Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Dai v Zhu [2013] NSWCA 412 Hearing dates: 29 October 2013 Decision date: 05 December 2013 Before: Barrett JA at [1];
Leeming JA at [2];
Sackville AJA at [3].Decision: 1. Grant leave to the applicants to appeal.
2. Direct the applicants to file a notice of appeal within seven days.
3. Dismiss the appeal.
4. The applicants to pay the respondents' costs of the application for leave to appeal and the appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: SUMMARY DISPOSAL - applicants in default of discovery obligations - orders made striking out their defence and entering judgment against them - whether primary Judge erred in factual findings - re-exercise of discretion - SUMMARY DISPOSAL - Judgment entered in default of filing a defence - whether primary Judge erred in refusing to set aside judgment - re-exercise of discretion - significance of failure to put on evidence of a bona fide defence Legislation Cited: Civil Procedure Act 2005, ss 56, 57, 58, 59, 61
Uniform Civil Procedure Rules 2005, rr 12.7, 14.28, 16.2, 16.3, 16.7, 21.3, 36.16
Fair Trading Act 1987, s 42
Supreme Court Act 1970, s 101(2)(e)Cases Cited: Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503
Allesch v Maunz [2000] HCA 40; 203 CLR 172
Browne v Dunn (1893) 6 R 67 (HL)
Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; 188 CLR 501
Commonwealth Bank of Australia v Humphreys [2010] NSWSC 581
Davison v Queensland [2006] HCA 21; 226 CLR 234
Emmerton v Clerk of the Supreme Court [1992] NSWCA 65
Evans v Bartlam [1937] AC 473
Ex parte Vigilant Finance (NSW) Pty Ltd; Re Cameron Smith [1964] NSWR 1282
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46
Frankenstein v Gavin's House-to-House Cycle Cleaning and Insurance Co [1897] 2 QB 62
Fruehauf Finance Corp Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359
Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230
Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992) 36 FCR 557
Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331
Mulley v Manifold [1959] HCA 23; 103 CLR 341
Nash v Swinburne (1841) 3 Man & G 630; 133 ER 1293
Procter v Kalivis [2009] FCA 1518; 263 ALR 461
Reinehr Industrial Lease & Finance Pty Ltd v Jordan (New South Wales Court of Appeal, 4 June 1974, unreported)
Rubin v Eacott [1912] HCA 55; 15 CLR…
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Details
- AGLC
- Dai v Zhu [2013] NSWCA 412
- Case
- [2013] NSWCA 412
- Decision Date
CaseChat Overview and Summary
This case concerned an appeal from orders made by a primary judge striking out the applicants' defence and entering judgment against them in default of discovery obligations. The applicants, Dai and Zhu, had failed to comply with court directions for discovery, leading the respondents to allege deliberate and contumelious non-compliance amounting to an abuse of process. The primary judge had noted the proceedings had been before the court on multiple occasions, with ongoing complaints about the applicants' failure to produce documents.
The central legal issues before the appellate court were whether the primary judge had erred in his factual findings regarding the applicants' conduct and whether his discretion to strike out the defence and enter judgment had been wrongly exercised. Specifically, the court had to consider the significance of the applicants' failure to provide evidence of a bona fide defence, particularly in light of allegations of fraud and misappropriation of funds. The applicants also raised issues concerning the adequacy of their defence and the opportunity to obtain legal advice.
The appellate court found that the primary judge had correctly identified the applicants' conduct as potentially contumelious and an abuse of process, noting that the respondents only needed to prove this on the balance of probabilities. Despite acknowledging the possibility of an innocent explanation, the primary judge had expressed severe reservations. The court agreed that the applicants had been afforded numerous opportunities to comply with court orders and present their case, describing the court's approach as providing "indulgence upon indulgence." The applicants had failed to provide any substantive answer to the allegations of fraud or explain the whereabouts of the misappropriated moneys.
The appeal was dismissed. Leave to appeal was granted, but the appeal itself was dismissed, with the applicants ordered to pay the respondents' costs.
The central legal issues before the appellate court were whether the primary judge had erred in his factual findings regarding the applicants' conduct and whether his discretion to strike out the defence and enter judgment had been wrongly exercised. Specifically, the court had to consider the significance of the applicants' failure to provide evidence of a bona fide defence, particularly in light of allegations of fraud and misappropriation of funds. The applicants also raised issues concerning the adequacy of their defence and the opportunity to obtain legal advice.
The appellate court found that the primary judge had correctly identified the applicants' conduct as potentially contumelious and an abuse of process, noting that the respondents only needed to prove this on the balance of probabilities. Despite acknowledging the possibility of an innocent explanation, the primary judge had expressed severe reservations. The court agreed that the applicants had been afforded numerous opportunities to comply with court orders and present their case, describing the court's approach as providing "indulgence upon indulgence." The applicants had failed to provide any substantive answer to the allegations of fraud or explain the whereabouts of the misappropriated moneys.
The appeal was dismissed. Leave to appeal was granted, but the appeal itself was dismissed, with the applicants ordered to pay the respondents' costs.
Orders
Orders of the court
1. Grant leave to the applicants to appeal.
2. Direct the applicants to file a notice of appeal within seven days.
3. Dismiss the appeal.
4. The applicants to pay the respondents' costs of the application for leave to appeal and the appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
The primary Judge delivered an ex tempore judgment at the conclusion of the hearing on 3 November 2011: Zhu v Yingle Culture Exchange (Australia) Pty Ltd; Zhu v Dai [2011] NSWSC 1339 ("2011 Judgment"). His Honour observed (at [6]) that even without s 61 of the CP Act, the Court would have an inherent jurisdiction to strike out pleadings in circumstances where a party has acted in a manner that disentitles it to the indulgence of the Court or to the benefit of the proceedings before the court. The primary Judge noted (at [7]) that the respondents alleged that the applicants had deliberately and contumeliously failed to comply with the directions to provide discovery and had engaged in conduct amounting to an abuse of process. In particular, the respondents relied on the applicants' failure to produce bank statements in relation to accounts held by them, although his Honour observed that the respondents had obtained some of these documents by other means (presumably subpoenas issued to third parties). The primary Judge recorded (at [8]) that the proceedings had been before the Court on a number of occasions and that on each of these the respondents had complained about the applicants' failure to produce documents or to comply with directions. His Honour inferred from a letter written by the applicants' then solicitors that, quite apart from the explanation given in the judgment of 24 May 2011 (see at [18] above), the solicitors themselves had explained to the applicants what was necessary to comply with the orders of the Court. The primary Judge considered (at [11]) that there was much to be said for the proposition that the applicants had deliberately failed to comply with orders and that their failure to provide information to enable the proceedings to be completed amounted to "contumelious and quite inappropriate (in the sense of dishonest)" conduct. However, his Honour recognised (at [12]) that there could be an innocent explanation for the applicants' conduct, although he held quite "severe reservations" as to whether such an explanation was available. He then observed that the respondents did not have to satisfy the court that deliberate non-compliance had been proved beyond a reasonable doubt: they only had to prove it on the balance of probabilities, bearing in mind the seriousness of the allegation. The primary Judge accepted (at [14]) that the inadequacy of the 2011 Defence might have been due to the absence of legal representation for the applicants. Nonetheless, he considered that the 2011 Defence did not address the allegations in the 2011 SC and therefore had to be struck out. The respondents had sought judgment in the 2011 Proceedings in default of the filing of a proper defence. In answer, the applicants had raised three matters (at [16]): The primary Judge stated (at [18]) that he was not satisfied that the applicants had taken all steps or all reasonable steps to obtain advice in a timely manner. His Honour accepted that the applicants had to be given an adequate opportunity to prepare and present their case (at [22]). However, the applicants had been given numerous opportunities and had been provided with "indulgence upon indulgence by the court" (at [23]). Despite the serious allegations made against them, the applicants had provided no answer to the allegations of fraud and the moneys apparently removed by them from Yingle had not found their way to the liquidator.
Ratio Decidendi
Legal Principle Established
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