Ren v Sinicorp Pty Ltd
[2021] VSC 728
•12 November 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S CI 2014 02265
| JINGLI REN & ORS (according to the attached Schedule) | Plaintiffs and Defendants by Counterclaim |
| - and - | |
| SINICORP PTY LTD (ACN 125 090 815) | First Defendant and Plaintiff by Counterclaim |
| - and - | |
| AILI LIU | Second Defendant and Plaintiff by Third Party Notice |
| - and - | |
| JIAN YANG | Third Party |
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JUDGE: | Matthews AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 July 2021, 10 August 2021 |
DATE OF RULING: | 12 November 2021 |
CASE MAY BE CITED AS: | Ren & Ors v Sinicorp Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2021] VSC 728 |
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PRACTICE AND PROCEDURE – Application to dismiss claims and defences to counterclaim under s 56(2)(j) Civil Procedure Act 2010 (Vic) – Challenge to sufficiency of affidavits of documents - Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No. 4) [2010] FCA 863 - Ongoing and intentional failures to comply with discovery obligations and orders of the Court in relation to discovery – Conduct intended to delay, frustrate or avoid discovery of discoverable documents – Contumelious disregard for discovery obligations and Court orders – Prejudice to administration of justice – Appropriate to dismiss claims and defences to counterclaim, and no lesser remedy suitable – Hodgson v Amcor Ltd [2011] VSC 63 - British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 - Lenijamar Pty Ltd v AGC (Advances) Pty Ltd (1990) 27 FCR 388.
APPEARANCES: | Counsel | Solicitors |
| For the First and Second Plaintiffs | Francis Lim Barristers & Solicitors | |
| For the First Defendant | Mr P Clarke | Leem Lawyers |
| No appearance by or on behalf of any other party |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Material filed in relation to the Summons................................................................................. 2
Other relevant material................................................................................................................ 2
Background and pleadings.............................................................................................................. 3
Statement of Claim........................................................................................................................ 4
Defence and Counterclaim.......................................................................................................... 6
Reply and Defence to Counterclaim.......................................................................................... 8
History of discovery dispute............................................................................................................ 8
Initial steps and 2014 Summons.................................................................................................. 8
2015 Mukhtar Orders.................................................................................................................... 9
The 2016 Mukhtar Orders.......................................................................................................... 12
The 2016 Summons..................................................................................................................... 13
The 2019 Mukhtar Orders.......................................................................................................... 14
Cross-Examination of the Plaintiffs.......................................................................................... 17
Submissions...................................................................................................................................... 18
Sinicorp’s Submissions............................................................................................................... 18
Plaintiffs’ Submissions............................................................................................................... 22
Applicable principles...................................................................................................................... 25
Approach to the assessment of the Plaintiffs’ discovery......................................................... 31
Are the Affidavits of Documents conclusive?........................................................................ 31
The role and importance of the Mukhtar Orders in this application.................................. 33
Ren...................................................................................................................................................... 40
Has Ren failed to comply with discovery obligations or orders related to discovery, or engaged in conduct intended to delay, frustrate or avoid discovery of discoverable documents? 40
Ren’s general approach to discovery.............................................................................. 40
Particular classes of documents....................................................................................... 43
Bank records - evidence....................................................................................... 44
Consideration of bank records........................................................................... 50
Email correspondence between Ren and Hayes - evidence........................... 54
Consideration of email correspondence between Ren and Hayes................ 56
Documents relating to the sale, nomination, cancellation, settlement or transfer of Apartments in the Development - evidence.................................... 60
Consideration of Documents relating to the sale, nomination, cancellation, settlement or transfer of Apartments in the Development........... 62
Documents relating to the Trustworthy Loan and Zita Loan - evidence..... 65
Consideration of documents relating to the Trustworthy Loan and the Zita Loan................................................................................................................ 66
Conclusion - Ren has failed to comply with her discovery obligations and orders related to discovery, and she has engaged in conduct intended to delay, frustrate or avoid discovery of discoverable documents................................................................ 68
Is it appropriate to strike out Ren’s claim or defence to counterclaim, in whole or in part? 69
Pan....................................................................................................................................................... 74
Has Pan failed to comply with her discovery obligations or orders related to discovery, or engaged in conduct intended to delay, frustrate or avoid discovery of discoverable documents? 74
General comments regarding Pan’s discovery.............................................................. 74
Particular categories of documents................................................................................. 76
Bank Records - evidence..................................................................................... 76
Consideration of bank records........................................................................... 78
Documents leading up to the making of the Contract of Sale for Apartment 101 - evidence................................................................................................ 80
Conclusion - Pan has failed to comply with her discovery obligations and orders related to discovery, and she has engaged in conduct intended to delay, frustrate or avoid discovery of discoverable documents................................................................ 81
Is it appropriate to dismiss Pan’s claim and/or defence to counterclaim?........................ 81
Conclusion......................................................................................................................................... 82
HER HONOUR:
Introduction
By summons dated 7 June 2021 (‘Summons’) the First Defendant (‘Sinicorp’) seeks orders that the claims by the First Plaintiff, Chin Lee Ren (‘Ren’) and Second Plaintiff, Yi Pan (‘Pan’) against Sinicorp, and their defence to the counterclaim by Sinicorp, be dismissed pursuant to s 56(2)(j) of the Civil Procedure Act 2010 (Vic) (‘CPA’).
Section 56(2)(j) of the CPA provides for a power to dismiss a claim, defence or any part thereof of a party who is responsible for a failure to comply with discovery obligations or orders or directions of the Court in relation to discovery, or who is responsible for conduct intended to delay, frustrate or avoid discovery of discoverable documents.
This application does not concern the Third Plaintiff who, I understand, is now deceased. Nor does it concern the Fourth Plaintiff whom Sinicorp has not included in the application. For convenience, Ren and Pan will together be referred to as the Plaintiffs in these reasons.
For the reasons which follow, I find that:
(a) the Plaintiffs have failed to comply with their discovery obligations and with orders made by the Court for discovery;
(b) the Plaintiffs have engaged in conduct intended to delay, frustrate or avoid the discovery of discoverable documents;
(c) in doing so, the Plaintiffs have contravened their overarching obligations under the CPA and have engaged in conduct contemplated by s 56(1) of that Act;
(d) it is appropriate that the Plaintiffs’ claims against Sinicorp and their defences to Sinicorp’s counterclaim in this proceeding should be struck out; and
(e) no alternative remedy by way of a lesser but equally efficient sanction is suitable.
Material filed in relation to the Summons
In support of the Summons, Sinicorp relies upon the affidavits of its solicitor, Chuen Lim:
(a) sworn on 5 June 2021 (‘Lim 5 June Affidavit’) and the exhibits thereto; and
(b) sworn on 15 June 2021 (‘Lim 15 June Affidavit’) and the exhibits thereto.
The Plaintiffs rely on the following affidavits in response to the Summons:
(a) Affidavit of Jingli Ren affirmed on 18 June 2021 (‘Ren June Affidavit’); and
(b) Affidavit of Yi Pan affirmed on 18 June 2021 (‘Pan June Affidavit’).
Other relevant material
Ren has filed 6 affidavits of documents in the proceeding, being those affirmed on:
(a) 20 November 2014 (‘Ren’s First Affidavit of Documents’);
(b) 4 March 2015 (‘Ren’s Second Affidavit of Documents’);
(c) 23 April 2015 (‘Ren’s Third Affidavit of Documents’);
(d) 14 December 2015 (‘Ren’s Fourth Affidavit of Documents’);
(e) 12 March 2020 (‘Ren’s Fifth Affidavit of Documents’); and
(f) 5 February 2021 (‘Ren’s Sixth Affidavit of Documents’).
Pan has filed three affidavits of documents in the proceeding, being those affirmed on:
(a) 18 November 2014 (‘Pan’s First Affidavit of Documents’);
(b) 4 March 2015 (‘Pan’s Second Affidavit of Documents’); and
(c) 11 February 2021 (‘Pan’s Third Affidavit of Documents’).
The transcripts of Ren and Pan’s cross-examinations on these affidavits of documents pursuant to s 57 of the CPA are exhibited to the Lim 5 June Affidavit.
The Fourth Plaintiff filed an Affidavit on 11 May 2021 which Sinicorp refers to in relation to the Summons. Further, the transcript of the cross-examination of the Fourth Plaintiff on his affidavits of documents is also referred to by Sinicorp, and is exhibited to the Lim 15 June Affidavit.
Bundles of documents which had been discovered in the proceeding were provided to the Court and to the Plaintiffs for the purpose of cross-examination. Where those documents were referred to in the cross-examination, I have had regard to them as necessary.
Sinicorp filed a written outline of submissions on the Summons on 16 July 2021.
The Plaintiffs filed a written outline of submissions on 19 July 2021 in respect of the Summons (‘Plaintiffs’ First Outline’) and provided a further written outline of submissions by email on Monday 9 August 2021, which have not been filed (‘Plaintiffs’ Second Outline’).
I have had regard to all of the above material in considering the Summons.
Background and pleadings
The Summons arises in the context of a protracted dispute between the parties as to the adequacy and conduct of the Plaintiffs’ discovery. It is helpful to first set out the pleadings of the parties which form the context for the parties’ discovery, and then it is necessary to set out the history of the discovery dispute in some detail.
Sinicorp is the developer of a 20-apartment development at 21 Cambridge Street, Box Hill, Victoria, 3128 (‘Development’). In the relevant period there were two directors of Sinicorp:
(a) Huiyu Tian (‘Tian’) was appointed director on 2 May 2007 with an 80% shareholding in Sinicorp. Tian was and remains based in China;
(b) the Second Defendant, Aili Liu (‘Liu’), was appointed director on 2 May 2007 with a 20% shareholding, which Sinicorp says is held on a bare trust for Tian. Liu was the director normally resident in Australia, and is the mother of Pan.
Liu was removed as a director on 2 April 2012 following proceedings brought by Sinicorp for breach of fiduciary duties and contraventions of the CorporationsAct2001 (‘Corporations Act’).
The Plaintiffs commenced these proceedings by originating motion on 9 May 2014. The proceeding was ordered to proceed as if commenced by writ pursuant to r 4.07(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) by orders of the Honourable Associate Justice Derham dated 4 August 2014 (‘2014 Derham Orders’). There have since been a number of iterations of the parties’ pleadings. The current pleadings are, relevantly:
(a) the Plaintiffs’ third amended statement of claim dated 2 May 2018 (‘Statement of Claim’);
(b) Sinicorp’s third further amended defence and counterclaim dated 18 April 2019 (‘Defence and Counterclaim’); and
(c) the Plaintiffs’ further amended reply and defence to the third amended defence and counterclaim dated 1 July 2019 (‘Reply and Defence to Counterclaim’).
Statement of Claim
The Plaintiffs allege that they entered into contracts of sale with Sinicorp for apartments in the Development (‘Contracts of Sale’), and that they are entitled to specific performance and declarations in relation to the Contracts of Sale including that Sinicorp is estopped from denying the enforceability of the Contracts of Sale. The Plaintiffs also seek damages for the loss of use of money comprising alleged payments made pursuant to the Contracts of Sale. The Plaintiffs also seek damages in the amount of the alleged payments.
Ren alleges that she entered into Contracts of Sale for Apartments 102 to 108 inclusive in the Development in or about August 2010 following representations that Liu was authorised to sell the apartments. The Contracts of Sale were dated 31 October 2008, and provided for payments of purchase prices between $348,900 and $446,900 to James Yang, the Third Party in the Proceeding (‘Yang’), and/or to LWY Constructions Management Pty Ltd (‘LWY’), who were responsible for construction of the Development in August 2010. Ren alleges that a number of payments were made to Yang’s Chinese bank account between September 2010 and June 2011, which Ren says amounts to a combined sum of approximately $244,503.39 (‘Ren Alleged Apartment Payments’).
Ren alleges that, at the request of Liu, she agreed to nominate Junxin Xia, the Third Plaintiff (now deceased), as purchaser of Apartment 105 in or about July 2011; and that she agreed to nominate Hai Shan Feng as purchaser of Apartments 102, 103 and 106 in or about October 2011 (‘Nomination Agreements’).[1] Ren alleges that the Nomination Agreements permitted her to ‘transfer’ the deposits and part payments for those apartments to the purchase of the remaining apartments for which she had executed the Contracts of Sale, without compensation from Sinicorp. The nominees under the Nomination Agreements were to pay the deposit and balance of the purchase price of their respective apartments.
[1]The Defence and Counterclaim, and Reply, include Jiann Gwo Ni as an additional nominee for Apartments 102, 103 and 106.
Ren further alleges that in March 2009 she was induced by Liu and Sinicorp’s construction manager for the Development at the time, Chester Cheng (‘Cheng’), to loan a sum of RMB560,000 (approximately AUD119,811) to or for the benefit of Sinicorp (‘Alleged 2009 Loan Payment’). The Alleged 2009 Loan Payment is said to have been intended to be applied to Cheng’s medical expenses as Sinicorp owed Cheng money for the constructions works at the Development. The Alleged 2009 Loan Payment is also said to have been made to Liu in cash on terms that Sinicorp would repay the whole of the loan by October 2010.
Ren alleges that in December 2011 she executed a further Contract of Sale with Sinicorp, represented by Liu, for Apartment 203. Ren alleges that it was agreed that the price of Apartment 203 would be $350,000 and that the Alleged 2009 Loan Payment, which Liu represented could not be repaid by Sinicorp, would instead be applied as the deposit to Apartment 203 by way of a set-off.
Ren alleges that in August 2012 Sinicorp did not settle the sale of Apartments 104, 107, 108 and 203, being those apartments not subject to Nomination Agreements, because the mortgagee had not been paid the full purchase price and therefore would not discharge its mortgage. Ren therefore alleges that she has lost the benefit of the money comprising the Ren Alleged Apartment Payments and Alleged 2009 Loan Payment.
Pan similarly alleges that she entered into a Contract of Sale for Apartment 101 with Sinicorp, which Liu purported to represent. The Contract of Sale was alleged to be dated 31 October 2008 and on terms that the purchase price of $379,900 be paid to Yang and/or LWY. Pan alleges that a number of payments were made between December 2009 and January 2010 to a Westpac Banking Corporation (‘Westpac’) bank account in Liu’s name, which payment sums were transferred to a Westpac bank account in LWY’s name; and that Pan made further payments, or caused further payments to be made, between March 2010 and July 2010 into an Industrial and Commercial Bank of China (‘ICBC’) bank account in Yang’s name and a Westpac bank account in LWY’s name. In total, Pan alleges that she paid $356,635.34 (‘Pan Alleged Apartment Payments’), and that the balance of the purchase price (a sum of $23,264.66) was paid by Liu by way of a set-off between Liu and Sinicorp in relation to moneys paid by Liu to LWY. Pan alleges that Sinicorp has refused to settle on Apartment 101 and that she has lost the benefit of the money comprising the Pan Alleged Apartment Payments.
Defence and Counterclaim
Sinicorp denies that Liu was authorised to enter into the Contracts of Sale or to procure the Alleged 2009 Loan Payments on behalf of Sinicorp, and says that the Plaintiffs knew or ought to have known that Liu was not so authorised. Further, Sinicorp denies that any of the money comprising the Alleged 2009 Loan Payments, Ren Alleged Apartment Payments and Pan Alleged Apartment Payments was paid to it, and says that the Contracts of Sale provided for the purchase of the apartments for no consideration. Pan is alleged not to have had the financial resources or intention to make any of the Pan Alleged Apartment Payments. Sinicorp accordingly seeks declarations that the Contracts of Sale are unenforceable.
Sinicorp says that any payments made by the Plaintiffs or Liu to Yang or LWY were payments of funds belonging to Liu comprising part payment of invoices rendered for Yang’s and LWY’s work on the Development, and are in no way referable to payments for apartments in the Development.
Further, by its counterclaim Sinicorp alleges that from 2010 until 23 December 2011 the Plaintiffs acted in concert with Liu to cause injury to Sinicorp by entering into Contracts of Sale for apartments owned by Sinicorp and below market value to the Plaintiffs, and backdating the Contracts of Sale (‘Alleged Conspiracy’).
During this period Sinicorp alleges that Ren purported to act as an officer or agent of Sinicorp in furtherance of the Alleged Conspiracy, and that Ren breached her duties as a shadow director of Sinicorp when she became involved in the management of Sinicorp’s assets and obtained financial advantage as a result. There are particular allegations of conduct in this respect. Armed with the purported authority to act at the behest of Sinicorp, Ren is alleged to have:
(a) represented Sinicorp at the first meeting of the Owners Corporation of the Development being Owners Corporation Plan PS621860J (‘Owners Corporation’) on 8 August 2011;
(b) provided instructions to Sinicorp’s legal representatives, John V Hayes & Co (‘Hayes’) concerning the sale of Apartments between December 2011 and January 2012;
(c) sold apartments in the Development for less than a fair market value and without proper accounting to Sinicorp;
(d) otherwise collected money from purchasers of Apartments 102, 103, 106, 202, 207 and 208 in the sum of $136,700;
(e) obtained rental income of at least $26,668 from tenants in Apartment 104, which Liu is alleged to have leased on the basis that she purported to be the registered proprietor of Apartment 104;
(f) obtained finance in the form of a loan in the sum of $15,000 from Anthony Zita, a solicitor at Hayes, without accounting to Sinicorp (‘Zita Loan’); and
(g) obtained finance in the form of a loan in the sum of $99,940 from Trustworthy Nominees Pty Ltd without accounting to Sinicorp (‘Trustworthy Loan’).
As a consequence of the above, Sinicorp alleges that the Plaintiffs have committed the tort of conspiracy, and that Ren breached the Corporations Act.
Reply and Defence to Counterclaim
Generally speaking, the Plaintiffs deny the allegations made by counterclaim against them and contend that no factual basis is pleaded in support of them. However, the Plaintiffs make several admissions, including, most relevantly, that Ren admits to the alleged conduct set out at paragraphs 29(a) to 29(c) and 29(e) to 29(g) above, but says that she did so on behalf of, at the direction of, and for the assistance of Liu only.
History of discovery dispute
Initial steps and 2014 Summons
The 2014 Derham Orders provided for a timetable for pleadings, to be followed by affidavits of documents by 31 October 2014 and complete inspection of documents by 12 November 2014.
Sinicorp filed an affidavit of documents sworn 1 November 2014 by Baoer Shi on 5 November 2014.
By letter dated 20 November 2014, Sinicorp served a notice of default of discovery on the Plaintiffs pursuant to r 29.12.1 of the Rules requiring the Plaintiffs to make full discovery by 28 November 2014.
The Plaintiffs’ respective First Affidavits of Documents were filed on 28 November 2014.
By summons dated 10 December 2014, Sinicorp sought orders inter alia for further discovery and for the Plaintiffs’ claims to be struck out (‘2014 Summons’).
2015 Mukhtar Orders
On 12 February 2015, on return of the 2014 Summons, the Honourable Associate Justice Mukhtar recorded the following in the ‘Other Matters’ section of his Honour’s orders (‘2015 Mukhtar Orders’):
A.Generally speaking, there was justification in the defendant’s apprehension that, having regard to the nature of the case, the plaintiffs’ exiguous affidavits of documents seemed to be limited to the contracts of sale on which they have sued the defendants for specific performance, but not much else. That is, they have discovered documents that only support the plaintiffs’ case, but not documents that might harm it.
B.For multiple contracts of sale, it is reasonable to suppose that in the ordinary course of a sale of land, many other documents ought to have come into existence if the contracts were real. That is especially so because the defendant pleads a case that the contracts were not what they seemed to be. That suggests they were illusory. There are allegations the contracts lacked consideration; were void for uncertainty; deposits paid were in truth not for the purchase of land but were payments made to the company constructing the apartment block; and that the dealings involved some wrongful conduct by a previous director of the defendant. Counsel suggests there could be allegations of fraud once the facts are investigated, aided by the process of discovery.
C.There is enough to see that there is a lot more to this case than an ordinary sale of land. The problem is that the defence and counterclaim suffers from alleging conclusions rather than alleging the material facts. The Court has now encouraged the defendant to re-visit the defence and consider making substantial amendments to state the material facts (as principal facts) by which it seeks to impeach the legal validity or reality of the contracts of sale. The defendant ought positively plead the facts of what it says really happened in these dealings or what was behind them. That is the only way there can be engagement on the pleadings to enable the matter to proceed to trial.
D.The Court’s concern is to not allow the case to be yet another example of a case involving protracted discovery fights that add greatly to delay and expense, and inattention to obligations under the Civil Procedure Act. To advance the case, these orders are the result of the Court for itself having to intervene and judge by the nature of the case the sort of documents that ought be discovered that arise from a/legations in the statement of claim or might have forensic utility. To that end, the Court has taken to approach of erring on the side of disclosure to try and advance the case.
Following these remarks, his Honour made detailed orders in respect of discovery by each Plaintiff pursuant to r 29.08(2) of the Rules, requiring each of them to file and serve a second affidavit of documents stating whether any documents falling within specified categories of documents are, or have been, in their possession by 4 March 2015. The categories of documents were generally defined with reference to the pleadings as they stood at the time.
The categories of documents in the 2015 Mukhtar Orders in respect of Ren were:
(a)any bank statement or other record showing the debiting of funds by which she procured the moneys for the cash payment which she allegedly made in paragraph 18 of the statement of claim;
(b)any correspondence or documents leading up to the making of the –
i.contracts of sale alleged in paragraphs 19 and 33 of the statement of claim;
ii.nomination for apartment 104 alleged in paragraph 22;
iii.nomination for apartment 105 alleged in paragraph 25;
iv.nomination for apartments 102, 103 and 106 alleged in paragraph 28; and
v.rescission of the nomination agreement for apartment 104 alleged in paragraph 30 -
and, without limiting the generality of that description, any correspondence solicitors, conveyancers, estate agents or banks concerning the sale, purchase, nomination, rescission of the contract of sale of each of the apartments referred to in those paragraphs of the statement of claim;
(c)any documents concerning the necessity to insert or use the date of 31/10/2008 in the Contracts of Sale and the Bank’s knowledge of that date, and the inability to change it, as alleged in the particulars in paragraph (d) of paragraph 19 of the statement of claim;
(d)any documents concerning the first plaintiff’s involvement, if any, in the sale of any units located at 21 Cambridge Street, Box Hill and her receipt, handling or involvement in the application of moneys received from purchasers relating to those sales; and
(e)any bank statement evidencing receipt of $99,940 as alleged in paragraph 78 of the counterclaim.
The categories of documents in the 2015 Mukhtar Orders in respect of Pan were:
(a)any bank statement or other record showing the debiting of funds by which she procured the moneys for the payment which she allegedly made in paragraph 40 of the statement of claim;
(b)any correspondence or documents leading up to and the making or signing of the contract of sale alleged in paragraph 38 of the statement of claim and, without limiting the generality of that class of documents, any correspondence with solicitors, conveyancers, estate agents or banks concerning the sale of apartment 101 referred to in paragraphs 38 of the statement of claim; and
(c) any document concerning any party relating to or affected by any of the contracts of sale concerning the date stated or to be stated or to remain stated in any of the contracts of sale as alleged in particulars (d) of paragraph 38 of the statement of claim.
On 4 March 2015, the Plaintiffs filed their respective Second Affidavits of Documents.
On 12 March 2015, on return of a summons issued by the Plaintiffs on 16 January 2015 seeking further discovery by Sinicorp, Mukhtar AsJ dispensed with the need for Sinicorp to file a summons to enforce the 2015 Mukhtar orders, and (by paragraph 6 of those orders) adjourned Sinicorp’s ‘application for compliance with the discovery orders’. Mukhtar AsJ also made orders that Sinicorp file and serve a further affidavit of documents in respect of specific categories of documents pursuant to r 29.07(1) of the Rules.
Ren’s Third Affidavit of Documents was filed on 1 May 2015.
On 23 November 2015, the Honourable Associate Justice Lansdowne ordered that any further affidavit of documents from any party be filed and served by 15 December 2015, and directed that a request to relist the 2014 Summons or the Plaintiffs’ summons dated 16 January 2015 may be made to Mukhtar AsJ.
Ren’s Fourth Affidavit of Documents was filed on 14 December 2015.
The 2016 Mukhtar Orders
On 23 March 2016, on the further return of the 2014 Summons, Mukhtar AsJ made the following orders (‘2016 Mukhtar Orders’):
1. Paragraph 6 of the Court’s order made 12 March 2015 is discharged.
2.The defendant’s summons filed 10 December 2014 by which it sought further discovery and on which the Court ordered further discovery by 12 February 2015 is dismissed (as having been dealt with).
3.The defendant shall by 7 April 2016 give the plaintiff a list which states with precision the documents which it contends it has reasonable grounds to believe could exist and which ought to have been discovered.
4.The plaintiff shall within 14 days of receipt of that list give a response on each document as sought and shall, in accordance with the obligation in s. 22 of the Civil Procedure Act to use reasonable endeavours to resolve the dispute by agreement, give any explanation concerning the document as sought with a view to avoiding the necessity of a judicial determination of the issue.
5.If the parties cannot resolve the remaining discovery dispute, any application for further or particular discovery, or if necessary, an application under s. 57 of the Civil Procedure Act for oral examination shall be made by summons to be filed by 9 May 2016, but not before consulting with the Associate to the Hon. Associate Justice Mukhtar about an available return date.
Pursuant to paragraph 3 of the 2016 Mukhtar Orders, on 7 April 2016 Sinicorp served a letter on the Plaintiffs’ solicitor enclosing a list of documents which Sinicorp contended it had reasonable grounds to believe could exist and which ought to have been discovered.[2] The Plaintiffs’ solicitor responded on 22 April 2016.
[2]Affidavit of Chuen Lim sworn 10 May 2016, [3]; Exhibit CL-1.
The 2016 Summons
On 10 May 2016, Sinicorp issued a further summons (‘2016 Summons’) seeking oral examination of Ren in relation to an affidavit of document management pursuant to s 55C(1) of the CPA, in respect of matters set out in Schedule 1 of the 2016 Summons.
The 2016 Summons also sought an order that Pan make further discovery pursuant to r 29.08 of the Rules in respect of matters set out in Schedule 3 of the 2016 Summons. While Schedule 3 refers to the Third Plaintiff throughout, it is tolerably clear that Pan was intended to respond to Schedule 2. The 2016 Summons sought orders that Pan’s claims be dismissed if further discovery was not made within 14 days.
On 31 January 2017, the Court was informed that the Third and Fourth Ren Affidavits of Documents had not been served on Sinicorp. Mukhtar AsJ made orders that they be served along with a copy of the documents discovered. Further, the 2016 Summons was amended to encompass a request for cross-examination of the Plaintiffs on their affidavits of documents pursuant to s 57 of the CPA (‘Cross-Examination Application’), and was fixed for hearing on 6 April 2017.
The 2016 Summons was again adjourned on 6 April 2017, and again on 28 June 2017, due to circumstances surrounding the proceeding which his Honour considered made it ‘unavoidable to put [the] discovery controversies to one side’.[3] In particular, the Plaintiffs applied to join Liu as Second Defendant and to plead an alternative case for breach of warranty of authority against her. Mukhtar AsJ recorded the following in the ‘Other Matters’ section of his Honour’s order of 28 June 2017:
C. [Liu’s] joinder, depending on her conduct of the case, may assist in ascertaining the facts of the many dealings which so far are unclear, and undocumented, and which has spawned the discovery fights.
D.Pleadings must now be re-set. From there discovery obligations may also be re-set. The Court has reminded the parties of their obligations under the Civil Procedure Act. It appears it is a case where the nature of the defence, based as it is on fraud, means that pre-trial investigation of facts is going to be necessary in order to avoid problems and disorder at trial.
[3]Orders of Mukhtar AsJ, 28 June 2017, Other Matters ‘A’.
Until the resolution of disputes which arose over pleadings, regarding which Mukhtar AsJ repeated his concerns to the parties over the slow progress of the proceeding and the ‘convoluted, unbusinesslike and, it seems, undocumented’ nature of the facts of the matter, the 2016 Summons was held in abeyance. It was re-enlivened on 21 June 2018 and listed for hearing on 16 August 2018, which hearing was then adjourned by consent to 25 September 2018 and again to 12 November 2018.
On 12 November 2018, on return of the 2016 Summons, Mukhtar AsJ ordered, despite the additional affidavits of documents filed by the Plaintiffs, that Sinicorp give to the Plaintiffs a further list of the type or class of documents which it still contended it had reason to suppose would exist; and which list would identify the allegation in the pleadings making the document relevant or otherwise explain the relevance of the document (‘2018 Sinicorp List’). In response to the 2018 Sinicorp List, the Plaintiffs were to:
(a) state whether the document has already been discovered;
(b) object to the relevance of the document, if necessary, with any explanatory remark;
(c) acknowledge that the document for which discovery is sought is something for which an affidavit under r 29.08 of the Rules ought be provided; or
(d) state that the document does not exist.
On 14 December 2018 the timetable for the 2018 Sinicorp List and the Plaintiffs’ response was extended and the 2016 Summons adjourned.
The 2019 Mukhtar Orders
On 26 February 2019, on the further return of the 2016 Summons, Mukhtar AsJ made orders by consent that the Plaintiffs file and serve further affidavits ‘stating whether any document is or has been in [their] possession’ in the categories stated in Schedule 1 (in respect of Ren) and Schedule 2 (in respect of Pan) by 16 April 2019 (‘2019 Mukhtar Orders’).
The 2019 Mukhtar Orders superseded the 2015 Mukhtar Orders in certain respects. However, it remains necessary to occasionally differentiate between the Plaintiffs’ discovery in response to the 2015 Mukhtar Orders, and their response to both sets of orders. Together, the 2015 Mukhtar Orders and 2019 Mukhtar Orders will be referred to as the ‘Mukhtar Orders’.
Schedule 1 to the 2019 Mukhtar Orders is identical in form to Schedule 1 to the 2016 Summons, and picks up categories of documents in the 2015 Mukhtar Orders. Schedule 1 provides as follows:[4]
[4]The references in the schedule to paragraph numbers in the amended statement of claim is to a version of it which is no longer current, such that the paragraph numbers do not necessarily correlate with those in the current version, being that which I have defined as the Statement of Claim.
a.Any bank statement or other record showing the debiting of funds by which the First Plaintiff procured the moneys for the cash payment which she allegedly made in paragraph 18 of the amended statement of claim.
b.All bank statements and other records of the First Plaintiff in respect of her bank accounts in Australia and China for the period January 2008 to December 2012.
c. Full records and details of all monies received by the First Plaintiff relating to the sale, nomination, cancellation and settlement relating to the apartments at 21 Cambridge Street, Box Hill or of monies belonging or due to the defendant.
d.All documents including nominations, statutory declarations, duties forms, transfer of land and other documents relating to the sale, nomination, cancellation and settlement relating to the purchase, sale or transfer of apartments at 21 Cambridge Street, Box Hill by the First Plaintiff or her nominee.
e.Records and details of all monies received by the First Plaintiff from Hai Shan Feng & Jiann Gwo Ni or on their behalf for the period January 2008 to December 2012 in respect of the purchase, sale or transfer of the apartments located at 21 Cambridge Street, Box Hill.
f.Any correspondence or documents leading up to the making of the -
i.Contracts of sale alleged in paragraphs 19 and 33 of the amended statement of claim;
ii.Nomination for apartment 104 as alleged in paragraph 22;
iii.Nomination for apartment 105 as alleged in paragraph 25;
iv.Nomination for apartments 102, 103 and 106 alleged in paragraph 28; and
v.Rescission of nomination agreement for apartment 104 as alleged in paragraph 30
and without limiting the generality of that description, any correspondence with solicitors, conveyancers, estate agents or banks concerning the sale, purchase, nomination, statutory declarations, duties forms, transfer of land and rescission of the contract of sale of each of the apartments referred to in those paragraphs of the statement of claim.
(g)Any documents relating to or otherwise concerning the necessity to insert the date of 31/10/2008 in the contracts of sale and the Bank’s knowledge of that date, and the inability to change it, as alleged in the particulars in particulars (d) of paragraph 19 of the amended statement of claim.
(h)Any documents concerning the First Plaintiff’s involvement in the sale of any of the units at 21 Cambridge Street, Box Hill and her receipt, handling or involvement in the application of moneys received from purchasers relating to those sales.
(i)Any bank statement or other record showing the debiting of funds by which the First Plaintiff procured the moneys for the cash payment which she allegedly made in paragraph 3E of the amended reply and amended defence to counterclaim.
(j)Copies of tenancy agreements, correspondence, receipts or acknowledgments relating to the lease or licence of any of the apartments at 21 Cambridge Street, Box Hill.
(k)Full records relating to, including but not limited to contracts, agreements, deeds, financial records, bank statements, statements of accounts, records, banking slips, cheques, transfers of funds, the receipt by the First Plaintiff to John V. Hayes & Co. of $69,990 on 9 December 2011 and $29,990 on 16 December 2011.
(l)Full records relating to, including but not limited to contracts, agreements, deeds, memoranda, the loan of $15,000 from Mr Zita to Aili Liu (“Liu”) purportedly received by the First Plaintiff on behalf of Liu as alleged in paragraph 3F of the amended reply and amended defence to counterclaim.
(m)Copies of all email and other correspondence or communications between the First Plaintiff and John Hayes & Co relating to the sale or otherwise of the apartments at 21 Cambridge Street, Box Hill.
(n)Full details and records of instructions by the First Plaintiff to John Hayes & Co relating to the sale, settlement, payment of monies and documentation of the apartments at 21 Cambridge Street, Box Hill.
(o)The First Plaintiff’s Tax returns and tax assessment notices for the years 2008 to December 2012.
(p)The First Plaintiff’s Tax returns and tax assessment notices for the years 2010 to 2014 in China.
Schedule 2 to the 2019 Mukhtar Orders is a copy of Schedule 3 to the 2016 Summons, which as noted at paragraph 49 above was clearly intended for the attention of the Third Plaintiff. As also noted at paragraph 49 there was a Schedule 2 to the 2016 Summons which referred to Pan, albeit this schedule was not attached to the 2019 Mukhtar Orders.
Under the 2019 Mukhtar Orders, Sinicorp was required to advise any of the Plaintiffs of any concerns about their discovery by 30 April 2019, and was granted liberty to apply to relist the 2016 Summons by 10 May 2019.
Cross-Examination of the Plaintiffs
At the directions hearing on 19 September 2019, Mukhtar AsJ recorded that Sinicorp maintained that the Plaintiffs’ discovery was inadequate, and ordered that the 2016 Summons be again re-enlivened and heard by the Court as a special fixture.
On 25 February 2020, the date for the Plaintiffs’ compliance with the 2019 Mukhtar Orders was extended to 10 March 2020, and the Cross-Examination Application which remained undisposed of in the 2016 Summons be adjourned.
Ren’s Fifth Affidavit of Documents was filed on 12 March 2020.
I heard the Cross-Examination Application on 15 December 2020, and granted it following a ruling delivered ex tempore. To briefly summarise, I read Ren’s Fifth Affidavit of Documents in the context of her previous affidavits of documents and the 2019 Mukhtar Orders, and found it to consist of formulaic references to a lack of documents within the categories in Schedule 1 to the 2019 Mukhtar Orders and statements as to why some of the categories, or some documents falling within some categories, were not relevant to the proceeding. I heard similar submissions on behalf of Pan, who had failed entirely to make a further affidavit of documents in response to the 2019 Mukhtar Orders. In the circumstances I considered that a further order for discovery by either Plaintiff would be futile and that both Plaintiffs should be cross‑examined on their affidavits of documents. The orders I made that day were made pursuant to s 57 of the CPA, as I was satisfied that Sinicorp had established that there was a reasonable basis to believe that the Plaintiffs may be misinterpreting their discovery obligations or failing to disclose discoverable documents.
Notwithstanding my indication that a further order for discovery would be inutile, Ren’s Sixth Affidavit of Documents was filed on 5 February 2021. Ren was cross-examined on her affidavits of documents on 9 February 2021 and on 9 March 2021.
Pan’s Third Affidavit of Documents was filed on 15 February 2021. Pan was cross‑examined on 18 February 2021.
The Fourth Plaintiff was also ordered to be cross-examined on his affidavits of documents, which examination took place on 12 May 2021.
Following the examinations of Ren and Pan, by letter dated 10 May 2021 Sinicorp set out in detailed terms its contentions that the Plaintiffs had failed in their discovery obligations and invited each of them to file and serve a further affidavit of documents. This letter did not receive a response.[5]
[5]Lim 5 June Affidavit, [31]-[32].
On 18 June 2021 Sinicorp filed the Summons for the present application.
The Summons came on for hearing on 23 July 2021 and was adjourned part-heard to 10 August 2021.
Submissions
Sinicorp’s Submissions
In support of its Summons, Sinicorp submits that the Court must first determine whether there has been conduct falling within s 56(1) of the CPA, being:
(a) a failure to comply with discovery obligations;
(b) a failure to comply with any order or direction of the Court in relation to discovery; or
(c) conduct intended to delay, frustrate or avoid discovery of discoverable documents.
Sinicorp submits that there has been a clear failure to comply with discovery obligations and with the Mukhtar Orders.
Sinicorp also submits that the Plaintiffs’ conduct over the course of the proceeding has been intended to delay, frustrate or avoid discovery of documents which are harmful to their claims or defence, or helpful to Sinicorp’s counterclaim. In saying so, Sinicorp submits that it is not required to show an abuse of process or contumelious conduct on the part of the Plaintiffs to establish a basis for the orders it seeks,[6] but suggests that such a finding may be warranted in this case and would support its application for a dismissal of the claims and defence.
[6]Citing ReLenijamar Pty Ltd; Domenico Picone and Margaret Anne Picone v AGC (Advances) Limited (1990) 27 FCR 388, 396 (Wilcox and Gummow JJ) (‘Lenijamar’); Freeman v Rabinov [1981] VR 539, 544 (Lush J, with whom Murray and King JJ agreed) (‘Freeman’).
Sinicorp submits that in considering whether an order under s 56(2)(j) is appropriate, the Court should consider the nature and extent of the prejudice suffered by reason of the default. It submits that there has been extensive delay in the proceeding, substantial costs incurred in the interlocutory proceedings concerning discovery, and the potential for very great prejudice to Sinicorp by reason of its inability to properly obtain documents from the Plaintiffs which it says are required to establish aspects of the Defence and Counterclaim.
Sinicorp submits that, in addition to s 56(2)(j) of the CPA, the Rules also provide for significant penalties for default of discovery obligations. In this regard Sinicorp referred to r 24.02(a), which empowers the Court to order that a proceeding be dismissed or a defence struck out on default of orders for discovery. It also directed the Court’s attention to r 29.12.1(3)(a), which gives the Court power to order that a proceeding be dismissed or a defence struck out where a party fails to comply with a default notice issued under r 29.12.1(2). Further, Sinicorp referred the Court to r 29.14, which provides that a party who does not comply with orders pursuant to rr 29.08(2), 29.11 or 29.12 may be liable to committal. In Sinicorp’s submission, these provisions show that the legislature and the Court recognise the critical importance of discovery and, accordingly, enable the Court to sanction those who neglect their discovery obligations.
Sinicorp submits that the peculiar circumstances of the case, where a large number of documents establishing the facts of the matter are uniquely in the possession of the Plaintiffs, make proper discovery particularly important.[7] Sinicorp submits that from 2010 until 23 December 2011 Ren and Liu were in control of the First Defendant’s records and generated records while engaged in conduct in furtherance of the Alleged Conspiracy. It is said that documents were, or should have been, created and retained by Sinicorp, but these documents are not in the possession of Sinicorp. It is said that the alleged conspirators created documents and used emails and bank accounts at the relevant time in relation to matters that are the subject of this proceeding, relating to Sinicorp’s assets, but which documents and records were not placed in Sinicorp’s possession. Further, Sinicorp contends that a number of categories of documents relate to personal bank accounts, email exchanges and other matters to which Sinicorp would have no access other than through proper discovery.
[7]Citing Octagon Inc v Hewitt [2011] VSC 138.
Sinicorp submits that it would be inappropriate and inutile to order further discovery. It is submitted that the affidavits of documents filed in the proceeding, the evidence of the Plaintiffs given on cross-examination, and the Plaintiffs’ affidavits in response to the Summons reveal that the Plaintiffs consider themselves entitled to withhold certain documents or classes of documents on the basis that, in the Plaintiffs’ view, they are not to be relevant to the proceedings. The evidence is also said to reveal that certain documents or classes of documents have not been subject to reasonable and good faith efforts on the part of the Plaintiffs to obtain, and that a number of documents have been deliberately withheld, whether under cover of objections as to relevance or otherwise. Sinicorp says that this is evidence of at least an ongoing and fundamental misapprehension as to the Plaintiffs’ discovery obligations, if not intentional frustration or avoidance of those obligations, which cannot be cured by the making of a further order. Further, it is submitted that the discovery orders in the proceeding, including the 2019 Mukhtar Orders, are sufficiently specific that a further order would add nothing to the Plaintiffs’ understanding of their obligations.
Sinicorp also submits that it is appropriate to dismiss the claim and defence to counterclaim on the basis that the other sanctions set out in s 56(2) of the CPA would not be suitable to address the Plaintiffs’ default. According to Sinicorp:
(a) an order to initiate proceedings for contempt of court pursuant to s 56(2)(a) would not address the claim or defence to counterclaim, or the prejudice to Sinicorp in maintaining its defence and counterclaim;
(b) adjournment with costs, including indemnity costs, pursuant to ss 56(2)(b) and (c) would not address the effects of the default on the viability of the proceedings, and may only extend the discovery dispute;
(c) preventing the Plaintiffs from taking any step in the proceeding pursuant to s 56(2)(d) would cut against the overarching obligations to proceed promptly and effectively to trial, and would be difficult to frame; and
(d) an order limiting the use of evidence, establishing particular facts or for any adverse inferences pursuant to ss 56(2)(e), (f) or (h) would be difficult to frame, and would not necessarily assist Sinicorp which seeks to rely on evidence which has not been discovered.
Sinicorp submits that, in the circumstances set out above, the Court should exercise its discretion to dismiss the Plaintiffs’ claims and defences to counterclaim. Sinicorp acknowledges that the discretion should be exercised with restraint, but says that the Plaintiffs’ non-compliance with their discovery obligations indicates an unwillingness or inability to cooperate with Sinicorp and the Court which is causing unnecessary delay and expense to Sinicorp. Further, the Plaintiffs’ non-compliance is characterised as very substantial and a blatant disregard of prior orders, and that in such a situation the dismissal of the claim and defence to counterclaim is warranted.
Plaintiffs’ Submissions
The Plaintiffs made some preliminary submissions about whether the Summons or the supporting material properly identified the nature of the alleged defaults in discovery, or the relief sought. Though it is not clear where this submission was intended to lead, I reject it. The Summons was clearly framed by reference to s 56(2)(j) of the CPA and the Plaintiffs cannot have been taken by surprise by the nature of Sinicorp’s application.
The Plaintiffs submit that dismissing a claim or defence to counterclaim for failure to make discovery is a ‘drastic’ step which should not be done lightly. The Plaintiffs disputed that the jurisdictional basis for such an order had been met in this case, being conduct meeting the description of s 56(1) of the CPA, and focussed almost exclusively on this issue in their submissions.
The Plaintiffs submit that their affidavits of documents establish that the Plaintiffs have discovered all those documents which they could access or were in their possession or control that are relevant to the proceedings. The Plaintiffs also provide explanations as to which documents are said not to exist, to not be accessible, to already have been discovered, or to otherwise already be in Sinicorp’s possession.
The Plaintiffs submit that Sinicorp ought to have in its possession all of the relevant documents, because Sinicorp was ‘micro-managed’ by Tian with the assistance of Cheng and Yang. To the extent that this submission relates to discovery, it is of no moment as it is clear that Sinicorp does not have all of the documents it seeks. To the extent that the submission about ‘micro-management’ goes further than this, it is a submission on the ultimate subject matter of the proceedings including Sinicorp’s counterclaim and is not relevant here.
The Plaintiffs also submit that, taken together with the documents discovered by Liu and Sinicorp, and the documents produced pursuant to subpoenas issued by Sinicorp to Stan Kwong, Anthony Zita, Liu, Hai Shan Feng and Jiann Gwo Ni, Sinicorp is already in possession of all relevant documents. It is submitted that the absence of any proceedings for contempt in relation to the subpoenas reinforces this point.
The Plaintiffs submit that, in accordance with what it described as the ‘normal rule’, the Plaintiffs’ affidavits of documents are conclusive and cannot be challenged by a ‘contentious’ affidavit such as the Lim Affidavits in support of the Summons.[8] The Plaintiffs submit that they have never admitted the existence of discoverable documents which have not been discovered. It is said that there has been no clear and undisputed evidence proving the existence of documents which have not been discovered.
[8]Citing Finance Sector Union of Australiav Commonwealth Bank of Australia Limited [2000] FCA 1389, [9]-[10] (‘FSU v CBA’); Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No. 4) [2010] FCA 863, [9] (‘Sunland’).
The Plaintiffs cite my decision in Muchnicki & Anor v Avalanche Management Pty Ltd & Anor[9] for the proposition that in challenging the adequacy of a party’s discovery:
It is not enough for there to be vehement assertions that ‘relevant documents exist which have not been discovered’ without an identification of those documents and an explanation of how and in what way they are relevant to an issue in the case.
[9][2020] VSC 710, [78] (‘Muchnicki’), agreeing with the Mukhtar AsJ in Austructures Pty Ltd & Anor v Makin & Anor [2016] VSC 289, [42].
It is submitted that the Lim Affidavits in support of the Summons do not specifically identify the further documents said to exist, produce clear evidence that these documents exist, or show how Sinicorp is prejudiced by the non-production of these documents.
The Plaintiffs submit that no further documents in relation to the counterclaim exist to be discovered, for the simple reason that there was no conspiracy to defraud Sinicorp.
Notwithstanding the Plaintiffs’ submissions to the effect that they had made full and proper discovery, the Plaintiffs’ First Outline dealt extensively with the principles relating to an order for further discovery. After Sinicorp pointed out, at the first day of hearing of the Summons that the Summons did not seek further discovery, the Plaintiffs prepared and filed the Plaintiffs’ Second Outline for the further hearing of the Summons on 10 August 2021. I do not understand the Plaintiffs to press any submissions in relation to an order for further discovery, either in opposition or as a more proportionate alternative to Sinicorp’s preferred remedy in the circumstance that a default in discovery is identified.
The Plaintiffs made further and more technical submissions in relation to the past orders for discovery and the analytical approach the Court should adopt. It was said that the 2015 Mukhtar Orders and the 2019 Mukhtar Orders each required the Plaintiffs to file and serve affidavits of documents stating whether any documents in the prescribed categories are or have been in their possession. The Plaintiffs submit that the Mukhtar Orders were confined to r 29.08(2)(a) of the Rules and did not extend to subsection (b) requiring the Plaintiffs to depose to documents not in their possession. The Plaintiffs also submit that the Mukhtar Orders did not require them to ‘discover or produce’ documents, but merely to depose as to their possession of documents. On this basis it is said that the Plaintiffs have discharged their obligations under the Mukhtar Orders.
Further, the Plaintiffs sought to distinguish orders for particular discovery under r 29.08(2) from orders for discovery under r 29.07, though it was not clear where this submission ultimately led.
The Plaintiffs also point to the error in the 2019 Mukhtar Orders whereby Pan was ordered to make an affidavit in relation to Schedule 2, which refers to the Third Plaintiff throughout. The Plaintiffs submit that Pan’s Third Affidavit of Documents clearly complied with this order in stating that Pan does not have, and has not had, any of the documents in the categories in Schedule 2. It was said that, notwithstanding that Schedule 2 was clearly attached or drawn in error, Pan remained compelled to file an affidavit strictly in accordance with the 2019 Mukhtar Orders.
The Plaintiff also referred to a number of alleged defaults in Sinicorp’s own discovery to in support the position that a reasonable response to such defaults is not to engage in lengthy interlocutory battles, but instead raise any defaults and consequent evidentiary implications at trial.
The Plaintiffs also submit that the Statement of Claim was not finalised until after the 2015 Mukhtar Orders were made, and that the Defence and Counterclaim and Reply and Defence to Counterclaim were not filed until after the 2019 Mukhtar Orders were made. Although it was not made explicit, I understand this submission to mean that the parties’ discovery obligations were not settled until the finalisation of the pleadings.
The Plaintiffs finally submit that the Summons is an abuse of process, as Sinicorp’s pursuit of discovery is substantially disproportionate to the value of the subject matter. In this respect the Plaintiffs cited J Forrest J in Volunteer Fire Brigades Victoria v CFA (Discovery ruling)[10] where his Honour observed that the process of discovery should remain proportionate both with respect to the issues in dispute and the likely cost to be incurred in an exhaustive search for documents.[11] In this regard, the Plaintiffs submit that Sinicorp’s pursuit of discovery is an attempt to drain the Plaintiffs’ resources and determination to prosecute their claims, and/or is a ‘fishing expedition’, in circumstances where the Plaintiffs have already made discovery.
[10][2016] VSC 573 (‘Volunteer Fire Brigades’).
[11]Volunteer Fire Brigades, [36]. The Plaintiffs also cite Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303, 323 [56]-[57] (‘Armstrong’).
Applicable principles
Sinicorp seeks orders that the Plaintiffs’ claims against Sinicorp, and their defences to Sinicorp’s counterclaim, be dismissed pursuant to s 56(2)(j) of the CPA.
Section 56 of the CPA is in Part 4.3 of the CPA which relates to disclosure and discovery, and is in the following relevant terms:
Section 56 - Court may order sanctions
(1)A court may make any order or give any direction it considers appropriate if the court finds that there has been—
(a) a failure to comply with discovery obligations; or
(b)a failure to comply with any order or direction of the court in relation to discovery; or
(c)conduct intended to delay, frustrate or avoid discovery of discoverable documents.
(2)Without limiting subsection (1), a court may make an order or give directions—
…
(j)dismissing any part of the claim or defence of a party who is responsible for any conduct referred to in subsection (1)…
It is clear from the terms and structure of s 56 that the Court must find, as a threshold matter, that conduct meeting the description of ss 56(1)(a), (b) or (c) has occurred. Where such a finding is made, jurisdiction to make an order pursuant to s 56(2), including dismissal pursuant to s 56(2)(j), is established.[12]
[12]See also National Builders Group IP Holdings Pty Ltd v ACN 092 675 164 Pty Ltd (in liq) [2015] VSCA 260, [37]-[38] (Maxwell P and Kaye JA) (‘National Builders Group Appeal’).
The applicant for orders under s 56(2) bears the onus of establishing that there has been conduct meeting the description of ss 56(1)(a), (b) or (c). I do not consider that it is necessary in every case to show that specific documents exist but have not been discovered, as this would impose a different or greater burden on an applicant than required by the terms of s 56(1). Further, and for obvious reasons, a requirement to show that specific documents exist may be unduly difficult or even impossible to meet.
Once conduct meeting the description of ss 56(1)(a), (b) or (c) is established, it falls to the Court to determine whether it is appropriate to make an order dismissing the party’s claims and defences, or some other order. While the circumstances in which the power may be exercised have not been exhaustively defined, the exercise of the discretion is not at large.[13]
[13]Lenijamar, [36]; Hodgson v Amcor Ltd; Amcor Ltd v Barnes & Ors [2011] VSC 63, [98] (‘Hodgson v Amcor’).
In Jia v Lee,[14] Derham AsJ considered an application under r 24.02 of the Rules and s 56(2)(j) of the CPA to strike out a defence for failure to comply with orders for discovery. In the course of that decision his Honour cited with approval the approach taken by Vickery J in Hodgson v Amcor with respect to the factors guiding the Court’s discretion to dismiss or strike out pleadings for non-compliance with orders. In that case, after reviewing the authorities Vickery J said:[15]
[14]Ting Ting Jia v Lee & Ors [2018] VSC 164, [58] (‘Jia v Lee’).
[15]Hodgson v Amcor, [99]-[100].
All matters relevant to the exercise of the power should be weighed. In different cases, the factors may assume greater or lesser significance. Such factors may include the following considerations, which are examples derived from the case law examined:
(a)the effect of the contravening conduct on the just resolution of the real issues in the proceeding in an efficient, timely and cost-effective manner;
(b)the extent of any delay caused by the contravening conduct and the prejudice associated with it, and whether the delay was inordinate and inexcusable;
(c)whether the history of non-compliance by a party is such as to indicate an unwillingness or inability to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period. In determining whether the defaulting party is either subjectively unwilling to cooperate or, for some reason, is unable to do so, the cumulative effect of the party’s defaults may be taken into account;
(d)whether the non-compliance is continuing and is continuing to occasion unnecessary delay, expense or other prejudice to the other party (ie. a significant continuing default which continues to impose an unacceptable burden on another party;
(e)the prejudice which might reasonably be assumed to follow for the other party arising from the contravening conduct, and that which is shown to have arisen;
(f)the extent to which the achievement of efficiency in the conduct of proceedings by other parties in other cases before the Court have been compromised;
(g)the veracity and reasonableness of any explanation given for the contravening conduct;
(h)whether the default was intentional or the product of contumelious conduct;
(i)whether any alternative remedy by way of a lesser, but equally efficient, sanction is available;
(j)whether the contravening conduct has rendered it impossible to conduct a fair trial, or would make any judgment in favour of the offending party unsafe, or which would render any further proceedings unsatisfactory and prevent the Court from doing justice, or there is a real risk of any of these things happening; and
(k)whether the object of the order which has been contravened is ultimately secured (eg. the late production of a document which has been withheld on discovery.
Given the gravity and effect of a striking out order, it should only be made in a clear case where the exercise of the discretion properly calls for this to occur and when the sanction ordered is the least that is necessary to achieve the ends of appropriate case management. Further, as observed in Lenijamar the power conferred on the Court must be “administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable … and of the likely serious consequences to [the party in default]”.
That a dismissal or striking out of a party’s case is a measure of ‘last resort’[16] is well established in the context of the Court’s inherent power to supervise, and take appropriate action in order to prevent injustice in the management of, a proceeding before it.[17] This applies with equal force to the powers conferred on the Court by the CPA.[18] However, there appear to be elements of the common law test applied in the exercise of the Court’s inherent jurisdiction which are attenuated in the context of s 56(2)(j) of the CPA. In particular, to the extent the common law test required an applicant to show a lack of good faith in the party whose pleadings are subject to dismissal or strikeout,[19] or required an applicant to show a ‘real risk’ that the defaulting conduct amounted to ‘an abuse of process which would render any further proceedings unsatisfactory and prevent the Court from doing justice’,[20] s 56(2)(j) of the CPA is not so confined. Rather, s 56(2)(j) treats a risk of an abuse of process and a lack of good faith as factors in the exercise of the discretionary power conferred by that section of the Act.[21]
[16]British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524, [178] (‘Cowell’) citing the decision of US District Judge Rosenbaum in Capellupo v FMC Corporation 126 FRD 545 (1989).
[17]Hodgson v Amcor, [69].
[18]In Jia v Lee, Derham AsJ applied this principle without discriminating between r 24.02 and the inherent jurisdiction of the Court, on the one hand, and s 56(2)(j) of the CPA on the other.
[19]Kennedy v Lyell (No 5) [1882] WN 137, CA.
[20]Logicrose Ltd v Southend United Football Company Ltd (unreported, Ch Div, 5 February 1988) as cited by the Court of Appeal in Cowell [178].
[21]National Builders Group Appeal, [33]-[38].
Similarly, the authorities in respect of s 56(2)(j) and cognate rules of court clearly establish that contumelious conduct or intentional default is not required before an order dismissing a proceeding or striking out a defence is made for default of discovery obligations.[22]
[22]National Builders Group Appeal, [33][38]; Freeman, 544; Hodgson v Amcor, [99].
Proper exercise of the power under s 56(2)(j) of the CPA also involves a determination of whether to dismiss or to strike out the whole of a claim or defence or, where appropriate, to do so in part only. In Cowell, the Victorian Court of Appeal considered r 24.02, which is not expressly framed to permit a partial dismissal or strike-out, yet permits the Court to order so-called ‘issues-based sanctions’, such as an order restricting or denying a party’s right to contest certain issues if the prejudice to the other party arising from the default specifically related to those issues.[23] The Court of Appeal further considered that an order striking out the whole of a defence was ‘out of proportion to the wrong’ in circumstances where only some issues in dispute were the subject of the default in discovery while other issues were entirely unrelated to that default.[24] The Court of Appeal directed attention to the particular prejudice suffered by the non-defaulting party by the default, and stated that the rules of court ‘do not exist to punish’[25] or, indeed, to produce an evidentiary windfall for a non‑defaulting party. On the facts before it, the Court of Appeal overturned an order striking out a defence for non-compliance with discovery orders on the basis that no relevant prejudice arose from the non-compliance. This was so in circumstances where the documents that were the subject of the non-compliance were generally already in the possession of the plaintiff and in circumstances whereby it could not be shown that the production by the defendant of its own copies would alter or improve the plaintiff’s position.[26]
[23]Cowell, [187].
[24]Cowell, [188].
[25]Cowell, [178].
[26]Cowell, [176]-[185].
The approach taken in Cowell relied on the identification of documents which were discovered. Yet it is important to stress that it will not always be possible to particularise a failure to make discovery in that way, especially in cases such as the present where the extent and nature of any documentation is very much in issue. I do not understand the decision in Cowell to compel a narrow view whereby prejudice to a party may only flow from the non-disclosure of specifically identified documents. Such an approach would be unduly narrow, and in some cases – such as in a conspiracy claim – may be tantamount to requiring a party to prove at least part of their case by way of demonstrating that certain documents exist, notwithstanding that they have not been discovered. Instead, the Court must have regard to the context and purpose of s 56(2)(j) as a case management tool and consider each of the factors outlined in Hodgson v Amcor as appropriate to the circumstances of a particular case.
I accept Sinicorp’s submission that it is appropriate to approach the proportionality and correctness of an order under s 56(2)(j) of the CPA by reference to the range of other sanctions which the Court may order, without limitation, under s 56(2). I will address these in more detail below when considering the appropriate relief in respect of each Plaintiff. However, I note here that an order for further discovery is not specified in s 56(2) nor would I be inclined to make such an order in the circumstances. Neither party sought an order for further discovery. Further, I accept Sinicorp’s submissions[27] that it would be inutile to make such an order in the circumstances.
[27]See paragraph 76 above.
While proportionality is fundamental to the ordering of sanctions under s 56(2) of the CPA, the Plaintiffs’ reference to the question of proportionality in Volunteer Fire Brigades is inapposite. That was a case in which the plaintiff served on the defendant a letter setting out categories of documents of which it demanded discovery, the majority of which categories were held by J Forrest J to be too wide or entirely irrelevant and, when taken together, ‘represent[ed] a totally non-proportionate approach to the issues in the trial’.[28] The passage cited by the Plaintiffs for the proposition that discovery must be proportionate to the ‘value of the subject matter’ is in fact about proportionality to the relevance of issues in relation to which discovery is sought. It arises in the context of his Honour’s view that, in light of the High Court of Australia’s decision in Armstrong, the CPA compels the Court to focus the process of discovery on the central issues in dispute.[29] That is exactly what Mukhtar AsJ did in the Mukhtar Orders, which clearly articulate categories of documents which are relevant to the issues in dispute. In this case, and by the Summons, the Court is no longer concerned with the proportionality of discovery to the issues in dispute, and is instead concerned with the proportionality of a sanction to the default in discovery. The Plaintiffs’ submissions in this regard misconceive the nature of the application before the Court.
[28]Volunteer Fire Brigades, [45]-[54].
[29]Volunteer Fire Brigades, [34].
The Plaintiffs’ reliance on my decision in Muchnicki is similarly misconceived. That was a decision on an application for orders for further discovery pursuant to r 29.08, concerning whether the documents sought were relevant to the proceeding and whether there were grounds for a belief that the documents sought existed and were in a party’s possession. Those questions have been determined in this proceeding. The Court is now concerned with whether there has been a failure to make discovery as ordered and, if so, what is the appropriate sanction.
Approach to the assessment of the Plaintiffs’ discovery
Are the Affidavits of Documents conclusive?
The Plaintiffs’ submissions raise the issue of whether Sinicorp can seek to ‘go behind’ the Affidavits of Documents and challenge their adequacy. The Plaintiffs properly conceded that an affidavit of documents is only prima facie conclusive, but said that the ‘contentious’ Lim 5 June Affidavit and Lim 15 June Affidavit cannot be used to show that the Affidavits of Documents are insufficient.
Sinicorp did not respond directly to this submission, but referred the Court to evidence, including evidence given on cross-examination, which it said demonstrates a lack of understanding by the Plaintiffs as to their discovery obligations and a lack of candour as to the ‘reasonable search’ undertaken to make discovery. Sinicorp also refers to evidence which it says demonstrates the existence of specific documents which are relevant and which have not been discovered, and/or which raises suspicion that discovery of certain categories of documents is incomplete.
In my view, the authorities referred to by the Plaintiffs in support of the proposition that an affidavit of documents is conclusive and cannot be challenged by ‘contentious’ evidence do not go so far. In both FSU v CBA and Sunland, the Court referred with approval to the decision of Mulley v Manifold[30] as follows:
[It] cannot be shown by a contentious affidavit that the discovery made is insufficient. Before 1912, it was thought that the insufficiency had to appear from the pleadings, the affidavit of documents itself or the documents therein referred to. However, in British Association of Glass Bottle Manufacturers Ltd v Nettlefold, it was established that the insufficiency might appear not only from the documents but also from any other source that constituted an admission of the existence of a discoverable document. Furthermore, it is not necessary to infer the existence of a particular document; it is sufficient if it appears that a party has excluded documents under a misconception of the case. Beyond this, the affidavit of discovery is conclusive.
[30](1959) 103 CLR 341, 343 (citations omitted) (‘Mulley’).
While there is some uncertainty in the authorities as to whether the rule has been ‘relaxed’ in some way,[31] even the classic formulation in Mulley proceeds on the basis that an affidavit of documents is only prima facie conclusive. As Logan J observed in Sunland:[32]
A claim for completeness in an affidavit verifying a list for discovery is not inviolate. Were that to be so there would, as Lockhart J noted in National Crime Authority v S, be potential for abuse. There must exist though some basis for questioning the sufficiency of such an affidavit. In the absence of any such basis the affidavit is regarded as conclusive.
[31]See especially FSU v CBA, [31]. See also the authorities on this point cited by Graham J in Seven Network Limited v News Limited [2005] FCA 915, [25].
[32]Sunland, [10] (citations omitted).
It is clear that a party challenging an affidavit of documents may put on evidence of insufficiency, and there is no bar to the Court’s consideration of that evidence in determining whether there is a basis for questioning the sufficiency of an affidavit of documents and, further, the extent of any insufficiency. In making these determinations, the Court may require more than a bare allegation of insufficiency in an affidavit in response. I do not think that the reference in Mulley to ‘contentious affidavits’ goes further than that. In any event, there is evidence of insufficiency in the present case and not just bare allegations by Sinicorp.
I do not consider that Mulley requires that Sinicorp raise evidence which specifically disproves some part of one of the Plaintiffs’ affidavits of documents, or else the affidavit evidence is unassailable. Requiring such specific evidence that there is a document which has not been discovered would place an unreasonable burden on an applicant for relief under s 56 of the CPA in circumstances where the evidence, when taken together, may cause the Court to doubt an affidavit as a whole. It is inappropriate to treat an affidavit as a series of disparate claims unconnected to each other or to the deponent’s credibility. Further, the simple proposition that, where a fact is to be proved, the Court ‘must feel an actual persuasion of its occurrence or existence’[33] applies equally to the Plaintiffs’ evidence as to their discovery as it does to Sinicorp’s allegations of default.
[33]Briginshaw v Briginshaw (1938) 60 CLR 336, 361 (‘Briginshaw’). The other proposition often cited to Briginshaw, that the seriousness of an allegation bears on the level of proof it is required to be put to establish a reasonable satisfaction in its existence, is also relevant.
The role and importance of the Mukhtar Orders in this application
Both parties largely framed their submissions around the 2019 Mukhtar Orders and, to a lesser extent, the 2015 Mukhtar Orders. Both parties, to different extents, also made submissions concerning the general principles of discovery and the general and continuing obligations to make discovery arising from the CPA and the Rules.
The Mukhtar Orders helpfully crystallise the discovery dispute and the Plaintiffs’ obligations. They provide a fixed reference point for the relevance of certain categories of documents as well as for the form and timetable for discovery. Further, the 2019 Mukhtar Orders represent the consent position of the parties and a perfected order of this Court as to the adequacy of discovery up to that point, in respect of the prescribed categories, and on the terms of discovery going forward. As such, the 2019 Mukhtar Orders occupy a position of particular significance in the present application.
It is true that both of the Mukhtar Orders required the Plaintiffs to file and serve affidavits ‘stating whether any document [in one of the prescribed categories] is or has been in her possession’. The Mukhtar Orders are also framed by reference to r 29.08(2) as a whole, and not to r 29.08(2)(a) alone.
It is also true, as the Plaintiffs point out, that the 2019 Mukhtar Orders mistakenly required Pan to depose as to the possession of documents according to a schedule which referred to the Third Plaintiff. I will address this in more detail later, however I cannot mention it now and not make some comment. Pan’s affidavit of documents in response the 2019 Mukhtar Orders, when eventually made on 11 February 2021, did not refer to this error. There is no evidence that Pan at any stage raised this with Sinicorp. It was not raised at the hearing on 15 December 2020 when Sinicorp sought orders for cross-examination of the Plaintiffs. As far as I am aware, it was raised for the first time at the hearing on 10 August 2021. That it is raised now, in an attempt to excuse Pan’s conduct and to contend that she is not in default of the 2019 Mukhtar Orders, is staggering. Either it was known at an early stage and ought to have been raised it, but Pan elected not to do so, or it is some latterly identified error relied on in a very technical manner. Whichever it be, it is evidence in and of itself of an attempt to delay, frustrate or avoid discovery of discoverable documents. It speaks of a cavalier attitude to Pan’s discovery obligations.
(h) the evidence points towards Ren’s contravening conduct as being intentional. As already noted, she has been represented throughout the proceeding and there is no reason to think that she has not been properly advised by her solicitors;
(i) I do not consider that an alternative remedy by way of a lesser but equally efficient sanction is available. I have given considerable thought to whether, for example, the drawing of adverse inferences where documentary material is not available would be a remedy of a lesser but equally efficient sanction. In this instance, I do not think it would be. Ren’s defaults in discovery are wide‑ranging and are potentially quite harmful to Sinicorp’s prosecution of its counterclaim. It is difficult to identify now, at this stage of the proceeding, precisely what inferences should be drawn. The defaults in discovery potentially affect every aspect of Ren’s claim and defence to counterclaim, such that the real state of affairs is left to the imagination, which is not a proper basis for inferences to be drawn. On the other hand, the Court should be astute not to draw too narrow an inference on the basis of the evidence as it currently stands. In any event it is inappropriate at this stage to conduct a full analysis of that evidence as if it represented the total body of evidence in the case, as the problem faced by Sinicorp and the Court is precisely that it does not have that evidence. It would also be productive of unfairness for the proceeding to progress through the remaining pre-trial processes and to trial to await identification of such inferences. I have also considered whether a lesser remedy, such as striking out only part of Ren’s claim, or part of her defence to Counterclaim, would be sufficient. The contraventions, both in seriousness and in content, tare such that this is not an appropriate alternative remedy; and for similar reasons to those stated above in respect of the drawing of inferences, it is inappropriate to attempt to confine the effects of Ren’s defaults of discovery to a particular aspect of Ren’s claims or defence to counterclaim. Other orders which could be made, such as orders for costs, compensation, or referral to a disciplinary authority or proceedings for contempt of court, would not address the prejudice to Sinicorp arising from Ren’s conduct. Ren’s wide-ranging and intentional non-compliance with discovery obligations infects every aspect of her claims and defence to counterclaim, such that dismissal of those claims and the defence is the only appropriate response;
(j) there is at least a real risk, more likely a real certainty, that Ren’s contravening conduct would render or has rendered it impossible to conduct a fair trial of Ren’s claims and Sinicorp’s counterclaim. Either evidence which ought be available will not be, or there can be no confidence that the lack of such evidence is due to the fact of it never having existed rather than to it not having been discovered. This represents real and irremediable prejudice to Sinicorp; and
(k) the object of the order which has been contravened, being proper discovery, has not been secured by other means. This distinguishes the situation here from that which obtained in Cowell, for example.
Ren does not accept that she has engaged in conduct of the type proscribed by s 56(1) of the CPA. Indeed, she maintains, in forceful terms through the written outlines filed on her behalf, that she has fully complied with her discovery obligations and the orders of this Court. That is disingenuous and clearly not the case.
Accordingly, Ren’s claim and her defence to counterclaim should be dismissed, in whole.
Pan
Has Pan failed to comply with her discovery obligations or orders related to discovery, or engaged in conduct intended to delay, frustrate or avoid discovery of discoverable documents?
General comments regarding Pan’s discovery
Pan has made three affidavits of documents.
Pan’s First Affidavit of Documents was made on 18 November 2014. Pan’s Second Affidavit of Documents was made on 4 March 2015 following and pursuant to the 2015 Mukhtar Orders. Pan’s Third Affidavit of Documents was made on 11 February 2021, following and pursuant to the 2019 Mukhtar Orders.
It is submitted on behalf of Pan that she ‘is only obliged to discover documents that are relevant to the real central issues in dispute’. Such a submission is not to be accepted. As with Ren, she was obliged to make general discovery and then particular discovery as per the Mukhtar Orders. That discovery is not confined in the manner submitted.
Pan’s Third Affidavit of Documents offers a blanket denial that Pan has, or has ever had, any of the documents listed in Schedule 2 to the 2019 Mukhtar Orders in her possession, custody or control. The affidavit offers no explanation for this, nor does it shed light on the searches undertaken to confirm this. An explanation was not given until the hearing of the Summons on 10 August 2021, where the Plaintiffs submitted that Pan’s Third Affidavit of Documents was prepared with reference to Schedule 2 to the 2019 Mukhtar Orders, which referred to the Third Plaintiff rather than Pan, and to documents relevant to the Third Plaintiff rather than Pan. The Plaintiffs submitted that Pan and her solicitor, Mr Lim, were aware of the error when making the affidavit but nonetheless considered themselves obliged to respond directly to the erroneous Schedule 2. Such a position is extraordinary, and is contrary to the overarching obligations in the CPA.
In submissions, Mr Lim said that he became aware of the error in Schedule 2 when he was preparing Pan’s Third Affidavit of Documents and he discussed it with her then. Given that the 2019 Mukhtar Orders were made by consent and required discovery by 16 April 2019 (which deadline was later extended to 10 March 2020), in reality Pan ought to have been aware of the error much earlier than this. Nevertheless Pan failed to bring the error to the attention of the defendants or the Court, or to include any indication of the error in Pan’s Third Affidavit of Documents or on cross-examination. It is telling that Pan did not offer this explanation herself when being cross-examined.
Pan and her solicitor may have considered Pan’s Third Affidavit of Documents to be a clever response to the error in the 2019 Mukhtar Orders. However, I consider the approach taken to Pan’s Third Affidavit of Documents is evidence in itself that Pan has engaged in conduct intended to delay, frustrate or avoid discovery. The affidavit not only fails to respond to what was clearly the correct schedule to the 2016 Summons which ought to have been attached to the 2019 Mukhtar Orders, but more importantly fails to respond in any way to Pan’s general and overarching obligations to make discovery notwithstanding the orders.
Not only is Pan’s approach regarding this affidavit evidence of conduct intended to delay, frustrate or avoid discovery, Pan’s Third Affidavit of Documents represents a failure to properly comply with the 2019 Mukhtar Orders and her discovery obligations.
Particular categories of documents
Bank Records - evidence
Paragraph 2(a) of the 2015 Mukhtar Orders required Pan to make discovery of bank records showing the debiting of funds by which Pan procured the money for the Pan Alleged Apartment Payments. These payments are alleged to have been made between December 2009 and January 2010 to Liu’s Westpac account, and between March 2010 and July 2010 to accounts in the name of Yang and LWY.
Pan’s First Affidavit of Documents discovered a variety of transaction records relating to the Pan Alleged Apartment Payments as well as records of a bank account in Liu’s name relating to payments alleged to have been made by Liu towards the purchase of Apartment 101. Pan explained that she obtained Liu’s bank records on the basis of her understanding that they may be relevant to the case, and that she was obliged to make discovery of documents relevant to the case.[91] Pan’s First Affidavit of Documents was produced prior to the 2015 Mukhtar Orders.
[91]Pan’s Examination Transcript, 86.10–22.
Pan’s Second Affidavit of Documents does not discover any further bank records relating to the Pan Alleged Apartment Payments. When asked about this failure on cross-examination, Pan relied on a document retention policy said to be in place at the Australia and New Zealand Banking Group Limited (‘ANZ’) at the relevant time whereby records would be destroyed after five or seven years.[92] However, Pan was evasive as to whether she had actually made inquiries with ANZ for those records.[93] Further, Pan deposed that she ‘didn’t worry about the previous records at all’ because her concern was whether money had been received,[94] and that she thought it would be sufficient just to provide transaction records of the Pan Alleged Apartment Payments.[95]
[92]Pan’s Examination Transcript, 94.9–13.
[93]Pan’s Examination Transcript, 96.13–29.
[94]Pan’s Examination Transcript, 94.19-22.
[95]Pan’s Examination Transcript, 96.13–29.
When asked about the source of money used to make deposits into Liu’s account in December 2009 and January 2010, Pan suggested that they had come from Liu herself.[96] Subsequently, Pan could not remember where the money had come from.[97] When it was put to Pan that she did know where this money had come from, and was deliberately avoiding discovery in relation to this, Pan replied that ‘if [Sinicorp] can provide evidence, then [the Plaintiffs] can provide it.’[98]
[96]Pan’s Examination Transcript, 88.26–28.
[97]Pan’s Examination Transcript, 89.21–23.
[98]Pan’s Examination Transcript, 101.9–13.
Pan also said that she had obtained the money to make one of the Pan Alleged Apartment Payments to LWY in April 2010 from her father.[99] Pan said that she didn’t provide details as to a payment from her father but would do so ‘if the court requires’.[100]
[99]Pan’s Examination Transcript, 89.23–28 and 99.22–29.
[100]Pan’s Examination Transcript, 87.2–7.
It was said by Pan that another of the Pan Alleged Apartment Payments, in March 2010, was made directly to LWY by her aunt.[101] Pan was asked whether she had asked her aunt for a bank statement, to which she responded that she had provided all that she could provide.[102] Pan’s manner of giving evidence at her cross-examination, on this issue and on many others, was to avoid answering questions directly. After she gave this answer, I interjected and said that Pan had not answered the question asked of her, and I asked it again. Her response was that she provided the transaction record of payment by her aunt to LWY and at the time she did not believe a bank statement would be important.[103]
[101]Pan’s Examination Transcript, 87.109.7-9.
[102]Pan’s Examination Transcript, 100.3-7.
[103]Pan’s Examination Transcript, 100.11–13.
Although Pan stated that she understood she had to provide all documents which she had and not just those which helped her case,[104] I formed the view that in saying this she was stating what she thought she had to say and was paying lip service to her discovery obligations. This was because her answers in response to other questions revealed that she had a different approach to discovery. For example, after she had given the two non-responsive answers described in the previous paragraph, Pan was asked whether she had talked to her lawyer about what steps she should take about fulfilling the 2015 Mukhtar Orders.[105] Pan’s response was as follows:[106]
He was quite sure at the time that this sum, the RMB 460,000, and the sum below, which is the $150,000 – you know, we’re both quite sure so that no further – you know, it was discussed that no further documents would need to be required apart from what have been provided.
[104]Pan’s Examination Transcript, 85.9-13.
[105]Pan’s Examination Transcript, 100.19-21.
[106]Pan’s Examination Transcript, 100.21-26.
It is readily apparent from Pan’s answers to Sinicorp’s line of inquiry about her bank records that Pan’s focus was on documents to prove her version of a transaction, rather than on discovering documents relevant to the issue.
Pan’s Third Affidavit of Documents provides no further documents or information.
Consideration of bank records
I do not accept any of the explanations or excuses given by Pan for failing to comply with the 2015 Mukhtar Orders as they concern bank records.
Pan’s evidence on cross-examination that, in her view, it would be sufficient to provide transaction records only and that she did not worry about previous bank records, bespeaks a total disregard of the 2015 Mukhtar Orders. Even if I were to view this evidence as going to Pan’s approach to Pan’s First Affidavit of Documents only, Pan has provided no explanation as to why Pan’s Second Affidavit of Documents did not correct these errors. This approach is consistent with the view that Pan discovered only those documents which she considered relevant to support her case.
I am not satisfied that Pan sought any bank records from ANZ beyond those discovered in Pan’s First Affidavit of Documents. Pan was unacceptably vague as to what inquiries, if any, she undertook to obtain documents from ANZ and whether the alleged document retention period at ANZ was for five or seven years. Clearly, at the time Pan’s Second Affidavit of Documents was prepared in February and early March 2015, Pan could have obtained all relevant documents from ANZ under a seven-year document retention period; and could have obtained at least those documents relating to the payments made to Yang and LWY between March and July 2010 under a five‑year period. The fact that Pan discovered none of these documents, and was not able to specify what the supposed document retention policy was which barred her from discovering documents, makes clear that Pan made no real effort to obtain bank records from ANZ as required by the 2015 Mukhtar Orders.
It is also clear that Pan did not make any effort to obtain documents from the relatives from whom she says the money to make the Pan Alleged Apartment Payments was provided, other than Liu. Pan admitted as much, and at this stage it is no answer to say that documents will be provided ‘if the court requires’. The Court did require that discovery in 2015, as was clearly stated in the 2015 Mukhtar Orders, and if such documents were in her control (if not her possession) then these were required to be discovered.
More than this, Pan sought to challenge Sinicorp’s entitlement to proper discovery by suggesting that she could discover evidence of the source of money for the Pan Alleged Apartment Payments in December 2009 and December 2010 if Sinicorp provided evidence. This goes beyond an admission that Pan has in her possession, custody or control discoverable documents which have not been discovered. It reveals an intention not to discover those documents unless and until Sinicorp has proven that they exist and have not been discovered. This approach mistakes the process of discovery for an adversarial and adjudicative process, and evinces an intention to deliberately frustrate, delay or avoid discovery obligations.
Pan cannot cure her default of discovery by seeking to identify the source of the money for the Pan Alleged Apartment Payments on cross-examination, as the default is a failure to discover documents. Further, she did not cure her default by Pan’s Third Affidavit of Documents.
Documents leading up to the making of the Contract of Sale for Apartment 101 - evidence
Paragraph 2(b) of the 2015 Mukhtar Orders required Pan to discover correspondence or documents leading up to the making of the Contract of Sale for Apartment 101, including with solicitors, conveyancers, estate agents or banks.
No documents meeting this description are discovered in any of Pan’s Affidavits of Documents. On cross-examination Pan stated that she obtained no such correspondence or documents except two copies of the Contract of Sale itself, which were obtained from Liu.[107]
[107]Pan’s Examination Transcript, 111.16-27.
Sinicorp did not press the issue or make submissions on this point. I consider that Pan’s discovery in this category must be assessed in the same or a similar way to my assessment of Ren’s discovery of documents and correspondence leading up to her own purchase, nomination and transfer of the Apartments. In short, and as I observed earlier, it is unusual that no such documents or correspondence are in Pan’s possession, custody or control, and this may possibly be explained by the familial relationship between Pan and Liu. However, I think it likely that such documents exist and that Pan has failed to discover them.
Conclusion - Pan has failed to comply with her discovery obligations and orders related to discovery, and she has engaged in conduct intended to delay, frustrate or avoid discovery of discoverable documents
I am satisfied that Pan has failed to comply with her discovery obligations and the Court’s orders relating to discovery, for the reasons set out above. I am also satisfied that her conduct has been intended to delay, frustrate or avoid discovery of discoverable documents. In particular, her failure to comply at all with the 2019 Mukhtar Orders until a week before she was to be cross-examined pursuant to s 57 of the CPA is egregious and has not been explained. Even more egregious is that Pan’s Third Affidavit of Documents does not, for the reasons set out above, represent compliance with that order. That she relies on the mistaken schedule to the 2019 Mukhtar Orders is, as I have already said, representative of a continuing failure to comply with her obligations and her intention to frustrate or avoid discovery. That alone is a clear breach of her overarching obligations under the CPA.
Is it appropriate to dismiss Pan’s claim and/or defence to counterclaim?
In addressing this question, I will follow the same approach as set out in paragraphs 245 to 249 and 251 to 252 above.
In my view, it is appropriate to dismiss Pan’s claim and her defence to counterclaim. Her failures in respect of her discovery obligations and compliance with discovery orders are extensive, and her conduct in respect of discovery has been particularly egregious.
In considering the factors identified in Hodgson v Amcor, I reach the same conclusions regarding Pan as I did in respect of Ren, for the same reasons. Pan’s appalling Third Affidavit of Documents and her evasive and inconsistent responses on cross‑examination indicate a serious and continuing recalcitrance in respect of her discovery obligations, which has denied Sinicorp a hearing of the issues in a timely, efficient or fair manner. There is irremediable prejudice to Sinicorp as a result of this conduct, as it and the Court can no longer have any confidence that Pan would make proper discovery now if given the opportunity to do so. For the reasons already stated in respect of Ren, I am not satisfied that any less severe order would be appropriate to address Pan’s conduct.
Conclusion
It is convenient to summarise here my views about a number of remaining submissions made on behalf of the Plaintiffs which have not been specifically addressed above.
First, I reject the Plaintiffs’ submissions that they were not obliged to give discovery of many of the documents sought, including those required by the Mukhtar Orders, on the basis of r 29.01.01(4)(a) of the Rules, which provides that:
if a party giving discovery reasonably believes that a document is already in the possession of the party to which discovery is given, the party giving discovery is not required to discover that document
The reasons for this rejection are as follows:
(a) at least by the time of the Mukhtar Orders, the Plaintiffs were on notice that Sinicorp did not have many of the documents which the Plaintiffs asserted they must already have;
(b) there is no evidence that the Plaintiffs reviewed the documents produced on subpoena or by Sinicorp on discovery to ascertain whether documents which they had or once had but no longer have were now in Sinicorp’s possession;
(c) many of the documents sought by Sinicorp and not discovered by the Plaintiffs were uniquely in the control or possession of the Plaintiffs themselves; and
(d) for the large part, if the Plaintiffs did believe Sinicorp already had the documents, such belief was not reasonable.
Second, I reject the Plaintiffs’ vociferous submission that Sinicorp has disproportionately, unfairly and unreasonably pursued them in respect of discovery and that the Summons is an abuse of process.[108] Sinicorp has doggedly pursued proper discovery from the Plaintiffs and cannot fairly be criticised for that. There is a real sense in which the time and expense dedicated to discovery in this proceeding has been out of all proportion. Discovery has run over nearly seven years and has occupied the resources of both parties and the Court in the course of the various pieces of correspondence, affidavits, putative efforts at discovery and interlocutory proceedings. However, the disproportionate scale of the discovery process in this proceeding is entirely the Plaintiffs’ fault. That is a corollary of my findings, detailed above, that the Plaintiffs have failed to comply with their discovery obligations and have engaged in conduct intended to frustrate, delay and avoid their discovery obligations. The Plaintiffs cannot then say that Sinicorp has ‘clogged the wheels of justice’ in maintaining its entitlement to proper discovery.
[108]See paragraph 94 above.
Third, I consider the Plaintiffs’ submission that the Mukhtar 2015 Orders required them to state whether certain documents were in or had been in their possession but did not order them to make discovery or produce certain documents[109] to be astonishing. That such a disingenuous proposition could be put as an excuse for not discovering documents is remarkable.
[109]Plaintiffs’ Second Outline, [9]-[10].
Fourth, I reject the Plaintiffs’ submission that they could not be seen to have continued to fail to comply with the 2015 Mukhtar Orders as those orders were spent. The Plaintiffs said the 2015 Mukhtar Orders were spent because they had complied with them and by virtue of the 2016 Mukhtar Orders. In respect of the latter, paragraphs 1 to 3 of the 2016 Mukhtar Orders were relied upon.[110] This submission is specious. Discharging an earlier order adjourning the balance of the plaintiffs’ own application for discovery can hardly be characterised in this way. So too the discharge of the order adjourning Sinicorp’s summons in respect of the Plaintiffs’ compliance with discovery, when the 2016 Mukhtar Orders themselves set up a mechanism for dealing with that issue. Paragraph 2 of the 2016 Mukhtar Orders goes no further than dismissing Sinicorp’s earlier summons: this does not mean that the discovery obligation itself is spent. The discovery orders contained in the 2015 Mukhtar Orders were not discharged and the Plaintiffs’ obligations in respect of them are not spent. Mr Lim eventually retreated from the submission that the 2015 Mukhtar Orders were spent by reason of the 2016 Mukhtar Orders, but only after I expressed the view during argument that this was not a proper reading of the latter.
[110]The 2016 Mukhtar Orders are relevantly set out in paragraph 46 above.
Fifth, I reject the Plaintiffs’ submissions in respect of the error in the 2019 Mukhtar Orders relating to Pan. The Plaintiffs submit that it is possible Sinicorp and its lawyers did not know about this error. So much may be true, and it certainly appears that the Plaintiffs made no effort to draw it to their attention. But the Plaintiffs go further, submitting that Sinicorp and its lawyers ‘had no interest in making sure that Orders made by the Court were correct because they were not going to accept whatever affidavits of documents Ms Ren and Ms Pan may make’.[111] The 2019 Mukhtar Orders were made on the papers by consent, signed minutes having been provided by the parties, and were just as much the Plaintiffs’ responsibility as Sinicorp’s. More importantly, there is no proper basis for the Plaintiffs to cast the aspersions they have on Sinicorp and its lawyers by making this submission in the manner in which they have done.
[111]Plaintiffs’ Second Outline, [30].
Sixth, I reject the Plaintiffs’ submissions that Sinicorp’s pursuit of their discovery over the years has been an attempt to drain their resources and weaken their resolve to pursue their claims and defend the counterclaim. There is no proper basis for this: Sinicorp has given the Plaintiffs every opportunity to make proper discovery and they have continually failed to do so. Sinicorp has not acted unreasonably in the course of this protracted discovery process.
Seventh and relatedly, I reject the Plaintiff’s submissions that instead of making this application Sinicorp could have applied for specific discovery but had not done so as it would have been unable to satisfy the Court that the documents it was seeking were likely to exist. Having made the efforts it already had to extract proper discovery from the Plaintiffs, I fail to see how it can reasonably be said that Sinicorp ought to have kept making what would likely be futile discovery applications instead of pursuing the course that it has done. I also reject the submission that to the extent Sinicorp needs bank statements which have not been discovered by the Plaintiffs, it should have subpoenaed them from the banks. That is no answer to the Plaintiffs’ failures to comply with their discovery obligations.
For all of the reasons set out herein, I have reached the conclusion that the Plaintiffs’ claims and defences to counterclaim as between them and Sinicorp should be struck out.
In doing so, I should state that I have not given any weight to Sinicorp’s submissions about the Plaintiffs’ conduct in respect of discovery where those submissions are based on the cross-examination of the Fourth Plaintiff or his affidavit of 11 May 2021. Consequently, I have not viewed it necessary to summarise those submissions at all.
As noted by John Dixon J in Bolitho v Banksia Securities Ltd (No 18) (remitter):[112]
The proper discharge of discovery obligations by parties and practitioners has long been recognised as fundamental to the goal of a just, efficient, timely and cost-effective quelling of disputes.
[112][2021] VSC 666, [2127] (‘Bolitho v Banksia No 18’).
The Plaintiffs’ conduct of their discovery in this proceeding has been such as to make the achievement of the goal identified by John Dixon J in the preceding paragraph impossible. Further, I embrace his Honour’s observation that an inexcusable failure to provide discovery when ordered to do so is ‘a form of suppression of evidence’.[113]
[113]Bolitho v Banksia No 18, [1238].
I fully accept that striking out the Plaintiffs’ claims and their defences to counterclaim has grave consequences for them. However, I consider that the conduct of the Plaintiffs in this case calls for that sanction and that it is the ‘least that is necessary to achieve the ends of appropriate case management.’[114] Further, I consider it the least that is necessary to do justice between the parties.
[114]Hodgson v Amcor, [100].
I will hear from the parties as to the form of orders and as to costs.
To that end, the parties should confer as to the form of final orders and as to costs. If an agreed position is reached, then proposed consent orders giving effect to this ruling and dealing with the matter of costs should be sent to my Chambers by 4.00 pm on 26 November 2021. If the parties do not reach agreement, then each party is to send to my Chambers, by 4.00 pm on 26 November 2021, their preferred form of orders and a short written submission (of no more than 3 pages) in respect of costs. In the latter instance, the proceeding will be listed for 3 December 2021 for the making of orders and a determination on costs.
SCHEDULE OF PARTIES
| S CI 2014 02265 | |
| BETWEEN: | |
| JINGLI REN | First Plaintiff |
| YI PAN | Second Plaintiff |
| JUNXIN XIA | Third Plaintiff |
| SCOTT YUNG-HANG NI | Fourth Plaintiff |
| - and - | |
| SINICORP PTY LTD (ACN 125 090 815) | First Defendant |
| AILI LIU | Second Defendant |
| AND BY COUNTERCLAIM: | |
| SINICORP PTY LTD (ACN 125 090 815) | Plaintiff by Counterclaim |
| - and - | |
| REN JINGLI | First Defendant by Counterclaim |
| YI PAN | Second Defendant by Counterclaim |
| JUNXIN XIA | Third Defendant by Counterclaim |
| SCOTT YUNG-HANG NI | Fourth Defendant by Counterclaim |
| AND BY THIRD PARTY NOTICE: | |
| AILI LIU | Plaintiff by Third Party Notice |
| - and - | |
| JIAN YANG (also known as JAMES YANG) | Third Party |
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