Hu v Gu

[2020] NSWSC 1193

Supreme Court

New South Wales

Medium Neutral Citation:

Hu v Gu [2020] NSWSC 1193

Hearing dates:

21 August 2020

Date of orders:

21 August 2020

Decision date:

21 August 2020

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1) Judgment for the Plaintiffs against the First Defendant in the sum of $5,929,897.86.

(2) There be no order as to costs in respect of the proceedings against the First Defendant.

(3) Upon the continuation of the Plaintiffs’ undertaking to the Court as set out in (1) of Schedule A to the Summons, the freezing order initially made by the Court on 8 July 2020 (Freezing Order) continues to operate against the First Defendant until the judgment amount in order 1 is paid in full.

(4) The Freezing Order against the Second Defendant is discharged.

(5) The matter be listed in the Commercial List on 23 October 2020.

Catchwords:

PRACTICE AND PROCEDURE – Judgment debt – Where judgment debt not paid – No issues of principle

Cases Cited:

Hu v Blue Whale Entertainment Pty Ltd [2020] NSWSC 562

Category:

Principal judgment

Parties:

Po Hu (First Plaintiff)
Zhenhua Zhang (Second Plaintiff)
Ying Qin (Third Plaintiff)
Zhi Huang (Fourth Plaintiff)
Menghong (Michael) Gu (First Defendant)
i-Prosperity Capital Management Pty Ltd (ACN 635 134 977) (Second Defendant)

Representation:

Counsel:
DB Larish (Plaintiffs)
No Appearance (First Defendant)

Solicitors:
MJF Law Pty Ltd (Plaintiffs)

File Number(s):

2020/201775

Publication restriction:

None

EX TEMPORE Judgment

1. On 14 May 2020, I delivered a judgment in proceedings Hu v Blue Whale Entertainment Pty Ltd [2020] NSWSC 562 (the Blue Whale proceedings). Blue Whale is a company connected with Mr Menghong (Michael) Gu, who was involved with the iProsperity group of companies. Following that judgment, the plaintiffs in those proceedings entered into a deed of guarantee and indemnity with two companies in the iProsperity group and Mr Gu dated 2 June 2020. The circumstances in which that deed was entered into are explained in recitals D and E which state:

D.   The Plaintiffs are concerned that the Defendants will not pay them the Judgment Debt. The Plaintiffs wish to pursue various relief and/or orders from the Court in respect of any such concerns regarding non-payment and/or the operation of, and compliance with, the Freezing Order, including a prospective application to cross-examine Gu in respect of affidavit evidence he has given.

E.    The Beneficiaries [Plaintiffs] have agreed to enter into this Deed to obtain the benefit of certain guarantees and indemnities in this Deed, and in return to forbear and not commence any proceedings or take any enforcement action in respect of the Judgment Debt and/or the Freezing Order and any ancillary matters to the Freezing Order, including any application seeking to cross-examine Gu, up to and including 30 June 2020.

2. Under the terms of that deed, the iProsperity companies and Mr Gu agreed unconditionally and irrevocably to guarantee the due and punctual payment of the judgment debt on or prior to 30 June 2020 in the Blue Whale proceedings. That judgment debt was not and has not been paid and, on 8 July 2020, the plaintiffs commenced these proceedings to recover the amount owing to them under the deed.

3. Mr Gu was originally represented when directions were made for the filing of a list response. However, no list response has been filed and, on 30 July 2020, Mr Gu's then solicitors filed a notice of intention of ceasing to act. The notice of ceasing to act was filed on 7 August 2020. Before that happened, the matter was set down for hearing today. Mr Gu's solicitors were on notice of the hearing. Moreover, there is evidence before me that Mr Gu was informed of the hearing today in a letter sent to him on 13 August 2020 by the solicitors for the plaintiff.

4. The plaintiffs only seek to proceed against Mr Gu today. There was no appearance by him and, as I have said, no list response has been filed.

5. It seems clear on the material before me that the plaintiffs are entitled to judgment against Mr Gu under the deed of guarantee and indemnity. In addition, cls 5.1 and 5.2 of the deed of guarantee and indemnity provide:

5.1   Indemnity in respect of Judgment Debt

For the consideration mentioned in clause 1.4, the Guarantors [the Defendants] hereby unconditionally indemnify the Beneficiaries [the Plaintiffs] against any loss, liability, damage, cost or expense which the Beneficiaries may suffer because the Judgment Debt, in whole or in part, is not paid to the Beneficiaries by 30 June 2020, or is otherwise not recoverable from the Debtors by that date, or having been recovered is repaid or restored.

5.2   Payment under indemnity

The Guarantors must pay to the Beneficiaries on demand a sum equal to any loss, liability, damage, cost or expense in respect of which they indemnify the Beneficiaries under this clause 5, including any of the Judgment Debt (or any moneys which, if recoverable, would have formed part of the Judgment Debt) which are not or may not be recoverable.

6. The plaintiffs claim their legal costs of these proceedings in accordance those clauses. The evidence before me is that the legal costs are $67,520.13. Although costs remain in the discretion of the Court irrespective of any agreement reached between the parties, there is no reason in this case not to give effect to the agreement reached by the parties in cls 5.1 and 5.2 of the deed. Consequently, I accept that any judgment amount should include the amount of the costs incurred by the plaintiffs.

7. Finally, on 8 July 2020 the Court made a freezing order against Mr Gu. There is no reason, on the material before the Court, why that freezing order should not continue.

8. In those circumstances, I make the following orders:

1. Judgment for the Plaintiffs against the First Defendant in the sum of $5,929,897.86.

2. There be no order as to costs in respect of the proceedings against the First Defendant.

3. Upon the continuation of the Plaintiffs’ undertaking to the Court as set out in (1) of Schedule A to the Summons, the freezing order initially made by the Court on 8 July 2020 (Freezing Order) continues to operate against the First Defendant until the judgment amount in order 1 is paid in full.

4. The Freezing Order against the Second Defendant is discharged.

5. The matter be listed in the Commercial List on 23 October 2020.

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