Mr Qi's abuse of process application
32 Mr Qi alleged that Fine China's conduct before and during the proceeding provides a basis for inferring that it is not pursuing the litigation for a legitimate purpose and therefore must be pursuing the litigation for a collateral purpose.
33 Alternatively, the abuse case was put on the basis that pursuit of the proceeding is likely to bring the administration of justice into disrepute.
34 The principles governing applications of this sort were not in dispute.
35 In Tomlinson v Ramsey Food Processing Pty Limited (2015) 256 CLR 507, French CJ, Bell, Gageler and Keane JJ said at [25] 518-519:
Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
(Footnotes omitted).
36 Categories of abuse of process include pursuit of a proceeding for a collateral purpose; conduct bringing the administration of justice into disrepute; and litigation of the same issues in separate or multiple proceedings. See Willams v Spautz (1992) 174 CLR 509 at 518-521 (Mason CJ, Dawson, Toohey and McHugh JJ); Henry v Henry (1996) 185 CLR 571 at 591 (Dawson, Gaudron, McHugh and Gummow JJ); Michael Wilson & Partners Limited v Nicholls (2011) 244 CLR 427 at [88]-[90] 452 (Gummow ACJ, Hayne, Crennan and Bell JJ).
37 In this case, Mr Qi submitted that I should conclude that Fine China's "real purpose has been to obtain discovery in respect of [his] business activities … and of companies in which he is involved such as CSJH, in circumstances where it has not troubled to articulate any rational cause which would support the right to such discovery …"
38 It was submitted that I should draw that inference because Fine China has:
(a) persisted in prosecuting claims that are plainly precluded by the reflective loss principle;
(b) done that while failing to prosecute the application to reinstate in any effective sense, including, at one point, resiling from joining CSJH as an applicant and suggesting that it could be joined instead as a respondent;
(c) alleged that Mr Qi has improperly benefitted through use of the monies alleged to have been misappropriated without any proper basis, that being the inference properly to be drawn from the facts that: (i) Fine China has been challenged as to whether it had a proper factual basis for making such an allegation; and (ii) its response has been to say that it has not pleaded "the details of the actual benefit" because it "has yet to obtain the necessary documents to properly plead the improper benefit";
(d) pursued fishing expeditions;
(e) pursued the same factual allegations in this proceeding and in other proceedings; and
(f) stood back from protecting its own rights, preferring to let a Ms Sophie Qinghui Wang prosecute an earlier proceeding against Mr Qi in the Supreme Court of Queensland until it fell apart under the threat that Ms Wang's evidence would be tested under cross-examination.
39 It was also submitted that:
Those same facts, particularly given the lackadaisical approach that has been taken in the litigation, provide the basis for characterising Fine China's conduct in this court as likely to bring the administration of justice into disrepute. Failure to prioritise key threshold issues, subordinating those to plainly-doomed attempts at preliminary discovery, and duplicating issues in separate proceedings in separate countries, along with the attendant costs is plainly oppressive to Mr Qi.
40 Mr Qi's counsel relied on a document in support of his application to dismiss the proceeding on the ground that it is an abuse of process entitled "Particulars of abuse of process." It runs to 16 pages, and makes many cross references to a large body of evidence that was before me. The particulars were then supplemented by a longer "aide memoire" document, handed up by Mr Qi's counsel during the hearing, which set out the cross-references to the evidence in further detail.
41 The particulars make allegations under the following rubrics, which follow on from 3 pages of "background" materials, including the following:
• Maintaining claims that are bound to fail.
• Failure effectively to prosecute the application to reinstate CSJH.
• Making a serious allegation without sufficient basis.
• Pursuing fishing expeditions.
• Duplicity of proceedings.
• Standing by while Qld Proceeding was prosecuted.
42 I do not propose to trawl through the particulars and all the evidence to which they are cross-referenced. To do so would mean that these reasons would be of inordinate length, serving no purpose - because it seems to me quite plain that the evidence falls far short of showing that the instigation or pursuit of the proceeding is an abuse of process.
43 The points raised by Mr Qi's counsel can be dealt with in short order.
44 Mr Qi contended that Fine China "has known, or should have known that it has not alleged any basis upon which it, as distinct from CSJH, might be able to recover the Alleged Transfer Loss" (being the $19,747,000 removed from CSJH's bank account), because of the principle that a shareholder cannot recover reflective loss in share value where the company has a cause of action to recover its corresponding loss.
45 But, at least by the time of the hearing, senior counsel for Mr Qi accepted that Fine China's case - that Mr Qi breached his duties as an agent of Fine China and a trustee for the benefit of Fine China of all the shares of CSJH when he misappropriated at least $16.4 million by closing CSJH's bank account, transferring the sum to a newly created company of his own, and then deregistering CSJH - arguably does not infringe the rule about the non-recoverability of so-called "reflective losses." In that regard, I refer to what Mr Ferrett KC said at page 20, lines 21-22 of the transcript of the first day of the hearing (8 March 2024).
46 In that circumstance, it is not necessary to consider in detail the cases about the reflective loss principle. It is sufficient to note what the Full Court said in Garner v Central Innovation Pty Ltd [2022] FCAFC 64 at [123]-[124]:
First, if a company suffers loss by reason of the breach of duty owed to it or a breach of a contract to which it is a party, a shareholder has no standing to sue to seek to make good any diminution in the value of its shareholding, even in circumstances in which the company has determined not to pursue any action to seek to recover the loss it has suffered …
Second, where a company has suffered loss but has no cause of action that would permit it to recover that loss, a shareholder in the company may sue in respect of such loss, provided it has a cause of action in its own right to do so, even if the loss is a diminution in the value of its shareholding …
(Citations omitted).
47 Mr Qi submitted in his written submissions that:
Fine China does not identify any loss it has suffered, or gain that Mr Qi has made, that is not (on Fine China's conception of the facts) recoverable by CSJH. On Fine China's case, it must be that CJSH would be entitled (electing where required) to:
(a) recover the Transferred Sum from Mr Qi as compensation for breach of fiduciary duty (and perhaps breach of trust);
(b) trace the Transferred Sum (if it can) into the hands of the eventual recipient and seek disgorgement;
(c) recover from any equitable wrongdoer any benefit obtained from use of the Transferred Sum.
48 It is well established that the reflective loss principle does not prevent shareholders from suing for a loss suffered from a breach of duty owed to him or her where the loss is separate and distinct from the loss suffered by the company. See Haigh v Department of Planning NSW [2022] NSWSC 1434 at [112] (Harrison AsJ); Central Coast Council v Norcross Pictorial Calendars Pty Ltd (2021) 391 ALR 157; [2021] NSWCA 75 at 175-176 [104] (Bathurst CJ, Macfarlan and Gleeson JJA agreeing); and Mercedes Holdings Pty Ltd v Waters (No 3) [2011] FCA 236 at [33] (Perram J).
49 And in any event, Fine China is not, and never was, a shareholder of CSJH. There seem to be no cases directly on point, but in my view, even if the reflective loss principle applies to Fine China, it is reasonably arguable that the breaches of fiduciary duty currently pleaded by Fine China against Mr Qi under the deed are also, relevantly, separate and distinct from the loss suffered by CSJH.
50 So that is sufficient to deal with the first point about abuse of process.
51 The second point was that Fine China has failed "effectively to prosecute the application to reinstate CSJH".
52 I agree that the application ought to have been made earlier. And, as I have explained, I propose to dismiss it (for want of proof). But the late making of an application that fails, even for that reason, is hardly something that would warrant dismissing the entire proceeding, or certain claims made in it, as an abuse of process.
53 The third point concerns Fine China's plea that by reason of breaches of duty, Mr Qi has improperly obtained a profit or benefit for himself, which Mr Qi dubbed the "Improper Profit Conclusion". It was said that "Fine China has not pleaded any factual basis for the Improper Profit Conclusion". That may (or may not) be the case, but, again, failure to provide particulars of such allegations in a case where, as Mr Qi's counsel recognises, "[t]he fundamental allegation in this case [that Mr Qi took money from a bank account to which he was not entitled] is simple", is not a basis to dismiss it as an abuse of process.
54 The fourth point is that Fine China has pursued fishing expeditions. That is a reference to two things. First, Fine China pressed Mr Qi to affirm an affidavit setting out, so far as he was able, the details of his assets located in Australia, despite the fact that he had already paid into court the whole sum the subject of the dispute. Secondly, Fine China pressed, before me, subpoenas issued to five different banks requiring that they produce bank account statements for any bank accounts in respect of some or all of CSJH, Mr Qi, and other companies controlled by him (Sunshine Scenery (Australia) Pty Ltd, MAWF Australia Pty Ltd and Sunshine Glory Australia Pty Ltd), in circumstances where senior counsel for Fine China conceded in oral argument that the subpoenas were sought for the purpose of obtaining discovery. See Fine China Capital Investment Limited v Qi (No 3) [2023] FCA 1405 at [14] (O'Callaghan J).
55 I agree that both those matters do not reflect well on Fine China and why the applications were pursued is puzzling. But the making of them does not rise to the level of an abuse of process warranting the dismissal of all, or part of, the proceeding.
56 The fifth and sixth points deal with a so-called "duplicity of proceedings" - one in Hong Kong, the other in Queensland. Much of the circumstances surrounding the proceedings remain a mystery, involving, as they do, various other parties and entities, about which I know next to nothing. But it is clear that the Hong Kong proceeding involves claims to other monies, as well as part of the sum claimed here. And the Queensland proceeding has been discontinued. It is alleged that "a reasonable litigant in the position of Fine China would not have stood by whilst the applicants in the [Queensland] Proceeding prosecuted that case, but instead would have intervened to ensure that its rights as it perceived them were vindicated". But I have no evidentiary basis for making such a finding, and I decline to make it.
57 Mr Qi's contention that the proceeding is an abuse of process is founded on the cumulative effect of each of the individual matters pointed to. But, in my view, whether viewed cumulatively or separately, they do not constitute conduct of a type that would prevent Fine China from continuing its efforts to recoup the large sum of money that it says Mr Qi misappropriated.
58 For those reasons, Mr Qi's abuse of process application will be dismissed.