James Australia Group Pty Limited v Yu

Bank of Tokyo Ltd v Karoon [1987] AC 45 CSR Ltd v Cigna Insurance (1997) 189 CLR 345 CASES CITED : Murakami v Wiryadi [2010] NSWCA 7 Puttick v Tenon Ltd (formerly Fletcher Challenge Forests Ltd) (2008) 238 CLR 265 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538

James Australia Group Pty Limited (first plaintiff) PARTIES : James Australia Group (Shanghai) Wine Trading Pty Limited (second plaintiff) Ling Kui Yu (first defendant) Xun Fan (second defendant)

COUNSEL : D A Allen (plaintiffs) S B Loughnan (first defendant)

SOLICITORS : Ramsland Laidler Solicitors (plaintiffs) Maxim Legal (first defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Date of Hearing: 28 May 2010 Date of Judgment: 2 June 2010

2009/331126 James Australia Group Pty Limited and anor v Ling Kui Yu and anor

JUDGMENT (EX TEMPORE) 1 REIN J: The first plaintiff ("JAG"), is an Australian company that produces wine and was persuaded by Mr Yu, the first defendant, to establish the second plaintiff, James Australia Group (Shanghai) Wine Trading Pty Limited ("JAGS"), as a Chinese corporation to sell wine in China. In that connection, JAG entered into an agreement with Mr Yu, engaging him to establish JAGS and to act as its agent in China.

2 Mr Yu had an association with a Ms Xun Fan, also known as Ellin Fan, the second defendant. So far as JAG was concerned, Ms Fan, who was resident or would be resident in Shanghai, would run JAGS.

3 The plaintiffs claim that Mr Yu made representations concerning the business to be established and the need for a fairly large amount of capital, and they claim that the defendants have conspired to have wine sold in China at a very low price to entities with which Ms Fan is connected and to use the resources of JAGS to run businesses owned by Mr Yu and/or Ms Fan. The plaintiffs claim that the defendants breached the fiduciary duties owed by them to the plaintiffs and that Mr Yu and Ms Fan have attempted to enter into arrangements with an entity called Newcastle Machine Shop. The plaintiffs also claim that Ms Fan agreed to sell a Nissan X-Trail vehicle to JAGS for RMB 200,000 and that Ms Fan has failed to hand over the vehicle. 4 JAG has an employment contract with Mr Yu: see Exhibit 1. There is no written employment agreement between JAGS and Ms Fan. It would seem that if there was an oral agreement, it was only between JAGS and Ms Fan, not JAG.

5 Mr Yu is of Chinese background, but he has lived in Australia for over 30 years. He owns real estate in New South Wales. Ms Fan used to live in Sydney and still owns a property here, but she moved to China in or before 2008 and is still resident there. The plaintiffs have served Mr Yu with a Statement of Claim in Sydney and claim to have served Ms Fan in Shanghai, but were not at the hearing able to prove service against her.

6 Mr Yu, by Notice of Motion, seeks to stay the proceedings in this Court pursuant to s 67 of the Supreme Court Act 1970 (NSW). He alternatively seeks to have the portion of the claim relating to the vehicle stayed or struck out as an abuse of process. Mr Yu's application for a stay is based on the following matters: (1) that the work which Mr Yu was to perform was in Shanghai; (2) that the only contract with Ms Fan is with JAGS, and the entire work under that contract is work to be carried out by her in China; (3) that there are many witnesses who Mr Yu will call in the case who live in China and speak Chinese; (4) that Chinese law gives the plaintiffs all the remedies that they can obtain under Australian law; and (5) that there are five sets of proceedings already on foot in China.

7 So far as the first point is concerned, it is not disputed that Mr Yu was to help establish JAGS in Shanghai to carry out work for JAG in China, but the plaintiffs' case is that Mr Yu entered into an employment contract in New South Wales and made representations in New South Wales which led JAG to set up a subsidiary company in China. JAG claims that Mr Yu owed to it fiduciary duties, which he breached by reason of the implementation of the plan which, it is alleged, Mr Yu and Ms Fan hatched.

8 So far as the second point is concerned, there is no written contract between either JAG or JAGS on the one hand and Ms Fan on the other, or at least none has been tendered, and it would appear that any employment contract entered into by Ms Fan was with JAGS.

9 So far as the third point is concerned, it became clear from Mr Yu's evidence that the list of 14 witnesses that he put forward is not really a list of witnesses at all, but rather a list of all the persons who were engaged in JAGS' business in Shanghai. There has been no attempt by Mr Yu's solicitors to make an assessment of who of those would, or even could, assist Mr Yu in defending the case. In relation to the contract and the alleged misrepresentations, no Shanghai witness could be relevant. There is likely to be a factual dispute as to what steps were taken by Mr Yu and Ms Fan, particularly in regard to sale of wine in China, and what interest Ms Fan or Mr Yu had in companies that were purchasing wine.

10 So far as the fourth point is concerned, both the plaintiffs and Yu put on evidence from a Chinese lawyer. Although Mr Loughnan of counsel, who appeared for Mr Yu, attacked the report of Mr Spring Liu, the plaintiffs' expert, because Mr Liu acts for the plaintiffs and associated companies and hence it was said was not impartial, he sought to draw support from that report. For reasons I shall explain in a moment, I do not think that the reports of either expert support the applicant's motion.

11 So far as the fifth point is concerned, the proceedings are, first, proceedings brought by Shanghai Cong Yun Trade and Development Co. Ltd against JAGS, that plaintiff is a company of which Ms Fan is the agent, seeking return of computers and office furniture, and rentals for those items.

12 The second proceedings are brought by Shanghai Long Yu Wine Trading Co. Ltd against Shanghai Xin Rong Sheng Wine Culture Management Co. Ltd, being a claim for wine delivered and in respect of a dishonoured cheque. It seems that Ms Fan is connected with this claim and that the plaintiff is the company to whom JAG sold wine: see Exhibit K to the affidavit of Mr Yu.

13 The third proceedings are brought by JAG against Ms Fan in respect of the Nissan vehicle: see exhibit L to Mr Yu's affidavit.

14 The fourth proceedings are brought by Ms Fan aginst JAGS in respect of her employment contract: see Exhibit M to the affidavit of Mr Yu.

15 The fifth set of proceedings are brought by JAGS against Ms Fan seeking return of documents and claiming compensation for financial losses and repayment of a loan: see Exhibit A.

16 Of these proceedings, it appears that the first and fifth have not been filed. The fourth proceedings apparently have been heard and dismissed, but Ms Fan has lodged an appeal. The third proceedings are on foot and the second proceedings are on foot. It will be observed that none of these proceedings involve JAG.

17 Dealing first with the principles of law, a defendant will: "ordinarily be entitled to a permanent stay of proceedings instituted against it and regularly served upon it within the jurisdiction, if the defendant persuades the local court that, having regard to the circumstances of the particular case, and the availability of an alternative foreign forum to whose jurisdiction the defendant is amenable the local court is a clearly inappropriate forum for determination of the dispute": see Puttick v Tenon Ltd (formerly Fletcher Challenge Forests Ltd) (2008) 238 CLR 265 at 276-277 ([27]) per French CJ, Gummow, Hayne and Kiefel JJ.

18 The question is not whether the foreign court is an appropriate one, nor is there any question of comparative appropriateness: see Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, Puttick and Murakami v Wiryadi [2010] NSWCA 7.

19 There is, it appears, an exception which is dealt in CSR Ltd v Cigna Insurance (1997) 189 CLR 345, in which the High Court held that the Supreme Court of New South Wales had erred in granting an anti-suit injunction and failing to order a stay of proceedings brought in New South Wales. The proceedings in the United States were brought by an insured against its insurer and the parent company of that insurer, and the insured claimed that a letter that had been sent by the insured restricting its claims for indemnity in respect of asbestos injury claims made against it had been obtained by coercion. The proceedings in the United States sought exemplary damages under the US Sherman Act. The insurer commenced proceedings in New South Wales seeking a declaration that it was not liable to indemnify the insured or its US subsidiary. The High Court held that there was no serious question to be tried as to whether the United States proceedings were vexatious or oppressive according to equitable principles, as the Australian company sought relief which was not available in the New South Wales proceedings. The dominant purpose of the New South Wales proceedings was to prevent the continuation of the United States proceedings and thereby to prevent the Australian company "from pursuing remedies available in the US proceedings but not in the NSW proceedings": per Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ at 402.

20 It should be noted that the majority referred with approval to cases which establish that mere coexistence of proceedings in different countries does not constitute vexation or oppression and referred to a decision of Goff LJ (as his Lordship then was) in Bank of Tokyo Ltd v Karoon [1987] AC 45, in which it was held at page 60 that foreign proceedings are to be viewed as vexatious and oppressive only if there is nothing which can be gained by them over and above what might be gained in local proceedings (see page 393 of Cigna) and that they will be regarded as vexatious or oppressive if there is complete correspondence between the proceedings or if complete relief is available in the local proceedings.

21 JAG is not a plaintiff in any of the other proceedings. It is an Australian corporation. Mr Yu is an Australian citizen who resides in New South Wales and has property here. The contract of employment by which Mr Yu was engaged is a contract made in Newcastle, New South Wales. The representations made are alleged to have been made in connection with Mr Yu's contract with JAG, and at least the first representations appear to be allegations of representations made in New South Wales. The fact that Mr Yu was to perform work in China has little bearing on the matter.

22 Mr Yu is not "amenable"to the jurisdiction of the Chinese court. No evidence has been provided to show that he is or would be so amenable. No evidence has been put forward to establish that a judgment obtained in China against Mr Yu, even assuming that he could be made amenable, could be enforced against property owned by him in New South Wales.

23 In Cigna, the High Court held that the proceedings in New South Wales were vexatious and oppressive, that is, that they were "productive of serious and unjustified trouble and harassment" or "seriously and unfairly burdensome, prejudicial or damaging": see pages 400-401, applying the Voth test. As I have noted, the Court came to that view because it regarded the institution of proceedings in New South Wales as having as their central purpose preventing the continuation of the United States proceedings, which proceedings were regularly instituted.

24 This case is very different to Cigna because the proceedings brought in this Court involve both a plaintiff and a defendant who are not a party to the proceedings in China. There is nothing irregular about the commencement of proceedings here - I deal separately with the motor vehicle claim below - and they are not designed to stifle or stymie proceedings already commenced in China. Incidentally, I am not satisfied that any of the proceedings commenced in China were filed before these proceedings were commenced, which was in December 2009.

25 It follows that I do not accept that New South Wales is a "wholly inappropriate forum" for the claims that are brought, with one possible exception being the claim by JAG and JAGS in relation to the motor vehicle. The vehicle is located in China. JAGS have commenced proceedings there against Ms Fan. In the proceedings in this Court, the plaintiffs claim that Mr Yu and Ms Fan represented that Ms Fan owned the vehicle and that JAGS entered into an agreement for purchase of the vehicle implicitly with Ms Fan, but they assert that "the defendants" have retained the vehicle and refuse to hand it over, which I think is confusing.

26 The plaintiffs face the risk that any judgment obtained against Ms Fan for return of the vehicle obtained in these proceedings will be unenforceable in China. In the course of the hearing before me, it was stated that the vehicle is actually owned by Ms Fan's husband, so there may be difficulties in the path of JAGS in obtaining such an order here or in China. Mr D A Allen of counsel, who appeared for the plaintiffs, indicated that his client would be willing to accept a stay in relation to the claim against Ms Fan in this Court for the vehicle, which I think recognises that there is nothing additional that is to be gained here, and hence that this aspect falls within the principles endorsed in Cigna to which I have referred. If Ms Fan has been properly served in these proceedings and in due course seeks to take part in them, she will be entitled to ventilate this, but no application is made by her, obviously, for a stay of the proceedings.

27 Having regard to that fact, I think the appropriate course in relation to the claim in respect of the vehicle is to afford the plaintiffs an opportunity to either abandon the claim in the Chinese proceedings against Ms Fan or to abandon their claim against Ms Fan for the vehicle in these proceedings. As I say, if they do not abandon their claim, it is a matter which will very likely be ventilated by Ms Fan in these proceedings. I think that they should indicate their position in relation to that to Ms Fan and the first defendant's solicitors within 7 days of today's date.

28 The first defendant claims in relation to the vehicle that it is an abuse of process for the reasons I have mentioned. I have already dealt with this issue so far as JAG's claim against Ms Fan is concerned. JAGS has not, and nor has JAG, brought any claim against Mr Yu in China, therefore there is no abuse of process as against him.

29 The first defendant asserts that claims in relation to "breaches of fiduciary duties" and the second defendant's alleged breach of contract are also an abuse. Once again, no claim has been made in China by JAG at all, and it would seem that there is no claim on foot by JAGS in China against Ms Fan in relation to this aspect of the case.

30 I turn now to the issue of vacation of the orders made on 5 May 2010. On 5 May, the first defendant's Notice of Motion seeking the stay was listed before Windeyer J. There was no appearance by or on behalf of Mr Yu on that occasion. Windeyer J dismissed the Notice of Motion and made an order for costs in favour of the plaintiff against Mr Yu.

31 Mr Nolan Qin, Mr Yu's solicitor, has in an affidavit of 10 May 2010 explained his non-attendance on 5 May. He deposes to the fact that he was told by counsel that the date for the hearing of the Notice of Motion had been changed from 10 June to 7 May. He instructed Mr Loughnan to appear on 7 May, and Mr Loughnan sent in an outline of submissions on 3 May. On 22 April, Mr Qin had written to the plaintiffs' solicitors requesting a change of date from 7 May, as it was inconvenient to him or his client, but he received no reply. On 5 May, when the matter was listed, Mr Qin received no call from the plaintiffs' solicitor or counsel. He did, however, receive a letter by fax; however, that letter was headed "National Liquor v Yu".

32 It is clear that the error in relation to the date was one made on Mr Yu's side of the record, but it must have been apparent to the plaintiffs' solicitors that Mr Qin thought the matter was listed on 7 May. Indeed, when Mr Qin learned of what had occurred, he wrote a further letter to the plaintiffs' solicitors complaining about their failure to advise him of the error contained in his letter of 22 April: see annexure C to his affidavit. As with his first letter, he received no reply.

33 Solicitors on the record cannot properly leave letters unanswered in the fashion that has occurred here. I infer that had the first letter been answered, it would have corrected Mr Qin's misapprehension as to the date.

34 In my view, the appropriate order in the circumstances is that the orders on 5 May 2010 made by Windeyer J be vacated and that there be no order as to costs for that date.

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