Keynes Capital Global Limited v Guo

Judgment

1. BELL P: This is an application for leave to appeal from orders of the Supreme Court of New South Wales made on 1 April 2020, requiring Keynes Capital Global Limited (the First Applicant) and General Energy International Holdings Limited (the Second Applicant) (together, the Applicants) to give discovery of certain documents in proceedings in the Court below (the Supreme Court Proceedings).
2. So stated, the application is not an auspicious candidate for a grant of leave to appeal, the decision challenged involving an exercise of discretion on a matter of practice and procedure: see PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [3]-[5]. The prospects of success in obtaining leave were more remote still in light of the concession, properly made, that Ball J (the primary judge) had power to make the discovery orders, even in the context of the sui generis nature of the proceedings, namely an application by Ms Hui Guo (the Respondent) for freezing orders in relation to proceedings that she intended to commence in Hong Kong against the Applicants (the Hong Kong Proceedings).
3. Freezing order relief of this kind is expressly provided for in r 25.14 of the Uniform Civil Procedure Rules 2005 (NSW), sub-rule (3) of which is directed to a prospective judgment which has both sufficient prospects of being given and enforced in the jurisdiction in which the freezing orders are sought: see, for example, Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102.
4. Before being placed on a statutory basis, freezing order applications of the kind made in the present proceedings were regarded as contentious because they did not appear to be in aid of substantive proceedings in the jurisdiction, and indeed substantive proceedings, whether in Australia or abroad, may not yet have been commenced at the time freezing order relief was sought: see Davis v Turning Properties Pty Ltd (2005) 222 ALR 676; [2005] NSWSC 742. As the High Court explained in PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36, freezing orders are designed to protect the prospective enforcement process in the Court that issues the freezing order. It is in this sense that the Supreme Court Proceedings in the present case, rather than being described as being "in aid of the Hong Kong Proceedings", are more accurately described as anticipating the enforcement of a Hong Kong judgment in New South Wales and were in aid of that prospective enforcement process.
5. On 10 October 2018, the primary judge made ex parte freezing orders in relation to an amount of $17,168,803.60 held by Gleneagle Securities Nominees Pty Ltd (Gleneagle), an Australian stockbroker, and held on account for the Applicants (which was 49% of certain dividend payments in Australia of certain companies as at that date), so as to prevent those dividends being distributed offshore, pending the final resolution of the (then anticipated) court proceedings in Hong Kong (the Freezing Order). Those proceedings were subsequently commenced in the High Court of the Hong Kong Special Administrative Region Court of First Instance Action on 12 October 2018.
6. The amount of money which was the subject of the Freezing Order was subsequently increased to $22,671,178.47 (the Frozen Funds), by way of a further application by the Respondent on 15 October 2018. The Frozen Funds remain in a custodian account held by Gleneagle.
7. In circumstances described more fully below, the Applicants filed a Notice of Motion seeking to vacate the Freezing Orders. It was in anticipation of the hearing of that Notice of Motion that the Respondent sought discovery from the Applicants and succeeded in that application. In ordering discovery, the primary judge said (see Guo v Xu [2020] NSWSC 337): "[10] In order for the plaintiff to establish that the freezing order should continue, it will be necessary for her to establish, among other things, that she has a good arguable case. That raises factual questions about the relationship between KCG and GEI on the one hand and Party A and Party B on the other as well as questions about the adequacy of the pleading of the claim against KCG and GEI in Hong Kong. Although the plaintiff is not required to prove her case in this proceeding, she must still prove that she has a good arguable case. That requires her, among other things, to produce sufficient evidence to establish that the factual basis of her case satisfies that requirement. The communications between KCG and GEI on the one hand and the persons referred to in the discovery category (other than the plaintiff) are not within the plaintiff's knowledge. But they are relevant to the factual basis of her case and therefore relevant to the question whether she has a good arguable case. It is not suggested that discovery of communications between KCG and GEI would add substantially to the scope of discovery. [11] KCG and GEI do not suggest that they would face any particular difficulties in giving discovery of the documents sought; and the fact that they previously agreed to do so suggests that an order for discovery will not place any particular burden on them. The delay in the plaintiff prosecuting the proceeding in Hong Kong and the explanation for that delay may be very relevant to the question whether the freezing order should continue. It is difficult, however, to see why it is relevant to the question whether KCG and GEI should be required to give discovery of documents going to the question whether the plaintiff has a good arguable case."

Leave to appeal

1. The Applicants submitted that leave to appeal should be granted as the appeal raises issues of principle and the application of those principles to motions for discovery by an applicant for a freezing order in advance of obtaining the freezing order itself, or establishing in a substantive contested hearing that a freezing order obtained ex parte ought not be discharged. The Applicant submitted that it did not appear that this Court had considered this specific question in any prior litigation.
2. The Applicants further submitted that a substantial injustice would result if leave were refused, as the Applicants submitted that they were being subjected to an "unjustified order to provide verified discovery" which comprised a "very serious invasion of the privacy and confidentiality of [their] affairs".
3. The Respondent submitted that leave to appeal should not be granted as, inter alia, the Applicants had not satisfied the requirements for the grant of leave pursuant to House v R (1936) 55 CLR 499; [1936] HCA 40, that the Applicants had failed to show an error by the primary judge, or had failed to establish that the decision was so unreasonable to amount to a failure by the primary judge properly to exercise his discretion.

Leave should be refused

1. Leave to appeal should be refused for a number of reasons.
2. First, since the primary judge made his orders for discovery, the Court was informed that the High Court of the Hong Kong Special Administrative Region had made orders for general discovery, and that the discovery either had been given or was in the process of being given. That being the case, and it not being suggested that the orders for discovery made by the primary judge in the Supreme Court Proceedings went beyond what could be required to be disclosed pursuant to the order for general discovery in the Hong Kong Proceedings, the utility of the application for leave to appeal in this Court is, at best, negligible. Similarly, no question of injustice arises.
3. Moreover, and contrary to a submission put on behalf of the Applicants, it is not plain to me how an order for limited discovery made in this Court would be a potential affront to comity, or interfere in some way with the processes of the Hong Kong Court. In any event, the discovery ordered by the primary judge is in aid of the proceedings in this Court, and it is with respect to this Court's enforcement processes that the jurisdiction to grant the freezing order relief is directed: see [4] above.
4. Secondly, the orders made by the primary judge were made against the background of the particular procedural history of the proceedings in the Supreme Court which meant that the potential issue of principle raised by the Applicants (see [8] above) did not obviously arise for consideration, even though the primary judge appeared, in his short reasons, to contemplate that it would be for the Respondent to justify the continuation of the freezing order (see [10] of his judgment, extracted at [7] above). For the reasons given at [16] below, I have some reservations as to the correctness of this observation, but it is not necessary to resolve that matter for present purposes.
5. Shortly stated, the procedural history involved: (a) the ex parte interlocutory freezing orders being extended from time to time up until a particular date; (b) pleadings being filed in the form of a Commercial List Statement and Response; (c) orders for discovery by both the Respondent and the First Applicant being made; (d) the matter being set down for a 3 day hearing, with the interim freezing order being due to expire (or be renewed) at the conclusion of the third day; (e) the parties subsequently agreeing to vacate the orders relating to discovery and for a 3 day hearing, and a consent order (the Consent Order) being made on 19 February 2019, which provided that: "1. Upon the plaintiff giving the usual undertaking as to damages, the freezing order made in Order 2 of the 15 October 2018 orders, as varied by the 31 October 2018 and 9 November 2018 orders, be extended until the final resolution (including the hearing, determination of any appeals and the payment of all monies awarded) of the proceedings commenced by the [p]laintiff in the High Court of the Hong Kong Special Administrative Region, being Action No. 2404 of 2018. 2. The hearing listed to commence on 10 April 2019 is vacated. 3. The following [procedural] orders are vacated … 4. Liberty to apply on 24 hours' notice. 5. Each party to pay their own costs of, and incidental to, these proceedings."
6. Unlike the orders that had previously been made extending the interim orders that had been obtained ex parte, the Consent Order was not stated to be until further order or until a date which would permit preparations to be made for a contested hearing of the orders originally made ex parte. Nor was it said to be made "without admission". True it is that the Consent Order had only a limited time span and, in that sense, could perhaps be described as "interlocutory". Its utility and purpose would, however, have been spent by the time it was set to cease effect, namely "the final resolution (including the hearing, determination of any appeals and the payment of all monies awarded) of the proceedings". Although the parties were given liberty to apply on 24 hours' notice, the quasi-finality of the Consent Order was reflected in the fact that order 5 made provision for the payment of the costs of, and incidental to, the proceedings.
7. Subsequent to the filing of the Consent Order, on 5 June 2019, the Respondent (who is the moving party in the Hong Kong Proceedings) filed an Amended Statement of Claim in those proceedings which amended the case in that Court including against the current Applicants.
8. On 29 October 2019, the Respondent filed a Notice of Motion in the Supreme Court by which she sought, inter alia, an order that: "(a) the Fourth Defendant (by itself, its servants, agents or nominees) and Fifth Defendant (by itself, its servants, agents or nominees) are to transfer 49% of the unencumbered value of the dividend payments paid to them (or their respective servants, agents or nominees) by Rand on or around 22 October 2019 (22 October Dividends) and Tribune on or around 25 October 2019 (25 October Dividends) to be paid into Court or into a controlled monies account in the name of the solicitors for the Plaintiff and the solicitors for the Fourth and Fifth Defendants as directed by the Court; (b) the Fourth Defendant (by itself its servants, agents or nominees) and Fifth Defendant (by itself its servants, agents or nominees) direct their agent or nominee to pay 49% of any future dividend payments made by Rand and Tribune to the Fourth or Fifth Defendants (or their respective servants, agents or nominees) (Future Dividends) into Court or into a controlled monies account in the name of the solicitors for the Plaintiff and the solicitors for the Fourth and Fifth Defendants as directed by the Court; (c) the Fourth and Fifth Defendants, by themselves and their servants, agents or nominees, be otherwise restrained from taking any step to pay, transfer, or dispose or otherwise alienate 49% of the 22 October Dividends, the 25 October Dividends and the Future Dividends".
9. On 17 January 2020, the Applicants filed a Notice of Motion seeking, in substance, to vacate the Consent Order that had been made on 19 February 2019.
10. On 21 February 2020, the Respondent filed a further Notice of Motion seeking discovery.
11. The Notices of Motion for further freezing orders and to vacate the Consent Order were set down for 3 days to be heard from 13 May 2020, with the Notice of Motion for discovery heard on the papers with judgment being delivered on 1 April 2020. By reason of the application for leave to appeal from the discovery orders, the 3 day hearing was vacated pending resolution of this application.
12. On the hearing of the leave application, there was debate as to whether or not the Consent Order was of a kind that, on the Applicants' Notice of Motion to vacate it, the Respondent would need to justify afresh and relevantly bore the onus given that she had originally obtained the freezing orders on an ex parte basis: see, for example, Resort Hotels Management Pty Ltd v Resort Hotels of Australia Pty Ltd (1991) 22 NSWLR 730 at 731 (Resort Hotels), where McLelland J said: "It is sometimes convenient, for a variety of reasons, for the court, when granting an ex parte injunction, to express the injunction to operate 'until further order' rather than, as is the more usual practice, up to and including the date of return of the summons or notice of motion as the case may be. However, when that occurs the practice of the court is ordinarily that on the return of the summons or notice of motion the injunction should be discharged unless the plaintiff shows sufficient reason for its continuation. In other words, the mode in which the duration of the ex parte injunction is expressed should not be allowed to affect the substance of the matter, or the onus, on the first occasion on which the defendant has any opportunity at all to put its case to the court." (emphasis added).
13. What is plain from the recitation of the procedural history of the current proceedings is that they do not present for determination any clear issue of principle that might arise on the return of an ex parte freezing order cf. the Applicants' contentions as set out at [8] above.
14. Whilst in what might be described as a Resort Hotels context one can conceive of arguments that an applicant for freezing order relief should not be able to invoke or engage the Court's compulsory process before it has first established the existence of a prima facie case, that circumstance is far removed from the context and facts of the present case where what I have described as a quasi-final Consent Order was made which was expressed in terms that would see it remain in place until "final resolution" of the Hong Kong Proceedings.
15. Even in a Resort Hotels context, senior counsel for the Applicants conceded that there may be exceptional cases where to seek discovery, issue a subpoena or a notice to produce would be permissible, accepting as correct the observations of N Adams J in PA Putney Finance Pty Limited v Aalders [2020] NSWSC 305 at [66]; cf. Suzhou Haishun Investment Management Co Ltd v Yue'e Zhao (Ruling No 2) [2018] VSC 144.
16. At the end of the day, on the Applicants' case, the matter is one involving an exercise of discretion on a matter of practice and procedure. I am not convinced that the discretion of the very experienced primary judge miscarried in the unusual circumstances of the present case. That, combined with the lack of utility noted at [12] above, means that the application for leave to appeal should be dismissed with costs.
17. MEAGHER JA: I agree with Bell P.
18. PAYNE JA: I agree with Bell P.

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