In the matter of Sunnya Pty Ltd

[2023] NSWSC 1286

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Sunnya Pty Ltd [2023] NSWSC 1286

Hearing dates:

20 October 2023, with further submissions received on 24 and 25 October 2023

Date of orders:

30 October 2023

Decision date:

30 October 2023

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

See paragraph [141]

Catchwords:

CIVIL PROCEDURE — Application for leave under r 11.8AA of the Uniform Civil Procedure Rules 2005 (NSW) to proceed against foreign defendant served outside Australia — Application granted - No question of principle

CIVIL PROCEDURE — Pleadings — Amendment — Where plaintiffs seek leave to make extensive amendments to pleadings a matter of weeks prior to the commencement of the hearing — Risk to hearing dates and prejudice to defendants if hearing dates vacated — Plaintiffs responsible for delay in seeking leave to amend, save in respect of one category of the proposed amendments which would not put the hearing dates at risk if leave were granted — Application for leave to amend refused to the extent that the amendments were opposed and would require the hearing dates to be vacated — No question of principle.

CIVIL PROCEDURE — Costs — Security for costs — Application by certain defendants for security for future costs of the proceedings — Whether reason to believe that plaintiff companies will be unable to pay the defendants’ costs if ordered to do so — Application dismissed — No question of principle

CIVIL PROCEDURE — Evidence by audio visual link — Where plaintiffs applied for direction under s 5B of the Evidence (Audio and Audio Visual Links) Act 1998 (NSW) for a citizen of the People’s Republic of China to give evidence by audio visual link (AVL) from the Hong Kong Special Administrative Region of the People’s Republic of China — Where the place in the Hong Kong Special Administrative Region from which the plaintiffs propose that AVL facilities will used for the purpose of the witness giving evidence in these proceedings is taken to be part of this Court in New South Wales pursuant to s 5C of the Evidence (Audio and Audio Visual Links) Act 1998 (NSW), including for the purposes of laws relating to evidence, procedure, contempt of court and perjury — Whether this Court would intrude on the sovereignty of the People’s Republic of China in respect of the Hong Kong Special Administrative Region by taking evidence by AVL from the witness in the Hong Kong Special Administrative Region — Where plaintiffs adduced no expert evidence of foreign law — Where no evidence of any law or rule permitting citizens of the People’s Republic of China to give evidence in foreign proceedings by AVL from the Hong Kong Special Administrative Region — Where plaintiffs have taken no steps to obtain permission from relevant authorities in the People’s Republic of China or the Hong Kong Special Administrative Region for the witness to give evidence in these proceedings by AVL from the Hong Kong Special Administrative Region — Where the evidence establishes that it is inconvenient for the witness to travel to Australia for the purpose of giving evidence due to his business commitments in the People’s Republic of China — Where the evidence does not establish that the witness is unable to travel to Australia for that purpose — Application dismissed

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 56(3), 58, 64, 64(2)

Conveyancing Act 1919 (NSW), s 37A

Corporations Act 2001 (Cth), ss 79, 181, 182, 237, 1317H, 1335

Evidence (Audio and Audio Visual Links) Act 1998 (NSW), ss 5B, 5B(1), 5B(2), 5B(2)(b), 5C, 5D

Evidence Act 1995 (NSW), ss 21, 26, 28, 29, 30, 32, 128

Evidence Ordinance (Hong Kong), pt VIII

Cases Cited:

Agar v Hyde (2000) 201 CLR 552; (2000) 74 ALJR 1219; (2000) 173 ALR 665; [2000] Aust Torts Reports 81-569; [2000] HCA 41

Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; (2009) 83 ALJR 951; (2009) 258 ALR 14; [2009] HCA 27

Barnes v Addy (1874) LR 9 Ch App 244; (1874) 43 LJ Ch 513; (1874) 43 LJ Ch 513; (1874) 22 WR 505

Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; (2014) 32 ACLC 14-010; [2014] NSWCA 65

Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; [2004] NSWSC 664

General Steel Industries v Commissioner for Railways (1964) 112 CLR 125; (1964) 38 ALJR 253; [1965] ALR 636; [1964] HCA 69

In the matter of Sunnya Pty Ltd [2023] NSWSC 1104

Joyce v Sunland Waterfront (BVI) Ltd (2011) 195 FCR 213; (2011) 281 ALR 54; [2011] FCAFC 95

Motorola Solutions Inc v Hytera Communications Corporation Ltd [2020] FCA 539

The Case of the SS Lotus [1927] PCIJ Ser A No 10

Treloar Constructions Pty Ltd v McMillan [2016] NSWCA 302

Wang Chunfeng v Law Society of New South Wales [2022] NSWSC 986

Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245

Texts Cited:

Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, opened for signature 18 March 1970, 847 UNTS 231 (entered into force 7 October 1972)

J R Crawford, Brownlie’s Principles of Public International Law (Oxford University Press, 9th ed, 2019)

M Davies, A S Bell, P L G Brereton, and M Douglas, Nygh’s Conflict of Laws in Australia (LexisNexis, 10th ed, 2020)

Category:

Procedural rulings

Parties:

2022/329426

Sunnya Pty Ltd (First Plaintiff)
Jatcorp Limited (Second Plaintiff)
Yinghan He (First Defendant)
Yanxia Lu (Second Defendant)
Guangzhou Aotea Biological Technology Pte Ltd (Third Defendant)
Guangzhou Niurui Trading Co., Ltd (Fourth Defendant)
Sunlife Healthfood Pty Ltd (Fifth Defendant)
Yaqing He (Sixth Defendant)
HLW Investments Pty Ltd (Seventh Defendant)
Supermega Market Ltd (NZ) (Eighth Defendant)
Megadairy Ltd (NZ) (Ninth Defendant)
NZFDA Ltd (NZ) (Tenth Defendant)

2022/333557

All168 Pty Ltd (First Plaintiff)
Yinghan He (Second Plaintiff)
Yanxia Lu (Third Plaintiff)
Jatcorp Limited (First Defendant)
Peng Shen (Second Defendant)
Zhan Wang (Third Defendant)
Zhiguo Zhang (Fourth Defendant)
Sunnya Pty Ltd (Fifth Defendant)

Representation:

2022/329426

Counsel:
Mr R Foreman SC with Mr G P Gee (First and Second Plaintiffs)
Mr S Docker SC with Mr J Rodgers and Mr J Li (First, Second, Fifth, Sixth, and Seventh Defendants)
Ms J M Beaumont SC with Mr A Aleksov and Mr Y Chen (Eighth, Ninth, and Tenth Defendants)

Solicitors:
Auyeung Hencent & Day Lawyers (First and Second Plaintiffs)
Monaco Lawyers (First, Second, Fifth, Sixth, and Seventh Defendants)
Roberts Gray Lawyers (Eighth, Ninth, and Tenth Defendants)

2022/333557

Counsel:
Mr S Docker SC with Mr J Rodgers and Mr J Li (Plaintiffs)
Mr R Foreman SC with Mr G P Gee (Defendants)

Solicitors:
Monaco Lawyers (Plaintiffs)
Auyeung Hencent & Day Lawyers (Defendants)

File Number(s):

2022/329426 & 2022/333557

Publication restriction:

N/A

Judgment

Introduction

1. These two related proceedings are listed for hearing commencing on 28 November 2023. As in previous judgments, I will refer to proceeding 329426 of 2022 as the Sunnya proceedings, and to proceeding 333557 of 2022 as the All168 proceedings.

2. A brief description of the parties to the Sunnya and All168 proceedings and the nature of the issues in dispute is found in my previous reasons for judgment granting leave under s 237 of the Corporations Act 2001 (Cth) for Jatcorp nunc pro tunc to bring the Sunnya proceedings on behalf of and in the name of Sunnya (the s 237 judgment). [1] Terms used in the s 237 judgment have the same meaning in these reasons.

   1. In the matter of Sunnya Pty Ltd [2023] NSWSC 1104.

3. These reasons concern the following applications that were heard on 20 October 2023:

1. an application by Sunnya for leave under rule 11.8AA of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to proceed against GNT in the Sunnya proceedings;

2. an application by Sunnya for leave to make extensive further amendments to its Second Further Amended Statement of Claim in those proceedings;

3. an application by the He Parties for parts of the Reply filed by the plaintiffs in the Sunnya proceedings out of time, and without the leave of the Court;

4. an application by Mr He and Ms Lu for an extension of time to file a cross-claim in the Sunnya proceedings;

5. an application by All168 and the other plaintiffs in the All168 proceedings to make minor further amendments to their Further Amended Statement of Claim in those proceedings;

6. an application by Jatcorp and the other defendants in the All168 proceedings for leave to amend their Defence;

7. an application by the He Parties for the plaintiffs in the Sunnya proceedings to provide security for their future costs of defending the Sunnya proceedings, and for an order that the proceedings be stayed pending payment of such security as may be ordered; and

8. an application by Sunnya for a direction pursuant to s 5B of the Evidence (Audio and Audio Visual Links) Act 1998 (NSW) (the AVL Act) that Mr Lin Maocheng give evidence by audio visual link (AVL) from the Hong Kong Special Administrative Region of the People’s Republic of China (Hong Kong SAR).

4. The hearing of those interlocutory applications occupied a full day on 20 October 2023, most of which was occupied by the hearing of Sunnya’s application for leave to amend. The court book prepared for the interlocutory applications exceeded 6,000 pages. I have considered all of the parties’ written and oral submissions, and the evidence referred to in those submissions, irrespective of whether I have expressly referred to them in these reasons for judgment.

Sunnya’s application for leave to proceed against GNT

5. This application was considered in the s 237 judgment. At that stage, the plaintiffs had not formally served GNT with the pleadings and the notice required by rule 11.7 of the UCPR, and I declined to make an order for substituted service. The application was adjourned until 28 September 2023 to allow time for the plaintiffs to serve GNT, and to allow time for GNT to either file an appearance or apply to dismiss or stay the proceedings or set aside service. [2]

   2. In the matter of Sunnya Pty Ltd [2023] NSWSC 1104 at [62]-[78].

6. GNT is a company registered in the People’s Republic of China. As I explained in the s 237 judgment, Jatcorp relies on Part 11 and Schedule 6 of the UCPR as authorising service of the originating process on GNT outside Australia, and seeks leave under r 11.8AA to proceed against GNT because GNT has not filed an appearance in the Sunnya proceedings. In circumstances where Jatcorp has now been granted leave under s 237 of the Corporations Act to bring the Sunnya proceedings in the name of and on behalf of Sunnya, the application under r 11.8AA can be regarded as an application made by Jatcorp and Sunnya as the plaintiffs in the Sunnya proceedings.

7. As noted in the s 237 judgment, r 11.4 of the UCPR provides that an originating process may be served outside of Australia without leave in the circumstances referred to in Schedule 6, which sets out a number of connecting factors between a defendant and New South Wales that can provide sufficient justification for this Court to exercise personal jurisdiction over that defendant notwithstanding that they are outside New South Wales. Rule 11.5 provides that, if service is not permitted under Schedule 6, an originating process may be served outside of Australia with the leave of the Court.

8. Rule 11.6 provides:

(1)   On application by a person on whom an originating process has been served outside of Australia, the court may dismiss or stay the proceeding or set aside service of the originating process.

(2)   Without limiting subrule (1), the court may make an order under this rule if satisfied—

(a)   that service of the originating process is not authorised by these rules, or

(b)   that the court is an inappropriate forum for the trial of the proceeding, or

(c)   that the claim has insufficient prospects of success to warrant putting the person served outside Australia to the time, expense and trouble of defending the claim.

9. Rule 11.7 provides:

If a person is to be served outside of Australia with an originating process, the person must also be served with a notice in the approved form informing the person of—

(a)   the scope of the jurisdiction of the court in respect of claims against persons who are served outside Australia, and

(b)   the grounds alleged by the plaintiff to found jurisdiction, and

(c)   the person’s right to challenge service of the originating process or the jurisdiction of the court or to file a conditional appearance.

10. The approved form of notice is Form 161 to the UCPR, which is reproduced in the s 237 judgment. [3]

    3. In the matter of Sunnya Pty Ltd [2023] NSWSC 1104 at [66].

11. Rule 11.8 requires a defendant who has been served outside of Australia to file an appearance within 42 days from the date of service, unless the Court otherwise orders. The orders made on 12 September 2023 abridged for GNT to file an appearance to 12 days after service in accordance with r 11.8AC referred to below.

12. Rule 11.8AA provides:

(1)   If an originating process is served on a person outside Australia and the person does not enter an appearance, the party serving the document may not proceed against the person served except by leave of the court.

(2)   An application for leave under subrule (1) may be made without serving notice of the application on the person served with the originating process. 

13. I pass over r 11.8AB, which concerns service of documents other than originating process outside Australia.

14. Rule 11.8AC provides:

A document to be served outside Australia need not be personally served on a person so long as it is served on the person in accordance with the law of the country in which service is effected.

15. As the plaintiffs submitted, the proceedings against GNT in the Sunnya proceedings fall within at least the following sub-paragraphs of Schedule 6 to the UCPR:

1. sub-paragraph (d)(i), which is applicable to prayers 84 and 86 of the Second Further Amended Statement of Claim, being claims for injunctions against GNT restraining it from taking steps to have certain products manufactured for in its benefit in Australia;

2. sub-paragraph (h)(i), which is applicable because GNT is a necessary party to the proceedings that have been properly commenced against Mr He and Ms Lu, in circumstances where the plaintiffs claim in prayers 69 and 72-82 of the Second Further Amended Statement of Claim that GNT was involved in alleged contraventions of ss 181 and 182 of the Corporations Act by Mr He and Ms Lu, that GNT knowingly assisted Mr He and Ms Lu in committing alleged breaches of their fiduciary duties owed to Sunnya—a company registered in New South Wales—and that GNT knowingly received property derived from those alleged breaches of duty and holds that property on constructive trust for Sunnya;

3. sub-paragraph (j), which is applicable to the claims in prayers 69-71 and 90 of the Second Further Amended Statement of Claim for declarations that GNT contravened ss 79, 181, and 182 of the Corporations Act and for compensation under s 1317H of the Corporations Act; and

4. sub-paragraph (l), which is applicable to the claims in prayers 77 to 82 of the Second Further Amended Statement of Claim for declarations of constructive trust, to which I have already referred above, on the basis that the alleged liability of GNT arises out of acts or omissions that include acts or omissions of Mr He and Ms Lu that occurred wholly or partly in Australia.

16. Accordingly, r 11.4 of the UCPR permitted service of the originating process on GNT outside Australia without the leave of the Court. On the basis of the evidence of the plaintiffs’ solicitor, Simon Li, in his affidavit affirmed on 18 October 2023, I am satisfied that the Second Further Amended Statement of Claim and a notice under r 11.7 of the UCPR were served on GNT on 13 September 2023 by a solicitor in Shanghai acting on behalf of the plaintiffs, who delivered those documents to an address in Guangzhou. At the hearing on 20 October 2023, the plaintiffs tendered a certified translation of a National Enterprise Credit System Information Publicity System Report in relation to GNT, which reproduces information in the business licence for GNT, including that the address at which those documents were served on 13 September 2023 is the location and postal address of GNT. The documents served at that address on 13 September 2023 also included a covering letter stating that, if GNT did not appear at the hearing on 28 September 2023, the plaintiffs would apply for leave to proceed against GNT in its absence.

17. Mr Li’s evidence in his affidavit affirmed on 18 October 2023 also establishes that the plaintiffs sent their application for leave to amend and the supporting evidence, including the proposed Third Further Amended Statement of Claim, to GNT by email on 11 October 2023, and caused those documents to be delivered to GNT’s Guangzhou address referred to above by the same Shanghai solicitor on 12 October 2023. Those documents were accompanied by a letter informing GNT that the plaintiffs’ application for leave to amend was listed for hearing on 20 October 2023.

18. It is not necessary to consider whether the numerous occasions on which the plaintiffs have sent iterations of the statement of claim and other documents relating to these proceedings to the company email address for GNT recorded in the National Enterprise Credit System Information Publicity System Report referred to above constitute valid service in accordance with the law of the People’s Republic of China for the purpose of r 11.8AC of the UCPR. [4] However, I note that the evidence tendered by the plaintiffs at the hearing on 20 October 2023 included several emails generated by GNT’s company email acknowledging receipt of the emails from the plaintiffs’ solicitors.

    4. In the matter of Sunnya Pty Ltd [2023] NSWSC 1104 at [62] and [71]-[76].

19. This Court’s jurisdiction has now been properly invoked by the plaintiffs having effected personal service on GNT in the People’s Republic of China of the Second Further Amended Statement of Claim, which includes claims of the kind referred to in Schedule 6 to the UCPR. GNT has not filed an appearance in the proceedings, and has not applied under r 11.6 of the UCPR to stay or dismiss the proceedings, or to set aside service. There was no appearance for GNT on 28 September 2023 when the plaintiffs’ application for leave to proceed against GNT was listed before the Court. GNT did not file an appearance in the proceedings after the plaintiffs effected personal service on GNT on 12 October 2023 of the plaintiffs’ application for leave to amend, including the proposed Third Further Amended Statement of Claim. There was no appearance for GNT at the hearing of the plaintiffs’ amendment application on 20 October 2023.

20. In the circumstances described above, leave to proceed should be granted in the absence of any countervailing consideration. [5] There is no countervailing consideration. I do not consider that this Court is an inappropriate forum for the trial of the claims against GNT. The connection between the claims and this jurisdiction referred to at [15] above renders this Court an appropriate forum. Nor do I consider that the plaintiffs’ claims against GNT are so obviously untenable that they cannot succeed. The lengthy Second Further Amended Statement of Claim discloses arguable causes of action against GNT. [6] The same is true of the proposed Third Further Amended Statement of Claim to the extent to which leave to amend is to be granted as described below.

    5. Agar v Hyde (2000) 201 CLR 552; (2000) 74 ALJR 1219; (2000) 173 ALR 665; [2000] Aust Torts Reports 81-569; [2000] HCA 41 at [54] (Gaudron, McHugh, Gummow, and Hayne JJ).

    6. Supra at [60] (Gaudron, McHugh, Gummow, and Hayne JJ); General Steel Industries v Commissioner for Railways (1964) 112 CLR 125; (1964) 38 ALJR 253; [1965] ALR 636; [1964] HCA 69 at 112 CLR 129 (Barwick CJ).

Sunnya’s application for leave to further amend its statement of claim in the Sunnya proceedings

21. By prayers 1 and 2 of an interlocutory process filed by the plaintiffs in the Sunnya proceedings on 11 October 2023, the plaintiffs sought leave to amend by filing and serving the proposed Third Further Amended Statement of Claim in Exhibit VZ8 to the affidavit of Vincent Zhu affirmed on 10 October 2023. During the course of the hearing of the amendment application on 20 October 2023, and in the following days, the plaintiffs withdrew their application for leave in respect of some of those proposed amendments. A revised iteration of the proposed Third Further Amended Statement of Claim was served on the defendants and sent to my Associate by email at approximately 2:00pm on 24 October 2023. It is that iteration of the document that I address in these reasons.

22. The proposed amendments fall into the following categories:

1. proposed new claims against the proposed eleventh defendant, Mega Aqua Limited (Mega Aqua) under s 37A of the Conveyancing Act 1919 (NSW); [7]

   7. 3FASOC prayers 189L-189N and paragraphs 47C-47G, 219A, 543E-543F.

2. proposed new estoppel claims against Mr He, Ms Lu and GABT; [8]

   8. 3FASOC prayers 16A, 30A, 36A, 68A-68C and paragraphs 63A-63K, 68A-68I, 77A-77D, 82B, 82D-82F, 104A, and 548-579.

3. proposed expansion of the claims against Mr He, Ms Lu, GABT, GNT, and Super Mega arising from supply of Neurio products by Supermega to GABT and GNT; [9]

   9. 3FASOC paragraphs 167A-167E, 318h2, 322h2, 330i2, 334i2, 336, 342e1, 343f1, 344e1, 345f1, 347f1, 348d1, 349d1, 355f1, 356f1, 357f1, 362a1, 362f1, 367d1, 368d1, 369d1, 370d1, 372d1, 373e1, 374e1, 375e1, 380e1, 385d1, 386d1, 387d1, 388d1, 390d1, 391e1, 392e1, 393e1, 398e1, 448k, 449k, 450k, 451k, 453l, 454h, 455h, 461k, 462k, 463k, and 468k.

4. proposed claims against Mr He, Ms Lu, and GNT in respect of what are defined in proposed paragraph 74D of the Third Further Amended Statement of Claim as the “Commercial Invoices”; [10]

   10. 3FASOC paragraphs 74A – 74L, 90C – 90K; 306d, 318a1, 318B, 321A, 322a1, 330a1, 330B, 333A, 334a1, 342a1, 343a1, 344a1, 345a1, 347a1, 355a1, 356a1, 357a1, and 362a1.

5. proposed claims against Mr He and Ms Lu in respect of the purported termination by GABT of the 2014 and 2020 Agreements; [11]

   11. 3FASOC prayer 68B (being the second 68B on page 9 of the 3FASOC) and paragraphs 122A, 122B, 318h1, 322h1, 330i1, 334i1, 448j, 449j, 450j, 451j, 453k, 461j, 462j, 463j, 468j, 536f, and 537k.

6. proposed amendments that the plaintiffs submit are necessary in order to bring the pleadings into line with the evidence in relation to the “Under Value Sales” and “Under Value Scheme” claims; [12]

   12. Amendments to the date range proposed in 3FASOC paragraphs 76, 77, 85-88, 90-90B, 291; amendments to the claims proposed in paragraphs 75, 90-90B, 90G, 90J, 90K, 91, 291, 293, 318a, 322a, 330a, 334a, 342a, 342b, 343a, 343b, 344a, 344b, 345a, 345b, 347a(vi), 348a, 349a, 355a, 355b, 356a, and 356b.

7. proposed amendments, including additional prayers for relief, that the plaintiffs submit are necessary in order to bring the pleadings into line with the evidence in relation to the existing claims under 37A of the Conveyancing Act against Mr He, Ms Lu, and HLW; [13]

8. proposed amendments that the plaintiffs submit are necessary in order to bring the pleadings into line with the evidence in relation to the license that the plaintiffs allege GABT granted to Sunnya in respect of Neurio trademarks; [14]

9. proposed amendments that the plaintiffs submit are necessary in order to bring the pleadings into line with the evidence in relation to “miscellaneous factual matters”; [15]

10. proposed removal of a claim that the plaintiffs no longer wish to press in respect of product batch number NE04220010; [16] and

11. proposed removal of a claim that the plaintiffs no longer wish to press in respect of the Distribution Agreement. [17]

    13. 3FASOC prayers 16E-16F, 30E-30F and paragraphs 138A, 138B, 214A, and 219A.

    14. 3FASOC prayer 36A and paragraph 104A.

    15. 3FASOC paragraphs 23, 79, 84A, 96, 99, 203, 306, and 307.

    16. Deletion of 3FASOC paragraphs 111 and 112.

    17. Deletion 3FASOC prayers 74 and 76(a) and paragraphs 72, 74, and 89.

23. I will briefly explain the substance of each of category of proposed amendments, the relationship between the proposed amendments and the existing pleaded claims and defences, and the extent of any new legal or factual issues raised by the amendments. I will outline the parties’ key contentions in relation to each category of the proposed amendments. I will identify any matters specific to that category of proposed amendments that weigh in favour of, or against, a grant of leave to amend. I will then address the application for leave to amend as a whole by reference to ss 56 to 58 and s 64 of the Civil Procedure Act 2005 (NSW) and the applicable legal principles.

24. In describing the defendants’ position in relation to each category of the proposed amendments, I will refer to the existing defendants in the Sunnya proceedings in two groups according to their legal representation in those proceedings. I will refer to the first group—comprising the first, second and fifth to seventh defendants—as the He Parties. I will refer to the second group—the eighth to tenth defendants, each of which is registered in New Zealand—as the NZ defendants. At the hearing of the interlocutory applications on 20 October 2023, senior counsel for the NZ defendants also appeared for the proposed eleventh defendant, Mega Aqua. [18] The third defendant—GABT—is not presently taking any active role in the proceedings. As explained above in relation to the plaintiffs’ application under UCPR r 11.8AA, the fourth defendant—GNT—has not filed an appearance in the proceedings.

    18. Mega Aqua is named in the proposed 3FASOC as the prospective twelfth defendant, but Mega Aqua would in fact be the eleventh defendant if leave were granted to join it as a defendant to the Sunnya proceedings. During the course of, and in the days following, the hearing of the interlocutory applications on 20 October 2023, the plaintiffs withdrew their applications for leave to join persons who had been named in the previous iteration of the 3FASOC as the prospective eleventh and thirteenth defendants.

Category 1: Proposed new s 37A claims against Mega Aqua

25. The plaintiffs’ existing pleaded case, as expanded by uncontentious the category 7 amendments referred to below, includes allegations that Mr He and Ms Lu were on notice of Sunnya’s claims for compensation against them in these proceedings after being served with the originating process and initial supporting affidavits on 3 November 2022, and that Mr He and Ms Lu were on notice of the plaintiffs’ intention to apply for orders restraining them from dealing with or divesting their assets from 17 February 2023 when they were served with the plaintiffs’ application for freezing orders. The plaintiffs allege that Mr He and Ms Lu transferred amounts totalling approximately $1.9 million from their bank accounts to a bank account of HLW during the period from 17 February 2023 to 28 February 2023, and that HLW transferred amounts totalling approximately $3,200,000 to “international accounts” during the period from 17 February 2023 to 3 March 2023. [19]

    19. 2FASOC paragraphs 214, 215-219; 3FASOC paragraphs 138A-138B, 214A.

26. Although the pleading alleges that HLW transferred the $3.2 million sum referred to above on to intentional accounts, the plaintiffs’ existing pleaded case is limited to the alleged transfer of the $1.9 million sum from Mr He and Ms Lu to HLW. The plaintiffs allege that HLW received the benefit of the payments totalling $1.9 million knowing that those funds were the proceeds of breaches of fiduciary duty by Mr He and Ms Lu as directors of Sunnya. The plaintiffs claim that HLW is a knowing recipient within the first limb of the “rule” in Barnes v Addy,[20] that HLW holds the payments totalling $1.9 million on constructive trust for Sunnya, and that HLW is liable to account to Sunnya for those moneys. [21] Further or alternatively, the plaintiffs claim that each transfer of funds to HLW comprising the $1.9 million sum referred to above was made with the intent to defraud creditors and is voidable pursuant to s 37A of the Conveyancing Act. The plaintiffs claim that Sunnya has been prejudiced by those transfers, and is entitled to an order pursuant to s 37A setting aside the transfers, and an order requiring HLW to repay the amounts paid to it. [22]

    20. (1874) LR 9 Ch App 244; (1874) 43 LJ Ch 513; (1874) 43 LJ Ch 513; (1874) 22 WR 505.

    21. 2FASOC paragraphs 479-485, 541.

    22. 2FASOC paragraph 543.

27. By the uncontentious category 7 amendments referred to below, the plaintiffs propose to claim declarations against each of Mr He and Ms Lu that each of the transfers to HLW comprising the $1.9 million sum referred to above was made with intent to defraud creditors and is voidable pursuant to s 37A of the Conveyancing Act. [23] The plaintiffs’ existing claims for relief against HLW in relation to those same transfers are claims for: [24]

    23. 3FASOC paragraphs 16E-16F, 30E-30F.

    24. 2FASOC paragraphs 138, 142, 145-147.

1. a declaration that HLW “breached the rule established in Barnes v Addy by knowingly receiving” the benefit of those payments “by reason of” the alleged breaches of fiduciary duties owed by Mr He and Ms Lu to Sunnya;

2. an order that HLW account to Sunnya for those payments;

3. a declaration that “the transfers to and by [HLW]” were made with intent to defraud creditors and are voidable pursuant to s 37A of the Conveyancing Act;

4. an order pursuant to s 37A of the Conveyancing Act setting aside “the transfers”; and

5. an order that HLW repay the amounts paid to it.

28. Although the declaration sought against HLW concerning s 37A of the Conveyancing Act refers to the payments totalling $1.9 million allegedly paid by Mr He and Ms Lu to HLW and also to the payments totalling $3.2 million allegedly made by HLW to “international accounts”, there is no pleaded allegation that HLW had an intention to defraud creditors. [25] Nor have the plaintiffs pleaded any of the factual matters that would have been necessary to support such an allegation. If the plaintiffs had wished to pursue a case that HLW made the transfers to “international accounts” with intent to defraud creditors, it would have been necessary, amongst other things, to identify whether the relevant “creditors” are said to be creditors of HLW, or creditors of Mr He and/or Ms Lu. It also would have been necessary to identify the alleged recipients of the transfers made by HLW to the “international accounts”, to clarify which of those transfers were alleged to have been made with an intent by HLW to defraud “creditors” (including whether all of the transfers totalling $3.2 million, or only some of those transfers totalling $1.9 million, were sought to be avoided under s 37A), and to join the recipients of each such transfer as defendants to these proceedings, because their interests would be affected by an order avoiding the transfer to that recipient.

    25. 2FASOC paragraph 543 is limited to payments made to HLW.

29. For all of those reasons, it is clear that the plaintiffs’ existing pleaded case for relief under s 37A of the Conveyancing Act in relation to the transfers totalling $1.9 million made by Mr He and Ms Lu to HLW during the period from 17 February to 28 February 2023 is limited to claims against Mr He and Ms Lu as the persons who made those transfers allegedly with the intention of defrauding their creditors, and a claim against HLW as the recipient of those payments. No claim is pleaded against HLW (or any other person) in respect of the transfers totalling $3.2 million that HLW is said to have made to unspecified “international accounts” during the period from 17 February to 3 March 2023. To the extent that the plaintiffs’ submissions made during the hearing on 20 October 2023 suggested that the existing pleading does include claims for relief under s 37A of the Conveyancing Act in respect of the transfers totalling $3.2 million from HLW to the “international accounts”, I reject that submission.

30. By the category 1 proposed amendments, the plaintiffs seek leave to joint Mega Aqua as a defendant to the Sunnya proceedings, and to plead that:

1. the “international accounts” to which HLW transferred funds totalling approximately $3.2 million during the period from 17 February to 3 March 2023 is an account of Mega Aqua; [26]

2. “[t]he transfer to Mega Aqua” was made with the intent to defraud creditors and is voidable pursuant to s 37A of the Conveyancing Act; [27]

3. “Sunnya has or will thereby be prejudiced”; [28]

4. Sunnya is entitled to an order under s 37A “setting aside the transfer”; [29] and

5. Sunnya is entitled to an order under s 37A that Mega Aqua “repay or restore” the amount paid to it. [30]

   26. 3FASOC paragraph 219A.

   27. 3FASOC paragraph 543E.

   28. 3FASOC paragraph 543F.

   29. 3FASOC paragraph 543F(a).

   30. 3FASOC paragraph 543F(b).

31. The plaintiffs also seek leave to introduce claims against Mega Aqua for a declaration that each of the transfers made by HLW comprising the $3.2 million referred to above was made with the intent to defraud creditors, and is voidable pursuant to s 37A, an order pursuant to s 37A setting aside “the transfer”, and an order that Mega Aqua “repay or restore” the amounts paid to it. [31]

    31. 3FASOC prayers 189L-189N.

32. The He Parties, the NZ defendants and Mega Aqua oppose the plaintiffs’ application for leave in respect of category 1 amendments.

33. As the He Parties, the NZ defendants and Mega Aqua submitted, the proposed Third Further Amended Statement of Claim is devoid of any pleading of the facts and matters relied on by the plaintiffs in support of the proposed new allegation that HLW made each of the transfers totalling $3.2 million to Mega Aqua with an intent to defraud creditors. Nor does the proposed Third Further Amended Statement of Claim identify whether the creditors that HLW allegedly intended to defraud were creditors of HLW, or creditors of Mr He and Ms Lu. The proposed Third Further Amended Statement of Claim frequently refers to the transfers totalling $3.2 million as a single “transfer”, but this obfuscation does not overcome the failure to address those matters in relation to each transfer. The proposed Third Further Amended Statement of Claim does not articulate what appears to be an alleged nexus between, on the one hand, the amounts totalling $1.9 million transferred by Mr He and Ms Lu to HLW, and, on the other hand, the amounts totalling $3.2 million said to have been transferred by HLW to Mega Aqua. The proposed Third Further Amended Statement of Claim requires the defendants to speculate about the basis of the plaintiffs’ contention that any or all of the sums totalling $3.2 million were transferred by HLW to Mega Aqua with an intention on the part of HLW to defraud creditors.

34. As the NZ defendants and Mega Aqua submitted, these are serious deficiencies in the proposed pleading of new allegations of fraud. The draft particulars handed up by senior counsel for the plaintiffs during the hearing of the interlocutory applications on 20 October 2023 do not address those deficiencies. First, fraud must be specifically pleaded. [32] That requirement is not discharged by a party seeking to supplement a deficient draft pleading with a hastily prepared document containing proposed particulars that handed up during the hearing of the contested amendment application without prior notice to the party resisting the application for leave to amend. Second, the proposed particulars assert that HLW made the transfers totalling $3.2 million with knowledge of the plaintiffs’ application for freezing orders against Mr He and Ms Lu. The material facts relied on in support of that allegation are not pleaded and are not included in the particulars document. [33] Third, it is implicit in the allegation that HLW knew about the freezing order application against Mr He and Ms Lu that there is some connection between the allegations concerning the transfers from Mr He and Ms Lu to HLW totalling $1.9 million, and the proposed allegations concerning the whole of the $3.2 million transferred by HLW to Mega Aqua. The particulars document does not articulate that alleged connection.

    32. UCPR r 14.14.

    33. UCPR r 15.4.

35. In an affidavit affirmed on 8 May 2023 and served on the defendants on or about that date in connection with an interlocutory application in the Sunnya proceedings, Mr He gave evidence to the effect that HLW had entered into sales contracts with Mega Aqua for Mega Aqua to manufacture specified quantities of certain vitamin products. Mr He deposed that, when HLW places an order under one of the sales contracts, Mega Aqua issues a “contract of purchase” naming HLW as the “Buyer” and Mega Aqua as the “Seller”. Mr He described the “contracts of purchase” as being “like a purchase order”. Copies of all sales contracts, and all contracts of purchase issued by Mega Aqua, were exhibited to Mr He’s affidavit. Mr He deposed that HLW was obliged to pay a 50 per cent deposit in respect of each contract of purchase. In paragraph 10 of his affidavit, Mr He listed deposit payments totalling approximately $3.2 million that HLW had made to Mega Aqua. Copies of HLW’s bank account statements evidencing those payments were exhibited to Mr He’s affidavit. The payments described in Mr He’s affidavit and recorded in HLW’s bank statements are in Australian dollar amounts. The contracts for purchase, including the 50 per cent deposit stipulated in each such contract, are in New Zealand dollar amounts. Mr He deposed that, as a consequence of the freezing orders that had been made against him, against Ms Lu, and against HLW, he was concerned that HLW would be unable to pay the balance of the amounts that would become payable under the contracts for purchase when the products were ready for loading.

36. The plaintiffs’ written submissions served prior to the hearing of the interlocutory applications, and the particulars document handed up during the hearing, disclose that the basis of the fraud allegations that they now seek leave to plead against HLW is the plaintiffs’ contention that the funds transferred by HLW to Mega Aqua were not made under the contracts for purchase. The plaintiffs contend that those contracts are sham documents that were created after HLW transferred the funds to Mega Aqua for the purpose of manufacturing an explanation for those transfers that would assist the He Parties’ defence of the Sunnya proceedings.

37. The plaintiffs’ solicitor has given evidence to the effect that, although the plaintiffs have known since May 2023 about the contracts for purchase and the payments from HLW to Mega Aqua totalling $3.2 million, they did not interrogate the substance of Mr He’s evidence that I have summarised above until they were served with Ms Lu’s affidavit on 19 September 2023. In that affidavit, Ms Lu gave evidence to the effect that HLW had not completed its purchase of products from Mega Aqua pursuant to the sales contracts and contracts for purchase referred to above. The evidence given by the plaintiff’s solicitor does not explain why this initiated an investigation in September 2023 of the matters that had been known to the plaintiffs since May 2023. As I have already mentioned, Mr He’s affidavit affirmed on 8 May 2023 expressly referred to the risk that HLW would not complete its purchases from Mega Aqua. Ms Lu’s 19 September 2023 affidavit confirmed that the purchases had not been completed.

38. It is clear from the evidence of the plaintiffs’ solicitor that his investigation conducted at some time after 19 September 2023 comprised a review of the material that had been included in Mr He’s 8 May 2023 affidavit in relation to the sales contracts, the contracts for purchase and the payments totalling $3.2 million, and a review of electronic copies of the sale contracts and contracts for purchase in pdf format that had been produced by the He Parties under discovery on about 4 August 2023. The plaintiff’s solicitor ascertained from the metadata for those electronic documents that each pdf document had been created by scanning a paper document some months after the relevant sale contract or contract for purchase was said to have been entered into.

31. According to plaintiffs’ submissions, the principal basis for contentions referred to at [36] above is that almost all of the transfers from HLW to Mega Aqua comprising the $3.2 million total amount were for an amount of AUD $150,000 or some other rounded Australian dollar amount. The plaintiffs contend that this is unlikely to have been the case if the amounts were calculated on the basis of contracts already entered into for the purchase of different products, for different prices in New Zealand dollar amounts, and that this gives to an inference that each transfer had nothing to do with any contract for purchase, and an inference that the contracts for purchase were created after the transfers occurred, stipulating prices and deposit amounts denominated in New Zealand dollars that corresponded to the Australian dollar amounts of the transfers that HLW had already made to Mega Aqua.

32. It was submitted on behalf of the plaintiffs that the discrepancy between the scanning date indicated by the metadata for the pdf electronic copy of each sale contract and each contract for purchase provides some further support for these inferences, having regard to the evidence given by Mr Yi Wu in his affidavit verifying the NZ defendants’ discovery. Mr Wu described his practice of scanning signed documents to create an electronic record of those documents, and then discarding the original document. Mr Wu is the director of each of the NZ defendants, and the director of Mega Aqua. Mr Wu’s evidence does not refer to any processes or procedures that have been implemented to give effect to his practice. Mr Wu’s evidence does not shed any light on the period of time within which an electronic copy of a document is usually created after the paper document has been signed (if, indeed, there is a usual period of time).

33. Senior counsel for the plaintiffs placed only limited reliance on the metadata, submitting that the principal matters referred to at [39] above were sufficient to support the proposed amendments. As the NZ defendants submitted, and as I have explained at [35]-[38] above, the evidence on which the plaintiffs rely in relation to each of the matters referred to at [39] above was served on 8 May 2023. It was open to the plaintiffs to interrogate that evidence in May 2023, and to formulate the proposed category 1 amendments promptly thereafter. They did not do so. As I have already mentioned, the evidence does not explain why the plaintiffs’ investigation first occurred in about late September 2023. I infer that the plaintiffs prioritised other work in relation to the Sunnya proceedings in and after May 2023, or that the plaintiffs made a forensic decision in May 2023 not to pursue a claim in respect of the $3.2 million payments made by HLW to Mega Aqua, which decision the plaintiffs now wish to change. I note that, in his affidavit affirmed on 10 October 2023, the plaintiff’s solicitor described the object of the proposed category 1 amendments and the joinder of Mega Aqua as a defendant to the Sunnya proceedings as being to provide “a second possible source of recovery for Sunnya” in respect of the “transfers made by HLW to Mega Aqua [that] are already in issue in the proceedings”. As I have explained above, the transfers from HLW to Mega Aqua are referred to in the Second Further Amended Statement of Claim (without naming Mega Aqua), but those transfers have not been put in issue.

34. I do not accept the plaintiffs’ submission that the proposed category 1 amendments would not result in the vacation of the hearing dates, and would not prolong the hearing. I accept the evidence of the solicitor for the NZ defendants and for Mega Aqua that Mega Aqua would require until at least 17 November 2023 to prepare a defence to the serious fraud allegations, and to prepare evidence in support of that defence. That estimate takes into account the need to confer with Mr Wu in New Zealand where his businesses are located, and the need to communicate with him through an interpreter in conducting those conferences, in taking instructions for the preparation of a defence, and in preparing evidence.

35. It is no answer for the plaintiffs to say that the defendants in the Sunnya proceedings have already addressed the sales contracts, the contracts for purchase, and the $3.2 million transfers in their evidence served to date. Mega Aqua is not currently a party to the proceedings, and would need to consider whether it wished to serve any additional evidence in support of its defence. At the very least, the existing defendants would need to consider whether to adduce evidence addressing the authenticity of the sales contracts and contracts for purchase and the dates on which they were entered into.

36. I reject the plaintiffs’ submission that the filing of a defence and service of any evidence on behalf of Mega Aqua, and any further evidence of the existing defendants, by 17 November 2023 would be in sufficient time for the hearing to commence on 28 November 2023. These proceedings are already legally and factually complex, and the filing of pleadings and service of evidence six business days prior to the commencement of the three-week hearing would almost certainly delay the parties’ preparation for hearing, including the preparation of submissions and objections to evidence, and the preparation of the court book. That is in addition to the delay that the NZ defendants’ preparation for hearing will already have suffered prior to 17 November 2023 by being distracted from their existing trial preparation work as a result of being required to address the proposed category 1 amendments. The risk to the hearing dates is compounded by the obvious possibility of applications for further discovery, and by the prospect of the plaintiffs seeking to adduce further evidence after 17 November 2023 in reply to any evidence served by Mega Dairy or any other defendant relating to the proposed new fraud allegations.

37. For all of those reasons, I consider that the proposed category 1 amendments put the hearing dates at risk, and that it is highly likely that the hearing would need to be vacated if leave were granted to the plaintiffs in respect of those amendments.

38. In my opinion, there is an even greater risk that the duration of the hearing will be prolonged if the proposed category 1 amendments are allowed. It seems to me that this would be the inevitable consequence of allowing the plaintiffs to introduce the proposed new fraud allegations, which would add to the matters to be canvassed in cross-examination of witnesses who I understand will be seeking leave to give their evidence through interpreters.

39. In this case, any vacation of the hearing or prolongation of the duration of the hearing will be prejudicial to the defendants in a way that cannot be cured by costs orders. The commencement of the hearing has already been delayed twice in order to accommodate the delays on the part of all parties in relation to discovery and service of evidence. The hearing is presently listed to commence on 28 November 2023 on the basis that it will conclude on the last day of the 2023 law term. The defendants submit that they would be prejudiced if the hearing were to extend into the 2024 law term because this would necessarily cause a corresponding delay to the determination of the proceedings, which would extend the time for which the defendants are subject to freezing orders that place significant restrictions on their business and financial activities.

Category 2: Proposed new estoppel claims against Mr He, Ms Lu and GABT

48. In the course of the hearing of Jatcorp’s application for leave under s 237 of the Corporations Act to prosecute the Sunnya proceedings on behalf of and in the name of Sunnya, it became apparent that the plaintiffs’ existing pleading disclosed no cause of action in respect of the claim in prayer 37 of the Second Further Amended Statement of Claim for an order requiring GABT to transfer to Sunnya seven Chinese-registered trademarks relating to the “Neurio” brand. [34]

    34. In the matter of Sunnya Pty Ltd [2023] NSWSC 1104 at [50]-[57].

49. As the plaintiffs acknowledged during the hearing of the interlocutory applications on 20 October 2023 and in their written submissions served in advance of these proceedings, it is that flaw in the plaintiffs’ existing pleading that has prompted the current application to make the extensive amendments proposed in category 2. The very late timing of the application for leave in respect of proposed category 2 is not attributable to the conduct of any other party in these proceedings.

50. The proposed category 2 amendments would introduce claims for:

1. declarations that each of Mr He, Ms Lu and GABT is “estopped from denying that that Sunnya owns the Neurio brand and has an exclusive and permanent right to sell Neurio branded products in Australia and China”; [35]

2. a declaration that “Sunnya owns the Neurio brand”; [36] and

3. further or alternatively, an order that GABT transfer the Chinese-registered Neurio trademarks to Sunnya. [37]

   35. 3FASOC prayers 16A, 30A and 68A.

   36. 3FASOC prayer 68B.

   37. 3FASOC prayer 68C.

51. Those proposed claims for relief rely on the doctrines of promissory estoppel, conventional estoppel, and proprietary estoppel.

52. The proposed category 2 amendments would introduce many new factual issues into the Sunnya proceedings for the first time, including, but not limited to: [38]

1. whether Mr He and/or Ms Lu represented to Jatcorp, before it entered into the agreement to purchase 51 per cent of the shares in Sunnya, that “Sunnya would own the Neurio brand and own 100% of the right to sell Neurio branded products in both Australia and China”; [39]

2. whether Jatcorp made certain alleged assumptions on the basis of those alleged representations, or was otherwise induced by Mr He and/or Ms Lu to make those alleged assumptions, or whether those alleged assumptions were common assumptions adopted by each of Jatcorp, Mr He, Ms Lu and GABT; and

3. whether the Jatcorp relied on those alleged assumptions to its detriment.

   38. 3FASOC paragraphs 548-579.

   39. I note that the 3FASOC contains no particulars of this alleged representation.

53. The He Parties oppose the plaintiffs’ application for leave in respect of the proposed category 2 amendments. The He Parties submit that these proposed amendments would require significant investigation, further discovery and further evidence, and that they cannot undertake the work necessary to defend the proposed estoppel claims in time for the hearing to commence on 28 November 2023. I accept that submission, having regard to the nature of the factual issues referred to in the of non-exhaustive list above, and the need to investigate each of those issues having regard to the context in which relevant negotiations and communications occurred more than five years ago. Moreover, as the He Parties submitted, the proposed new claims also raise legal issues, including questions about the proper construction of relevant provisions of the agreement pursuant to which Jatcorp acquired 51 per cent of the shares in Sunnya.

54. The NZ defendants and Mega Aqua also oppose the plaintiffs’ application for leave in respect of the proposed category 2 amendments if those amendments would put the hearing dates at risk. For the reasons I have explained above, the hearing dates would need to be vacated if the proposed category 2 amendments were allowed.

Category 3: Proposed amendments to expand existing claims against Mr He, Ms Lu, GABT, GNT and Super Mega arising from supply of Neurio products by Supermega to GABT and GNT

55. These amendments [40] are not opposed by the He Parties or by the NZ defendants, with the exception of proposed paragraph 362(a1) of the 3FASOC, which in fact forms part of the proposed category 4 amendments discussed below. There is no suggestion that a grant of leave in respect of proposed category 4 (excluding paragraphs 362(a1)) would result in the vacation of the hearing dates or would prolong the hearing.

    40. 3FASOC paragraphs 167A-167E, 318h2, 322h2, 330i2, 334i2, 336, 342e1, 343f1, 344e1, 345f1, 347f1, 348d1, 349d1, 355f1, 356f1, 357f1, 362a1, 362f1, 367d1, 368d1, 369d1, 370d1, 372d1, 373e1, 374e1, 375e1, 380e1, 385d1, 386d1, 387d1, 388d1, 390d1, 391e1, 392e1, 393e1, 398e1, 448k, 449k, 450k, 451k, 453l, 454h, 455h, 461k, 462k, 463k, and 468k.

Category 4: Proposed claims against Mr He, Ms Lu and GNT in relation to the “Commercial Invoices”

56. The plaintiffs’ existing pleaded case includes claims that Mr He and Ms Lu breached their statutory and fiduciary duties as directors and employees of Sunnya by allegedly causing or permitting Sunnya to supply its Neurio branded products to GNT at specified prices that were significantly less than the prices for which Sunnya was selling the same products to other customers, including to distributors in China. These claims are referred to as the Undervalue Claims and the Undervalue Scheme Claims.

57. In their Amended Defence to the Second Further Amended Statement of Claim, Mr He and Ms Lu deny these allegations. The Amended Defence pleads the terms of distribution agreements pursuant to which GNT distributed Neurio products in China on behalf of Sunnya. The Amended Defence pleads that the price that Sunnya received for Neurio products distributed by GNT in China began to fall from about October 2020 due to market conditions. The Amended Defence pleads the Customs Service of the People’s Republic of China conducted an investigation into the authenticity and legality of GNT’s import and export activities from March 2021 to January 2022, following which Sunnya was required to sell Neurio products to GNT (rather than distributing Neurio products in China through GNT), and was “not permitted to receive more than the import price and was not permitted to take profits due to GNT out of China”. It is pleaded that Mr He advised representatives of Jatcorp of the Customs investigation in June 2021, and that Mr He informed Jatcorp that “Sunnya can only collect the import price from GNT”, that Sunnya must adjust its sales strategy and follow the guidance of Customs, and that “Sunnya sales will be greatly affected”. The Amended Defence did not identify or define the “import price”.

58. In paragraphs 76 and 77 of her affidavit affirmed on 19 September 2023, Ms Lu deposes that there were two channels for sales of Neurio products: (1) the “General Trade Channel” through which Sunnya exported the products to China, and GNT was the importer of those products which it distributed to major distributors in China for eventual retail sale (often after passing through one or more smaller distributors); and (2) the “Cross-Border Channel” through which Sunnya sold its products directly to major distributors who were typically based in Australia, New Zealand, and the Hong Kong SAR. Ms Lu deposes that Sunnya’s sales to distributors through GNT in the General Trade Channel were generally at lower prices than Sunnya’s sales to distributors through the Cross-Border Channel.

59. In paragraphs 86 to 89 of the same affidavit, Ms Lu refers to a distribution agreement and supplementary distribution agreement entered into between Sunnya and GNT in March and April 2019. In paragraphs 95 to 98, Ms Lu describes how these agreements were implemented in practice during the period from about April 2019 until about April 2021. According to Ms Lu, GNT was Sunnya’s importer of products into China, Sunnya entered into sales agreements with the large distributors directly, and GNT collected payment for the Neurio products under those agreements and remitted the money to Sunnya after deducting certain amounts that GNT was entitled to retain to cover its costs and its agent service fee. In paragraph 97 of her affidavit, Ms Le deposes that, under those arrangements, “GNT was not buying the Neurio products from Sunnya it was assisting with the administration of the contracts Sunnya had entered into with the Chinese distributors”. Paragraphs 62 to 86 of Mr He’s affidavit affirmed on 19 September 2023 are to similar effect.

60. In paragraph 92 of her affidavit affirmed on 19 September 2023, Ms Lu deposes that: “Even though GNT was acting as an agent to import Neurio products and was not the buyer, Sunnya issued GNT with tax invoices. The price on these invoices was known as the export price.”

61. In paragraphs 123 to 138 of her affidavit, Ms Lu describes the Customs investigation that commenced in March 2021, as referred to in the He Parties’ Amended Defence. According to Ms Lu, she understood that Customs suspected Sunnya of “smuggling money out of China” for reasons that were unrelated to GNT’s remission to Sunnya of money collected from Chinese distributors under the distribution arrangements between Sunnya and GNT. Nevertheless, Ms Lu deposes that, as a result of the Customs investigation, it was agreed between Mr He, Ms Lu and representatives of Jatcorp in about July 2021 that:

“… Sunnya would implement a new system of recording sales in its accounts as a result of the Chinese customs investigation complaints. The major difference in the new system was that Sunnya was no longer entitled to the revenue from the sales to distributors in China as income. The revenue for Sunnya would be the export price and not the price paid by the distributors because the profit on the price sole to the distributors belonged to China.”

62. Mr He’s evidence in paragraphs 143 to 156 of his affidavit affirmed on 19 September 2023 is to similar effect.

63. Ms Lu refers to the invoices issued to GNT on which the “export prices” were recorded as the “commercial invoices”. I infer that what Ms Lu describes as the “export prices” in her affidavit are the prices that are referred to in the Amended Defence as the “import prices”.

64. Ms Lu then describes a process that was undertaken from about July 2021 to January 2022 to transition each distributor in China that had a contract with Sunnya to a new contract with GNT “because Chinese customs did not want Sunnya entering into direct contracts with distributors”.

65. The affidavits of Ms Lu and Mr He to which I have referred above were tendered by the plaintiffs in support of their application for leave to amend. Those affidavits were not tendered or admitted as evidence of the truth of their contents.

66. By the proposed category 4 amendments, the plaintiffs seek leave to plead that:

1. prior to about April 2021, Sunnya had entered into contracts for the sale of its Neurio products to distributors in China (the “Chinese Distributor Customers”);

2. from about April 2019 to March 2021, GNT acted as the importer of Sunnya’s Neurio products into China and arranged for the delivery of those products to Sunnya’s Chinese Distributor Customers, collected payments from those Chinese Distributor Customers on behalf of Sunnya, and remitted those payments to Sunnya after deducting GNT’s fees and costs as importer (the “Import Arrangement”);

3. GNT did not purchase Neurio products from Sunnya under the Import Arrangement, yet Mr He and/or Ms Lu caused or permitted Sunnya to prepare and issue to GNT documents described as “Commercial Invoices” that described GNT as the buyer and Sunnya as the Seller, and recorded a price described as the “export price”, which was less than the prices for which Sunnya was selling the Neurio products to its Chinese Distributor Customers;

4. the Commercial Invoices did not record a transaction that was in fact entered into or completed between Sunnya and GNT;

5. from about April 2019 until about March 2022, GNT presented the Commercial Invoices to Chinese Customs for the assessment of import duties and/or taxes to be paid for the importation of the Neurio products into China, and that GNT did so as the alter ego of Mr He and/or Ms Lu, or at their direction or request, or with their encouragement or endorsement;

6. these matters exposed Sunnya to a reasonably foreseeable risk of harm to its interests, including the risk of being investigated by Customs and the risk of having to accept the export price recorded in the Commercial Invoices for its Neurio products rather than the higher prices under its contracts with the Chinese Distributor Customers;

1. during the period from about April to July 2021, Mr He and/or Ms Lu caused or permitted Sunnya to make the changes to its distribution arrangements referred to at [61] above, which Mr He and Ms Lu contend (but the plaintiffs do not accept) were required as a result of the Customs investigation;

2. GNT—acting as the alter ego of Mr He and/or Ms Lu, or at their direction or request, or with their encouragement or endorsement—entered into new agreements with Sunnya’s Chinese Distributor Customers under which GNT sold Sunnya’s Neurio products to those customers and retained the proceeds of those sales for itself; and

3. by their alleged conduct referred to above, Mr He and Ms Lu breached their statutory and fiduciary duties owed to Sunnya, and GNT was involved in the alleged breaches of statutory duty, knowingly assisted the alleged breaches of fiduciary duties, and knowingly received the benefit of the contracts with Sunnya’s Chinese Distributor Customers.

67. I accept the plaintiffs’ submissions that the proposed category 4 amendments arise out of the recently served affidavits of Mr He and Ms Lu, and particularly the affidavit of Ms Lu in which she describes a practice of Sunnya issuing invoices to GNT for Neurio products that Sunnya exported into China through GNT as its agent, notwithstanding that GNT was not in fact purchasing those Neurio products from Sunnya. I note that, at the hearing on 20 October 2023, the He Parties’ did not dispute the plaintiffs’ characterisation of this evidence as evidence of a practice of issuing false invoices, which stipulated a false “export price”. The proposed category 4 amendments are based on that practice, and the plaintiffs’ contentions concerning the legality of the practice, the risks arising from it, and the causal connection between the existence of the practice and the loss of revenue resulting from Sunnya’s response to the Customs investigation. The practice of issuing these “Commercial Invoices” was not disclosed in the He Parties’ Amended defence filed in the Sunnya proceedings on 5 July 2023. The He Parties did not submit that the plaintiffs were aware of the Commercial Invoices before they were served with the affidavits of Mr He and Ms Lu affirmed on 19 September 2023, or that the plaintiffs could reasonably have formulated the proposed category 4 amendments at an earlier stage of these proceedings.

68. The He Parties opposed the plaintiffs’ application for leave to amend in respect of category 4 on the basis that it would require them to investigate additional factual matters in relation to the alternative courses of action available to Sunnya, both in the period from April 2019 to March 2021, and in the period during and following the Customs investigation. The He Parties’ solicitor, Stefano Del Monaco, gave evidence in his affidavit affirmed on 18 October 2023 referring to the need to make those inquiries if the proposed category 4 amendments were allowed. Mr Del Monaco stated: “I have not undertaken this task to date but I will need to do so if leave is granted to add these claims”. Mr Del Monaco did give any evidence about the time that would be likely to be required in order to undertake the task. It was not submitted on behalf of the He Parties that this could not be done, and that they could not file a defence responding to the category 4 amendments and any further evidence relating to the subject matter of those amendments, in time for the hearing to commence on 28 November 2023. Senior counsel for the plaintiffs assured the Court that the plaintiffs have served all of their affidavit evidence in chief and that the plaintiffs would not be seeking to adduce further evidence in chief in respect of any of the proposed amendments, including category 4, if leave to amend is granted. I infer that the He Parties are in a position to promptly adduce any evidence on which they would wish to rely in response to the plaintiffs’ evidence relating to the category 4 amendments, as Mr He and Ms Lu are the persons who instituted the Commercial Invoices practice and participated in the decision about Sunnya’s response to the Customs investigation. They must know what their reasons for those actions and decision were, including the availability or lack of availability of any alternative courses of action. It does not seem to me that it would be a difficult or time consuming exercise for Mr He and Ms Lu to provide instructions about those matters to their legal representatives now for the purpose of defending the plaintiffs’ proposed claims that are the subject of the category 4 amendments. I draw those inferences more comfortably in the absence of any evidence from Mr Del Monaco to the contrary.

Category 5: Proposed claims against Mr He and Ms Lu in respect of the purported termination of the “Purported 2014 Commission Agreement”, the “Purported 2014 Authorisation Agreement”, the “Purported 2020 Commission Agreement”, and the “Purported 2020 Authorisation Agreement”

69. The proposed category 5 amendments concern agreements that the He Parties contend that Sunnya entered into with GABT in 2014 and 2020, pursuant to which GABT authorised Sunnya to register Neurio trademarks in Australia and certain other countries (excluding China), GABT authorised Sunnya to use those trademarks, and GABT retained the right to terminate those agreements without cause and to require Sunnya to assign the trademarks to GABT. The plaintiffs deny that those agreements were entered into, and deny that they were valid and binding if they were purportedly entered into. Accordingly, the plaintiffs refer to them as the “Purported 2014 Commission Agreement”, the “Purported 2014 Authorisation Agreement”, the “Purported 2020 Commission Agreement”, and the “Purported 2020 Authorisation Agreement”. Nevertheless, the plaintiffs now seek leave to amend to introduce claims that Mr He and Ms Lu breached their statutory and fiduciary duties as directors of Sunnya by encouraging or endorsing GABT on or about 21 October 2022 to “purport to terminate each of the … purported agreements” and to demand that Sunnya transfer to GABT all Neurio trademarks held by Sunnya.

70. Neither the He Parties nor the NZ defendants object to the proposed category 5 amendments to that extent. There is no suggestion that those amendments will put the hearing dates at risk, or will prolong the hearing.

71. The He Parties do object to the category 5 amendments to the extent that they would introduce an additional claim for relief in proposed prayer 68B of the 3FASOC for a declaration that the purported termination of the purported agreements on 21 October 2022 “is not valid”. I accept the He Parties’ submission that no cause of action is pleaded in the proposed 3FASOC that would support that claim for relief. I note that the plaintiffs did not respond to that submission.

Category 6: Proposed amendments to bring the pleadings into line with the evidence in relation to the “Under Value Sales” and “Under Value Scheme” claims

72. The proposed amendments in category 6 were not the subject of written or oral submissions. They were identified in correspondence received from the parties in the days after the hearing on 20 October 2023 as amendments that the plaintiffs press, some of which are opposed by the He Parties.

73. The following is a list that I have prepared of the category 6 amendments proposed by the plaintiffs, with a notation indicating whether or to what extent they are opposed by the He Parties. The NZ defendants did not oppose any of the amendments except to the extent that they may put the hearing dates at risk. No party made submissions about whether the amendments listed below would put the hearing dates at risk. The list below includes the observations that I have made based on my brief review of these proposed amendments. My review has been of a cursory nature in circumstances where the parties did not trouble themselves to make submissions about these proposed amendments, and the parties expect the Court to determine the amendment application promptly to facilitate their continuing preparation for trial.

Proposed 3FASOC paragraph	Opposed	Not opposed	Subject matter of proposed amendment and observations
75	•	Amendment of existing pleading that GNT has been acquiring Neurio branded products from Sunnya for sale in China since April 2019. Amendment pleads that this was in addition to GNT having acted as the importer of Sunnya’s products under the Import Arrangement that is the subject of the proposed category 4 amendments. The proposed amended paragraph 75 of the 3FASOC is consistent with paragraphs 72 to 75 of the He Parties’ Amended Defence filed on 5 July 2023 in the Sunnya proceedings. This proposed amendment should stand or fall with category 4.
76	•
77	•
85-88	•
90-90B	•	Part of proposed category 4—see above.
90G	•	Part of proposed category 4—see above.
90J	•	Part of proposed category 4—see above.
90K	•	Part of proposed category 4—see above.
91	•	Minor amendment to the existing paragraph 91 in a manner that is consistent with the proposed category 4 amendments—should stand or fall with category 4.
291	•	Minor amendments to the existing paragraph 291 in a manner that is consistent with the proposed category 4 amendments—should stand or fall with category 4.
293	•	Minor amendments to the existing paragraph 293 in a manner that is consistent with the proposed category 4 amendments—should stand or fall with category 4.
318a	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Part of proposed category 4—see above.
322a	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Inclusion of references to 90G and 90K is consistent with proposed category 4 amendments—should stand or fall with category 4.
330a	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Inclusion of references to 90G and 90K is consistent with proposed category 4 amendments—should stand or fall with category 4.
334a	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Inclusion of references to 90G and 90K is consistent with proposed category 4 amendments—should stand or fall with category 4.
342a	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Inclusion of references to 90G and 90K is consistent with proposed category 4 amendments—should stand or fall with category 4.
342b	•	Expansion of matters allegedly known to GNT to include Mr He’s alleged conduct relating to the Commercial Invoices that is the subject of proposed category 4 amendments—should stand or fall with category 4.
343a	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Inclusion of references to 90G and 90K is consistent with proposed category 4 amendments—should stand or fall with category 4.
343b	•	Expansion of matters allegedly known to GNT to include Ms Lu’s alleged conduct relating to the Commercial Invoices that is the subject of proposed category 4 amendments—should stand or fall with category 4.
344a	•	Expansion of existing allegation concerning conduct of GNT to include conduct pleaded in para 90J, which is part of proposed category 4—should stand or fall with category 4.
344b	•	Expansion of existing allegation concerning conduct of GNT to include conduct pleaded in para 90J, which is part of proposed category 4—should stand or fall with category 4.
345a	•	Expansion of existing allegation concerning conduct of GNT to include conduct pleaded in para 90J, which is part of proposed category 4—should stand or fall with category 4.
347a(vi)	Oppose inclusion of reference to 90G and 90K	Do not oppose inclusion of reference to 93	Inclusion of references to 90G and 90K is consistent with proposed category 4 amendments—should stand or fall with category 4.
348a	•	Expansion of existing allegation concerning benefits alleged received by GNT as a result of alleged breaches of fiduciary duty by Mr He and/or Ms Lu to include the contracts with Sunnya’s Chinese Distributor Customers—should stand or fall with category 4.
349a	•	Expansion of existing allegation concerning benefits alleged received by GNT as a result of alleged breaches of fiduciary duty by Mr He and/or Ms Lu to include the contracts with Sunnya’s Chinese Distributor Customers—should stand or fall with category 4.
355a	•	Expansion of existing allegation that GNT knowingly assisted alleged breaches of fiduciary duty by Mr He to include the alleged breaches that are the subject of proposed category 4—should stand or fall with category 4.
355b	•	Expansion of existing knowing assistance allegation against GNT to include conduct pleaded in para 90J, which is part of proposed category 4—should stand or fall with category 4.
356a	•	Expansion of existing allegation that GNT knowingly assisted alleged breaches of fiduciary duty by Ms Lu to include the alleged breaches that are the subject of proposed category 4—should stand or fall with category 4.
356b	•	Expansion of existing knowing assistance allegation against GNT to include conduct pleaded in para 90J, which is part of proposed category 4—should stand or fall with category 4.

Category 7: Proposed amendments in relation to existing s 37A claims against Mr He, Ms Lu and HLW

74. As I have already mentioned under category 1 above, the He Parties do not oppose a grant of leave in respect of the category 7 amendments. It is not suggested that those amendments will cause the hearing to be vacated, or will extend the duration of the hearing. In those circumstances, the NZ defendants do not oppose a grant of leave for the plaintiff to make the amendments proposed in category.

Category 8: Proposed amendments to bring the pleadings into line with the evidence in relation to the licence

75. This category comprises proposed prayer 36A and proposed paragraph 104A of the 3FASOC.

76. Prayer 36A forms part of the proposed category 2 amendments, which I have addressed above.

77. The He Parties oppose the amendment in proposed paragraph 104A. That proposed new paragraph seems to me to lack utility because it adds nothing to the existing paragraph 61. In the absence of any submissions made by the plaintiffs explaining this amendment, leave should be refused.

Category 9: Proposed amendments to bring the pleadings into line with the evidence in relation to “miscellaneous factual matters”

78. The plaintiffs’ proposed category 9 comprises:

1. the proposed amendments marked in paragraphs 23, 84A, 203, 306, and 307 of the 3FASOC, which are not opposed by the He Parties or by the NZ defendants; and

2. the proposed amendments marked in paragraphs 79, 96, and 99 of the 3FASOC, which are opposed by the He Parties.

79. The proposed amendment to paragraph 79 is a materially expanded description in the scope of the business of Sunnya, which is one of the foundational allegations for the plaintiffs’ claims in relation to the opportunity to register a trademark for to Guamis brand, and to become the promoter and distributor of Guamis products. The proposed amendments to paragraphs 96 and 99 flow from the proposed amendment to paragraph 79, in that they are allegations that Mr He and/or Ms Lu caused Sunnya to commence producing and selling an expanded range of products under the Guamis brand, and to develop the Guamis brand for that expanded range of products. Unassisted by any submissions made by any party in relation to these proposed amendments, it seems to me that they would be likely to require the He Parties to review their evidence and potentially to adduce further evidence. The effect of these proposed amendments on the hearing dates and the length of the hearing dates is unknown. There is no explanation for the lateness of the plaintiffs’ application for leave to make these proposed amendments.

Categories 10 and 11: Withdrawal of claims

80. Category 10 involves the deletion of allegations in relation one batch of Neurio products, which the plaintiffs no longer wish to press. Category 11 involves the withdrawal of the claim for a declaration that the distribution agreement between Sunnya and GNT entered into in March 2019 is void, or an order setting it aside. The plaintiffs no longer wish to press their claim for that relief. Neither the He Parties nor the NZ defendants oppose any of the proposed amendments in categories 10 and 11.

Consideration and determination of the plaintiffs’ application for leave to amend

81. In determining the plaintiffs’ application for leave in respect of the eleven categories of proposed amendments, the Court must exercise the discretion under s 64 of the Civil Procedure Act 2005 (NSW) in a manner that seeks to give effect to the overriding purpose of facilitating the just, quick, and cheap resolution of the real issues in the proceedings. [41] The provision in s 64(2) that all necessary amendments are to be made for the purpose of determining the real questions raised by or depending on the proceedings is subject to s 58, which requires the Court to seek to act in accordance with the dictates of justice. In determining what are the dictates of justice in the particular case, s 58 requires the Court to have regard to the overriding purpose, and permits the Court to have regard to a range of matters that include the degree of difficulty or complexity to which the issues in the proceedings give rise, the degree of expedition with which the parties have approached the proceedings (including interlocutory activities), the extent to which any lack of expedition by a party is attributable to that party or to circumstances beyond that party’s control, and the degree of injustice that would be suffered by the parties as a consequence of leave to amend being granted, or being refused.

    41. Civil Procedure Act 2005 (NSW), s 56.

82. A just resolution of the proceedings is the paramount objective. Any amendment will usually occasion some waste of costs, and some delay. However, a just resolution of the proceedings does not require that a party be permitted to raise any arguable case, at any stage of the proceedings, subject to an order requiring it to pay the other parties’ costs thrown away by the amendment. An order for costs does not always ameliorate the prejudice that those other parties suffers by reason of a late amendment, particularly if the amendment causes the hearing to be vacated at a time when the proceedings were otherwise ready for trial. As Gummow, Hayne, Crennan, Kiefel, and Bell JJ said in Aon Risk Services Australia Limited v Australian National University (emphasis in original):[42]

“[111]   An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. …

[112]   A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.

[113]   In the past it has been left largely to the parties to prepare for trial and to seek the court’s assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.”

116. The plaintiffs’ claims against the NZ defendants in the Sunnya proceedings are principally claims that those defendants are liable to the plaintiffs by reason of having been involved in, having knowingly received the proceeds of, or having knowingly assisted in, alleged breaches of statutory and fiduciary duties owed by Mr He and Ms Lu as directors of Sunnya. Thus, in the event that the plaintiffs’ claims in the Sunnya proceedings do not succeed against the He Parties, it is likely that their claims against the NZ defendants will also fail, and that the plaintiffs will be the subject of adverse costs orders in relation to the costs of both the He Parties and the NZ defendants. There is no evidence of the likely amount of the NZ defendants’ costs, but the nature of the proceedings is such that those costs would also be considerable.

117. As senior counsel for the He Parties submitted, the threshold question is not whether there is reason to believe that the plaintiffs will be unable to pay the He Parties’ future costs estimated at $807,000 if ordered to do so. Rather, the question is whether there is reason to believe that the plaintiffs will be unable to pay the He Parties costs of defending the Sunnya proceedings if ordered to do so, in circumstances where the He Parties’ costs are likely to be in the order $1.98 million, [44] the plaintiffs are likely to also be the subject of an adverse costs order in respect of the NZ defendants’ costs of the proceedings, and the failure of the plaintiffs’ claims (in this hypothetical scenario that applies for present purposes) points to the possibility that the plaintiffs would also be liable for compensation under their undertakings as to damages given in respect of the freezing orders and interim injunctions ordered against Mr He, Ms Lu and other defendants on the application of the plaintiffs in the Sunnya proceedings. There is no evidence presently before the Court about the likely amount of any such compensation in that scenario.

     44. Approximately 60 per cent of $3.3 million.

118. On the basis of the evidence referred to above, I am not satisfied that there is reason to believe that the plaintiffs will be unable to pay the costs of the He Parties of the Sunnya proceedings if ordered to do so. The net assets of Sunnya (of approximately $4.443 million, after allowing for the reduction in its cash assets after 30 June 2023) together with the net assets of Jatcorp (approximately $5.247 million as at 30 June 2023) are adequate to meet a potential future liability in respect of the He Parties’ costs of approximately $1.98 million, which would be reduced somewhat on assessment, even taking into account that the assets of Sunnya and Jatcorp are likely to be depleted by the costs that they will incur in relation to the Sunnya and All168 proceedings over the coming weeks, and having regard to the fact that any liability they may incur in respect of the He Parties’ costs of the Sunnya proceedings would be likely to coincide with a liability in respect of the NZ defendants’ costs and a possible liability under the plaintiffs’ undertakings as to damages. It is to be expected that there will be some changes in the net assets of Sunnya and Jatcorp between the date of these reasons and the date on which these proceedings are determined. However, the evidence does not disclose any rational basis for inferring that any reduction in the net assets is likely to be material compared to the value of those net assets as at 30 June 2023. On the contrary, Jatcorp has consistently reduced its losses and increased the value of its net assets over the past four financial years. Given its demonstrated ability to raise capital to fund its losses to date, there is no basis for inferring that Jatcorp would be unlikely to be able to raise further capital if that were to be necessary in order to fund any loss that was caused in part by being ordered to pay the He Parties’ costs of the Sunnya proceedings.

119. It follows that the Court’s jurisdiction to order security for the He Parties’ costs is not engaged, and discretionary matters and questions of quantum do not arise. There will be an order dismissing the He Parties’ application for security for costs.

Sunnya’s application for Mr Lin Maocheng to give evidence by AVL

123. In the Sunnya proceedings, the plaintiffs have served an affidavit of Mr Lin Maocheng affirmed on 4 August 2023. I understand that Mr Lin is a citizen of the People’s Republic of China. According to Mr Lin’s affidavit, he is employed by Chengdu Kuaiyi E-commerce Limited Company as an operations manager, and his address is in the Sichuan Province of China. Mr Lin deposes that he was asked on five occasions during the period from February to May 2023 to purchase specified Neurio and Guamis products from the Neurio flagship store online. Mr Lin’s affidavit exhibits documents recording each of those purchases, and photographs of the products that were subsequently delivered to him. I infer that the plaintiffs, or someone acting on their behalf, made these requests of Mr Lin.

124. On 29 August 2023, the He Parties notified the plaintiffs’ solicitors that Mr Lin was required for cross-examination.

125. The plaintiffs’ solicitors sent an email to Mr Lin on 29 August 2023 asking him to advise whether he would be able to attend the hearing to be cross-examined, and, if not, the reasons why not. At that stage, the hearing was due to commence on 28 September 2023.

126. In a subsequent exchange of WeChat messages, Mr Lin informed the plaintiffs’ solicitors that he would need about 45 days to obtain a passport, that his visa application for Australia may not be approved as he had never travelled to Australia previously, and that he did not have time to travel to Australia in any event because September, October, and November are very busy times for him as an e-commerce operator in China. Eventually, Mr Lin agreed that he could travel to the Hong Kong SAR for one day during the period from 10 to 13 October to give evidence by AVL, if required.

127. Subsequently, the plaintiffs’ solicitors sent a further WeChat message to Mr Lin advising that the hearing would now commence on 28 November 2023, and asking whether he would be able to attend the hearing in Sydney to give evidence during that period. Mr Lin replied:

“I am not able to come to Australia. Reasons: I have never been overseas before. Applying for a passport is troublesome and I may not be able to get it. The company is very busy during November and December so I have not time to travel.”

128. There is no evidence that Mr Lin has taken any step to apply for a passport and visa that would facilitate his travel to Australia for the purpose of giving evidence in these proceedings. There is no evidence of any reason why he would or might be refused a passport or a visa if he were to make those applications.

129. Prayer 3 of the interlocutory process filed by the plaintiffs in the Sunnya proceedings on 11 October 2023 seeks a direction pursuant to s 5B of the AVL Act that Mr Lin give evidence by AVL from the Hong Kong SAR. No party opposed this application.

130. Section 5B(1) of the AVL Act confers power on the Court to make such a direction. However, s 5B(2) provides that the Court must not make such a direction in certain circumstances, including if “the court is satisfied that the evidence … can more conveniently be given or made in the courtroom or other place where the court is sitting”.

131. If the direction is made, s 5C of the AVL Act provides that the place in the Hong Kong SAR at which AVL facilities are used for the purpose of Mr Lin giving evidence will be taken to be part of the Supreme Court of New South Wales, including for the purposes of the laws relating to evidence, procedure, contempt of court and perjury.

132. In my opinion, the receipt of evidence by this Court given by Mr Lin from the Hong Kong SAR by AVL would be an exercise of jurisdiction by this Court within the territorial confines of the Hong Kong SAR. This Court would exercise jurisdiction over Mr Lin—a citizen of the People’s Republic of China—for the duration of his evidence, including by determining whether or not he is required to take an oath or make an affirmation before giving evidence, by determining whether he will be permitted to give evidence through an interpreter, by making orders in relation to the way in which he is to be questioned and in relation to the production and use of documents in connection with his cross-examination, by determining any application by Mr Lin for leave to use a document to revive his memory in the course of giving evidence and requiring him to produce any such document to parties in the proceedings, and by determining any objection to answering a question on the grounds of privilege. [45] Mr Lin would be liable to prosecution or punishment in accordance with New South Wales law for any perjury or contempt of court that he may commit in the course of giving his evidence, which is deemed to be given in the courtroom in New South Wales where this Court will be sitting. [46] Of course, any proceedings in respect of any such perjury or contempt could not be prosecuted without the assistance of the relevant authorities in the People’s Republic of China or the Hong Kong SAR in facilitating Mr Lin being brought before this Court for the purpose of those proceedings. However, this does not detract from the fact that Mr Lin will have become liable to prosecution for that alleged offence as a result of his conduct during the exercise of this Court’s jurisdiction while receiving Mr Lin’s evidence given by AVL given from the Hong Kong SAR.

     45. AVL Act, ss 5C and 5D; Evidence Act 1995 (NSW), ss 21, 26, 28, 29, 30, 32, 128.

     46. AVL Act, s 5C.

133. In my opinion, absent some law or rule that applies in the Hong Kong SAR that permits foreign courts to take evidence by AVL from persons who are within the geographical territorial confines of the Hong Kong SAR, or some specific permission granted by relevant authorities in the Hong Kong SAR for this Court to take evidence given by Mr Lin by AVL from the Hong Kong SAR, the exercise of this Court’s jurisdiction in the manner described above would impinge on the sovereignty of the People’s Republic of China in respect of the Hong Kong SAR. I refer to sovereignty in the sense of internal independence, including freedom from the exercise of jurisdiction by foreign states, without permission, within the geographical confines of the Hong Kong SAR. [47]

     47. See Joyce v Sunland Waterfront (BVI) Ltd (2011) 195 FCR 213; (2011) 281 ALR 54; [2011] FCAFC 95 at [55]-[56] and [63] (Keane CJ, Dowsett and Greenwood JJ) (Joyce) and the authorities there cited; see also J R Crawford, Brownlie’s Principles of Public International Law (Oxford University Press, 9th ed, 2019), at page 462, citing The Case of the SS Lotus [1927] PCIJ Ser A No 10 at 18-19.

134. I acknowledge that my opinion differs from that of the Full Court of the Federal Court in Joyce v Sunland Waterfront (BVI) Ltd,[48] and from the views of the learned authors of Nygh’s Conflict of Law’s in Australia. [49] In coming to my opinion, I have considered the issues raised by Basten AJ in Wang Chunfeng v Law Society of New South Wales (Wang Chunfeng). [50] His Honour was not required to determine those issues in that case. I have also taken into account that the legislation applied by the Full Court in Joyce did not include a provision equivalent to s 5C of the AVL Act deeming the foreign territory where the witness is located to be part of the Court that is taking the evidence of the witness by AVL.

     48. Joyce at [63] (Keane CJ, Dowsett and Greenwood JJ).

     49. M Davies, A S Bell, P L G Brereton, and M Douglas, Nygh’s Conflict of Laws in Australia (LexisNexis, 10th ed, 2020), paragraph 11.25.

     50. [2022] NSWSC 986, especially at [20]-[28].

135. I note that my opinion is consistent with the following observation of Perram J in Motorola Solutions Inc v Hytera Communications Corporation Ltd—a case involving an issue about whether evidence could be taken by AVL from witnesses in China (emphasis added):[51]

“The Civil Procedure Law of the People’s Republic of China (1991) prevents those witnesses being cross-examined via video-conferencing while being located in China. The taking of evidence by this Court would be an exercise of sovereignty by the Commonwealth within the territorial confines of China and as such would require the permission of the Chinese State.”

51. [2020] FCA 539 at [2].

136. I do not understand Perram J’s observation that I have highlighted above to be founded on, and conditional on, the existence of the law which expressly precluded the witnesses in that case from giving evidence by AVL from the People’s Republic of China.

137. Foreign law is a question of fact to be proved by expert evidence. The plaintiffs have adduced no expert evidence in support of their application in this case. The plaintiffs’ solicitor, Mr Li, has exhibited to his affidavit affirmed on 10 October 2023 certain information that he has printed from internet searches about the extent to which laws of the People’s Republic of China apply in the Hong Kong SAR. That evidence does not identify any law that permits foreign states to take evidence by AVL from witnesses who are located in the Hong Kong SAR. Mr Li has also given evidence that a Ms Jezamine Fewins, a senior legal practitioner in the Hong Kong SAR, has informed Mr Li that she is not aware of any legal or practical restriction in the Hong Kong SAR that would prevent a Chinese citizen from giving evidence by AVL from the Hong Kong SAR in proceedings in a foreign jurisdiction. This hearsay evidence of the state of mind of a foreign legal practitioner is no substitute for expert evidence. Moreover, the evidence does not address the question whether any law applicable in the Hong Kong SAR expressly permits foreign states to exercise their jurisdiction within the geographical territory of the Special Administrative Region in the manner proposed by the plaintiffs in this case.

138. Mr Li’s affidavit refers to the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Convention), [52] and identifies information that he has found through internet searches about the likely time that would be required for relevant authorities in the People’s Republic of China to process any request for evidence to be taken by AVL in these proceedings. That information suggests that any such request may take between three and six months to process. Mr Li deposes that, in view of those time frames, he has taken no steps to date to make any request through the Attorney-General’s Department. In any event, the Hague Convention does not apply to the taking of evidence by a court of a contracting state by AVL from persons within the territory of another contracting state, as explained by Basten AJ in Wang Chunfeng. [53] My research suggests that an application for assistance might be made to the Hong Kong SAR Court of First Instance under Part VIII of the Evidence Ordinance (Hong Kong), but my research is no substitute for expert evidence of the relevant foreign law. [54] Assuming that the Evidence Ordinance (Hong Kong) is currently in force in the Hong Kong SAR, there may be other relevant laws that affect its application in the circumstances of this case. Amongst other things, it is not clear in the absence of expert evidence whether Part VIII of the Evidence Ordinance (Hong Kong) applies to a person who is a citizen of the People’s Republic of China, but who is not ordinarily resident in the Hong Kong SAR, and who plans to travel to the Hong Kong SAR for the specific purpose of giving evidence in foreign proceedings by AVL.

     52. Opened for signature 18 March 1970, 847 UNTS 231 (entered into force 7 October 1972).

     53. [2022] NSWSC 986, especially at [11] and [17].

     54. I acknowledge the industry of my Tipstaff in identifying Part VIII of the Evidence Ordinance (Hong Kong).

139. As I have already mentioned, s 5B(2)(b) of the AVL Act provides that the Court must not make a direction for a witness to give evidence by AVL from a location within or outside New South Wales if the Court is satisfied that the evidence can “more conveniently be given … in the courtroom or other place at which the court is sitting”. It will almost always be more convenient to the witness, and to the party calling the witness, for the witness to give evidence by AVL without being required to travel to the place where the Court is sitting. Section 5B(2)(b) has no work to do, unless it is read as referring to the convenience of the other parties and of the Court, in addition to the convenience of the witness and the party calling the witness. That is how I understand s 5B(2)(b). In the present case, the evidence does not establish that Mr Lin is unable to travel to New South Wales. The evidence establishes that the plaintiffs caused Mr Lin to purchase Neurio and Guamis products for the purpose of creating evidence to be used in these proceedings, and served Mr Lin’s affidavit on the defendants, without having made any arrangements for Mr Lin to travel to New South Wales to give evidence in due course, and without even enquiring about his willingness to do so. Mr Lin is reluctant to do so because he does not wish to take time away from his business activities in China. In their correspondence with Mr Lin to which I have referred above, the plaintiffs’ solicitors have not pressed Mr Lin about this, and have allowed him to believe that it will suffice for him to travel to the Hong Kong SAR. The plaintiffs’ solicitors have taken no steps to seek the permission or assistance of relevant authorities in the Hong Kong SAR for Mr Lin to give evidence in proceedings in this Court by AVL from the Hong Kong SAR. From the perspective of the Court, it is important to avoid impinging on the sovereignty of the People’s Republic of China in respect of the Hong Kong SAR. The convenience of Mr Lin does not trump this important consideration. That is all the more so in circumstances where it would have been open to the plaintiffs to choose another person who is willing to travel to Australia to purchase the products that Mr Lin was asked to purchase, and to give the evidence that Mr Lin has given. In all the circumstances of this case, it is more convenient for the Court and for the administration of justice for Mr Lin’s evidence to be given in the courtroom in New South Wales. The consequence of that finding is that the plaintiffs’ application for Mr Lin to give evidence by AVL from the Hong Kong SAR must be declined by reason of s 5B(2)(b) of the AVL Act.

140. If I am wrong in construing s 5B(2)(b) of the AVL Act as including the convenience of the Court, I would have declined to exercise the discretion to permit Mr Lin’s evidence to be given by AVL from the Hong Kong SAR in any event for all of the reasons explained above.

Orders

141. For the foregoing reasons, the orders of the Court are as follows:

Proceeding 2022/329426 (the “Sunnya proceedings”)

1. Pursuant to rule 11.8AA of the Uniform Civil Procedure Rules 2005 (NSW), grant leave to the plaintiffs to proceed against the fourth defendant.

2. In relation to prayers 1 and 2 of the plaintiffs’ interlocutory process filed on 11 October 2023, grant leave to the plaintiffs to amend by filing and serving by 5:00pm on 1 November 2023 a Third Further Amended Statement of Claim containing the amendments marked in the following prayers and paragraphs of the document emailed to the Associate to Justice Williams at 2:00pm on 24 October 2023:

1. paragraphs 167A-167E, 318h2, 322h2, 330i2, 334i2, 336, 342e1, 343f1, 344e1, 345f1, 347f1, 348d1, 349d1, 355f1, 356f1, 357f1, 362f1, 367d1, 368d1, 369d1, 370d1, 372d1, 373e1, 374e1, 375e1, 380e1, 385d1, 386d1, 387d1, 388d1, 390d1, 391e1, 392e1, 393e1, 398e1, 448k, 449k, 450k, 451k, 453l, 454h, 455h, 461k, 462k, 463k, and 468k—being the amendments described as category 3 in the reasons for judgment delivered on 30 October 2023;

1. paragraphs 74A – 74L, 90C – 90K; 306d, 318a1, 318B, 321A, 322a1, 330a1, 330B, 333A, 334a1, 342a1, 343a1, 344a1, 345a1, 347a1, 355a1, 356a1, 357a1 and 362a1—being the amendments described as category 4 in the reasons for judgment delivered on 30 October 2023;

2. paragraphs 122A, 122B, 318h1, 322h1, 330i1, 334i1, 448j, 449j, 450j, 451j, 453k, 461j, 462j, 463j, 468j, 536f and 537k—being the amendments described as category 5 in the reasons for judgment delivered on 30 October 2023;

3. paragraphs 75, 76, 77, 85-88, 90-90B, 90G, 90J, 90K, 91, 291, 293, 318a, 322a, 330a, 334a, 342a, 342b, 343a, 343b, 344a, 344b, 345a, 345b, 347a(vi), 348a, 349a, 355a, 355b, 356a and 356b—being the amendments described as category 6 in the reasons for judgment delivered on 30 October 2023;

4. prayers 16E-16F, 30E-30F and paragraphs 138A, 138B, 214A, 219A—being the amendments described as category 7 in the reasons for judgment delivered on 30 October 2023;

5. paragraphs 23A, 84A, 203, 306 and 307 being some of the amendments described as category 9 in the reasons for judgment delivered on 30 October 2023;

6. the deletion of paragraphs 111 and 112—being the amendments described as category 10 in the reasons for judgment delivered on 30 October 2023; and

7. the deletion of prayers 74 and 76(a) and paragraphs 72, 74 and 89—being the amendments described as category 11 in the reasons for judgment delivered on 30 October 2023.

3. Order the plaintiffs to pay the defendants’ costs thrown away by reason of the amendments in respect of which leave has been granted in order (2) above.

4. Order that the plaintiffs’ application for leave to amend made by prayers 1 and 2 of the interlocutory process filed on 11 October 2023 is otherwise dismissed.

5. Note that the plaintiffs have served all of their affidavit evidence in chief, including the evidence in chief on which they will seek to rely in relation to the amendments in respect of which leave has been granted in order (2) above.

6. Order that the plaintiffs are not entitled to rely on any affidavit evidence in chief purportedly served after 20 October 2023, without leave of the Court.

7. Order the defendants to file and serve their defences to the Third Further Amended Statement of claim, and to serve any affidavit evidence on which they will seek to rely in relation to the amendments the subject of order (2) above, by 5:00pm on 16 November 2023, and the defendants shall not be entitled to rely on any such evidence served after that time without leave of the Court.

8. Order the plaintiffs to serve any affidavit evidence in reply to the defendants’ affidavits in order (7) above by 5:00pm on 23 November 2023, and the plaintiffs shall not be entitled to rely on any such reply evidence served after that time without leave of the Court.

9. Extend the time for provision of the court book to 5:00pm on 23 November 2023, and direct the parties’ solicitors to undertake all necessary consultation in relation to the contents of the court book, and, consistently with their obligations under s 56(3) of the Civil Procedure Act 2005 (NSW), to take all other necessary steps required to facilitate the plaintiffs’ solicitors delivering the complete court book to the Associate to Justice Williams by 5:00pm on 23 November 2023.

10. Grant leave to the plaintiffs to file and serve the Reply purportedly filed on 19 October 2023 to the Amended Defence of the first, second and fifth to seventh defendants, with the exception of paragraphs 2 to 19 of the Reply, which are ordered to be struck out.

11. In relation to prayer 1 of the interlocutory process filed by the first, second and fifth to seventh defendants in the Sunnya proceedings on 11 October 2023, grant leave to the first and second defendants/proposed first and second cross-claimants to file and serve by 5:00pm on 1 November 2023 a cross-claim in the Sunnya proceedings substantially in the form of the document at pages 13-23 of Exhibit SDM-3 to the affidavit of Stefano Del Monaco affirmed on 11 October 2023 but excluding prayer 4 and paragraphs 19 to 22 of that document.

12. Note that prayer 2 of the of the interlocutory process filed by the first, second and fifth to seventh defendants on 11 October 2023 has been determined by orders made on 20 October 2023.

13. Order that prayers 3 and 4 of the interlocutory process filed on 11 October 2023 by the first, second and fifth to seventh defendants in the Sunnya proceedings are dismissed.

14. Order that prayer 3 of the interlocutory process filed on 11 October 2023 by the plaintiffs in the Sunnya proceedings is dismissed.

15. Order that the costs of all interlocutory processes heard on 20 October 2023 are reserved.

Proceeding 2022/333557 (the “All168 proceedings”)

1. In relation to the interlocutory process filed by the plaintiffs on 11 October 2023, grant leave to the plaintiffs to file and serve by 5:00pm on 1 November 2023 a Second Further Amended Statement of Claim substantially in the form of the document at pages 23A1-23A42 of Exhibit SDM-3 to the affidavit of Stefano Del Monaco affirmed on 11 October 2023.

2. In relation to the interlocutory process filed by the defendants on 16 October 2023:

1. grant leave to the defendants to file and serve by 5:00pm on 1 November 2023 an Amended Defence substantially in the form of Annexure A to the interlocutory process, but omitting paragraphs 54 to 71 of that document, and omitting the references to paragraphs 54 to 71 in paragraphs 13(c), 14(c), 15(b), 16(b), 17(e), 18(d), and 33(b) of that document; and

2. order that the interlocutory process is otherwise dismissed.

3. Order that the costs of all interlocutory processes heard on 20 October 2023 are reserved.

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Endnotes

Decision last updated: 30 October 2023