which they say were unsuccessful due to inaction on the part of the first and second defendants. They submit that judicial notice can be taken of the impact of COVID-19 on Supreme Court proceedings and there have been motions heard before Parker J on 7 August and 11 November 2020. The further amended statement of claim was filed on 8 September 2020 and defences are yet to be filed by the defendants.

Consideration

1. At the outset of the hearing a question arose as to the admission of a number of documents including the letter of 5 June 2020 referred to above and other materials contained in the affidavits of Mr Anthony Ishac and Mr Se Yoon Kim both of 1 October 2020. Objection to each of the various materials was taken on the basis of s 131 of the Evidence Act 1995 (NSW) (the Evidence Act).
2. That section provides that evidence is not to be adduced of a communication that is made in connection with an attempt to negotiate a settlement. In each case it is said the section is engaged. Indeed a number of the communications are headed "Without Prejudice save as to Costs'.
3. I heard argument on the matter and in the course of argument I was taken to the decision of the Court of Appeal in Van Der Lee & Ors v State of New South Wales & Ors [2002] NSWCA 286 (Van Der Lee). I was also taken to s 11 of the Evidence Act. That section specifically states that the Act does not affect the power of a court to control the conduct of a proceeding, and more particularly in s 11(2), that the powers of the court with respect to abuse of process in a proceeding are not affected.
4. In Van Der Lee, Hodgson J A (with whom Mason P and Santow JA agreed) said (at [62]): … I think s.11(2) does have the effect that, when evidence is tendered that could be evidence of an abuse of process, albeit evidence of without prejudice settlement negotiations, the Court may receive that evidence on the voir dire; and then, if that evidence does either by itself or in combination with other evidence establish an abuse of process, the Court may rule the evidence admissible and make appropriate orders to deal with that abuse of process. In my opinion, the powers of a court with respect to abuse of process include its powers to receive evidence, and in my opinion the authorities relied on by the claimants show that, at common law, communications evidencing abuse of process will not be protected by without prejudice privilege. I do not think that s.131 provides otherwise, either expressly or by necessary intendment, particularly if s.132(2)(k) does not apply in cases of abuse of process.
5. I was of the view that the materials to which objection was taken should be admitted on the basis that they could arguably be some evidence of abuse of process, given their content and tone. I gave judgment admitting each of the documents.
6. The primary case sought to be made by the applicants is that properly construed the plaintiffs' predominant purpose, gleaned from the materials but especially the high point, namely the email of 5 June 2020, is to attempt to extort money and/or a remedial outcome not reasonably within the scope of the litigation.
7. An applicant in such a matter seeking a stay on the basis the proceedings are an abuse of process bears a heavy onus and is required to prove unjustifiable oppression or that the proceedings serve to bring the administration of justice into disrepute. Indeed as I have noted above it has rightly been said that such a remedy will only generally be granted in exceptional cases (see the discussion of the authorities by Davies J in TR v Director of Public Prosecutions [2020] NSWSC 255 at [39]-[40], [44]-[45]).
8. Most of the cases in this area involve proceedings or matters collateral or ancillary to the proceedings but it is clearly possible, as Clarke JA pointed out in Hanrahan v Ainsworth (1990) 22 NSWLR 73 (Hanrahan) at 112, that the doctrine might apply in circumstances where a person sought to use proceedings as a means to extort or attempt to extort money from the defendant whilst not being entitled to it (see also Dowling v Colonial Mutual Life Assurance Society Limited (1915) 20 CLR 509 at 524 (Isaacs J); Spautz at 528 (Mason CJ, Dawson, Toohey and McHugh JJ)).
9. That of course is the way the applicants/defendants put their case here. It is put that the letter for example of 5 June 2020 and the Concerns Notice fall directly into that category. The problem with too much weight being placed on the statement of the Court of Appeal in Hanrahan, and similar statements, alone is that Spautz also made it abundantly plain the improper purpose or motive relied upon must be the predominant, overriding, or main purpose (see Spautz at 259 (Mason CJ, Dawson, Toohey and McHugh JJ)).
10. There has been a somewhat persistent theme in much of what the plaintiffs have sought to achieve being at the least misconceived, for example the statement of claim seeking damages (CB.39). The current pleading (CB.66 and following) filed on 8 September 2020, however, makes no such claim. It focuses almost exclusively on alleged defects in the election process.
11. There is no doubt that damages are not a remedy that can be awarded in the current proceedings and to request them in for example the letter of 5 June 2020 (CB.440-443) was inappropriate even if it was an attempt to tempt or threaten the defendants with dire consequences. However the applicants must satisfy the court to a civil standard that the attempt as it were when taken together with the other conduct or alone reflected the plaintiffs' predominant purpose in bringing and maintaining the proceedings.
12. The attempts to investigate land dealings in Tasmania, the notices to produce and subpoenas seeking information about that matter and other irrelevant financial material (eg.CB.684-685, 992,1002-1010) and the submissions filed (CB.1149-1150) in support of those processes were likewise in my view misconceived. But whether they prove a predominant purpose to attempt to extort money from the defendants is another question.
13. On balance the conduct complained of is not sufficient in my view to demonstrate that the plaintiffs' predominant purpose was to abuse the process of the court. The conduct certainly exposes attempts by the plaintiffs to make claims which have not been capable of substantiation. However those attempts contained for example in the letter of 5 June could not get off the ground largely due to the subpoenas and notices to produce being set aside with appropriate costs orders. The Concerns Notice likewise has gone nowhere.
14. Even assuming one motive of the plaintiffs in seeking damages or some other collateral benefit was out of an attempt to apply some form of pressure upon the defendants, to a substantial extent the commencement and maintenance of the pleaded case is within the scope of the available remedy.
15. Whilst the letter of 5 June 2020 makes robust claims which could not properly be substantiated they have simply evaporated, and have been overtaken by the further amended statement of claim.
16. I should say something separately about the Concerns Notice (CB 414-419). Theoretically it was a prelude to case by the plaintiffs in libel. I should say that the article in my view was prima facie defamatory of the named persons. There may of course have been defences available. But the claim for damages as it were although bearing an uncanny resemblance to the amount claimed in the letter of 5 June is on the other hand to be seen in the context of another discrete piece of potential litigation.
17. I am satisfied that the predominant purpose is to prove defects in the election process. That much is clear from the further amended statement of claim. The relief sought is all directed to setting aside as invalid the effect of the 17 August 2019 AGM, the election of persons that thereat took place and the appointment of receivers to undertake various tasks.
18. The mere fact inflammatory correspondence was exchanged with what may be accepted were serious and outlandish allegations does not in my view in the totality of the circumstances, including the current pleading, lead to a finding that the predominant motivation in bringing and maintaining the proceedings amounts to an abuse. This is especially so given the concession recorded by Parker J in his para [10] referred to above. Unlike in Spautz the plaintiffs here are not making allegations in parallel litigation in order to pressure the defendants into some settlement. They attempted unsuccessfully to make or rather explore the making of additional allegations to bolster their case on electoral defects as I see it. They were simply not permitted to do so. But I am satisfied they do wish to have the appropriate relief granted.
19. The fact the defendants have offered as it were to capitulate and agree to fresh elections is in one sense not to the point. As I understand it they do wish to consent to the relief sought and oppose the appointment of receivers. Likewise I imagine there could be no agreement on the question of costs. The mere fact the plaintiffs are motivated by a desire to have formally made, orders which identify defects in the electoral process does not amount to an abuse.
20. In the circumstances I would not grant a stay of the proceedings. For the same reasons I would not dismiss the proceedings on the basis that they are frivolous or vexatious. I invite the parties to bring in short minutes of order reflecting these reasons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 December 2020