Chen v Tang
[2017] VCC 1538
•27 October 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-04858
| MIN CHEN | Plaintiff |
| v | |
| XIAO TANG | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 October 2017 | |
DATE OF JUDGMENT: | 27 October 2017 | |
CASE MAY BE CITED AS: | Chen v Tang | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1538 | |
REASONS FOR JUDGMENT
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Legislation Cited: Charter of Human Rights and Responsibilities Act 2006 (Vic)
Cases Cited:Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd (2009) VSC 418; Talacko v Talacko [2009] VSC 444
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Aleksov | Hope Earle Lawyers |
| For the Defendant | Dr G Boas | Stenta Legal |
HIS HONOUR:
Background
1 This application is the return of a freezing order and an injunctive order granted on 18 October 2017. The freezing order concerned an amount of $1.2 million lent by the plaintiff to the defendant. The injunctive order prohibited the defendant from leaving Victoria and attending any point of international departure until 25 October 2017.
2 The orders were made on the basis of allegations made by the plaintiff in a writ and supported by an affidavit sworn by the plaintiff on 17 October 2017. In essence, the plaintiff alleged that she entered a loan agreement with the defendant whereby she lent him $1.2 million. The defendant was to use this money in his currency exchange service. The defendant would receive Chinese Yuan from customers in China and deposit the equivalent value in Australian Dollars into the customers’ accounts in Australia.
3 Under the agreement the defendant was to make monthly interest payments to the plaintiff. If the defendant failed to make an interest payment when due, the plaintiff could demand repayment of the amount outstanding including the principal and unpaid interest. The defendant failed to make interest payments in August and September 2017. In early October 2017, the plaintiff demanded repayment. The plaintiff says that the defendant wrongfully refused to pay her the amount due.
4 In her supporting affidavit, the plaintiff made the following points:
(a) at about 9:00pm on 9 October 2017 the defendant rang her from his Chinese mobile number and informed her that he was not able to repay the loan amount to her. She said that he sounded anxious over the phone. He asked her not to contact him on his Australian mobile number but to use only his Chinese mobile number or WeChat voice messages. The defendant said to do this because he was afraid his Australian mobile number was bugged and under surveillance from the police. The defendant also said that during the afternoon that day, his subordinate, Jerry, who was responsible for transacting the currency exchange services, had been arrested by police and the funds had been confiscated. The plaintiff asked how much. The defendant said the police had confiscated $1.7 million, of which $1.2 million was the plaintiff’s funds.
(b) The plaintiff asked the defendant why the police would arrest Jerry and confiscate funds when the defendant had previously told her that the proposed use of the loan moneys were lawful. The defendant said that he had executed many currency exchange transactions and there were ‘unclean’ funds involved including illegal money laundering. The defendant said he believed the police had been observing them for a while.
(c) The defendant said he was not going to return the loan funds to her and he had sought legal advice. The defendant also said that his lawyers had told him the police suspected the funds were connected to drug dealing offences.
(d) On 16 October 2017 the plaintiff exchanged a series of voice messages with the defendant over WeChat. The defendant advised that he was planning to leave Australia at the end of October 2017. He said he was not planning to return in the short term because he was concerned about being charged by the police. He said that he intended to depart Australia after he had arranged bail for Jerry and obtained his release from custody. When the plaintiff asked the defendant to repay the $1.2 million loan, he said that he did not have the money and that the plaintiff should see how it goes.
(e) The plaintiff was aware that the defendant is a Chinese citizen who travelled frequently between Australia and China.
(f) The defendant had considerable experience in facilitating the transfer of money across international borders.
(g) She believed there was a danger that a prospective judgment of the court might be wholly or partly unsatisfied because the defendant intended to leave Australia and remove, dispose of or deal with his assets in Australia and elsewhere (I infer from this that any judgment in Australia would not, or might not, be satisfied).
5 The defendant responded to the plaintiff by affidavit made on 24 October 2017. This affidavit set out his various assets and liabilities in Australia. The defendant confirmed that he is a Chinese national who resides in Australia under a visitor visa. This visa is granted for a period of 3 months. The last date upon which the defendant could arrive in Australia was 1 November 2017. The visa expires on 25 December 2017. A condition of the visa is that the defendant cannot work in Australia. In the affidavit the defendant says the following:
(a) If the plaintiff succeeds in her claims against him, he would be unlikely to immediately wholly or substantially fulfil the judgment against him. But he says he would use his best endeavours to satisfy any order.
(b) He considers the plaintiff a close friend who knows his family and has had substantial contact with his mother. The defendant says the plaintiff is aware of his residential address in Shanghai. He said that the plaintiff has attempted to contact the defendant’s mother by telephone in connection with these proceedings.
(c) The defendant intends to travel to China for a business meeting on 31 October 2017 and return to Australia about 2 weeks later. The meeting concerns a potential business involving Chinese exchange students studying in Australia.
(d) The defendant said that, whilst in China, he intended to seek assistance from his relatives regarding the plaintiff’s claim. I inferred from this observation that the defendant intended to raise money from his relations to repay the plaintiff.
(e) The defendant denies the plaintiff’s allegation that he said he intended to leave Australia and not return in order to avoid criminal charges. He said that he has not been charged with any criminal offence and does not expect to be charged.
(f) The defendant is aware that individuals with whom he had commercial dealings are facing criminal charges. The defendant said that he was shocked to learn that these business associates have been charged with criminal offences. He is seeking advice about his rights with respect to those associates and the losses that he has suffered.
(g) The defendant says that returning to China is necessary for him to continue his business. His ability to access resources to improve his position is far greater in China than Australia. He says that he intends to return to Australia two weeks after his planned trip on 31 October 2017. He also plans to return to Australia after 25 December 2017 if he is able to extend his visa. He undertakes to answer any claim against him and return to Australia if and when called upon by the court to do so.
6 The defendant’s material was limited and not detailed. The defendant gave little or no sworn evidence about
· The receipt of the $1.2 million from the plaintiff;
· The current whereabouts of the $1.2 million;
· If and when he could repay the $1.2 million to the plaintiff;
· What factors affected his ability to repay the money;
· Whether and to what extent he or Jerry was engaged in arguably illegal activity;
· The nature of his business meeting in China on or about 31 October 2017 and why he needed to be there in person;
· Whether and on what basis he could lawfully return to Australia after 1 November 2017.
Most of these are matters peculiarly within the knowledge of the defendant. If he chooses not to provide evidence about them, the plaintiff cannot make good the deficit.
Legal principles
7 The principles relating to the grant of freezing orders were summarised by Forrest J in Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd:[1]
[1](2009) VSC 418 at [20].
First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.
Second, the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.
Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.
Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.
Fifth, that before such an order can be made it is necessary that the applicant establish –
(a) an arguable case against the defendant; and
(b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value.
Sixth, the balance of convenience must favour the granting of the freezing order.
Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.
Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property.
Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.
Freezing order
8 The defendant does not dispute that the plaintiff can assert an arguable case. The defendant contends that a freezing order will have no material impact upon the disposition of the proceeding. Hence, if the plaintiff succeeds in her claim, a freezing order will not assist in protecting the defendant’s assets from being moved or disposed of or diminished in value.
9 The defendant contends that he has no more than approximately $50,000 in assets in Australia together with a bank balance of approximately $18,000. Thus, he says that the quantum of assets affected by the order is no more than about $68,000. He argues that these moneys will be spent soon on living and legal expenses.
10 However, the defendant did not vigorously oppose the continuation of the freezing order on the basis that it might give some comfort to the plaintiff while not causing the defendant any particular harm.
11 I note in passing that the plaintiff’s current order does not extend to assets held by the defendant outside Australia. On one view, in a case such as the present, this seems curious, especially as the form of order in the rules explicitly provides for the inclusion of overseas assets.
12 I propose to continue the operation of the freezing order. I have reached this view for the following reasons.
13 First, the evidence establishes an arguable case against the defendant and the defendant conceded this.
14 Secondly, I am satisfied that without the order there is a risk that any judgment in favour of the plaintiff would not be satisfied because the defendant’s assets would be disposed of or dealt with in a fashion designed to achieve this result. Factors influencing this view are:
· the defendant does not raise any defence to the claim. Indeed, he seems to tacitly accept it insofar as he says that he wants to meet any obligations he has to the plaintiff;
· the defendant has experience in moving money internationally;
· the defendant has limited assets in Australia and is keen to get to China;
· it appears that his colleague Jerry is potentially involved in criminal activity;
· the defendant himself appears to be on an alert list created by the Australian Criminal Intelligence Commission;
· although the defendant said he had not been charged with any offence and did not expect to be, he refused to provide the court with detailed evidence about relevant events. If he is not involved in any potentially unlawful activity, why did he not give a detailed affidavit or at least explain why he failed to provide a detailed affidavit which addressed pertinent factual matters raised by the plaintiff?
· The evidence of the defendant regarding the phone number of Shanghai Talentour Travel Consulting Co Ltd was not reassuring – the plaintiff’s solicitor rang the number and was advised that it did not exist.
Further, especially in circumstances where the defendant did not vigorously oppose the continuation of the freezing order, I consider the balance of convenience favours the grant of the order.
Ancillary order
15 Of greater concern to the defendant was the injunctive order preventing him from leaving Australia. The defendant agreed that he is presently in Australia on a tourist visa which expires on 25 December 2017. The defendant contended that this was not a case where a foreign national such as him might disappear. He pointed out that: the plaintiff is a Chinese national; she knows the defendant’s address in Shanghai; she knows the defendant’s mother and has tried to contact her using the mother’s phone number in China; the plaintiff and defendant share mutual friends; “the plaintiff will always be able to locate the defendant in China and, as a Chinese national, will have all relevant rights to pursue him for any debt the subject of this proceeding within Chinese law”.[2] Accordingly, it was said that there was no need for the court to restrain the defendant from leaving Victoria. The defendant submitted that the limited case law regarding such ancillary orders was not such as to justify the making of an order in the present case.
[2]Defendant’s submissions, paragraph 14.
16 The defendant referred to the decision of Habersberger J in Talacko v Talacko,[3] where the trial judge noted that such restrictive orders were a serious interference with a person’s rights under section 12 of the Charter of Human Rights and Responsibilities Act 2006 (Vic). His Honour quoted from and effectively followed a Federal Court decision in which Finkelstein J said that the power to impose such a restriction should be exercised cautiously and only in a clear case.
[3][2009] VSC 444.
17 I accept that restraining the defendant from travelling out of Victoria constitutes an interference with his freedom of movement. However, I am apprehensive for several reasons that, if not restrained, the defendant may well go to China and not return to Australia.
18 First, his counsel noted, and I accept, that the defendant has no strong ties to this country – he is a Chinese national visiting Australia on a tourist visa; his family is in China.
19 Secondly, it appears that if the defendant were to return to China there is an issue about whether he could return to Australia in December before his current visa expires. The plaintiff’s solicitor, who is also an immigration agent, opines that he could not. If true, the defendant cannot be forced either to return to this country or to seek another visa for a future visit.
20 Thirdly, while plainly I cannot make any definitive findings, I am concerned about the credit of the defendant. I do not know which of the parties’ affidavits more accurately reveals the truth. But the defendant’s failure to grapple with and respond fully to the details of the plaintiff’s claim, and his failure to assist the court in detailing the matters which he knows, concerns me. Especially is this the case when it seems the defendant is on a government alert list, and owes the plaintiff the money. I am wary of trusting the defendant to honour his obligations if he has left for China.
21 Fourthly, I quoted in paragraph 15 above from the defendant’s submissions where he argued that the plaintiff as a Chinese national would have all relevant rights to pursue the defendant for any debt the subject of this proceeding within Chinese law. When I confessed to the defendant’s counsel that I knew nothing about Chinese law and what the plaintiff’s rights might be in China, the defendant advised that he too was not familiar with the plaintiff’s legal entitlements in that country. It troubles me when counsel makes a submission without any verifiable basis in law or fact. Such a method of discharging one’s duty to the court does not inspire confidence in the credibility of the client’s case.
22 Finally, in circumstances where I am not satisfied that there is a sufficiently good reason for the defendant to leave the jurisdiction and a serious question about whether he could lawfully return in the short term, I consider it preferable in the interests of justice that the defendant remain in the jurisdiction for a further time. Where the plaintiff appears to have lost $1.2 million, I consider she is at risk of greater prejudice if the defendant leaves the jurisdiction than if the defendant is compelled to remain in the jurisdiction. Although the defendant will not be able to attend in person the foreshadowed meeting in China, he might be able to appear by Skype, FaceTime or telephone. I note that the defendant did not say in his affidavit that the meeting related to an opportunity which will not be available in the future if he does not attend in person.
Conclusion
23 Subject to hearing from the parties, I order that:
(a) By 4:00pm on 10 November 2017 the defendant file and serve his defence;
(b) The further hearing of the plaintiff’s summons is adjourned until 15 November 2017.
(c) The operation of the freezing order and the injunction are extended until 4:15pm on 15 November 2017.
(d) Should the parties wish to rely upon any further affidavit material, they are to file and serve such material by 10:00am on 14 November 2017.
(e) Reserve liberty to the parties to apply to the Commercial Division Duty Judge for further directions upon giving reasonable notice to all the parties.
(f) Costs reserved.
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