BCEG Australia v Yu Xiao
[2020] NSWSC 1234
•10 September 2020
Supreme Court
New South Wales
Medium Neutral Citation: BCEG Australia v Yu Xiao & Ors [2020] NSWSC 1234 Hearing dates: On the papers Date of orders: 10 September 2020 Decision date: 10 September 2020 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Costs of the plaintiff’s notice of motion of 18 February 2020 to be the plaintiff’s costs in the cause
Catchwords: COSTS – List Response claiming privilege against self-incrimination - motion to strike out Response on basis that claim for privilege inadequately articulated – resolved on basis defendants circulate Amended Response – proposed Amended Response resolved shortcomings in original response – leave granted to file Amended Response
Legislation Cited: Practice Note SC Eq 3
Category: Costs Parties: BCEG International (Australia) Pty Ltd (Plaintiff)
Yu Xiao (First Defendant)
Yan Ying Chen (Second Defendant)
Interlink Laboratory Pty Ltd (Third Defendant)
Interlink Wagga Central Pty Ltd (Fourth Defendant)
West Wyalong Marketplace Pty Ltd (Fifth Defendant)Representation: Counsel:
Solicitors:
D L Williams SC with N Riordan (Plaintiff)
C Withers with B Cameron (Defendants)
Thomson Geer (Plaintiff)
Holding Redlich (Defendants)
File Number(s): 2019/310768
Judgment
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The plaintiff, BCEG International (Australia) Pty Ltd, sues its former director, Mr Yu Xiao, Mr Xiao’s wife Ms Yan Ying Chen (who BCEG alleges was a de facto director) and three associated companies.
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BCEG makes very serious allegations against Mr Xiao and Ms Chen, which it summarised in its Commercial List Statement as follows:
“The relevant conduct said to constitute breaches of fiduciary duty took place in the context of [BGEC] undertaking the development and construction of a private hospital on the Gold Coast, and involved [Mr] Xiao and [Ms] Chen preparing fraudulent documents intended to inflate the costs of construction of that project so as to enable them to cause [BCEG] to borrow additional funds which [Mr] Xiao and [Ms] Chen are said to have caused to be diverted to fund certain other construction projects they were separately undertaking in respect of which the plaintiff held no interest.”
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BCEG alleges that Mr Xiao and Ms Chen engaged in deliberate and systemic fraud and in conduct which is criminal in nature.
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By notice of motion filed on 18 February 2020, as amended on 26 June 2020, BCEG sought an order that the defendants’ List Response be struck out and that the defendants not be permitted to raise any new defence not already raised on the pleadings, without leave.
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BCEG’s complaint about the Response was, in substance, that the defendants sought to invoke the privilege against exposure to civil penalties and self-incrimination on a global basis, rather than doing so on a contention by contention basis and in a manner that identified the particular ground relied on in relation to each contention.
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The manner in which the defendants sought to invoke the privilege was set out in paragraphs 5 and 6 of the Response:
“Claiming the privileges in this response
[5] For each allegation in the Commercial List Statement pleaded against the [Mr Xiao or Ms Chen] where [Mr Xiao or Ms Chen] has pleaded a non-admission or a denial, the privileges against self-incrimination and exposure to penalties are claimed by that defendant.
[6] For each allegation in the Commercial List Statement pleaded against the [corporate] defendants where those allegations are not admitted or denied by the [corporate] defendants, these responses are taken to preserve [Ms Xiao or Ms Chen’s] exercise of the privileges against self-incrimination and exposure to penalties.”
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A difficulty with this pleading device was that it was unclear, on many occasions, whether the defendants were merely “not admitting” an allegation [1] or actually denying an allegation, as opposed to invoking the privilege.
1. Despite the statement in Practice Note SC Eq 3 [11] that, in this List, an allegation is either to be admitted or denied.
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I heard BCEG’s motion of 6 August 2020. On that occasion I raised with Mr Withers, who appeared for the defendants, the difficulties I saw with the Response. Those difficulties were, in effect, those complained of by BCEG in their submissions and in solicitors’ correspondence.
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By and large, Mr Withers accepted that the Response required amendment.
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The result was that the only order I made on 6 August 2020 was to direct the defendants to circulate a proposed Amended Response.
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The defendants did so by circulating a proposed Amended Response which did not have the shortcomings of the existing Response. The proposed Amended Response invoked the privilege on a contention by contention basis and identified the criminal and civil penalties to which the defendants apprehended exposure.
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I granted the defendants leave to file that Amended Response and the matter is now moving forward.
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I am now dealing with the costs of BCEG’s motion.
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The defendants accept that they must pay BCEG’s costs thrown away by the amendment to the Response.
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Otherwise each party seeks an order that the other pay their costs of the motion.
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It is true that BCEG did not obtain the orders sought in the motion. I did not strike out the original Response. I have not ordered that the defendants not be permitted to raise any new defences without leave. Nor has BCEG achieved the result, agitated in its submissions, that the defendants “plead their defence in the usual way.”
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BCEG has, however, achieved the result that the defendants have now delivered a Response which does not have the vices of the original and which incorporates, in one document, the various bases on which the defendants seek to invoke the privilege.
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I am satisfied that BCEG’s motion was necessary. Although the defendants had, by their solicitors, explained in correspondence and otherwise how it was said that the privilege was invoked, it was necessary in the context of this case that this explanation appear in one document: the Response.
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On the other hand, BCEG ultimately conceded that the defendants had sustained their onus of showing a real and appreciable risk of prosecution or exposure to civil penalty, were they to answer the List Statement in “the usual way.”
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Thus each side has achieved some measure of success although, as I have said, in substance BCEG has achieved what it sought to achieve by filing its notice of motion.
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In all the circumstances, in my opinion, the appropriate order to make is that the costs of the plaintiff’s notice of motion of 18 February 2020 be its costs in the cause.
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I make the following orders:
The defendants pay the plaintiff’s costs thrown away by reason of the defendants’ amendment of the Commercial List Response;
The costs of the plaintiff’s notice of motion of 18 February 2020 be the plaintiff’s costs in the cause.
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Endnote
Decision last updated: 10 September 2020
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