Sun v Chen [No 2]
[2020] WASC 71
•6 MARCH 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SUN -v- CHEN [No 2] [2020] WASC 71
CORAM: ALLANSON J
HEARD: 28 FEBRUARY 2020
DELIVERED : 6 MARCH 2020
FILE NO/S: CIV 2832 of 2017
BETWEEN: WEI MIN SUN
Plaintiff
AND
HUI MIN CHEN
First Defendant
HUAFANG JIANG
Second Defendant
(BY ORIGINAL ACTION)
HUI MIN CHEN
First Plaintiff by Counterclaim
HUAFANG JIANG
Second Plaintiff by Counterclaim
AND
WEI MIN SUN
Defendant by Counterclaim
(BY COUNTERCLAIM)
FILE NO/S: CIV 2498 of 2017
BETWEEN: HUI MIN CHEN
Plaintiff
AND
WEI MIN SUN
Defendant
Catchwords:
Practice and procedure - Discovery - Where trial adjourned part heard - Where application for further discovery - Whether documents sought relevant - Turns on own facts
Practice and procedure - Subpoena - Where trial adjourned part heard - Where subpoena issued to accountant to party - Whether documents sought apparently relevant - Turns on own facts
Legislation:
Supreme Court Rules 1971 (WA), O 1 r 4A, O 1 r 4B
Result:
Application to set aside subpoena granted in part
Application for discovery granted in part
Category: B
Representation:
CIV 2832 of 2017
Original Action
Counsel:
| Plaintiff | : | S K Shepherd |
| First Defendant | : | L D Coci |
| Second Defendant | : | L D Coci |
Solicitors:
| Plaintiff | : | Forbes Kirby |
| First Defendant | : | Chan Galic |
| Second Defendant | : | Chan Galic |
Counterclaim
Counsel:
| First Plaintiff by Counterclaim | : | L D Coci |
| Second Plaintiff by Counterclaim | : | L D Coci |
| Defendant by Counterclaim | : | S K Shepherd |
Solicitors:
| First Plaintiff by Counterclaim | : | Chan Galic |
| Second Plaintiff by Counterclaim | : | Chan Galic |
| Defendant by Counterclaim | : | Forbes Kirby |
CIV 2498 of 2017
Counsel:
| Plaintiff | : | L D Coci |
| Defendant | : | S K Shepherd |
Solicitors:
| Plaintiff | : | Chan Galic |
| Defendant | : | Forbes Kirby |
Case(s) referred to in decision(s):
Commonwealth v Albany Port Authority [2006] WASCA 185
Singh v Friedman [2013] WASC 78
ALLANSON J:
The two applications
Wei Min Sun is a businessman and Australian citizen. He previously lived in the Peoples Republic of China. Mr Chen and Huafang Jiang are a married couple. They have permanent resident status in Australia, and are citizens of the People's Republic of China.
Mr Sun and Mr Chen had a business and social relationship over many years. More recently, they have opposed each other in litigation concerning a property development in Western Australia, and in these proceedings where the boundary between business and social relationships is blurred.
These two actions are being tried together. The trial commenced on 11 November 2019, and was adjourned part heard on 14 November 2019. At the time of the adjournment, counsel for Mr Chen and Ms Jiang foreshadowed applications for discovery and the issuing of subpoenas resulting from issues that were introduced at the trial.
The subpoena and the application by Mr Sun to set aside the subpoena
On 10 and 11 December 2019, Hui Min Chen and Huafang Jiang, caused two subpoenas to be issued, one of which was addressed to the accountants for Mr Sun and the company Sunlong Fresh Foods Pty Ltd. The subpoena required the production to the court, by 24 December 2019, of nine specified categories of documents.
The other subpoena has not been challenged.
On 28 January 2020, Mr Sun's solicitors lodged an application to set aside categories 1, 4, 5, 7, and 8 of the subpoena to the accountants on grounds that:
1.The documents sought are not relevant to any matter in issue in the proceedings.
2.The documents sought are oppressive.
3.The documents sought by the defendants represent an exercise in fishing.
Mr Chen and Ms Jiang did not press production of documents in category 7.
The result is that the present application is directed to four categories:
1.Income tax statements of Wei Min Sun for the financial years ended 30 June 2013, 30 June 2014 and 30 June 2015.
4.Financial Statements of Sunlong Fresh Foods Pty Ltd for the financial years ended 30 June 2013, 30 June 2014 and 30 June 2015.
5.Management Reports of Sunlong Fresh Foods Pty Ltd for the years ended 2013, 2014 and 2015.
8.Bank statements for Sunlong Fresh Foods Pty Ltd for the period commencing 2009 to 31 January 2012 and for the period August 2014 to October 2014.
The subpoena recipients may not have documents in the other categories to which objection was not taken. I was informed from the bar table, however, that there are internal ledgers of Sunlong Fresh that deal with director's loans that can and will be provided. Mr Sun did not challenge the production of documents in category 9 - 'Any documents recording any loan account between Wei Min SUN and Sunlong Fresh Foods Pty Ltd for the period including 1 January 2009 to 30 June 2015'.
The discovery application
On 24 January 2020, the defendants applied by chamber summons for the plaintiff to provide discovery of 11 categories of documents, the categories being the subject of consent orders made on 17 December 2019.
On 10 February 2020, consent orders were made programming the hearing of the application to set aside the subpoena and the application for further discovery.
Mr Sun filed an affidavit (with an affidavit interpreting the text into English), sworn 27 February 2020, in which he deposed that he has never had possession, power or control of any document in six of the categories.
The documents remaining in issue on the discovery application are:
(a)Income Tax Statements of Wei Min Sun for the financial years ended 30 June 2013, 30 June 2014, 30 June 2015;
(e)Any agreements between Wei Min Sun and Jimei for years 2013, 2014 and 2015;
(i)Financial Statements of Sunlong Fresh Foods Pty Ltd for the financial years ended 30 June 2013, 30 June 2014 and 30 June 2015;
(j)Management Reports of Sunlong Fresh Foods Pty Ltd for the years ended 2012, 2014 and 2015; and
(k)Bank statements for Sunlong Fresh Pty Ltd for the period commencing 2009 to 31 January 2012 and for the period August 2014 to October 2014.
Five categories of documents are currently in dispute over both applications, with four of them common to both. Mr Sun did not oppose discovery of the document category which is not common: agreements between Mr Sun and the gaming club or organisation 'Jimei'. I understand from what was said from the bar table that Mr Sun may not have any documents in that category, in which case he will file an affidavit to that effect.
The principles governing applications for discovery and objections to subpoena are not identical, but there are common considerations. The relevance of the documents sought is, in effect, a threshold issue in each. And both applications must be considered by reference to the case management considerations in O 1 r 4A and 4B of the Rules of the Supreme Court 1971 (WA).
Principles
Discovery
Generally, an applicant for further discovery must establish the relevance of the documents requested and also that there are reasonable grounds for being fairly certain that the further documents, or a class of further documents, actually do or did exist in the possession, custody or power of the party against whom the application is made.
Although this is, in effect, an application for further discovery, the application is governed by consent orders by which Mr Sun was to provide discovery of categories of documents set out in Annexure A to the orders, subject to objection. The effect of those consent orders displaces the need to establish reasonable grounds for being fairly certain that the specified documents exist, or did exist in the possession, custody or power of Mr Sun.
The power to order discovery is discretionary. The discretion is to be exercised having regard to the timely and cost effective disposal of litigation.
A party does not have a strict entitlement to an order for discovery. On the other hand, discovery has been described as promoting the ascertainment of truth in litigation and as an essential part of the proper administration of justice. Subject to the rules of privilege, there is a public interest in having available all evidence relevant to the issues in litigation. The ultimate test is whether thediscovery is necessary for fairly disposing of the proceedings.[1]
[1] In Singh v Friedman [2013] WASC 78 [3] ‑ [6] I collected the authorities for these principles.
Subject to discretionary considerations, including those arising out of case management, the question is whether the documents sought relate to any matter in question in the action. To determine that question, the court should consider the pleadings, together with the conduct and admissions of the parties and the nature of the action.
Subpoenas
A subpoena can be issued where there is a legitimate forensic purpose, which includes where a document sought gives rise to a line of enquiry which is relevant to the issues before the court.
The relevance threshold, where a subpoena is challenged, is commonly described as 'apparent relevance'. On an application to set aside a subpoena the court will not embark on a detailed preliminary enquiry involving evidence from the party seeking to issue the subpoena. The relevance of the documents produced will be a question for determination at trial.[2]
[2] Commonwealth v Albany Port Authority [2006] WASCA 185 [18].
The issues in the actions
The pleadings in CIV 2832 of 2017
This action has several parts to it.
(1)Mr Sun pleads a loan to Mr Chen and Ms Jiang of A$300,000 in August 2013, for the particular purpose of purchasing a house. The defendants deny the loan was made.
(2)Mr Sun alleges a further loan of A$50,000 in October 2016, which the defendants admit but plead has been repaid or forgiven.
(3)Mr Sun claims for debts that were acknowledged by Mr Chen in two notes in March 2015 and March 2017. Mr Sun denies the debts and pleads the notes were obtained by duress.
(4)By counterclaim, Mr Chen alleges a loan to Mr Sun in 2010, only partly repaid, and a further loan on 25 October 2013, which he pleads has not been repaid. The loan in 2010 is the subject matter of the separate claim in CIV 2498 of 2017, which is being heard at the same time.[3]
[3] By a minute fined 31 January 2020, the defendants seek leave to amend their defence and counterclaim to remove claims for 2 other loans in 2014.
There is a dispute on the pleadings regarding the debt acknowledged in the two notes. Mr Chen and Ms Jiang allege that A$141,000 is the amount of salary that Sunlong Fresh paid to Ms Jiang, and is not a debt owed to Mr Sun; and they allege that the amount of HK$3,815,670 in the first note is roughly the amount of a gambling debt incurred by Mr Chen to Jimei International Holding Limited or its related entities (Jimei) in or about 2008. Mr Sun pleads that HK$510,000 has been repaid, and the second note records the balance owing.
The pleadings in CIV 2498 of 2017
This action is very straightforward. Mr Chen alleges an agreement in September 2010 by which he agreed to lend A$450,000 to Mr Sun, for one year, at a specified interest rate. Mr Chen pleads that three loan repayments were made, with A$268,790 plus interest still owing.
Mr Sun admits the agreement for the loan of A$450,000 for one year, but not the interest rate alleged. He pleads that between September 2010 and January 2013 he repaid any money advance by five payments totalling $600,000, and denies that he is indebted to Mr Chen.
Of the repayments alleged by Mr Sun, a payment of $100,000 in September 2011 is common to both party's pleadings.
The hearing to date
This matter is procedurally unusual. The trial began on 11 November 2019 and was adjourned part heard. The present applications were brought during the adjournment, and after evidence had been heard from Mr Chen. The catalyst for the adjournment, and the ensuing subpoenas and discovery application, was foreshadowed evidence and submissions at the hearing regarding Mr Sun's role with Jimei.
The only reference to Jimei in the pleaded cases is in particulars to [11] of the defence filed by Mr Chen and Ms Jiang. In response to the plea regarding the March 2015 note, the defence admitted that Mr Chen signed the note but denied borrowing AUD$141,000 or HKD$3,815,670 from Mr Sun or being indebted in the amounts pleaded. In particulars, they pleaded:
AUD141,000 is the amount of salary that the plaintiff (or the company associated with him, known as Sunlong Fresh Pty Ltd) paid to the second defendant, and is not a debt owed by the defendants to the plaintiff.
HKD3,815,670 is roughly the amount of a gambling debt incurred by the first defendant to Jimei International Holding Limited or its related entities (Jimei) in or about 2008. The amount of the gambling debt was HKD3,620,278 and the plaintiff said that he would assist the first defendant to repay this debt.[4]
[4] Defence [11f], particulars.
In opening the case for Mr Sun, senior counsel took the court to the note of March 2015, and the record in it: 'owe Jimei HK $2,215,670, owe Sun HK$1.6 million', with the total of those amounts owed to Mr Sun. Senior counsel for Mr Sun explained:
… monies owed to Jimei are owed to Sun. And your Honour will hear evidence about Jimei. Essentially what will be said by Mr Sun is that Jimei is a group of - a traditional group in Macau which lends money for gambling. He was the Jimei representative in Australia.
He guaranteed funds for the purpose of gambling at the casino, and any advances in relation to that were advances effectively given by him and that's why they are recorded in these notes as owing to him.[5]
[5] Trial ts 34 ‑ 35; see also trial ts 99.
In a supplementary witness outline, filed 13 November 2019, Mr Sun gave notice of proposed evidence about his role as the Australian agent (or junket partner) for Jimei; his receipt of a commission from the casino based on the international players' gambling turnover; and how money lost by an international player creates a debt owed by the international player to the junket partner.
Mr Sun said that Mr Chen lost money while gambling with Jimei in the Perth Crown Casino, and the note of 10 March 2015 acknowledged that he owed HK$2,215,670 and HK$1,600,000 to Mr Sun.
Mr Chen has already given evidence at trial. His evidence regarding the Jimei debt was inconsistent. At one point in his evidence, he said it was money owed to Jimei, not to Mr Sun, and that he signed the note because Mr Sun told him that in order to proceed with another contract, 'you must agree to this amount'.[6] Later, however, Mr Chen said that, at the time he provided the note, he believed that he owed Mr Sun HK$3,305,000.[7]
[6] Trial ts 73.
[7] Trial ts 79.
I only mention the evidence in that detail because it was submitted on behalf of Mr Sun that an admission had been made in Mr Chen's evidence that, in effect, precluded any further consideration of whether the amount recorded in the note was owed. It is not appropriate, in resolving these applications, to either make or foreshadow any final determinations on questions of fact, even where such a finding may arise from an admission. The evidence is not unequivocal.
In summary, based on the conduct of the trial to date, which has departed substantially from the pleaded case, Mr Sun's relationship with Jimei has become an issue. Documents which relate to Mr Sun's role with Jimei relate to matters in issue. The evidence about Mr Chen's gambling - and how money passed between Mr Chen and Mr Sun for that purpose - also has a prominence which was not apparent on either pleaded case.
At the time the trial was to be adjourned, I asked counsel whether it would be necessary for Mr Sun to give discovery of matters relating to the arrangement with Jimei - including any agreements he has with them, any agreements he has with Burswood Casino,[8] and tax returns relating to his earnings from the Jimei arrangement.[9] Counsel made no immediate objection.
[8] The reference should, of course, have been to Crown Casino.
[9] Trial ts 173.
The documents sought by discovery and subpoena are not confined to matters related to Jimei. Regarding the $141,000 salary component in the acknowledgement of debt, Mr Chen said, in effect, that there was an arrangement that Sunlong Fresh paid salary to Ms Jiang on his behalf so that she could still get her superannuation and welfare from the government.[10] Mr Chen gave the money to Mr Sun and who then paid it to Ms Jiang by way of salary.
[10] Trial ts 70.
The salary component of the documents sought are not related to any issue that only arose, or was fully identified, at trial.
Consideration
Subpoena item 1; Discovery category (a)
Mr Sun submits that his income tax statements do not relate to any issue in the proceedings.
Mr Sun submits that his case is that the Hong Kong dollar amount is the subject of an Acknowledgment of Debt, and arose because Mr Chen used funds advanced by Mr Sun to gamble at the Crown Casino and lost that amount. He submits that Mr Chen and Ms Jiang have failed to repay the debt owed to Mr Sun. There is no allegation in the proceedings that Mr Sun received income or any payments from 'Jimei'.
Mr Sun's written submissions do not address the way in which the case has been conducted. It is sufficient to refer to the case as opened by Senior Counsel for Mr Sun, outlining a factual case that Mr Sun, as a representative of Jimei, 'guaranteed funds for the purpose of gambling at the casino, and any advances in relation to that were advances effectively given by him and that’s why they are recorded in these notes as owing to him'.[11] In his supplementary witness outline, Mr Sun outlines evidence regarding his arrangements with Jimei and the conduct of the junket business.
[11] Trial ts 35.
Mr Chen has denied owing money to Jimei or Mr Sun as a result of his gambling in Australia.
There has been, sometimes confusing, evidence about sums of money advanced by one party to the other, for purposes which include gambling. On the way the trial has proceeded, the role of Mr Sun as an agent or junket partner for an overseas gambling organisation is, in my opinion, clearly relevant. I accept the submission on behalf of Mr Chen that whether Mr Sun received some income or commission for the role he undertook is a relevant matter, and whether he declared that income (or any loss) for taxation purposes will be relevant to his evidence about Jimei and to the reliability of his evidence and his credibility generally.
Counsel for Mr Sun also submitted that income tax returns are unlikely to separately show any income (or losses) by way of commission from Mr Sun's role as a junket partner. I agree that is a possible outcome, and is a factor that I take into account particularly in relation to the case management considerations. But the period covered by the request is short and comparatively recent. There is no evidence that the production of those records would be burdensome, let alone oppressive.
I am satisfied that the documents in this category are of sufficient apparent relevance to warrant their production.
Discovery category (e)
Mr Chen seeks discovery of any agreement between Mr Sun and Jimei for the years 2013, 2014 and 2015. For the reasons given in relation to category (a), these documents are relevant.
Mr Sun did not oppose discovery of this category of documents, although it was not conceded that he has or had any agreements with Jimei in his possession, custody or power.
Subpoena items 4 and 5; Discovery categories (i) and (j).
The requests for financial statements and management reports for Sunlong Fresh Foods Pty Ltd for the years ended 2013, 2014 and 2015, can be dealt with together.
Mr Sun objects on the basis that the request is fishing, and that none of the documents would assist in determining any matter in issue. He further submits that the term 'Management Report' does not have a sufficiently precise meaning and is broad and consequently oppressive.
Mr Chen submits that Mr Sun's case regarding the repayment of money to Mr Chen appears to be that certain payments made by Sunlong Fresh were in fact made by him. He submits that such payments should be recorded in financial statements, and 'Management Reports'.
Similarly, Mr Chen submits that whether the sum of $141,000 was a salary payment or a debt owing by Mr Chen to Mr Sun is an issue in the proceedings. The company records which are sought are relevant to whether that amount was paid as salary or owed to Ms Jiang, or are recorded in the books of the company as a loan account with Mr Chen.
In considering this category I take into account that it is agreed that Mr Sun or his accountants will provide any documents recording any loan account between Mr Sun and Sunlong Fresh for the period including 1 January 2009 to 30 June 2015. I accept the submission of counsel for Mr Sun that the provision of those documents should be sufficient, and may be more useful. Financial statements and 'Management Reports' are unlikely to disclose individual transactions.
The application for 'Management Reports', in particular, is too general. 'Management Reports' may deal with a wide variety of activities within an organisation. The fact that they may include information about assets and liabilities of the company is not, in my opinion, sufficient to require their disclosure when the issue before the court relates essentially to private arrangements between Mr Sun, Mr Chen and Ms Jiang. To the extent those arrangements may be reflected in the financial records of Sunlong Fresh, it will likely be in Mr Sun's loan accounts.
There is, in my opinion, another relevant factor. I have had regard to the position of the trial, and to the fact that none of these documents relate to issues only introduced at trial. The particular documents relating to the salary payments to Ms Jiang, and to money paid from Mr Sun or Sunlong Fresh to Mr Chen, have been discovered.
I will not order discovery, or production on subpoena, of the financial statements or 'Management Reports'.
Subpoena item 8; Discovery category (k)
The time period covered by this application is that in which the defendants say that Ms Jiang was an employee of Sunlong Fresh.
The fact that an amount described as salary was paid to Ms Jiang for the relevant period is not in dispute. The question between the parties is whether that payment was truly salary, or the result of a private agreement between Mr Chen and Mr Sun under which Mr Chen is required to pay Mr Sun that amount as a debt.
I am not satisfied that the bank statements, even if they record the payment of individual salaries (which seems unlikely), are relevant to resolving the actual dispute.
Conclusion
I will require, either by subpoena or discovery, the production of item 1/category (a). The balance of the objections to discovery will be upheld. The subpoena will be set aside in part, in relation to 4, 5 and 8.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson6 MARCH 2020
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