Li v Wang & Ors

Evidence

1. A significant number of affidavits were read on the three motions.
2. On the motion to amend the Statement of Claim, the plaintiff read the affidavit of the plaintiff affirmed 27 April 2023 and the affidavit of her solicitor Mr Li Feng affirmed on 10 May 2023. Exhibits to both their affidavits were tendered as exhibits 1 and 2. Ms Li was cross-examined by Mr Kabilafkas, who appeared on behalf of the second defendant, through a Mandarin interpreter for much of the hearing on 24 July 2023. The second defendant read the affidavits of her solicitor Mr Hudson Lu affirmed on 15 May 2023 and 4 July 2023, and that of Ms Fenglan Su affirmed on 19 June 2023. Ms Su was cross-examined via video link, by Mr Fielder on behalf of the plaintiff, through a Mandarin interpreter on 25 July 2023. The affidavit of Yi Feng Hun affirmed on 23 July 2023 was also read.
3. On the motion to set aside the subpoenas, the second defendant read the affidavit of Mr Hudson Lu affirmed on 13 April 2023. The plaintiff read the affidavit of Ms Li affirmed on 17 April 2023 and the affidavit of Mr Li Feng affirmed on 3 June 2023.
4. On the motion for security for costs, the second defendant read the affidavits of Mr Hudson Lu affirmed on 27 March 2023 and 13 April 2023, the affidavit of Fenglan Su affirmed on 19 June 2023, the affidavit of Huifang Wang affirmed on 3 May 2023 and the affidavit of Zhongpeng Wang affirmed on 1 June 2023. The latter was briefly cross-examined by Mr Fielder by video link through a Mandarin interpreter. The plaintiff read affidavits of Bin Li affirmed on 17 April 2023, 30 April 2023 and 14 July 2023.
5. Several documents were tendered in evidence as exhibits 3, 4 and 5.

Application to amend the statement of claim

1. The proposed Amended Statement of Claim is contained in exhibit 1 and was exhibited to the affidavit of the plaintiff affirmed on 17 April 2023. It seeks to join Ms Zisu Wang as the third defendant, provides further particulars generally, pleads a conversation with Ms Wang in about May 2016 which alleges her to be a party to the loan agreement, and adds a cause of action based on the existence of a constructive or a resulting trust and unjust enrichment.
2. It was not seriously argued that the plaintiff ought not to have leave to amend the Statement of Claim to plead another cause of action based on the facts and circumstances already pleaded. What was objected to, vigorously, was that the plaintiff ought not to be granted leave to replead based on the alleged conversation about the loan agreement with the proposed third defendant in about May 2016.
3. Shortly put, Mr Kabilafkas submitted that the documents pursuant to orders made by Walton J demonstrate that the plaintiff had never instructed any of her lawyers about a conversation with Ms Wang in 2016 until after her third lawyers refused to make an application to amend the Statement of Claim joining Ms Wang as a defendant in late 2022. It was only then, and after she changed solicitors, that the plaintiff instructed her current lawyers that she had a conversation with Ms Wang and an application was made to join Ms Wang as a defendant.
4. Mr Kabilafkas cross-examined the plaintiff at length on this topic. He showed her documents that had been produced pursuant to the recent orders of Walton J, which he suggested demonstrated that, based on her consistent instructions about conversations and events leading up to the loan agreement, she was advised that she had no legal basis to join Ms Wang and that she had made a deliberate decision not to join her based on legal advice. It was put to her that she had lied about the 2016 conversation with Ms Wang and that her application to join Ms Wang was made in bad faith and for the purpose of pressuring the first and second defendants to pay the money allegedly owed to her. It was on this basis that Mr Kabilafkas submitted that the application to join Ms Wang should be refused.
5. I observe that Ms Li consistently and strenuously denied any suggestion that she had lied about or made up any conversation which had occurred in 2016 with Ms Wang. Indeed, her evidence was that she had told her second and third lawyers about this conversation, but they had failed to act on her instructions. I note that Ms Li was absent from Australia during this time, and that she was corresponding with those lawyers (in Mandarin) largely through WeChat. After November 2022, her son had conversations in writing and otherwise with her then lawyers.
6. An issue arose as to the onus of proving bad faith on the part of Ms Li. I do not have to decide that issue. Indeed, on the evidence before me, taking into account that I am dealing with an interlocutory application, I am not prepared to make any finding other than that the plaintiff was at all times acting in good faith. No doubt the plaintiff's credibility will be in issue before the trial judge. It will be up to her or him to make any such findings.
7. The principles with respect to amendment are well-known and need not be repeated. The CPA permits all necessary amendments to be made for the purpose of determining the real questions in dispute and to avoid a multiplicity of proceedings, and includes a power to allow amendment for the purpose of adding a new cause of action if it arises from substantially the same facts as those giving rise to the existing action in the originating process: see ss 64, 65(2)(c) of the CPA. In making a decision about whether to permit an amendment, the Court must seek to act in accordance with the dictates of justice (s 58 of the CPA), having regard to ss 56 and 57 of the CPA. In this case, taking into account that no prejudice has been demonstrated on the part of the second defendant and that there has been no real delay on the part of the plaintiff in attempting to rectify the Statement of Claim, in my view the dictates of justice (allowing for those matters set out in s 58(2) of the CPA) favour the granting of leave to the plaintiff to amend her Statement of Claim.
8. I note that during argument it was suggested that the proposed Amended Statement of Claim may need to be further amended in light of criticisms made about it by Mr Kabilafkas. I grant leave to the plaintiff to file an Amended Statement of Claim, joining Ms Wang to the proceedings as a party to the alleged loan agreement, and by pleading a claim in trust and unjust enrichment. Any question about the effective date of Ms Wang's joinder is reserved to the trial judge.

Application to set aside the subpoenas

1. At the outset, Mr Fielder appropriately conceded that the subpoenas to Westpac and ANZ Bank should be limited to the dates of 1 June 2016 to 16 March 2020. He maintained his position with respect to the subpoena issued to Alice Yang & Associates, who were the solicitors who acted on the purchase and sale of the property.
2. In Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145, Bell P, as his Honour then was, and with whom McCallum JA agreed, said at [80]:- "…at least in civil matters, an inability to demonstrate that it is "on the cards" that the documents sought will materially assist the subpoenaing party's case will not automatically require either that the subpoena be set aside or that access to the documents produced be refused. It will generally be sufficient and prima facie evidence of a legitimate forensic purpose if the documents sought to be produced on subpoena have an apparent relevance to the issues in the case and or bear upon the cross examination of witnesses expected to be called in the proceedings."
3. Brereton JA, with whom McCallum JA agreed, said at [89]:- "In my view, at least in civil proceedings and in the absence of any question of public interest immunity, no more is required to support the issue of a subpoena for production than that there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case… Moreover, documents will add "in some way" to the relevant evidence in the case if they are capable of assisting in cross-examination, or go to credit, and notwithstanding that they are inadmissible according to the rules of evidence."
4. As I have decided that I will allow the amendments to the Statement of Claim, it is appropriate to look at the proposed Statement of Claim to determine whether or not the material sought will add to the relevant evidence in the case. In my view, the documents sought from the two banks have "apparent relevance" to the issues in dispute in this case. They are arguably relevant, at least, in determining to whom the initial (and further) funds were transferred, how the defendants treated those funds and in particular whether or not the funds were applied for the purchase of the property, how and by whom repayments were made in 2017 and 2018, and how and by whom repayment was made after the property was sold in 2020. In my opinion, the documents sought from Ms Yang are arguably relevant to how and by whom the repayment in 2020 was made. It follows that in my view, the subpoenas were issued for a legitimate forensic purpose.
5. In my opinion, allowing for the concession made by Mr Fielder, the subpoenas ought not to be set aside.

Application for security for costs

1. The second defendant makes an application for security for her costs from the plaintiff. Rule 42.21 of the Uniform Civil Procedure Rules provides:- 42.21 Security for costs (1) If, in any proceedings, it appears to the court on the application of a defendant - (a) that a plaintiff is ordinarily resident outside Australia, or (b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or (c) that, after the commencement of the proceedings, a plaintiff has changed his or her address, and there is reason to believe that the change was made by the plaintiff with a view to avoiding the consequences of the proceedings, or (d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, or (f) that there is reason to believe that the plaintiff has divested assets with the intention of avoiding the consequences of the proceedings, the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant - (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) whether the plaintiff is effectively in the position of a defendant, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff. (1B) If the plaintiff is a natural person, an order for security for costs cannot be made merely on account of his or her impecuniosity. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed. (4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given.
2. In this case, the real question is whether or not the plaintiff is "ordinarily resident outside Australia", such that it would enliven my discretion to make an order that she provide security for the second defendant's costs. The plaintiff denies that she is ordinarily resident outside Australia. The second defendant bears the onus of proving that she is ordinarily resident outside Australia, and in this particular case, that she is in fact ordinarily resident in China. I observe that the purpose of making an order for security for costs is not punitive. It is protective, so that an order for costs against the plaintiff will not be frustrated by the plaintiff's inability or unwillingness to pay those costs.
3. Mr Kabilafkas submitted that it was clear that the plaintiff was ordinarily resident in China. He pointed to the matters I have referred to in paragraphs [5] and [6] above to make good that submission. He also submitted that the plaintiff was involved in the forgery of hospital discharge records (which she vehemently denied) in an attempt to falsely demonstrate that she was unable to leave China during 2022.
4. Mr Fielder advanced several reasons why I should not find that the plaintiff is ordinarily resident outside Australia. He submitted that I could infer that Ms Li habitually and normally resides in Australia notwithstanding her absence from the jurisdiction for over a year. Further, he submitted that even if I found her to be ordinarily resident outside Australia, I would not exercise my discretion to order security because the dispute arises between family members who do not appear to dispute that a loan arises, who have repaid part of the loan and because Ms Li's claim is genuine.
5. I find that Ms Li is ordinarily resident outside of Australia. I do not doubt that she is entitled to become ordinarily resident in Australia because of her status as a permanent resident visa holder. However, she returned to China on a one-way ticket at a time approximate to when her husband was released from prison. She is still married to him, and he is now in Australia on a tourist visa. Their marriage is ongoing. Ms Li retains real property in China. On the evidence before me, I cannot conclude that she is anything other than ordinarily resident in China.
6. I make no finding about the authenticity of the hospital records. On the evidence before me, including its unreliable hearsay nature, I am unable to come to any conclusion.
7. Having decided that Ms Li is ordinarily resident outside China, I turn now to whether or not I should exercise my discretion and make an order for security. I accept that it would be nigh impossible to enforce any judgment against Ms Li in China. The plaintiff has no real property in Australia. She is not renting any residential premises. Her one asset is $1.5 million in cash held at St George Bank. Those funds can be electronically transferred from a computer simply and quickly. The evidence does not give me comfort that any costs order made against her would be enforceable. Rather, in my opinion, the fact that the sum currently exists in her bank account allows me to conclude that she can easily provide some security.
8. The only evidence about the quantum of the security sought is found in the affidavit of Mr Lu affirmed on 27 March 2023. He estimates that the costs of the second defendant for a five day trial, assessed on a party/party basis, would be between $126,742 and $242,384. Mr Lu was not cross-examined.
9. I do not accept that Mr Lu's estimate is proportionate to the issues at stake in these proceedings. For example, I doubt very much that there will be discovery in these proceedings. In any event, an order for security is not meant to provide an indemnity for the second defendant's costs. I propose to take an impressionistic view and apply my broad experience in such matters. Doing the best I can, in my opinion it would be just and proportionate to order the plaintiff to pay $100,000 into court as security for the second defendant's costs.

Disposition

1. In the premises I allow the application to join Ms Wang as the third defendant and to otherwise amend the Statement of Claim. I decline to set aside the subpoenas but I limit the date range for the production of the documents to 16 March 2020. I order that security for the second defendant's costs in the amount of $100,000 be paid into court.

Costs

1. With respect to the motion to amend the Statement of Claim, it was accepted that the plaintiff should pay the second defendant's costs occasioned by reason of the amendments. There was a dispute as to whether the plaintiff should otherwise pay the second defendant's costs of the motion. Mr Fielder submitted that as the amendments had been provided to the plaintiff on 14 April 2023, it was unreasonable for the plaintiff to pay those costs. I observe that the proposed Amended Statement of Claim will be further amended as a result of what transpired at the hearing of the motion. Furthermore, in my view, taking into account the evidence (including previously privileged documents) as to Ms Li's belated recall of a 2016 conversation with Ms Wang, it was appropriate for the second defendant to test Ms Li's evidence and resist the application. In the circumstances, the plaintiff should pay the second defendant's costs of the motion.
2. With respect to the motion to set aside the subpoenas, both the plaintiff and the second defendant were successful in part. The plaintiff was successful in resisting the application to have the subpoenas set aside. However, with respect to the subpoenas to Westpac and ANZ Bank, the second defendant was successful in limiting the date range to 16 March 2020. In the circumstances, there should be no order as to costs.
3. As to the motion with respect to security for costs, although the second defendant was successful, a letter dated 10 May 2023 from the plaintiff's solicitors to the second defendant's solicitors was tendered. That document contained an offer from the plaintiff's solicitors to pay the sum of $120,000 into court as security. A letter from the second defendant's solicitors to the plaintiff's solicitors dated 15 May 2023 rejected that offer and made a counteroffer that that the plaintiff pay $120,000 into court and pay the second defendant's costs of the motion forthwith. It was not disputed that in these circumstances the usual order ought to be made, ie that the plaintiff pay the second defendant's costs of the motion on the ordinary basis up to and including 15 May 2023 and that the second defendant pay the plaintiff's costs of the motion thereafter on an indemnity basis. In the circumstances, I will make that order.

Orders

1. I made the following orders on 25 July 2023:- 1. Order that the second defendant be granted access to subpoena packets S-1, S-2, and S-3 for the purpose of: 1. in respect of packet S-1, identifying whether there is any material over which privilege is claimed; and 2. in respect of packets S-2 and S-3, limiting the material produced to the date range of 1 June 2016 to 16 March 2020. 1. Subject to any privilege claims in respect of packet S-1, order that the second defendant produce to the plaintiff the material referred to in Order 1(a) and (b) above by no later than 1 August 2023. 2. The plaintiff is to pay $100,000 into Court by way of security for costs on or before 8 August 2023. 3. If the plaintiff fails to comply with order 3 hereof, then the proceedings against the second defendant are stayed unless and until the order is complied with. 4. The plaintiff is granted leave pursuant to s 64(1)(b) of the Civil Procedure Act 2005 (NSW) to file and serve an Amended Statement of Claim (substantially in the form provided to the second defendant on 14 April 2023, but subject to making amendments to address the concerns raised by the second defendant in respect of the pleading during the hearing on 24-25 July 2023) by 15 August 2023. The date from which the amendment is to take effect is reserved for the trial judge. 5. Order that service of the Amended Statement of Claim in Order 5 above be effected: 1. in respect of the first defendant, in the same manner provided for by Order 1 made on 22 July 2022 in these proceedings; and 2. in respect of the second defendant and Zisu Wang (the proposed third defendant), by email to Mr Hudson Lu of Luminous Legal. 1. The defendants are to file and serve a defence and/or amended defence by 5 September 2023. 2. The plaintiff is to file and serve a reply (if any) by 12 September 2023. 3. Pursuant to s 26 of the Civil Procedure Act 2005 the matter is referred to mediation before a private mediator. 4. The plaintiff is to propose three potential mediators to the defendants by 1 August 2023 and their available dates. 5. The active defendants are to select one of the mediators proposed by the plaintiff by 8 August 2023. 6. The plaintiff of the first part, and second defendant and third defendant of the second part, are to share the costs of mediation equally. 7. All parties are to attend private mediation by no later than 16 October 2023. 8. The plaintiff is to pay the second defendant's costs thrown away by reason of the amendments to the Amended Statement of Claim and her costs of that notice of motion. 9. There is to be no order as to costs with respect to the notice of motion seeking orders to set aside the subpoenas. 10. With respect to the notice of motion for security for costs, the plaintiff is to pay the second defendant's costs to 15 May 2023 on the ordinary basis. Thereafter, the second defendant is to pay the plaintiff's costs of the motion from 16 May 2023 on an indemnity basis. 11. I list the matter for hearing for 5 days commencing 17 June 2024. 12. I list the matter for case management directions at 9:30am on 23 October 2023 before me. 13. I will deliver reasons at 10am on 27 July 2023. 14. Liberty to apply on three days notice.

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: 27 July 2023