Flash Lighting Company Ltd v Australia Kunqian International Energy Co Pty Ltd (No 2)
[2018] VSC 821
•13 February 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS’ LIST
S ECI 2016 01132
and
S ECI 2016 01242
BETWEEN
| FLASH LIGHTING COMPANY LTD | Plaintiff |
| v | |
| AUSTRALIA KUNQIAN INTERNATIONAL ENERGY CO PTY LTD | Defendant |
AND BETWEEN
| FLASH LIGHTING COMPANY LTD | Plaintiff |
| v | |
| ZHANG YINAN | First Defendant |
| U&D MINING INDUSTRY (AUSTRALIA) PTY LTD | Second Defendant |
| WEI KUN PTY LTD | Third Defendant |
| YI KUN PTY LTD | Fourth Defendant |
| YI WEI AUSTRALIA PTY LTD | Fifth Defendant |
| AUSTRALIA WALES FINANCIAL MANAGEMENT PTY LTD | Sixth Defendant |
| BEIBEI ZHU | Seventh Defendant |
---
JUDGE: | ROBSON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 February 2018 |
DATE OF JUDGMENT: | 13 February 2018 |
CASE MAY BE CITED AS: | Flash Lighting Company Ltd v Australia Kunqian International Energy Co Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 821 |
---
PRACTICE AND PROCEDURE – Evidence – Interlocutory application for testimony of overseas witness to be taken via audio video link pursuant to s 42E(1) of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) – Exercise of Court’s discretion – Significance and importance of evidence – Allegations of fraud – Credibility of witness – Consideration of interests of justice – Application refused.
PRACTICE AND PROCEDURE – Evidence – Interlocutory application for testimony of overseas witness to be taken overseas pursuant to s 7 of the Foreign Evidence Act 1994 (Cth) – Exercise of Court’s discretion – Where video audio link evidence is inappropriate – Interests of justice – Application granted.
PRACTICE AND PROCEDURE – Evidence – Interlocutory application for testimony of overseas witness to be taken overseas – Exercise of Court’s discretion – Application conditionally granted.
---
APPEARANCES: | Counsel | Solicitors |
| For Flash Lighting Company Ltd | T J Margetts QC with W Thomas | Baker McKenzie |
| For Australia Kunqian International Energy Co Pty Ltd | J P Moore QC with G Kozminsky | Clayton Utz |
| For Jun Xiao | T J Margetts QC with W Thomas | Baker McKenzie |
| For Beibei Zhu | A P Rodbard-Bean with R Chan | MST Lawyers |
| For U&D Mining Industry (Australia) Pty Ltd | R D Strong with A D Barraclough | Clayton Utz |
| For Wei Kun Pty Ltd | A P Rodbard-Bean with R Chan | MST Lawyers |
| For Yi Kun Pty Ltd | A P Rodbard-Bean with R Chan | MST Lawyers |
| For Yi Wei Australia Pty Ltd | A P Rodbard-Bean with R Chan | MST Lawyers |
| For Australia Wales Financial Management Pty Ltd | C M Pierce | SBA Law |
TABLE OF CONTENTS
Introduction.......................................................................................................................... 1
The persons involved......................................................................................................... 3
The share-sale proceeding................................................................................................. 3
Application........................................................................................................................... 4
Mr Li’s proposed evidence................................................................................................ 7
FLC’s submissions............................................................................................................... 7
Principles.............................................................................................................................. 8
The video link.................................................................................................................... 13
Application for evidence to be given in Hong Kong................................................... 14
Conclusion.......................................................................................................................... 15
Tracing proceeding........................................................................................................... 15
HIS HONOUR:
Introduction
U&D Mining Industry (Australia) Pty Ltd (U&D) owned a mining tenement in the Bowen Basin in Queensland described as EPC 818. The shareholders in U&D were Flash Lighting Company Limited (FLC), who held 40 per cent of the shares, and Australia New Agribusiness & Chemical Group Ltd (ANB), which held 60 per cent. ANB was formerly known as Daton Group Australia Ltd. ANB is now in liquidation. ANB is not a party to the proceedings.
FLC and ANB purchased their interest in U&D in August 2011. In November 2011, U&D purchased its 20 per cent interest in the mining tenement EPC 818 for $25,250,000.
Australia Kunqian International Energy Co Pty Ltd (KQ) is a wholly owned subsidiary of a Chinese state owned company called Yima Coal Industry Group Co Limited (Yima). Yima was 68 per cent owned by Henan SASAC, described as a regulator of Chinese state owned entities in the Henan Province of China.
On or about 27 April 2012, FLC, KQ and ANB entered into an agreement called the Equity Transfer Agreement (ETA). Under the ETA, KQ agreed to purchase a 51 per cent holding in U&D for $65,790,000. FLC was to sell its 40 per cent interest in U&D for $51,600,000 and ANB agreed to sell an 11 per cent interest in U&D for $14,190,000. After the ETA was signed, KQ paid a $5 million deposit to U&D. The balance of the purchase price, being $60.79 million, was to be paid by KQ to ANB and FLC 20 days after the ETA entered into force.
The purchase price paid by KQ valued the total shares on issue in U&D at $129 million. At that stage the sole asset of any material value owned by U&D was U&D’s 20 per cent interest in the mining tenement.
According to these transactions, the value of U&D’s interest increased from $25,250,000 to $129,000,000 in some six months. U&D alleges that the parties agreed that the sale price of the shares would be determined by a valuation of the mining tenement and that the parties would accept the valuation determined by a nominated valuer. As Henan SASC was the majority shareholder of Yima, Chinese laws required Henan SASC approve the purchase of any Australian assets by Yima or its subsidiaries (including KQ). As part of that approval process, Henan SASAC selected Henan Jinshi Tenement Appraisals to value the tenement and confirm that the purchase price reflected market value. Henan SASAC paid for the assessment, and the valuation was carried out by Mingli Li of Henan Jinshi Tenement Appraisals.
KQ alleges that the nominated valuer relied on a geological report that calculated the quantity of coal in the tenement in order to value the tenement and thus the shares in U&D. This report was purportedly prepared and signed by Richard Smith (the Smith report), and was annexed to the valuation provided on 15 May 2012.
KQ contends that the Smith report was in fact a fraud and that it was not prepared or signed by Mr Smith.
Mr Yinan Zhang was a director of U&D. He was also a director of ANB. KQ alleges that Mr Zhang was also acting as the agent of FLC in the sale of the shares. (FLC also alleges that Mr Zhang was a shadow director of KQ.)
KQ alleges that Mr Zhang emailed the Smith report to Wei Liu of Yima, who then forwarded that document to the valuer.
KQ alleges that at the time the ETA was signed, the share price was left blank on the basis that the share price inserted would be that reached by the valuation and approved by Henan SASC, which was yet to occur. KQ says that the price was inserted at a later date and was based on the valuation.
On or about 8 May 2012, the agreed FLC shares in U&D were transferred to KQ. FLC alleges that pursuant to the terms of the ETA, KQ was required to pay FLC the agreed purchase price no later than on or about 8 May 2012. FLC alleges that on or about 17 September 2012, FLC received payment of $5,400,000 from U&D as part payment. On or about 18 September 2012, FLC received a further payment of $17,000,000.
FLC alleges that in breach of the agreement, KQ has not paid the balance owing of $29,200,000.
The persons involved
Before going to the various proceedings it is convenient to introduce the various people involved.
Mr Yinan Zhang was at the relevant times a director of U&D and ANB.
At the time of the sale of the shares, Jun Xiao was a director of U&D. In 2012, Mr Xiao was removed as director. Following the sale of the shares, Mr Zhang’s ex-wife, Beibei Zhu (Ms Zhu), and Hao Liu became directors of U&D.
Mr Jun Xiao and Mr Xiao’s wife, Yan Cui, were directors of FLC.
The directors of KQ were Hao Liu (Mr Liu), Dongmin Wang (also manager of Yima) and Ms Zhu.
The directors of Yima included Li Yong Jui (also occasionally referred to as Li Yong Ju in documents) (Mr Li), Mr Yulu Wu (chairman), Dongsheng Wu (Mr Wu) (manager), and Wei Lu.
The share-sale proceeding
On 26 June 2016, FLC brought proceedings against KQ for the outstanding balance of the purchase price (share-sale proceeding).
KQ, by its defence and counterclaim, alleges that it paid the purchase price to U&D for and on behalf of both FLC and ANB.
KQ alleges that it has discharged its obligation by paying the moneys to U&D. Alternatively, if it does owe any moneys to FLC, KQ alleges the outstanding balance is in the sum of $24,200,000.
KQ also alleges that it is entitled to set off against any claim by FLC the loss and damage KQ has suffered and is entitled to recover from FLC. Essentially, KQ alleges that FLC wrongly procured Mr Liu, a director of KQ, to breach his duties to KQ, causing it to suffer loss. In substance, it is alleged that Mr Liu breached his duties to KQ by causing KQ to pay an excessive price for the shares in U&D based on the unfair valuation of U&D. KQ seeks to set off that loss against the claim by FLC.
Further, KQ alleges that Mr Zhang provided the fraudulent Smith report, which allegedly was the basis of the unfair valuation, to KQ. KQ alleges that Mr Zhang was acting as FLC’s agent in all matters directly and indirectly relating to the tenement and the share sale agreement, including the provision of the fraudulent Smith report to KQ. KQ alleges that the provision of the fraudulent report also constituted misleading and deceptive conduct by FLC. KQ alleges that it relied on the fraudulent Smith report and suffered loss and damage which it seeks to set off against FLC’s claim.
FLC, in its reply, alleges that a receipt showing that FLC received the purchase price (which is relied on by KQ) was a fraudulent receipt. FLC says that it is not responsible for the valuation, but that it was procured by KQ. FLC also alleges that Mr Zhang was a director of KQ, being either a shadow or de facto director. Thus, KQ is responsible for the conduct of Mr Zhang, not FLC, and any fraudulent conduct was carried out with the knowledge of KQ.
Further and alternatively, FLC denies having any knowledge of the fraud. If Mr Zhang did provide the Smith report to KQ, FLC alleges that KQ knew that Mr Zhang was acting outside his authority to act on behalf of FLC, if he had any such authority, and without the knowledge of the directors of FLC.
Application
KQ proposes to call only one witness, other than its expert witnesses and Mr Smith. That witness is Mr Li, who is the deputy chief executive officer of Henan Group, the majority shareholder of Yima. He is also the deputy chief executive officer of Yima and has been a part of the management committee of Yima since 2007. In 2012, he was appointed a non-executive director of U&D. KQ does not propose to call any witnesses from KQ.
KQ has applied for Mr Li’s evidence to be taken by audio visual link from China. Mr Timothy Jones, a partner of Clayton Utz, the solicitors for KQ, has deposed in his affidavit of 2 February 2018 that a witness statement has been filed on behalf of Mr Li. In the witness statement, Mr Li states that due to medical complications caused by a heart attack he suffered in August 2015, he is unable to take long flights. Mr Li has exhibited a medical report to his witness statement. Mr Jones’ affidavit exhibits the witness statement but not the medical report.
Mr Jones refers to correspondence with FLC’s solicitors. FLC’s solicitors have refused to consent to Mr Li giving his evidence by audio visual link.
KQ also relies on the affidavit of Dugan Winston Cunningham of Clayton Utz, dated 2 February 2018. Mr Cunningham attaches a medical statement of Dr Hongyan Duan in Chinese, together with a translation. The report recites Mr Li’s heart illness, including that he has had a stent inserted. Under the heading of suggestions, the report says ‘to take rests, avoid being tired and emotional; any long distance travel over 3 hours is not recommended. Recommending hospital stay, strengthened medication treatment; if necessary another coronary angiogram + stent implantation procedure shall be performed.’
Mr Li has not travelled outside mainland China since March or February 2013. He has travelled on short flights for no longer than three hours since suffering his heart attack.
Mr Cunningham deposes that, to avoid flights of more than three hours, Mr Li could come to Melbourne by taking seven flights over a seven-day period.
Mr Cunningham deposes to passport difficulties arising from Mr Li’s position. One month ago, Mr Li was appointed as the acting chairman and acting chief executive officer and acting Communist Party General Secretary of the Henan Coal Seam Gas Development Co Limited.
Mr Cunningham deposes that, for reasons he explains, it is possible the government would not permit Mr Li to travel overseas for the required two weeks of travel to give evidence in Australia, or to stay overnight in so many destinations.
Mr Li has a private passport. Mr Cunningham deposes that to travel overseas for business, senior party officials are often not permitted to use private passports. Mr Li does not have a public affairs passport that he may be required to use if coming to Australia. Mr Cunningham deposes that Mr Li has applied for public affairs passports in the past, and on each occasion, it took more than two months to obtain the public affairs passport. The process involves obtaining supporting documentation to submit to the Henan Group for their approval. Henan Group would have an internal meeting and then would submit an application to the organisation department of the Communist Party of the Henan Committee, who would then review the papers to submit a recommendation to the Foreign Affairs Office of the Henan Provincial Government for final approval.
Mr Cunningham deposes that Mr Li could come to Hong Kong for a short period of time of less than seven days with a passport.
The approval process for overseas travel takes one month.
No evidence was given as to what steps, if any, Yima has taken to assist Mr Li to obtain a public affairs passport and generally to give evidence in support of Yima’s wholly owned subsidiary, KQ. It is relevant to note that the issues in the case concern the financial interests of Yima, not those of Mr Li.
No evidence was given why the evidence proposed to be given by Mr Li could not be given by the directors and officers of KQ. The witness statement of Mr Li, exhibited to Mr Jones’ affidavit, states that Mr Li was told by Dongwin Wang that he is unwilling to give evidence, and that Hao Liu was sued by Yima in China for embezzlement of KQ funds.
Mr Li’s proposed evidence
Mr Li was not an officer of KQ. He was an officer of the parent company, Yima. He proposes to give evidence of how Yima made decisions and how Yima became interested in investing in coal in Australia. He will give evidence that Yima was introduced to Mr Zhang. Mr Zhang informed Yima of the EPC 818 tenement.
Towards the end of 2011, Yima decided to buy the tenement and set up KQ. Mr Li proposes to give evidence on the persons appointed to KQ and responsible for conducting a due diligence assessment of the tenement.
He proposes to discuss the valuation reports being produced, relying on the Smith report and the sale process.
Mr Moore, senior counsel for KQ, contended these were all non-controversial matters, establishing undisputed facts that Yima and KQ relied on the Smith report to calculate the purchase price of the 51 per cent shareholding in U&D.
FLC’s submissions
FLC submits that Mr Li is a critical witness. He is the only witness in the trial able to give direct evidence of the process by which Yima approved the acquisition of a majority interest in U&D. He is also the only witness who will give evidence of the process by which Yima conducted due diligence and the interactions between Yima and the valuer who produced the valuation. He is also a witness to the dealings between Mr Zhang and Mr Liu, the director of KQ.
Mr Margetts, senior counsel for FLC, points to the failure of KQ to call any of its own officers and therefore the need to establish, if possible, FLC’s case against KQ by cross-examination of Mr Li, in addition to any evidence that it calls itself, or can obtain from other witnesses.
Mr Margetts wishes to cross-examine Mr Li to establish that KQ had notice, whether actual or constructive, that Mr Zhang was exceeding his authority (if he was acting for FLC) or that Mr Zhang was deemed to be a director of KQ.
Mr Margetts seeks to establish that there was no reliance on the Smith report by KQ. Further and alternatively, Mr Margetts seeks to establish that KQ had notice that Mr Zhang was acting outside any authority to provide such a document on behalf of FLC.
FLC submits that KQ was obliged under the ETA to undertake its own due diligence, which FLC says is what occurred. FLC contends that the price U&D initially paid for its interest in the tenement was publicly available, as published in an ASX announcement. FLC submits that one would expect that KQ would have made some inquiries as to what U&D paid for the tenement, and in any event, wishes to cross-examine Mr Li about this issue. Mr Margetts wishes to establish that Yima is a sophisticated investor and wishes to explore that issue with Mr Li.
FLC has applied under the Foreign Evidence Act 1994 (Cth) that Mr Li give his evidence in Hong Kong, if the Court accepts that Mr Li is too ill to come to Australia.
Principles
KQ makes its application under s 42E of the Evidence (Miscellaneous Provisions) Act 1958 (Vic), which relevantly provides:
(1) Subject to section 42F and to any rules of court, court may, on its own initiative or on the application of a party to the legal proceeding, direct that a person may appear before, or give evidence or make a submission to, the court by audio visual link or audio link from any place within or outside Victoria, or outside Australia, that is outside the courtroom or other place where the court is sitting.
(2) A court must not make a direction under subsection (1) unless it is satisfied that the technical requirements specified in section 42G are met, or can reasonably be met, in the case of the particular link.
Section 42G deals with the technical requirements:
(1) The technical requirements for an audio visual link are as follows:
(a) both the court point and the remote point are equipped with facilities that—
(i) enable all appropriate persons at the court point to see and hear the person appearing before the court or giving the evidence or making the submission; and
(ii) enable all appropriate persons at the remote point to see and hear appropriate persons at the court point; and
(b) any requirements prescribed by rules of court for or with respect to—
(i) the form of audio visual link;
(ii) the equipment, or class of equipment, used to establish the link;
(iii) the layout of cameras;
(iv) the standard, or speed, of transmission;
(v) the quality of communication;
(vi) any other matter relating to the link;
(c) any requirements imposed by the presiding judge or magistrate.
FLC makes its application under the Foreign Evidence Act 1994 (Cth). FLC submits that the Court has power to order that the evidence of a person be taken in person on examination at a place outside Australia under Division 1 of Part 2 of the Foreign Evidence Act 1994 (Cth).
Section 7 relevantly provides:
7 Orders for taking evidence abroad
(1) In any proceeding before a superior court, the court may, if it appears in the interests of justice to do so, on the application of a party to the proceeding, make an order, relating to a person outside Australia:
(a) for examination of the person on oath or affirmation at any place outside Australia before a judge of the court, an officer of the court or such other person as the court may appoint; or
(b) for issue of a commission for examination of the person on oath or affirmation at any place outside Australia; or
(c) for issue of a letter of request to the judicial authorities of a foreign country to take the evidence of the person or cause it to be taken.
(2) In deciding whether it is in the interests of justice to make such an order, the matters to which the court is to have regard include the following:
(a) whether the person is willing or able to come to Australia to give evidence in the proceeding;
(b) whether the person will be able to give evidence material to any issue to be tried in the proceeding;
(c) whether, having regard to the interests of the parties to the proceeding, justice will be better served by granting or refusing the order.
Both above powers are discretionary. FLC and KQ referred me to relevant authorities in electing to exercise and exercising a discretion under either provision.
In considering an application for video link evidence, the overarching purposes of the Civil Procedure Act 2010 (Vic) must be considered. Whether such an exercise of the discretion is justified will depend on the specific circumstances of the case.
Buchanan J made the following observations in Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3):[1]
Despite the undoubted efficiencies available in an appropriate case, the trend of authority seems to me to emphasise the need for a persuasive case to be made out to use a video link to take evidence, particularly to impose it on an unwilling cross-examining party, rather than the reverse.
I share the concerns expressed by Spender J in World Netscape and by Stone J in Dorajay about the limitation on the effectiveness of video link arrangements as a means of taking oral evidence. I am particularly troubled by the prospect (or possibility) that the cross-examination of an important witness might be rendered less effective by the limitations of video link technology or the absence of the witness from the courtroom. Although the days are gone when witnesses are expected to feel any sense of intimidation as an aid to telling the truth, there is no doubt in my mind that the requirement to give evidence on oath or affirmation in the (generally) solemn atmosphere of a courtroom in the presence of a judge, and to answer questions in cross-examination in the presence also of cross-examining counsel, has at least three potential benefits. It enhances the prospect that the witness will remain conscious of the nature and solemnity of the occasion and of his or her obligations. It affords the cross-examiner some reassurance that the gravity and immediacy of the moment, and of the supervising presence of the judge, are not lost on the witness and the cross-examination is not thereby rendered any less effective, to the possible prejudice of the cross-examining party. It provides the Court with a more satisfactory environment in which to assess the nature, quality and reliability of responses by a witness, both to questions and to the overall situation presented by the necessity to give evidence in court. To my mind there remains, even in the modern context, a certain “chemistry” in oral interchanges in a courtroom, whether between a judge and counsel (or other representative) or between cross-examiner and witness. I would not wish too lightly to deprive a cross-examiner of that traditional forensic element in the exchange although, as the cases universally make clear, the Court must now, if asked to do so, balance the interests of a cross-examining party against claimed inconvenience both in individual cases and with respect to individual witnesses. Notwithstanding the increased availability and use of video link technology, in my view, a case must be made out for the use of video link evidence if it is opposed by an affected party. I do not share the view expressed by Katz J. My own view and, I think, the weight of authority, is to the contrary.
[1](2009) 181 FCR 152, 171 [77]–[78] (citations omitted).
The above observations were cited with approval by Gilmore J in Commissioner of Taxation vOswal.[2] His Honour went on to say:[3]
The approach generally followed in this Court is that the discretion will not be exercised in favour of a video-link application where, as here, the relevant evidence is central to the case and is likely to involve significant credit issues, and the cross-examination is likely to be lengthy and there are a considerable number of documents involved: see Hua Wang Bank Berhad v Commissioner of Taxation (No 4) [2013] FCA 495 at [19] and the cases there cited.
…
… My own experience with video hearings has been variable. However, it has not been uncommon, even in hearings of short duration, for there to be, due to technical faults, breaks in transmission, which is plainly disruptive. I have also found the picture quality and sometimes the audio sound to be of poor quality. It is, in my opinion, a far less satisfactory environment for watching and listening to a witness giving evidence including under a lengthy cross-examination involving the extensive use of documents than having the witness in the court room.
This is particularly so, in my view, when the central issue involves an allegation that Mrs Oswal executed the mortgage in question with the intention of defrauding creditors. Such serious allegations should, in my opinion, be tested in the formal and solemn atmosphere of a public court where I, as the judge, am able to exercise control over the proceeding. I do not regard it as serving the best interests of the administration of justice in this case including doing justice between both parties that an overseas video link from a private institution should be employed. Moreover, the judicial control able to be exercised over a witness giving evidence remotely from overseas is questionable at least.
[2]Commissioner of Taxation v Oswal (No 5) [2015] FCA 1504 [26].
[3]Commissioner of Taxation v Oswal (No 5) [2015] FCA 1504 [28], [34]–[35].
Forrest J in Laurent v Unilever Australia Ltd[4] made the following comments on a video link application:
It is true, as Unilever submitted, that courts these days embrace the use of technology, in particular that of video link, which has improved greatly since it was first trialled in courts in this State. Courts routinely make orders under s 42E of the Evidence (Miscellaneous Provisions) Act 1958 (Vic). Many cases in country circuits (and indeed in Melbourne) have a considerable body of evidence given by this means. I also accept that the improvements in technology mean that, in the main, such evidence is not diminished to any significant extent by it being given by videolink.
On the other hand, as I have just mentioned, courts traditionally have been reluctant to make such orders where the critical evidence underpinning the determination of the proceeding involves the credibility of a central witness.
[4][2017] VSC 527, [36]–[37].
In Kirby v Centro Properties Limited, Gordon J listed some of the factors courts have taken into account in the exercise of the discretion as follows:[5]
1. the employment commitments of an overseas witness: see, for example, Reinsurance Australia Corp at [4];
2. whether the credibility of the witness is in issue: ASIC v Rich at [28]; Australia Medical Imaging at [27]; Sunstate Airlines (Qld) at 6 and Lamesa Holdings BV v Commissioner of Taxation (unreported, FCA, Sackville J, 30 July 1998) at [6];
3. whether the witness’ evidence will be “centrally important” to the case: see, for example, StoresOnline International Inc at [15] and ASIC v Rich at [22] and [28];
4. whether the use of video link may frustrate or delay the management of documents in cross examination: see, for example, ASIC v Rich at [31].
See also ASIC v Rich at [19]. It was common ground that while these factors may weigh into the balancing exercise, they are neither exhaustive nor prescriptive: see ASIC v Rich at [28].
[5]Kirby v Centro Properties Limited [2012] FCA 60 [10].
The case brought by KQ is most unusual to say the least. It proposes to call no witness to give evidence that it relied on the Smith report, or to rebut any suggestion that it was complicit in the possible fraud committed against Yima. It must be borne in mind that Mr Zhang has disappeared and cannot be located. Further, Mr Liu was sued by Yima for embezzling moneys from KQ, and he repaid $65 million to KQ. Mr Wang, a former manager of Yima and a director of KQ, has refused to give evidence according to Mr Li. The former chairman of Yima, Mr Yulu Wu, is in jail for bribery corruption, although he is to have a re-trial.
FLC submits that the specific forensic disadvantages referenced in the above cases will arise in the present case, which will affect the reliability of Mr Li’s evidence. FLC submits that critical evidence underpinning a determination of the proceeding involves the credibility of Mr Li.
The video link
It is proposed that Mr Li give evidence in his office by video link, supervised by an independent solicitor.
Mr Jones deposes to conversations that have taken place between Clayton Utz and the Court’s technology teams. Mr Jones states that it is possible for Mr Li to give evidence from his office in Zhengzhou, Henan, China, using BlueJeans video conferencing, a cloud-based video conferencing provider, and the Court’s video conferencing unit. Mr Jones states that documents can be simultaneously shared between the courtroom and Mr Li.
In the present case, parts of the witness statement of Mr Li contain statements based on recollections and beliefs. Mr Li does not speak or read English; his evidence is to be given through an interpreter. The case involves many documents which will need to be translated into two languages.
Mr Li would be required to be shown many documents that are in Chinese. I foresee that difficulties could arise in the evidence being given, when the cross-examiner is trying to bring Mr Li’s attention to passages in the relevant documents when somebody else would need to intervene to point out the passages in the Chinese document. Even if the evidence were given in court, it would be an exceedingly difficult cross-examination.
In my experience with video link evidence, it is unsuitable where there are documents that need to be shown to witnesses and the evidence is hotly contested, let alone if everything needs interpretation.
In those circumstances, I find that justice to FLC requires that Mr Li give his evidence in person before the judge conducting the trial.
Application for evidence to be given in Hong Kong
FLC, as a compromise to its opposition to KQ’s application for Mr Li to give evidence by video link, has made an application for Mr Li to give evidence in Hong Kong. It was also suggested that it would be convenient for Ms Lidan Wang to give her evidence in Hong Kong. This is discussed further below.
FLC submits that it is feasible for Mr Li to obtain permission to travel to Hong Kong for the time required to give his evidence, which FLC estimates to be two to three days.
As noted above, KQ submits that it could take up to a month for Mr Li to obtain the necessary approvals to travel to Hong Kong. It is submitted on behalf of FLC that nothing has been done to attempt to obtain such approval. Any delays so caused are the fault of Mr Li.
Affidavit material relied on by the parties has provided cost estimates of having Mr Li give his evidence in Hong Kong.
In his affidavit of 6 February 2018, Mr Pippin Barry of Baker McKenzie, the solicitors for FLC, deposes to the availability of rooms at the Hong Kong International Arbitration Centre for use during the trial.
It is submitted on behalf of KQ that the cost and inconvenience of having Mr Li give his evidence in Hong Kong cannot be justified, as his evidence will be relatively minor.
As discussed above, the evidence Mr Li may give may involve allegations of fraud against FLC. FLC therefore has a right to cross-examine Mr Li in person.
In view of the medical evidence provided, I am satisfied that Mr Li should not take flights for a duration exceeding three hours. In those circumstances, Mr Li would be required to undertake a two-week journey to come to Australia to give evidence. This would be an onerous journey for someone even in good health. This, together with the added complications that the journey would pose to the Chinese approval process, I find that the application for Mr Li to give his evidence in Hong Kong is a reasonable and fair solution.
Conclusion
KQ’s application for Mr Li to give his evidence by video link is dismissed.
I grant FLC’s application for Mr Li’s evidence to be given in Hong Kong at the Hong Kong Arbitration Centre before the parties and the trial judge.
Tracing proceeding
In the tracing proceeding, the plaintiff is FLC. The defendants are Mr Zhang, U&D, Wei Kun Pty Ltd, Yi Kun Pty Ltd, Yi Wei Australia Pty Ltd, Australia Wales Financial Management Pty Ltd (Australia Wales) and Beibei Zhu.
FLC alleges that moneys paid to U&D that were to be paid to FLC for the sale of its shares in U&D to KQ were improperly transferred to, or received by, the defendants.
Ms Lidan Wang is the sole director and shareholder of Australia Wales. She is the de facto partner of Mr Zhang.
It is disputed that some moneys that were received by Australia Wales relate to the $29.2 million said to be outstanding from the share transfer from FLC.
It is submitted that Ms Wang, who is the only person who can and is being called to give evidence on behalf of Australia Wales, is not in a fit state to do so presently.
It is submitted on behalf of Australia Wales that it is apparent from both FLC and U&D’s pleadings that Ms Wang’s evidence will necessarily relate to the state of her knowledge about various payments made to Australia Wales.
Andrew Schnaider, solicitor for Australia Wales, deposes that Ms Wang is ill. Ms Wang filed or exhibited medical certificates from China. As a consequence of her father’s severe illness and his subsequent death, Ms Wang has been diagnosed as suffering from anxiety and severe depression. Given her psychological condition, Ms Wang considers that she would not be able to come to Australia until after May 2018. Mr Schnaider produced a medical certificate stating that Ms Wang is in a critical condition.
Australia Wales’ counsel, Ms Pierce, said that if Mr Li’s evidence were to be taken in Hong Kong, Australia Wales applies that Ms Wang’s evidence also be taken in Hong Kong.
No party opposed Ms Pierce’s application.
I grant the application, if Mr Li gives evidence in Hong Kong. Otherwise I will defer the application to closer to the time Ms Wang is to give evidence.
2
5
0