Gao v Zhu [2002] VSC 64

11. According to an affidavit sworn on 7 February 2002 by Yaosheng Fan, a Senior Manager at the Bank of China at its Melbourne Branch at 270 Queen Street, the Bank of China is incorporated pursuant to the laws of the People's Republic of China, with its registered office in Australia in Sydney. Mr Fan said that the subpoena in duplicate was handed to him by the plaintiff at his branch office on 28 December 2001. He deposed that he told the plaintiff that he could receive the document, but would report it to the senior management of the Bank of China in Sydney and would be seeking legal advice. Mr Fan said that he was not given any conduct money. Mr Fan also said that about a week before this he had received a telephone call from Mr Gao who asked him whether the Melbourne Branch of the Bank of China could accept service of a subpoena for production of documents held at the Shanghai Branch of the Bank of China and that he had told Mr Gao that he should send the subpoena to the Bank of China in Shanghai.

14. By letter dated 21 January 2002, Herbert Geer & Rundle, the solicitors for the Bank of China, wrote to Mr Gao advising that the subpoena was deficient in relation to its content and the manner of service. The first of a number of grounds relied on by the Bank's solicitors was the following:

"The exercise of this Subpoena would infringe the territorial or sovereign rights of the People's Republic of China".

The solicitors sought written confirmation from Mr Gao that he would not be relying on the subpoena or seeking to enforce it. Failing that, they advised that they would have no option but to apply to the Court to set aside the subpoena and that they would be seeking an order that their costs be paid by Mr Gao.

19. Mr Gao responded by letter dated 28 January 2002. He stated that he was seeking "evidence" from the Shanghai Branch of the Bank of China and that on 21 December 2001 he had contacted Bai Ding, an officer of that branch who had advised him that "the evidence" could be produced. Mr Gao alleged that he had served the subpoena on Mr Fan "after he contacted with solicitor in Sydney Branch and said they accepted the subpoena". Mr Gao also indicated that he only wanted the Bank to produce documents not to give evidence.

22. By letter of 1 February 2002, Herbert Geer & Rundle again wrote to Mr Gao. The letter stated that their client had not been able to identify the person Bai Ding at the Shanghai Branch. The solicitors repeated their request that Mr Gao confirm that he would not be relying on the subpoena, otherwise they would apply to set aside the subpoena and seek costs against Mr Gao. They also referred Mr Gao to the case of MacKinnon v Donaldson, Lufkin and Jenrette Securities Corporation[1], which was said to support their position concerning the infringement of the sovereignty of the People's Republic of China.

25. In his affidavit, Mr Fan deposed that he had been unable to locate or identify a Bai Ding at the Shanghai Branch of the Bank. However, he did locate a Ms Ding Bai at the Shanghai Shi Zhong Branch of the Bank of China, which was a different branch. He said that he had spoken to Ms Ding Bai's immediate superior, Ms Qi Lu, who had told him that she had been told by Ms Ding Bai that she had spoken to Mr Gao, who had sought information regarding certain banking transactions, and that she had advised Mr Gao that:

"... he could obtain the information he sought only in two ways, being: (a) attend the counter of the Shi Zhong Sub-Branch of the Bank of China himself as the named remittance receiver of the funds, and request information and details, or (b) commence legal proceedings in China to obtain the information."

29. There was no reply by Mr Gao to the second letter from Herbert Geer & Rundle. Accordingly, the Bank of China issued its summons on 7 February 2002. It was returnable on 11 February 2002. By an affidavit sworn on 8 February 2002, Mr Gao sought an adjournment of the Bank of China's summons because of the pressure of other court commitments and a doctor's appointment on 11 February 2002. One of these other court commitments was the hearing on 12 February 2002 of two summonses issued by Mr Gao in this proceeding on 20 December 2001 and 24 January 2002. The subpoena, it will be recalled, was to produce the documents to the Court on 12 February 2002. The two summonses related in part to a judgment of Eames J[2] on 21 December 2001 in which his Honour set aside the judgment previously obtained by Mr Gao in default of appearance on condition that the defendant, Ms Zhu, paid the sum of $35,000 into court. Variation of his Honour's order, by way of orders that further sums be paid into court by the defendant, were sought by Mr Gao in both of his summonses. The second summons also sought other orders including that the Court deal with alleged perjury by Ms Zhu in swearing "false testimonies" in two earlier identified affidavits.

32. On 11 February 2002, the Bank of China's summons was adjourned by Master Wheeler to 28 February 2002. This order was made by consent despite the fact that Mr Gao's two summonses were returnable before me on 12 February 2002. After hearing some argument on 12 February 2002, I adjourned the further hearing of those summonses to 26 February 2002. On that day, I ordered that Mr Gao's summons dated 20 December 2001 and his summons dated 24 January 2002 be dismissed with no order as to costs.[3] This followed Ms Zhu's failure to comply with the condition imposed by Eames J for the setting aside of the default judgment against her and the withdrawal of her oral application to extend the time for compliance with that order. As a result, the default judgment for the sum of $163,000 plus interest of $35,681.37 and costs of $1,600 once again stands as an enforceable judgment of the Court.

35. On 28 February 2002, Master Evans referred the Bank of China's summons to me apparently because a jurisdictional question had been raised. Although I was minded to refer the matter into the Causes List for hearing, Ms Knights of counsel, who appeared for the Bank of China, persuaded me that I should at least hear argument on the jurisdictional issue.

38. Ms Knights' submission was that the subpoena infringed the sovereignty of the People's Republic of China. She referred me to the decision of MacKinnon v Donaldson, Lufkin and Jenrette Securities Corporation[4] In that case, Hoffman J set aside a subpoena requiring a non-party, Citibank, to produce books and other papers held at its head office in New York relating to transactions which took place in New York on an account maintained there by a Bahamian company. The subpoena had been served on Citibank at its branch office in London. Citibank successfully applied to set aside the subpoena on the ground that in principle it exceeded the international jurisdiction of the English court and infringed the sovereignty of the United States of America. His Lordship held that:

"The content of the subpoena ... is to require the production by a non-party of documents outside the jurisdiction concerning business which it has transacted outside the jurisdiction. In principle and on authority it seems to me that the court should not, save in exceptional circumstances, impose such a requirement on a foreigner, and, in particular, on a foreign bank. The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct outside the jurisdiction."[5]

42. Rule 7.06(c) of Ch. 1 of the Supreme Court (General Civil Procedure) Rules 1996 provides that the Court may by order allow service out of Australia of "any summons, order or notice in any proceeding". A subpoena for production of documents is in the form of an order of the Court (see r.42.01 and r.42.02(1)). It was held in Arhill Pty Ltd v General Terminal Company Pty Ltd[6] that the equivalent New South Wales rule authorised the Court to grant leave for service of a subpoena outside of Australia. However, it was also held by Rogers, CJ Comm D that the jurisdiction would seldom be exercised, as the making of an order that required a person who was resident in another country to attend before the Court to produce documents would infringe international law as to comity.

45. Ms Knights submitted that it was plain from reading the schedule to the subpoena that all of the documents to be produced were said to be at the Shanghai Branch of the Bank of China. In fact, any such documents would appear to be at the Shanghai Shi Zhong Branch. Nevertheless, it is clear, in my opinion, that regardless of which Shanghai branch the documents may be at, what was being sought was an infringement of the sovereignty of the People's Republic of China. The subpoena was an attempt to compel a foreigner, under threat of punishment for contempt, to produce documents in respect of conduct outside the jurisdiction.

48. Mr Gao submitted that the facts of every case were different and, therefore, that I should not follow the authorities relied on by the Bank of China. He submitted that the Bank of China must obey the laws of Australia and that as it was capable of producing the documents required by the subpoena, it should do so. I am afraid that this simply misses the point of the submission on behalf of the Bank of China concerning the Court's reluctance to infringe the sovereignty of a foreign country by allowing a subpoena taking effect in that foreign country, and relating to business transacted in that foreign country, to stand.

51. The general rule stated by Hoffman J was said to be subject to the qualification of "exceptional circumstances". Nothing said by Mr Gao suggested that there were any exceptional circumstances in this case. On the contrary, it seems to me that the peculiar circumstances relating to this subpoena are a further reason for setting it aside.

54. It is clear that the subpoena is primarily concerned with a bank draft for $140,000 drawn on the Bank of China. From reading some of the numerous affidavits sworn by Mr Gao and filed in this proceeding (see, for example, those sworn 10 August 1999, 26 August 1999 and 8 May 2001), I understand Mr Gao's complaint in respect of the bank draft to be as follows. He says that he purchased the draft for $140,000 from the Commonwealth Bank of Australia in the names of Ms Zhu and himself and that he sent the draft to Ms Zhu in Shanghai on 25 October 1996. The draft was given to Ms Zhu on condition that she was to purchase a property in both of their names in Shanghai and hold the property on trust for him and that she would repay him any unused funds. Mr Gao also says that, on 13 October 1996, he gave $8,000 in cash to Ms Zhu when she was returning to Shanghai and that on 6 November 1996 he sent a further $15,000 to Ms Zhu by telegraphic transfer. Mr Gao says that in November 1996 Ms Zhu purchased a property in Shanghai for about $30,000 to $35,000 with his funds in the name of Ms Zhu and her mother Wen Ai Chen. He alleges Ms Zhu falsely told him that the $140,000 had been invested in a year's term deposit with the Bank of China. Mr Gao also alleges that Ms Zhu moved some of the remaining funds to Hong Kong and then back to Australia when he asked about the money. It is these allegations which constituted his claim in paragraphs 3-5 of his amended statement of claim filed 17 November 1999 that Ms Zhu had, by her misleading and deceptive conduct and her breach of trust, caused him loss of $163,000. Further, Mr Gao has obtained judgment in respect of these allegations because, on 30 January 2001, Master Evans ordered that there be judgment for the plaintiff for damages to be assessed in default of appearance by the defendant. In addition, on 23 May 2001, Master Evans heard Mr Gao's application for the assessment of his damages and ordered as follows:

"1. The judgment entered in default of appearance against the Defendant on 30 January 2001 is set aside save in so far as it relates to the claim made in paragraphs 3-5 of the amended statement of claim filed on 17 November 1999. 2. The Plaintiff has leave to file and serve further amended statement of claim repleading the other claims made in this amended statement of claim within 60 days after this day. .... AND THE COURT assesses the damages payable pursuant to the said judgment in the sum of $163,000 together with interest by way of damages calculated at the rates fixed pursuant to the P_enalty Interest Rate Act_ 1983 from 10 August 1999 to this day, in the sum of $35,681.37."

58. Mr Gao filed a further amended statement of claim on 30 May 2001, but that pleading was struck out by Master Evans on 18 June 2001. Pursuant to the order of Gillard J on 9 July 2001, Mr Gao obtained leave to file and serve another further amended statement of claim. The further amended statement of claim was filed on 9 July 2001. That pleading related solely to Mr Gao's allegation that in reliance on Ms Zhu's fraudulent misrepresentation that she would spend the rest of her life with him and bear his children, he put into their joint names a property at 6/68 Raleigh Street, Thornbury which he had purchased on 26 September 1996. Mr Gao also claimed that in June 1997, Ms Zhu fraudulently persuaded him to transfer that property into her name alone on the basis that she was pregnant with his child. Mr. Gao alleged that he agreed to do so on condition that Ms Zhu not sell the property without his consent. In breach of that agreement, it was alleged that Ms Zhu sold the property in 1998 for the sum of $69,000 in spite of the fact that it had been bought for $83,728 and its market value at the time of the sale was said to be in the vicinity of $100,000. According to an affidavit sworn by Mr Gao on 11 July 2001, the further amended statement of claim was served personally on Ms Zhu at 7.50 that morning. It appears that no defence has been delivered and Mr Gao would therefore be entitled again to enter a default judgment for further damages to be assessed.

61. Given the above circumstances, and the fact that Mr Gao's two summonses originally returnable on 12 February 2002 (also the return date of the subpoena) were dismissed by me on 26 February 2002, I pressed Mr Gao as to the purpose behind the subpoena. I explained to him that he had already obtained, and had now retained, judgment for the $163,000, of which the $140,000 draft formed part. He told me that the subpoena was not in support of either of his summonses but was to help him prove Ms Zhu's false statement in an earlier affidavit that she had not received the bank draft and other false statements concerning what had happened to the funds. Although I had the greatest difficulty understanding Mr Gao, I am confident that this was what he was saying. I went over the matter several times to be sure. Further, in his written outline of submissions he said this and I quote verbatim:

"5. The defendant, on 24th July 2001, gave false testimony to the Court for want of the said judgement being set aside, and on 25th July 2001 the order of justice of Gillard was that the defendant be granted to filed her appearance out of time. 6. Further anther affidavit in support of setting the judgement aside file to the Court by the defendant on 9th August 2001, and the one of the false testimonies related to the said draft of $140,000 was that the defendant's parent gave A$70,000 in cash to the plaintiff in Shanghai, and another A$70,000 was ordered by the plaintiff to bring back to Australia by the defendant. Therefore to verify the position of the plaintiff evidence of transaction record as to the draft of $140,000 made by the defendant with the Bank of China should be produced by the Bank."

65. There was, in my opinion, no issue before the Court on 28 February 2002 to which Mr Gao's subpoena related. Certainly this was the case from 26 February 2002, after I dismissed Mr Gao's second summons and Ms Zhu withdrew her application to extend the time for compliance with the order of Eames J. Even if the application to set aside the subpoena had come before the Court at the same time as the adjourned hearing of Mr Gao's summons dated 24 January 2002, Mr Gao still faced the problem that, in my opinion, the procedure he had adopted with respect to the alleged perjury was inappropriate.[7]

68. For all of the above reasons, I have concluded that the subpoena to the Bank of China should be set aside.

[1] [1986] Ch 482

[2] [2001] VSC 500

[3] [2002] VSC 47

[4] [1986] Ch 482

[5] [1986] Ch 482 at 493

[6] (1990) 23 NSWLR 545

[7] See Coward v Stapleton [1953] HCA 48; (1953) 90 CLR 573 and Keely v Brooking (1979) 53 ALJR 526