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[2024] FCA 610
Federal Court of Australia
2024-05-31
Lee J
Original judgment source is linked above.
(Delivered ex tempore, revised from the transcript)
A INTRODUCTION AND BACKGROUND 1 This is an application for leave to appeal from orders (Orders) made for the reasons explained in DC Rd DC Pty Ltd v Zhang (No 2) [2024] FCA 157 (primary judgment). 2 It is unnecessary for me to set out the detailed factual background which gives rise to the dispute between the parties for the purposes of this application for leave to appeal. In any event, they have been helpfully set out in the primary judgment (at [1]-[22]), in terms which are not in contest before me. 3 By way of broad summary, DC RD DC Pty Ltd, Stanley Xue and Sit Family Pty Ltd (together, the applicants) moved on an interlocutory application following the provision of discovery by Link Investments Ltd (Link). 4 Link had discovered bank statements of a bank account held by Link with Bank of China (Hong Kong) Ltd (BOC), but those documents were not available for inspection. They had been discovered by Link because the documents were accepted to be directly relevant to the issues in the case and were documents once in the possession and control of Link. At the time of the swearing of the affidavit verifying the list of documents (List), however, it was said that they were no longer in Link's possession, custody, or control and hence they were discovered in Part 3 of the List. 5 Prayer 1 in the interlocutory application sought orders that Link produce the bank statements for any bank account in the name of, or held by, Link with BOC for the period 1 January 2019 to 31 March 2023 (Link Account Statements). Contrary to the assertion made in the affidavit verifying the List, the applicants asserted that the documents were relevantly within the control of Link, as it was possible for Link to take steps to recover bank statements which were said to be Link's property. 6 In the alternative, prayer 2 in the interlocutory application sought an order that Link make such requests and do such things as may be reasonably necessary to obtain the Link Account Statements from BOC, including but not limited to: (i) arranging for the first respondent (Mr Zhang) or another director of Link to attend a BOC branch in Hong Kong in person; (ii) completing an application form required by BOC; (iii) providing such identity verification documents as may be required by BOC; and (iv) paying any fees charged by BOC. 7 As the primary judge records (at [26]), the order sought by prayer 2 was in the nature of a "Sabre order", referring to the decision of Lockhart J in Sabre Corporation Pty Ltd v Russ Kalvin's Hair Company [1993] FCA 557; (1993) 46 FCR 428 (at 431-2). As is well known, this case is authority for the proposition that the Court has power to direct a party to take steps to obtain access to and discover documents which are in the possession, power or control of a third party where there is a real likelihood that the party to the proceeding would be given access to the documents upon request. 8 When the matter came before the primary judge, the task that his Honour was discharging was to make a practice and procedure decision at an interlocutory stage of a proceeding that he was managing as the Docket Judge. As such, his Honour was required to adopt an approach of applying the civil practice and procedure provisions and exercising any power conferred by them in a way which "best promotes the overarching purpose", being the just determination of the dispute according to law as quickly, inexpensively and as efficiently as possible: see s 37M(1) and (3) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). 9 The transcript reveals that his Honour immediately directed himself to resolving the interlocutory dispute in accordance with the overarching purpose. Further, the primary judgment (at [25]) reveals his Honour, with respect, sensibly eschewing getting into a complicated debate concerning the definition of "control" of the Link Account Statements because the proposed Sabre order appeared to his Honour, in the light of the evidence before him, to provide a solution to the dispute which was "… quick relatively inexpensive and efficient" (at [25]). It was on that basis that his Honour dismissed the application for an order in the terms of Order 1. 10 His Honour then turned to the consideration of the proposed Sabre order, and, in summary, reached the following conclusions (at [27]-[30]): (1) the production of the Link Account Statements would allow the applicants to confirm what they had already pieced together to date from the materials in their possession on subpoena as to the complex series of fund transfers referred to earlier in the primary judgment; (2) although Link is an overseas company, it had submitted to the jurisdiction of the Court and was actively defending the claims made against it and its director, Mr Zhang; (3) even if it were regarded as unreasonable to require Mr Zhang to travel to Hong Kong, there was no evidence that Mr Zhang could not appoint an additional director of Link solely for that purpose; (4) in any event, it would not be unreasonable to require Mr Zhang to travel to Hong Kong (which already had done for the purpose of opening and later closing the BOC Account); (5) it was alleged Link was the primary vehicle through which the proceeds of the disputed transactions were transferred; (6) the allegations and the scale of the alleged misappropriation of funds were serious; (7) at the final hearing, it is likely the Court will need to apply tracing principles, and hence need to access the Link Account Statements in order for this to be able to be performed properly; (8) there is a real question as to the source and co-mingling of funds in the BOC Account; and (9) the Link Account Statements would assist the applicants in seeking a proprietary claim in respect of certain real property and would be "critical in establishing that proprietary claim" (at [27]). 11 Save for (4) above, none of these facts are proposed to be challenged by any appeal. The challenge to his Honour's Orders is that, having made those findings and the additional finding that there was a real likelihood that Link would be given access to the Link Account Statements by BOC upon request, provided that the process for making that request in person in Hong Kong is carried out, his Honour then regarded the steps that were identified in Order 2 to be reasonably necessary in all the circumstances. 12 During oral submissions this morning, this issue turning on objective reasonableness emerged as the core contention made by Link, even though the three grounds of the appeal contained within the notice are as follows: 1. The primary judge erred and mistook the facts by finding: a. at Judgment, [26], that each of the steps to be undertaken by the Fifth Respondent (Link) to obtain the bank statements for any bank account in the name of, or held by, Link with Bank of China (Hong Kong) Ltd (BOC) for the period 1 January 2019 to 31 March 2023 (Link Account Statements) is reasonable; and b. should have held that arranging for the First Respondent (Mr Zhang) or another director of Link to attend a BOC branch in Hong Kong in person to obtain the Link Account Statements is not reasonably necessary. 2. The primary judge erred and mistook the facts by finding: a. at Judgement, [30], that the interference with the liberty of Mr Zhang, in requiring him to attend a BOC branch in Hong Kong in person to obtain the Link Account Statements, is not unreasonably onerous in the circumstances; and b. should have held that requiring Mr Zhang to attend a BOC branch in Hong Kong in person to obtain the Link Account Statements is not reasonably necessary. 3. The primary judge erred and acted on a wrong principle in that: a. his Honour acted, at Judgment, [27] and [28], on the basis that Mr Zhang bore the onus of adducing evidence to prove that he could not appoint an additional director of Link solely for the purpose of travelling to Hong Kong to obtain the Link Account Statements; b. whereas, the principle upon which his Honour should have acted is that, as the applicants on the Interlocutory Application seeking an order that Link arrange for a director of Link to attend a BOC branch in Hong Kong in person to obtain the Link Account Statements, the Applicants bore the onus of proving that Mr Zhang could appoint an additional director of Link solely for the purpose of travelling to Hong Kong to obtain the Link Account Statements. 13 I will come back to the core contention, which is reflected in Ground 1 of the proposed appeal, and the interrelated Grounds 2 and 3 briefly below.
B RELEVANT PRINCIPLES 14 The relevant principles for determining this application are not in dispute. 15 In Nationwide News Pty Limited v Rush [2018] FCAFC 70 (at [2]-[4]), I set out the principles informing a determination as to whether to grant leave to appeal from a decision of a single judge, with which Allsop CJ and Rares J agreed. They are not novel and the starting point is that in exercising the power to grant leave regard must be had to the statutory charge in s 37M(3) of the FCA Act, that the power to grant leave must be exercised or carried out in a way which best promotes the overarching purpose. 16 Consistently with the facilitation of a just resolution, an applicant must usually show that: (a) in all the circumstances, the decision to be appealed is attended with sufficient doubt to warrant its reconsideration on appeal; and (b) supposing the decision to be wrong, substantial injustice would result if leave were refused: Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397 (at 398-399 per Sheppard, Burchett and Heerey JJ). The sufficiency of the doubt in respect of the decision to be appealed and the question of substantial injustice bear upon each other so that the degree of doubt which is sufficient in one case may be different from that required in another. It has also been said that the considerations are cumulative such that leave ought not be granted unless each limb is made out: Rawson Finances Pty Ltd v Deputy Commissioner of Taxation [2010] FCAFC 139; (2010) 81 ATR 36 (at 38 [5] per Ryan, Stone and Jagot JJ); Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 (at 4 [3] per Jagot, Yates and Murphy JJ). 17 Additionally, consistent with the facilitation of a quick, inexpensive and efficient resolution is the principle which emerges from the oft-cited warning of Jordan CJ in In re the Will of F. B. Gilbert (Deceased) (1946) 46 SR (NSW) 318 (at 323), that if a tight rein is not kept upon the interference with orders of judges at first instance in the exercise of discretion on a point of practice and procedure, the result will be "disastrous to the proper administration of justice".
C CONSIDERATION 18 It is unnecessary to deal with each of the grounds of appeal independently, as they interrelate, and, as noted above, the focus of the complaint made about the primary judgment has been brought into sharper focus during the course of oral submissions this morning. 19 More specifically, the core complaint can be expressed as being that his Honour erred in finding, in all the circumstances, that the first step required by Order 2 was reasonable, that is, the step of "arranging for [Mr Zhang] or another director of Link to attend a BOC branch in Hong Kong in person" was reasonable and did not impose an unduly onerous obligation on Mr Zhang. It was submitted that all subsequent steps required to be undertaken by the Order flowed on from this erroneous conclusion. 20 Link contends that this determination involved his Honour mistaking relevant facts in the way contemplated by the third of the errors referred to in House v The King (1936) 55 CLR 499 (at 505 per Dixon, Evatt and McTiernan JJ). 21 There has been some debate before me today as to whether that is an appropriate characterisation of what his Honour was doing. Although it is obvious that one of the ways that the exercise of a discretion may miscarry in a manner opening the decision to review is where a judge mistakes the facts (see House v The King (at 505)), the demarcation between a finding of fact which involves an evaluative judgment (such as whether something is reasonable or could be regarded as sufficient), and the ultimate evaluative judgment constituting the exercise of discretion, can be somewhat blurred. 22 It is unnecessary for me to reach any conclusion about this matter of characterisation because I do not consider it reasonably arguable that his Honour mistook the facts or that his discretion otherwise miscarried. His Honour expressly accepted that proposed Order 2, if made, would interfere with Mr Zhang's liberty but then reached a view that he did not regard that interference as being unreasonably onerous in the circumstances (at [30]). His Honour addressed the steps that would need to be taken by Mr Zhang to travel to Hong Kong to discharge the obligation imposed by the Orders and reached the conclusion, in my view rationally, that in all the circumstances this did not impose an undue burden given the obvious likely relevance (indeed importance) of the Link Account Statements to the just disposition of the case. 23 In any event, his Honour also had before him the fact that the sole shareholder of Link is Langkawi Investments Limited, a company incorporated in the British Virgin Islands of which Mr Zhang is the sole director. 24 Link had been incorporated in Hong Kong also with Mr Zhang as its director. There was no evidence before his Honour that the natural inference to flow from these undisputed facts was that there was no fetter on Mr Zhang, if he so wished, taking steps to appoint a further director to attend to a task he found uncongenial to perform personally. There was some suggestion (which is sought to be encapsulated by the third ground of appeal) that his Honour misapplied principles relating to evidentiary onus in pointing to the fact that there was no evidence that Mr Zhang could not appoint a further director. 25 With respect, I do not think there is any substance in such an argument which was only faintly pressed. It had been made clear by both evidence and submissions filed in advance of the hearing that the applicants were proceeding to argue the application on the basis that it was open for a further director to be appointed, and no evidence was adduced by Mr Zhang to gainsay that proposition or demonstrate any particular difficulties that attended such an appointment. Proof of the foundational and undisputed matters sufficient to give rise to the inference drawn by his Honour was adduced by the applicant. It seems to me it was open for his Honour to find that compliance with the first requirement of Order 2, either through Mr Zhang attending himself in Hong Kong or appointing a further director in order to discharge that task, was not unduly onerous in the circumstances. 26 Given this conclusion, as senior counsel for Link, Mr Henry SC, frankly accepted, the other steps required by Order 2 logically follow.
D CONCLUSION AND ORDERS 27 Given that the primary attack on his Honour's conclusions as to reasonableness and the exercise of his practice and procedure discretion lacks persuasive substance, the decision proposed to be appealed is not attended with sufficient doubt so as to warrant reconsideration. 28 In this regard, when considering reasonableness, it must also be remembered that Link is a litigant before this Court and allegations have been made which are to be resolved in quelling the controversy in accordance with what might be described as the "local rules": see Mackinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] Ch 482 (at 495 per Hoffman J). Although Mr Henry makes the point, with some force, that the Orders require Mr Zhang to take steps which are not directly comparable to other Sabre orders that have been made, the issue relates to one of principle, and it is plain it was open for his Honour, consistent with the overarching purpose, to require these steps to be taken to ensure that the Link Account Statements, being documents likely to be directly relevant to the disposition of the case were able to be obtained. 29 Further, and considering the second Décor limb, the Orders do provide the provision of some money to Mr Zhang for the purposes of undertaking the tasks required by the Orders. Even if one supposed the decision to be wrong (which I do not accept), it is difficult to see why substantial injustice would result if leave were refused. 30 We are not dealing with the resolution of anything like the final substantive rights between the parties, and this coupled with the fact that the Court should be chary in granting leave to appeal in practice and procedure decisions necessitates a dismissal of this application for leave to appeal with costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.
SCHEDULE OF PARTIES NSD 292 of 2024 Respondents Fourth Respondent: FAI KEUNG (PHILLIP) SIT
Link Investments Ltd
DC Rd DC Pty Ltd
[1991] FCA 844
[1993] FCA 557
(1991) 33 FCR 397
(1936) 55 CLR 499
(2017) 252 FCR 1
(1993) 46 FCR 428