HungryPanda AU Pty Ltd v Fantuan Australia Pty Ltd
[2022] VSC 448
•26 July 2022 (revised 9 August 2022)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2022 00588
BETWEEN:
| HUNGRYPANDA AU PTY LTD (ACN 630 315 132) & ORS (according to the attached Schedule) | Plaintiffs |
| v | |
| FANTUAN AUSTRALIA PTY LTD (ACN 656 561 492) | Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 July 2022 |
DATE OF JUDGMENT: | 26 July 2022 (revised 9 August 2022) |
CASE MAY BE CITED AS: | HungryPanda AU Pty Ltd v Fantuan Australia Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2022] VSC 448 |
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SUBPOENAS – Application to set aside subpoenas – Points of claim recently replaced by pleadings – Pleadings not closed – Whether possible to determine legitimate forensic purpose where no defence filed – Issue of subpoenas said to be premature given pending stay application, and where subpoena recipients may be joined to the proceeding – Application to set aside subpoenas dismissed, but inspection postponed until after the hearing and determination of the stay application.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms J Nikolic | White & Case |
| For Mr Junquan (Peter) Liu and Ms Yan (Linda) Liu (‘Liu recipients’) | Mr D Kim | DLA Piper |
| For Ms Xiaoyun (Sharon) Wang, Mr Helin (Will) Wang and Mr Yingmin (Evan) Li (‘Wang recipients’) | Mr C Truong QC with Ms J Zhou | Neo Legal |
HER HONOUR:
These reasons concern applications to set aside subpoenas issued by the Prothonotary at the request of the plaintiffs, and directed at two groups of recipients, described in these reasons as the ‘Liu recipients’ and the ‘Wang recipients’ (together ‘subpoena recipients’).
The subpoena recipients were all senior executives of EASI Global Ltd (‘EASI’), which owned and operated an online takeaway food ordering and delivery business (‘EASI business’). The EASI business operates in a similar manner as Uber Eats and Deliveroo, but was targeted at the Chinese diaspora living in, among other countries, Australia. The plaintiffs’ objective was to absorb the EASI business into its own business. The defendant is a recently incorporated company using a similar name to Fan Tuan Holdings Ltd (‘Fantuan Canada’), the plaintiffs’ largest competitor in North America.
In October 2021, the plaintiffs entered into an asset purchase agreement with EASI, a related entity domiciled in China, Yan Liu and Jie Shen (‘sellers’) to purchase the EASI business for the sum of $55 million (‘sale agreement’). A dispute between the plaintiffs and the sellers regarding the failure of the sellers to transfer the assets of the EASI business to the plaintiffs within the time required by the sale agreement was ultimately resolved by consent orders made in a proceeding commenced by the plaintiffs in the High Court of Justice of England and Wales (‘English proceeding’). The assets were ultimately transferred on 23 February 2022. In the meantime, in January 2022, a number of EASI personnel resigned from the EASI business and commenced working for the defendant.[1]
[1]Not all of the factual matters referred to in these reasons are accepted by the defendant.
Upon taking control of the EASI business, the plaintiffs discovered that approximately 80 per cent of the data from the accounts and platform of the EASI business had been deleted. Much, but not all of this data was subsequently retrieved by forensic data recovery specialists (‘recovered documents’). Some of the recovered documents revealed that some EASI personnel, including but not limited to the subpoena recipients (‘EASI executives’), had negotiated with Fantuan Canada to use the assets of the EASI business purchased by the plaintiffs to establish a competing online food ordering and delivery business in Australia, using the same merchants and drivers, and targeting the same market as the EASI business.
The English proceeding remains on foot. In the English proceeding, the plaintiffs allege that the sellers breached the sale agreement by, among other things, carrying on a competing business in Australia, soliciting former customers and employees of the EASI business, disclosing confidential information to Fantuan Canada and the defendant, and conspiring with Fantuan Canada to use the assets, confidential information and former personnel and contractors of the EASI business to compete with the plaintiffs in the Australian market. The plaintiffs say that the defendant was incorporated to give effect to the unlawful arrangements entered into between the sellers and Fantuan Canada and as a consequence of the sellers’ breaches of the sale agreement. There is a possibility that the subpoena recipients, or some of them, may be joined to the English proceeding as defendants.
This proceeding was commenced by the plaintiffs on 28 February 2022. The plaintiffs sought urgent interlocutory relief to restrain the defendant from supplying food ordering and delivery services in Australia. However, Riordan J declined to grant the interim relief sought by the plaintiffs. Instead, the defendant agreed to provide the plaintiffs with access to certain financial information (which was ultimately provided on 1 July 2022), and his Honour indicated that the plaintiffs’ claim for final relief could be determined at an expedited trial.
The orders made by Riordan J on 3 March 2022 were consistent with an expedited timetable. The plaintiffs filed points of claim on 15 March 2022, and points of defence were filed on 23 March 2022. Following the review of further recovered documents, the plaintiffs filed amended points of claim on 20 April 2022, and the defendant filed further points of defence on 3 May 2022.
The amended points of claim is a lengthy document, running to some 72 paragraphs, which commences as follows:
By this proceeding, the plaintiffs (together, HungryPanda) allege that the defendant (Fantuan Australia):
a. induced EASI Global Limited (EASI Global), Chongqing Meikelaifuyireer Technology Co. Ltd. (EASI China), Yan Liu and Jie Shen (together, the Sellers) to breach the Asset Purchase Agreement between the Sellers and HungryPanda dated 15 October 2021 (the Asset Purchase Agreement); and
b. knowingly misused HungryPanda’s confidential information (acquired pursuant to the Asset Purchase Agreement) as a springboard to gain a head start in the establishment and launch of a competing online food delivery business in Australia.
The amended points of claim then goes on to narrate the plaintiffs’ version of the factual background to the proceeding, including the key terms of the sale agreement, some details concerning the English proceeding, a description of some of the recovered documents, described as the “Joint Venture documents”, the incorporation of the defendant, apparently at the instigation of Fantuan Canada and some of the EASI executives, the launch of the Fantuan business in Australia by the defendant, the departure of the EASI executives from the plaintiffs’ employ and their subsequent engagement by the defendant, and the engagement of merchants to provide takeaway food services via the defendant’s platform.
The amended points of claim go on to allege as follows:
(a) the knowledge of the EASI executives can be attributed to the defendant;
(b) the defendant has induced the sellers to breach the sale agreement;
(c) the defendant has received the plaintiffs’ confidential information, and used it in the operation of the defendant’s business; and
(d) the plaintiffs seek injunctive relief and an account of profits.
In its points of defence, the defendant:
(a) admitted the terms of the sale agreement, but said that certain assets of the EASI business were excluded from the sale agreement;
(b) said it did not know that the EASI executives held those roles;
(c) admitted the existence of some recovered documents, but says the Joint Venture documents were brought into existence prior to the incorporation of the defendant;
(d) admitted that in January 2022 a representative of EASI’s Chinese subsidiary met with representatives of Fantuan Canada to “discuss the integration of the EASI business with Fantuan”;
(e) criticised the “pleading” of the allegations regarding the engagement of the EASI executives, and denied that the defendant has engaged any of the EASI executives as employees or contractors;
(f) said it recruited merchants to the defendant’s online ordering platform (‘Fantuan platform’) using third party contractors;
(g) denied that the knowledge of the EASI executives could be attributed to it;
(h) admitted that its director (who is no longer the sole director of the defendant) was a delivery operation dispatcher who had previously provided services to the EASI business;
(i) denied inducing the sellers to breach the sale agreement;
(j) said that the confidential information referred to by the plaintiffs is not identified with the necessary specificity;
(k) said that much of the alleged confidential information is publicly available;
(l) denied being in possession of any of the plaintiffs’ confidential information; and
(m) said that while there is an overlap between the merchants listed on the Fantuan platform and the EASI equivalent, that is to be expected given the nature of the industry.
The points of defence then went on to refer to an affidavit of Ms Jinwan Sun, a director of one of the plaintiffs, filed in this proceeding on 15 March 2022, where she deposed that:
(a)The relevant market for the EASI business is online food ordering and delivery market in Australia for the overseas Chinese community.
(b)Between 2019 and late 2021, the EASI business was HungryPanda AU’s largest competitor in the Australian market for Asian food delivery services.
(c)Prior to HungryPanda AU’s alleged acquisition of the Australian arm of the EASI business, the share of the market was around 40% for HungryPanda AU, 40% for EASI, and 20% for non-specialised food delivery services.
(d)The purpose of the alleged acquisition was to “take advantage of the departure of EASI from the Australian market and significantly increase HungryPanda AU’s market share in a short period of time, to around 70‑80%.”.
(e)At the time of the acquisition, HungryPanda AU believed it would take considerable time for a new competitor to enter the market.[2]
[2]This summary is reproduced from the defendant’s points of defence.
The points of defence then referred to the anti-trust provisions of the Competition and Consumer Act 2010 (Cth), and asserted that the plaintiffs’ acquisition of the EASI business:
(a)may have contravened section 50 of the Competition and Consumer Act 2010 (Cth);
(b)as a consequence, HungryPanda may, among other things, be ordered to divest itself of those assets pursuant to Part VI of the Competition and Consumer Act 2010 (Cth); and
(c)by reason thereof, HungryPanda’s damages (if any) do not extend to loss of profits in relation to a business which it is not lawfully entitled to retain.
On 3 March 2022 and 25 March 2022 Riordan J ordered the defendant to make particular discovery and general discovery. The plaintiffs assert that the defendant’s discovery is deficient, but as far as I am aware no application seeking to agitate those issues is currently on foot.
On 7 June 2022, the defendant applied for the proceeding to be stayed pending the hearing and determination of the English proceeding.
The stay application was first returnable before Croft J (‘managing judge’) on 28 June 2022 (’28 June hearing’), where his Honour made orders that the plaintiffs file and serve a statement of claim by 5 July 2022, and the defendant file its defence by 19 July 2022. From the transcript of the 28 June hearing, it is apparent that the primary purpose of ordering that the parties file pleadings was to define the issues in the proceeding in the lead up to the stay application. However, by the time of the hearing of the subpoena recipients’ applications on 21 July 2022, no defence had been filed, and owing to discussions between the parties about confidentiality issues, only a redacted version of the statement of claim was available.
The plaintiffs’ statement of claim (dated 6 July 2022 but filed on 22 July 2022) is in a more conventional form than the amended points of claim, but largely traverses the same ground. Among other things, the statement of claim:
(a) alleged that the knowledge of the EASI executives is to be attributed to the defendant;
(b) alleged that the defendant induced the sellers to breach the sale agreement;
(c) alleged that the following assets of the EASI business were transferred to the plaintiffs pursuant to the sale agreement, being;
(i) the merchant database;
(ii) the delivery driver database; and
(iii) the employee database;
and that the information in those databases constituted confidential information purchased by the plaintiffs pursuant to the sale agreement;
(d) the defendant has used the confidential information in the launch and operation of its business in Australia;
(e) each of Sharon Wang, Will Wang, Evan Li and Annie Shi owed fiduciary duties to the plaintiffs, which they breached by, among other things, assisting the defendant to establish its business in competition with the plaintiffs and improperly using the information and knowledge gained as the plaintiffs’ fiduciaries to assist the defendant;
(f) the alleged breaches of fiduciary duty were part of a fraudulent scheme by the sellers, Fantuan Canada, and later the defendant, to enhance their business and interests, and to damage the plaintiffs’ interests;
(g) the defendant assisted and/or participated in the breaches of fiduciary duty; and
(h) in addition to the injunctive and other relief sought in the amended points of claim, the plaintiffs seek equitable compensation and/or damages.
Accordingly, the only material difference between the amended points of claim and the statement of claim (insofar as they can be detected from the redacted document) is a more detailed pleading of what constitutes the plaintiffs’ confidential information and how it is said to be confidential, the addition of a cause of action based upon the alleged accessorial liability of the defendant for alleged breaches of fiduciary duty by some of the EASI executives, which was said to be part of a “dishonest and fraudulent scheme” and some additional heads of relief in the prayer for relief.
On 17 June 2022, the plaintiffs issued subpoenas directed at the subpoena recipients, seeking production to the Prothonotary of the following documents:
1.Copies of all ‘WeChat’ and ‘WeCom’ (also known as ‘WeChat Enterprise’ and ‘WeChat Work’) chat records in the possession, custody or control of Xiaoyun (Sharon) Wang showing conversations in the period 15 October 2021 to 1 March 2022 between Xiaoyun (Sharon) Wang and any or all of the following individuals:
a.Junquan (Peter) Liu (previously, EASI’s Chief Executive Officer);
b.Yan (Linda) Liu (previously, EASI’s Business Advisor);
c.Helin (Will) Wang (previously, EASI’s Investment and Legal Advisor);
d.Yingmin (Evan) Li (previously, EASI’s Chief Information Officer);
e.Yi (Gary) Ge (previously, EASI’s Chief Technology Officer);
f.Aijuan (Annie) Shi (previously, EASI’s Chief Marketing Officer);
(together, the Senior EASI Executives)
g.Leping (Randy) Wu (Fan Tuan Holding Ltd. Chief Executive Officer); and
h.Yaofei Feng (director of Fantuan Australia Pty Ltd and Fan Tuan Holding Ltd).
(together the Fantuan Canada Directors)
referring to any or all of the following:
a.the establishment and/or conduct of the food delivery business operated by Fantuan Australia Pty Ltd in Australia;
b.the database of merchants maintained by the food delivery business known as EASI;
c.the food delivery business known as HungryPanda, save for chat records between Xiaoyun (Sharon) Wang and other of the Senior EASI Executives that do not involve the Fantuan Canada Directors; and or
d.the acquisition of the EASI food delivery business by HungryPanda, save for chat records between Xiaoyun (Sharon) Wang and other of the Senior EASI Executives that do not involve the Fantuan Canada Directors.[3]
[3]The schedule below is reproduced from the subpoena to Ms Xiaoyun (Sharon) Wang, but its terms are the same for each subpoena recipient. The marked up changes record the plaintiffs’ proposal to narrow the scope of the subpoena put forward on the morning of the hearing. I accept that the proposed amendments would have the effect of significantly confining the scope of the subpoena.
On 7 July 2022, the Liu recipients made an application to set aside the subpoenas. On the previous day, their solicitor wrote to the plaintiffs’ solicitors, stating, among other things, as follows:
We query the legitimacy of issuing the subpoenas to our clients at this time, that is:
1. prior to the closure of pleadings,
2. before the conclusion of discovery, and
3.in circumstances where the Defendant (Fantuan Australia Pty Ltd) has sought to stay the proceedings, and a hearing has been listed for 2 August 2022 to hear that application.
Further, we consider the scope of categories (c) and (d) of the subpoenas to be drafted in impermissibly broad and vague terms. These categories request wechat and wecom conversations about – (c) the food delivery business known as Hungry Panda, and (d) the acquisition of the EASI food delivery business by Hungry Panda.
We are surprised that your client has sought to issue the subpoenas using these broad terms which lack a legitimate forensic purpose. It is not clear how any documents held by our clients in respect of those categories can be relevant to your client’s case regarding the conduct of the Defendant and its impact on your client. There is no attempt to tie such documents to the issues in dispute, and indeed such an attempt cannot be made until the pleadings are closed. There appears to be a lack of consideration as to what documents, if any, ought properly be sought from our clients.
Objections in similar terms were made by the Wang recipients. The amendments proposed by the plaintiffs as marked up in paragraph 19 above was put forward to confine the scope of the subpoena in order to address the contention that the scope of the subpoena was “impermissibly broad”.
The only evidence relied upon by the subpoena recipients were affidavits exhibiting the correspondence between solicitors regarding the subpoenas. The plaintiffs relied upon an affidavit of their solicitor, Mr Bradley Strahorn, sworn on 20 July 2022. In his affidavit, Mr Strahorn deposed, in summary, as follows:
(a) as to the background to the proceeding, including the sale agreement, and the term in the sale agreement which precluded the sellers from establishing a competing business in Australia within two years of the completion of the sale;
(b) that each of the subpoena recipients held senior executive roles within the EASI business;
(c) that from November 2021, the sellers engaged with Fantuan Canada to establish a food and delivery business to compete with the EASI business, and took various steps, including the negotiation of a joint venture agreement, to give effect to this plan;
(d) that the subpoena recipients were involved in the establishment of the defendant, including the nomination of a 22‑year‑old man as the then sole director of the defendant;
(e) that the subpoena recipients provided or facilitated access to certain confidential information of the EASI business to assist the defendant to formulate and implement its business plan and to conduct its business;
(f) as to the steps undertaken in the proceeding to date, including the filing of detailed points of claim and defence and affidavit evidence, the orders made for the defendant to provide general discovery and particular discovery, and the issue and service of the subpoenas which are the subject of this application;
(g) that, as part of the document recovery process, a number of relevant documents were located, including videos of WeChat conversations between Xiaoyun and Helin Wang on the one hand, and directors of Fantuan Canada on the other hand; and
(h) the subpoena recipients are not parties to the proceeding, such that the documents sought by the subpoena, while highly relevant, may not be discoverable or discovered in the proceeding.
There was no real dispute between the parties regarding the principles applicable to applications of the current kind, save that the submissions of the subpoena recipients contended that, practically speaking, it is not possible to make a real evaluation of the likely forensic purpose of a subpoena prior to the finalisation of pleadings in the proceeding, and highlighted statements in the authorities to the effect that compelling the production of documents via subpoena should not be used as a substitute for discovery and non‑party discovery processes, particularly in circumstances where the subpoena recipients may be joined as defendants or third parties to the proceeding. Further, the Liu recipients submitted that the provisions of the Civil Procedure Act 2010 (Vic) could not be utilised to salvage an otherwise invalid subpoena. In the interests of expedition, I do not propose to traverse the submissions of the parties at any length, save to say that the plaintiffs submitted that, at least up until the 28 June hearing, the issues in the proceeding were defined by the points of claim and points of defence, and, if the defendant had the documents sought by the subpoenas in their possession, they should have already been discovered.
I will not set aside the subpoenas, but will postpone inspection of any documents produced in compliance with the subpoenas (in the form submitted by the plaintiffs at the hearing) to a date which is five business days after the hearing and determination of the stay application. My reasons follow.
First, in my view, the amendments proposed by the plaintiffs to the subpoenas adequately address the legitimate concerns the subpoena recipients may have concerning the breadth of the subpoenas in their original form.
Secondly, the submission to the effect that it would be futile to require compliance with the subpoenas if the stay application is successful can be addressed by postponing the date for the inspection of the documents produced pursuant to the subpoenas until a short time after the hearing and determination of the stay application. The argument that there is a real risk that documents produced for the purpose of this proceeding will inadvertently or otherwise be misused has less force in circumstances where it appears that there have been a substantial number of documents already exchanged by the parties to this proceeding, and it appears that protocols are in place to limit the potential for misuse. Further, if the proceeding is not stayed, then the subpoenaed documents should be available for inspection as soon as possible, given that a trial in early 2023 has been foreshadowed by the managing judge.[4] The subpoena recipients adduced no evidence or made any submissions to the effect that compliance with the subpoenas would be oppressive, and there is no real suggestion that they do not understand what they are being asked to produce. To the extent that the subpoena recipients will be required to incur costs in order to comply with the subpoenas, that issue can be dealt with on an appropriate occasion. In these circumstances, any stay of the proceeding will not absolve the plaintiffs of any liability to pay the subpoenaed parties’ reasonable costs of complying with the subpoenas.
[4]The issue of inspection could be revisited if there is any appeal concerning the stay application.
Thirdly, it is difficult to see how it could be said that the issue of the subpoenas could be characterised as an attempt on the part of the plaintiffs to bypass the usual processes of discovery. The subpoena recipients are named in the statement of claim, as having breached their fiduciary duties to the plaintiffs, for the purpose of alleging accessorial liability on the part of the defendant, but they are not parties to the proceeding. Indeed, I share the plaintiffs’ scepticism that they will be joined by the defendants as third parties to the proceeding, given the nature of the allegations made against them in the statement of claim. Further, the documents sought by the subpoenas do not include any communications involving any director of the defendant, and the timeframe referred to in the subpoenas commences months before the incorporation of the defendant in January 2022. Accordingly, I accept that the documents sought by the subpoenas are unlikely to be discovered in this proceeding, and as such, the issue of the subpoenas is not an abuse of process in that regard.
The most compelling argument, at least on its face, in favour of setting aside the subpoenas is that the subpoenas are premature, in that the pleadings have not yet closed, and, therefore, arguably, the issues in the proceeding have not been fully defined, such that it is not feasible to evaluate whether the subpoenas have a legitimate forensic purpose.
I accept that the plaintiffs must establish that the subpoenas have a legitimate forensic purpose, and, in the ordinary course of litigation, the issues in the litigation are defined by the pleadings. However, in my view, it is possible to determine whether a subpoena has a legitimate forensic purpose without recourse to pleadings, and the authorities relied upon by the subpoena recipients do not lay down any inflexible rule as to when a subpoena is valid or amounts to an abuse of process.[5] After all, it is accepted that parties to proceedings commenced by originating motion may issue subpoenas. As illustrated by the decision of Derham AsJ in Harrison v Bauld,[6] there are other means by which the legitimate forensic purpose of the documents sought by a subpoena can be evaluated. Further, I also accept that the hurdle facing the plaintiffs in establishing a legitimate forensic purpose is reasonably low: all that is required is for the plaintiffs to show that it is “on the cards” or there is a “reasonable possibility” that the documents produced upon subpoena will materially assist the plaintiffs’ case.[7]
[5]See Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 [60], [98].
[6][2021] VSC 73.
[7]See Webb v Wheatley [2015] VSC 153 [55].
In the current case, there are detailed points of claim and detailed points of defence, and now, a fulsome statement of claim which elaborates upon, rather than substantially alters the allegations made by the plaintiffs in their amended points of claim. Further, given the nature of the allegations made against the defendant in this proceeding, it would involve a wholesale shift in the defendant’s approach to the current litigation for the issues to which the documents sought by the subpoenas are likely to be relevant to be taken off the table, so to speak, such as to negate the relevance of the documents sought by the subpoenas. By way of example, it seems to me to be highly unlikely that the defendant will admit to being involved in any breach of fiduciary duty by the EASI executives, or being involved in any dishonest and fraudulent design, which are issues which the subpoenas are directed at, at least in part.
In any event, the authorities relied upon by the subpoena recipients, where subpoenas were set aside prior to the closure of pleadings as being premature, do not lay down any hard and fast rule to the effect that issuing a subpoena prior to the finalisation of pleadings, or the completion of discovery, is an abuse of process. Rather, these authorities refer to a distinction between a permissible purpose for which a subpoena may be issued (for the gathering of evidence to support a case which has been “set up”, or “stated” by a party),[8] and an impermissible purpose, being to seek documents for the purpose of putting forward or pleading a case. That a party’s case is ordinarily set up or stated via a pleading does not preclude that case from being put forward in a different way, especially where it has been done in accordance with a judicial direction, as is the case in the current proceeding.
[8]See Marshall v Smith [2013] WASC 432 [9].
In the current proceeding, the plaintiffs have “set up” their case, indeed, fulsomely. That the purpose of the subpoena was not an impermissible purpose is illustrated by the fact that the plaintiffs were able to prepare a lengthy and detailed statement of claim in a conventional format without the assistance of any documents produced by the subpoena recipients.
Further, it is noteworthy that the subpoenas were issued and served prior to the managing judge making orders for the delivery of pleadings. Prior to that time, it seems to me that it would have been difficult for the subpoena recipients to responsibly advance an argument that the case management process adopted by the previous managing judge meant that it would be impossible for the plaintiffs to establish a legitimate forensic purpose for the subpoenas. It is understandable that the managing judge made orders for the delivery of pleadings in the context of the stay application, given that, in effect, the determination of the stay application will at least in part require a close side‑by‑side analysis of the issues in this proceeding and the issues in the English proceeding. But, given the level of detail in the points of claim and points of defence, it is not particularly difficult to see how records of the discussions between the EASI executives and the Fantuan Canada directors could well be of substantial relevance to the issues in this proceeding.
Turning to the “legitimate forensic purpose” of the subpoenas in more detail, the plaintiffs have made allegations that, among other things, the sellers, with the assistance of the EASI executives, entered into a conspiracy with Fantuan Canada to, in effect, deprive the plaintiffs of the full benefit of the sale agreement, for the benefit of the defendant. The subpoenas seek documents which evidence communications between the EASI executives (noting that Ms Linda Liu is also a seller) and two Fantuan Canada directors in the period between the execution of the sale agreement and the issue of this proceeding, regarding the subject matter of the proceeding. While I would perhaps not go so far as the plaintiffs in saying that there could be no legitimate reason for the EASI executives to communicate with the Fantuan Canada executives during this period, the very existence, let alone the contents, of such communications would be relevant to, among other things, the following issues:
(a) whether the sellers breached the sale agreement, and whether the EASI executives breached any fiduciary duties owing by them to the plaintiffs;
(b) the defendant’s knowledge, and Fantuan Canada’s knowledge, of any breach of contract or breach of fiduciary duties on the part of the sellers and/or the EASI executives; and
(c) whether Fantuan Canada actively induced any breach of fiduciary contract by the seller.
Finally, while this is not fatal to the application to set aside the subpoenas, it could hardly be said that the plaintiffs have acted improperly by issuing the subpoena “prematurely”. While the subpoenas were issued after the stay application was issued, it was only two days later, and it seems to me from my brief review of the parties’ submissions in the stay application that the stay application is, to put it neutrally, at least contestable. The subpoenas were issued prior to the orders made by the managing judge for the delivery of pleadings, such that the plaintiffs could not have reasonably been expected to anticipate that pleadings would be required. In the context of the nature of the issues in the proceeding, the declining value of the plaintiffs’ claims for injunctive relief over time given the terms of the non‑compete provisions of the sale agreement, and the former managing judge’s remarks regarding the need for expedition, the plaintiffs’ conduct in issuing subpoenas promptly is quite understandable. Further, the defendant’s defence (which would of course finally clarify the issues in the proceeding, subject to any future amendments) was due to be filed and served on 19 July 2022, two days prior to the hearing of the current application: it is, at the time of writing these reasons, a week late. Accordingly, it is not the plaintiffs’ fault that the issues in the proceeding have not been finally defined by the pleadings, and, in any event, any party may apply to amend their pleadings at any time prior to the conclusion of the trial, such that it can never be completely certain when pleadings could be taken to be finally closed.
I shall hear further from the parties regarding the precise form of order, the date for compliance with the subpoenas, and the question of costs, including, if necessary, the question of any costs incurred by the subpoena recipients in complying with the subpoenas.
SCHEDULE OF PARTIES
| S ECI 2022 00588 | |
| BETWEEN: | |
| HUNGRYPANDA AU PTY LTD (ACN 630 315 132) | First Plaintiff |
| HUNGRYPANDA JAPAN LTD (a company incorporated in Japan with company number 1200‑01‑232400) | Second Plaintiff |
| HUNGRPANDA (NZ) LTD (a company incorporated in New Zealand with company number 6570802) | Third Plaintiff |
| - v - | |
| FANTUAN AUSTRALIA PTY LTD (ACN 656 561 492) | Defendant |
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