Suzhou Haishun Investment Management Co Ltd v Yue'e Zhao (Ruling No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2015 01669

SUZHOU HAISHUN INVESTMENT MANAGEMENT CO LTD	Plaintiff
v
YUE’E ZHAO	Defendant

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	20 and 26 March 2018
DATE OF RULING:	29 March 2018
CASE MAY BE CITED AS:	Suzhou Haishun Investment Management Co Ltd v Yue’e Zhao (Ruling No 2)
MEDIUM NEUTRAL CITATION:	[2018] VSC 144 First Revision: 3 April 2018

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PRACTICE AND PROCEDURE – Subpoena in support of a freezing order – Application to set aside subpoenas – Whether subpoenas constituted a ‘fishing expedition’ – Whether subpoenas served a ‘legitimate forensic purpose’ – Whether subpoenas were ‘oppressive’ and an ‘abuse of process’ – Supreme Court (General Civil Procedure) Rules2015, r 42.04 – Civil Procedure Act 2010 (Vic), s 55 – Volunteer Fire Brigades Victoria v CFA (Discovery Ruling) [2016] VSC 573.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D A Smallbone	Accuro Legal
For the Defendant	Mr A Silver	Waterson Legal
For the Respondents (Cheng Heng Zhao and ZCH Investment Pty Ltd)	Mr A Silver	Waterson Legal

TABLE OF CONTENTS

Procedural Background.................................................................................................................... 1

The 14 subpoenas............................................................................................................................... 5

The freezing order application........................................................................................................ 6

Evidence............................................................................................................................................... 6

Submissions...................................................................................................................................... 10

Defendant’s submissions........................................................................................................... 10
Plaintiff’s submissions............................................................................................................... 15

Applicable principles – subpoenas............................................................................................... 20

Applicable principles - freezing and ancillary orders............................................................... 27

Specific subpoena categories......................................................................................................... 32

BankWest subpoena................................................................................................................... 32
Category 1.............................................................................................................. 32
Categories 2 to 6................................................................................................... 36
Category 7.............................................................................................................. 37
Category 8.............................................................................................................. 38
Categories 9 – 11................................................................................................... 39
Category 12............................................................................................................ 40

Westpac subpoena...................................................................................................................... 40
Category 12............................................................................................................ 40
Category 13............................................................................................................ 41

NAB subpoena............................................................................................................................ 42
Category 12............................................................................................................ 42

Commonwealth Bank subpoena............................................................................................... 43
Category 12............................................................................................................ 43

Subpoenas to accountants and solicitors..................................................................................... 43

Category 15............................................................................................................ 43
Category 16............................................................................................................ 43

Vandna Abichandani subpoena............................................................................................... 44
Addsum Accountants (Mel) Pty Ltd subpoena...................................................................... 44
Hannah Lin subpoena................................................................................................................ 44
Ma & Company subpoena......................................................................................................... 44
Jennifer Yan, Jing Jiang, t/as JYJ Associates subpoena......................................................... 45
Andy Yeo & Co Pty Ltd subpoena........................................................................................... 45
Reckon Docs subpoena.............................................................................................................. 45

Analysis.............................................................................................................................................. 45

HER HONOUR:

This proceeding is a commercial dispute about monies that the plaintiff says it advanced to the defendant as a consequence of three loan agreements made in the People’s Republic of China in July and October 2013. The plaintiff says that the monies have not been repaid despite obtaining judgments in China in its favour in October 2014. The defendant denies she is indebted to the plaintiff and says she was unaware of the judgments until commencement of this proceeding. The central issue in dispute in this proceeding is whether or not the defendant owes monies to the plaintiff as a consequence of the loan agreements and the judgments in China.

This proceeding was commenced in April 2015, and has been dismissed and reinstated twice now. Pleadings remain open and it has not progressed to trial. This ruling concerns another interlocutory dispute.

The plaintiff caused 14 subpoenas to be issued on 22 January 2018. The plaintiff says this has been done in support of an application it has made for a freezing order against the defendant and two non-parties (‘the respondents’). One respondent, Chen Heng Zhao, is the son of the defendant. The other respondent is ZCH Investment Pty Limited, a company that the plaintiff says is effectively controlled by the defendant. The subpoenaed parties include the defendant, the respondents and 11 others. Those others include banks, accountants and solicitors. By way of summons filed on 8 February 2018, the defendant seeks to have all 14 subpoenas set aside. The respondents also seek the subpoenas be set aside. The issue for determination in this ruling is whether or not the subpoenas should be set aside.

For the following reasons, the 14 subpoenas should be set aside.

Procedural Background

In June 2015, which is approximately two months after this proceeding was commenced, the defendant sought summary dismissal of the plaintiff’s claim. The plaintiff’s statement of claim sought registration of a judgment in the People’s Court of Huqiu District, Suzhou City in the People’s Republic of China. The registration was sought on the basis of s 6 of the Foreign Judgments Act 1991 (Cth). Upon the hearing of the summons, the plaintiff conceded that the Act did not apply to judgments made in the China. The plaintiff sought leave to amend its originating motion to make a common law application for recognition of the judgments.

On 29 June 2015, the defendant’s application for summary dismissal was dismissed. A self-executing order was made for the plaintiff to file and serve an amended originating motion by 13 July 2015. The plaintiff did not do so and accordingly the proceeding was dismissed.

The plaintiff’s solicitor later swore an affidavit deposing to confusion regarding dates. On 4 August 2015, the proceeding was reinstated and the plaintiff was ordered to pay the defendant’s costs. The plaintiff was given leave to file and serve an amended statement of claim.

On 2 December 2015, the defendant filed a summons seeking summary dismissal of the proceeding or dismissal pursuant to Order 23 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). The defendant also sought security for costs. On 8 December 2015, directions were made regarding that application. It was listed for hearing on 17 March 2016.

On 17 March 2016, the defendant’s summons dated 2 December 2015 was dismissed save for its application for security for costs. That was adjourned for a date to be fixed. In the meantime, the plaintiff was ordered to pay a tranche of security in the sum of $46,267 by 14 April 2016. It did not do so. Other directions were also made on that date, including that the parties file and serve on each other their respective affidavits of documents on or before 20 May 2016. That did not occur.

On 10 August 2016, there was no appearance at the directions hearing listed on that day and the proceedings were dismissed for a second time. The plaintiff, who has since changed solicitors, has deposed to being aware of the dismissal orders on 10 October 2016.[1]
[1]Affidavit of Xia Ping Xiao affirmed 10 October 2017.

There were no steps taken in the proceeding from the date of the second dismissal until well over one year later: on 28 November 2017, the plaintiff filed a summons seeking freezing and ancillary orders against the defendant and respondents. They were sought on an ex parte basis and neither the defendant nor the respondents had been notified. On the following day, the plaintiff filed another summons seeking that the proceeding be reinstated, leave to file a further amended statement of claim, joinder of the respondents, and discovery.

By orders made on 30 November 2017, the plaintiff was required to serve both its summonses as soon as was practicable. They were listed for hearing on 6 December 2017.

On 6 December 2017, the Court declined to make the interim freezing and ancillary orders sought by the plaintiff.[2] On 7 December 2017, orders were made recording the various undertakings which the defendant and respondents had given, and an undertaking as to damages given by the plaintiff, and otherwise directions were made for steps prior to the hearing of various applications by the plaintiff. These steps included a date by which any subpoenas must be issued.
[2]Haishun v Yue’s & Ors, 19 December 2017 (per Keogh J).

The undertakings given by the defendant and respondents on 6 December 2017 are as follows.

The defendant undertakes through her Counsel not to deal with the land situated at 1912/39 Coventry Street, Southbank (‘the Coventry Street property’) until 4pm on the next return date;

The respondent Chen Heng Zhao undertakes through his Counsel not to deal with the land situated at 8 Cluney Court, Blackburn (‘the Cluney Court property’) and the shares in ZCH Investment Pty Ltd until 4pm on the next return date; and

The respondent ZCH Investment Pty Ltd undertakes through its Counsel not to deal with or further encumber the land situated at 1 Ottawa Avenue, Blackburn (‘the Ottawa Avenue property’) until 4pm on the next return date.

On 7 December 2017, the plaintiff was also ordered to secure its undertaking as to damages by paying the sum of $50,000 into Court by 4.00pm on 27 December 2017. The orders made on 7 December 2017 included that any subpoena under Order 42A be issued on or before 22 January 2018.

On 22 January 2018, the plaintiff caused 14 subpoenas to be issued. On 8 February 2018 the defendant filed a summons seeking to have those subpoenas set aside.

On 14 March 2018, the Court determined a number of the plaintiff’s applications. The defendant did not oppose the application for reinstatement of the proceeding. The proceeding was reinstated. It was noted that the two tranches of security had been paid into Court on 11 and 20 December 2017 respectively. The plaintiff’s application seeking directions for further discovery was not allowed. Directions were made for the defendant’s application to set aside the subpoenas and for the application for freezing orders.

On 16 March 2018, the plaintiff filed a further proceeding in this Court against the defendant and respondents.[3]
[3]Proceeding S ECI 2018 00063.

On 23 March 2018, by consent, leave was granted to the plaintiff to file and serve a further amended statement of claim. This version of the claim was not the same as that filed with the summons. The allegations of fraud and dishonesty in the draft further amended statement of claim were removed. They are now contained in the new proceeding referred to above. However, these proposed amendments were only made shortly before the hearing on 14 March 2018. This means that at the time the subpoenas were issued, the plaintiff was still proposing to include allegations of fraud and dishonesty in this proceeding.

The 14 subpoenas

In addition to the subpoenas addressed to the defendant and respondents, the subpoenas are addressed to the following: BankWest, Andy Yeoh & Co Pty Ltd, Commonwealth Bank, Reckon Docs Pty Ltd, Westpac Banking Corporation Limited, Vandna Abichandani, Hannah Lin and Associates, Ma & Company Solicitors, National Australia Bank Limited, Addsum Accountants (Mel) Pty Ltd, Jennifer Yan (Jing Jiang t/as JYJ Associates).

There is a large degree of overlap in the categories sought in each subpoena. During the hearing, the subpoena to BankWest was used by the plaintiff as a tool to discuss the categories. These categories are outlined later in this ruling. In addition to BankWest, there are subpoenas to three other banks – Westpac, NAB and Commonwealth Bank. The categories of the subpoenas are the same as the BankWest subpoena save that category 12 of the subpoena to NAB replaces the reference to the respondent son with Dong Ying Zhao and refers to a different property and categories 12 and 13 of the Westpac subpoena are in respect of other properties and individuals and also to payments by Minarvi Pty Ltd.

There are seven subpoenas addressed to accountants and solicitors as well as the three subpoenas addressed to the defendant and respondents. They are all similar. They include all the categories from the BankWest subpoena as well as referring to each of the properties referred to in the subpoenas to the other banks (discussed above). For instance, the subpoena addressed to Andy Yeoh & Co Pty Ltd contains additional categories that are replicated in categories 15 and 16 below. These additional categories are also in the subpoenas addressed to other accountants and to solicitors.

The subpoenas addressed to the defendant and respondents mirror the categories from the subpoenas addressed to the accountants and solicitors (which in turn largely overlap with the categories in the bank subpoenas).

The freezing order application

The plaintiff’s application for a freezing order is made by summons filed 28 November 2017. The orders sought include the following freezing and ancillary orders:

The respondents and each of them be restrained until further order or until the payment by them into Court or into a bank account in the joint names of the solicitor for the plaintiffs and solicitor for the defendants of the sum of AUD 8,000,000 (‘the Relevant Amount’), whichever first occurs, from by themselves, their servants or agents:
a.removing from Australia or in any way disposing of, dealing with or diminishing the value of any of the respondents’ assets in Australia (‘Australian assets’) up to the unencumbered value of the Relevant Amount, and
b.disposing of, dealing with or diminishing the value of any of their, her, his or its Australian assets and ex-Australian assets up to the unencumbered value of their Australian and ex-Australian assets of the relevant amount.

provided that this order shall not prevent the defendants from each paying $500 per week on ordinary living expenses and paying their reasonable legal expenses in defending these proceedings.
That within seven days of the making of this order the respondents each serve upon the plaintiff affidavits setting out all of their assets worldwide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of their interests in the assets, and, in respect of financial assets, specifying the financial institution with which the asset is held, the branch and the account number.

Evidence

There has been voluminous affidavit material filed by the plaintiff since it decided to re-agitate these proceedings:

(a) the first affidavit of Xia Ping Xiao affirmed on 10 October 2017 (‘the first Xiao affidavit’);

(b) the second affidavit of Xia Ping Xiao affirmed on 10 October 2017 (‘the second Xiao affidavit’);

(c) the third affidavit of Xia Ping Xiao affirmed on 10 October 2017 (‘the third Xiao affidavit’);

(d) five affidavits of Annette Leung affirmed on: 28 November 2017, 29 November 2017, 22 December 2017, 9 January 2018 and 5 March 2018;

(e) two affidavits of Tiangxiang Cao affirmed on 29 November 2017 and 21 March 2018); and

(f) two affidavits of Ziguang Yao affirmed on 5 December 2017 and 20 March 2018.

The defendant and respondents have filed the following affidavit material:

(a) two affidavits of Ben Waterson affirmed on 8 February 2018 and 12 February 2018;

(b) affidavit of Chen Heng Zhao affirmed on 13 February 2018 (‘affidavit of Chen Heng Zhao’); and

(c) an earlier affidavit of the defendant affirmed on 20 November 2015 in which she deposes to being unaware of the proceedings in the People’s Republic of China and disputes any indebtedness to the plaintiff.

It is unnecessary to reiterate all the evidence for the purpose of this ruling.

There are a number of factual matters concerning identity and relationships that are not in dispute. They are as follows. That the respondent son is in fact the son of the defendant and that Dong Ying Zhao, who is also named in the subpoenas, is the sister of the defendant. That the accountants and solicitors who have been subpoenaed for records are named on the ASIC records exhibited as contact names in respect of various companies.

In respect of the various companies to which the subpoenas relate, the following is not in dispute.

That Suzhou Bolun Technology Co., Ltd. (‘the Bolun Company’) was registered on 31 October 2006 and at the time of registration was registered as a ‘solely-owned company by natural person’ and its legal representative was the defendant. On 18 June 2013 the defendant transferred 100% of the shares in the Bolun Company to the respondent son for no consideration. Co-incident with the share transfer Dong Ying Zhao was removed from the office of supervisor of the company and replaced by the respondent son for a period of three years and the defendant remained as the executive director.

On 16 April 2014 the respondent son transferred the shares back to the defendant. Simultaneously the respondent son was removed from the office of supervisor of the company and replaced by Dong Ying Zhao for a period of three years and the defendant remained as the executive director. The Share Transfer Agreement at page 29 of Exhibit XPX-2 to the second Xiao affidavit states that the transfer to the defendant was ‘at the price of RMB50,000,000’ but this is refuted in the affidavit of Chen Heng Zhao. He deposes that he ’did not receive any money for the transfer despite what is stated in the document’.

Coffee Kingdom Pty Ltd was registered on 8 July 2010 and deregistered on 8 February 2016, and the defendant was its sole shareholder and director.

On 13 November 2014, ZCH Investment Pty Ltd was registered and its directors and equal shareholders, with 50 shares each, were the defendant and the respondent son.

Forbes Finance Holding Pty Ltd was registered on 29 February 2016 and has four directors and seven shareholders. The defendant was appointed as a director on 27 July 2016 and became a holder of 17.5 per cent of the shares. The remaining directors and shareholders are unrelated to the proceedings.

Forbes Financial Holding Pty Ltd was registered on 17 May 2016 and has six directors and eight shareholders. The defendant was appointed as a director on 22 July 2016 and became a holder of 17.5 percent of the shares. The defendant replaced the respondent son as a director and shareholder.

First Capital Corporation Pty Ltd was registered on 5 July 2016 and deregistered on 9 February 2017, and its directors were the respondent son and, two individuals who are unrelated to this proceeding, Ying Fu and Meng Lam. The shareholders were the three directors as well as Jian Liang. The respondent son held 15.75 per cent of the shares.

On 9 November 2016 the defendant ceased being a director and shareholder of ZCH Investment Pty Ltd and transferred her shares to the respondent son.

The plaintiff says the subpoenas are issued in support of its application for a freezing order. The following property acquisitions and property transfers are not in dispute between the parties.

On 31 August 2010 the defendant signed a Transfer of Land for the purchase of Unit 4703 Queensbridge Square, Southbank (‘the Freshwater Place property’). On 23 July 2010 the defendant signed a mortgage over the property in favour of Westpac.

On 15 July 2013 the defendant became the registered proprietor of the Coventry Street property and Westpac registered a mortgage over the property.

On 8 September 2015 the defendant transferred her interest in the Freshwater Place property to Minarvi Pty Ltd and it became the registered proprietor. On the same day Westpac registered a mortgage over the property.

On 22 October 2016 the Ottawa Avenue property was purchased by ZCH Investment Pty Ltd and it became the registered proprietor on or around 2 February 2017 when Westpac registered a mortgage over the property.

On 22 October 2016 the Cluney Court property was purchased by the respondent son. The respondent son became the registered proprietor on 2 February 2017 when Westpac also registered a mortgage over the property.

On 27 February 2017 the property at 1 Davey Road, Montmorency was purchased by Dong Ying Zhao. Dong Ying Zhao became the registered proprietor on or about May 2017 and NAB registered a mortgage over the property.

There are two observations that I must make at this point concerning the evidence. The first is that some of the affidavit material is dependent upon a translation done by the plaintiff’s solicitor. I have cautioned the plaintiff concerning this issue. The second is that Ms Xiao has deposed to affidavits on behalf of the plaintiff, and deposes that she is authorised to do so, and has engaged in various dealings on behalf of the plaintiff (including with the defendant). However, she does not depose as to her precise relationship or office with the plaintiff. Whilst these two evidentiary matters were not in dispute in the hearing before me, they are matters that will need to be addressed if the affidavits are to be relied upon at trial.[4] They also mean that the findings in this ruling are solely for it.
[4]Noting, section 75 of the Evidence Act only relates to interlocutory proceedings. It provides that the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.

Finally, it is agreed that the defendant was in the People’s Republic of China during the time of the alleged second and third loan agreements in 2013, and that the defendant left China for Australia in early May 2014.

The defendant does not dispute that the three judgments were given in the People’s Republic of China in October 2014 but has deposed that she was not aware of them until this proceeding commenced. She does not accept the judgments and alleges corruption.[5] The defendant has not deposed as to whether or not she accepts the loan agreements. The defence to the further amended statement of claim is not yet due.
[5]Affidavit of Zhao Yue’e affirmed on 20 November 2015.

Submissions

The parties each made oral and written submissions.[6]
[6]The outline of the defendant’s submissions is dated 16 March 2018 and the plaintiff’s outline is dated 19 March 2018. In addition, the plaintiff provided a list of authorities.

Defendant’s submissions

Counsel for the defendant is also acting for the respondents and the Court was informed that the respondents also seek that the subpoenas be set aside. For ease of convenience and because no separate submissions were made by the respondents (noting however that the respondent son filed an affidavit discussed above) the submissions are referred to as the defendant’s submissions.

The central submissions of the defendant in support of its objection to set aside the subpoenas are as follows.

Firstly, the defendant says the subpoenas are oppressive or an abuse of process.

The subpoenas are an attempt to obtain an order ancillary to the freezing orders rather than the freezing order itself. The subpoenas are subverting the process for a freezing order application to try and obtain wholesale financial discovery as if there is a basis for a freezing order. The subpoenas are being impermissibly used for a global financial exploration.

There is no requirement for the defendant or respondents to produce evidence of their financial position. If a freezing order is considered appropriate, then that may well be an ancillary order.

In response to the plaintiff’s submission that adverse inferences should be drawn from the defendant’s failure to put on affidavit evidence in relation to many of the issues, the defendant says it is not appropriate to draw such an inference. Many facts can be adopted for the purpose of the freezing order application. It is up to the trial judge as to whether to draw adverse inferences of fact in due course. If so, inferences would be drawn in relation to specific facts. That is not the issue with respect to this application.

The Court refused the application for discovery at this stage of the proceeding. It is an abuse of process to circumvent that ruling by way of the subpoenas. It is not appropriate to use subpoenas as a substitute for discovery. There is a distinction between obligations of discovery and subpoenas. It is not appropriate to correlate the breadth of the discovery obligation with the breadth of the subpoena requirement. The discovery obligation is broader. And, in this case, as the subpoenas do not relate to the pleadings, an order for discovery would not even relate to the subpoenas.

It is an abuse of process to file subpoenas in the hope that the documents produced will support the freezing order application. In support of its submission that there is no legitimate forensic purpose, the defendant points to the plaintiff’s submission that it is ‘seeking to obtain documents to see whether they may be of relevance or assistance’. That is not a legitimate forensic purpose.

The defendant does not see how the subpoenaed parties are relevant to the freezing order application or at all. At any rate, relevance alone is insufficient to establish a legitimate forensic purpose.

The defendant says that of course parties need to say what they know for a freezing order application. Their obligation is fulfilled by doing just that. However the plaintiff cannot rely on its obligation to give disclosure to the Court as a basis for causing the documents to be subpoenaed.

The defendant says it is nonsensical to put on a pleading (further amended statement of claim) dealing with one set of facts and seek a subpoena on a different set of facts (affidavits supporting the freezing order application).

The Court must be satisfied that there is an express and precise identification of the forensic purpose for the matters the subject of the subpoenas (being the categories of documents). Usually this is established by reference to the pleadings, however here the subpoenas are sought in respect of the freezing order application so that application should be the focus of the Court’s enquiries. If the plaintiff were to say that they sought a freezing order on particular grounds, and there was evidence to found those grounds, then that frames a forensic purpose for the subpoenas. There is insufficient evidence to allege that the defendant absconded from the People’s Republic of China because she knew about the debt, however that is the ground the plaintiff relies on for the freezing order. None of the categories sought have any forensic purpose in dealing with the allegation.

The defendant says that the precise identification of the forensic purpose is critical. The subpoenas have no legitimate forensic purpose. There must be relevance to the proceeding. There is no relevance in the pleaded case to the materials in the subpoena. There is no precision as to the subpoenas. To the extent that it matters, there is only potential relevance to the freezing orders. None of the categories of documents are relevant to the pleadings. They are not relevant to the validity of any dealings between the parties.

In response to the plaintiff’s submission that the purpose of the subpoenas is to support the evidence and inferences already adduced, the defendant submits that is not a legitimate forensic purpose. The Court must be satisfied the matter is ‘on the cards’. A mere assertion of bad faith is insufficient. There is no allegation of bad faith in the pleadings. The allegation was made, for the first time, during oral submissions. It is an abuse of process to subpoena documents to test the veracity of allegations made in support of the freezing order.

None of the subpoenas go to the allegation that the defendant absconded from the People’s Republic of China when faced with the judgment debt. There is no evidence of alienation except for 50 shares in ZCH Investment Pty Ltd. There is no evidence of any intent. The allegations of fraud are not in this proceeding but rather in the new proceeding, and are not particularised. Making allegations without putting on evidence and bringing subpoenas in the hope that something might come up is the definition of fishing.

There should be admissible evidence to support the allegations made by the plaintiff in respect of each specific subpoena category having a legitimate forensic purpose. They must each have an evidentiary foundation.

As to the plaintiff’s reference to compliance with the subpoenas by production of documents, it is important that the issues of production are considered separately from the issue of whether the subpoenas are issued validly in the first place.

It matters not that the subpoenaed parties have mostly produced the documents to Registry. The issue of oppression is not how hard it is to produce the documents. Rather, it is the oppression to the defendant because the subpoenas are a fishing exercise.

Secondly, the defendant says the subpoenas were not filed for the purpose of providing relevant evidence in the proceeding but are a fishing expedition. The subpoenas require the production of documents which are not sufficiently relevant to the issues in the proceeding.

The defendant submits the plaintiff has cast a wide and indiscriminate net for documents in the hope that it might obtain a smoking gun to prove its application. That is the very essence of a fishing expedition. The defendant relies on the Civil Procedure Act 2010 (Vic) (‘CPA’) and refers to the principles in Volunteer Fire Brigades Victoria v CFA (Discovery Ruling)[7] and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited.[8] The Court has overarching supervision of the subpoena process. To the extent it should be exercised in light of the CPA, it should be fair, timely and cost effective.
[7][2016] VSC 573 (‘Volunteer Fire Brigades’).
[8](2013) 250 CLR 303 (‘Armstrong’).

As J Forrest J refers to in Volunteer Fire Brigades,[9] the days of searching for the smoking gun are over. A precise forensic purpose needs to be identified from the existing evidence and to the extent relevant to a case, what is pleaded. These two things go hand in hand because to plead there must be a proper basis.
[9][2016] VSC 573.

The allegations are made by the plaintiff in respect of the freezing order and are not made by way of pleading or in any formal way. Therefore the Court may inform itself as to the basis upon which the subpoena is sought by way of the affidavits provided by the plaintiff in support of the application. The Court can look at the submissions supporting the freezing order to determine the grounds relied upon but must then look at the evidence. It is not appropriate to make an allegation without evidence and then to subpoena documents to find the evidence. Any subpoena without an evidentiary foundation is necessarily fishing. There is nothing in the particulars or affidavits to identify alienation with the exception of the 50 shares in ZCH Investment Pty Ltd. There is no evidence or particulars of any intention to defraud.

Thirdly, the defendant says the subpoenas are too wide. It says there are ‘cookie cutter’ schedules of documents in each subpoena. This supports the submission that it is plainly a fishing expedition. The subpoenas are addressed to numerous entities. Categories of documents sought by the subpoenas are broad in the extreme.

In relation to the breadth of the subpoenas, the documents sought include taxation returns, financial statements, and finance applications to a variety of entities. There is no reference in the pleadings and limited reference to most of those entities in the freezing order application.

Subpoenas cannot be sent out in a hope that there will be something relevant to be produced. That this was the defendant’s premise is evidenced by the fact that the Commonwealth Bank and NAB have nothing to produce.

There is no suggestion in the evidence that the proceeds of sale of the Coffee Kingdom business have been dissipated or removed from the country. There is no evidence of any wrongdoing with respect to that entity. The fact the company is deregistered means nothing.

Fourthly, the defendant rejects the plaintiff’s argument that it does not have standing to object to the subpoenas. The defendant and the two respondents are party to three subpoenas. The application is not one of objection to inspection. Rather, it is to set aside the subpoenas and it is made under r 42.04 of the Rules.

Plaintiff’s submissions

The plaintiff’s central submissions are as follows.

Firstly, it says the subpoenas are for the purpose of the pending freezing order application. It refers to the directions made on 6 and 7 December 2017.

On a freezing order application, an applicant should set out what enquiries have been made about the defendant’s business. Without information on the nature and location of assets, the plaintiff may not be able to undertake the risk assessment necessary to give its undertaking as to damages. This information, including the identification of bank accounts, is relevant to the framing and burden of the freezing order, including with respect to third parties.

Relatedly, the plaintiff says that four of the subpoenas are to banks. Seven are to accountants or, in one case, a solicitor. They are named in ASIC records as either the applicant for incorporation, or the registered office, or the address for service of notices by ASIC, for corporations which the defendant is or has been interested, or they applied to deregister the defendant’s company Coffee Kingdom Pty Ltd during the pendency of these proceedings. Three subpoenas are directed severally to the defendant and two respondents.

Secondly, subpoenas may be issued for the purpose of evidence in a pending interlocutory application. Discovery for final issues is a different subject and does not prevent subpoenas on an earlier interlocutory application, especially where brought to prevent the Court’s process being defeated.

The CPA is relevant, as referred to in Volunteer Fire Brigades:[10] a timely and efficient disposition cannot be formed by trying to form some bright line between the categories of subpoenas and discovery. That is, the Court does not now engage in a barren exercise of classification between discovery and subpoenas if that is merely going to cause an application for discovery for the same information, particularly in circumstances where there is a short time left before the relevant hearing.
[10][2016] VSC 573.

Thirdly, it is proper to issue a subpoena to illicit evidence to add to the evidence in a case already propounded. (There has already been substantial evidence in support of the freezing order application adduced.) The test of relevance at this stage is whether it is ‘on the cards’ the material sought will add to the evidence.

The respondent son has responded to documentary evidence he purchased shares in the Bolun Company from the defendant for RMB 50 Million. Other than this, and although the defendant describes herself as an investor, the defendant and respondents have adduced no evidence of their financial position, asset dealings or business affairs, in the face of evidence the defendant has set out to enrich her respondent son to defeat creditors. It is to be inferred that no evidence that they could give on these subjects would assist the defendant and respondents on the freezing order application. Further, the respondents have refused to submit to any interlocutory control of liquid assets – no doubt for a reason. It must be ‘on the cards’ that production of the material sought would assist the plaintiff:

(a) to support by further evidence, the evidence and inferences already adduced on the risk that the Court’s processes may be defeated by prejudicial dealings;

(b) to support by further evidence, the evidence and inferences already adduced that there is a good arguable case that the respondents will be liable in due course to disgorge assets in favour of the defendant or her bankrupt estate, so as to be available for the creditors;

(c) to assist the plaintiff to identify the extent of its exposure on its undertaking as to damages, both existing and, if a freezing order be made, upon the making of that order – and to assist in moulding such an order so as to best minimise any disruption that might otherwise unnecessarily expose the plaintiff to hazard on its undertaking, including inconvenience to third parties; and

(d) to adduce evidence of the kind that Third Chandris Shipping Corporation v Unimarine SA[11] indicates should be given. In that case, Laughton LJ said that, on a freezing order application, the plaintiff should set out what inquiries have been made about the defendant’s business, including various matters mentioned.

[11][1979] QB 645.

Fourthly, there is legitimate use of subpoenas for seeking direct and conclusive evidence of matters already alleged. The metaphor used for this by the defendant is to look for a ‘smoking gun’. It is not necessary for the plaintiff to be able to identify the particular ‘smoking gun’. To do so would be inconsistent with the ‘on the cards’ test which recognises the contents of documents may not be known but it is ‘on the cards’ that they will assist. Subpoenas may seek documents by description.

Fifthly, the defendant bears a burden of persuasion to show why the evidence so far served is incapable of supporting any reasonably arguable case on the freezing order application, such as to render the subpoenas an abuse of process because they are merely fishing. This has not been attempted by the defendant.

Sixthly, the defendant has no standing to assert that subpoenas to third parties are oppressive to them.

Seventhly, the defendant has adduced no evidence that the subpoenas are oppressive to her or anyone. Further, the defendant has no standing to complain of oppression regarding any one other than herself. There is no basis for suggesting the defendant is oppressed by the subpoenas.

Eighthly, if a plaintiff ‘meets a blank wall’ in a freezing order application, that will sometimes be enough. On this application, the defendant must say there is no evidence to support the freezing order application. She must do that to satisfy her objection because it puts its case as fishing.

Ninthly, the plaintiff submits that the Court can look at the summons for the freezing order application, the pleadings and principles for the freezing order application and the nature of the case. Apprehension of risk can be a relative factor. There are many particulars in the related proceeding, and it is relied upon in this proceeding, such that a reasonable person would perceive a risk of dissipation. It should be borne in mind the Court looks to the risk of dissipation in the future.

The Court can look at submissions and evidence in respect of the application for a freezing order. The second Xiao affidavit evidences that the respondent son is a young man of no obvious training or experience. There was no basis for him suddenly being able to buy two substantial properties in Melbourne in 2016.

The evidence of the second Xiao affidavit is that the defendant left the People’s Republic of China owing many debts. Further there are three loan agreements and Chinese judgments in favour of the plaintiff. The affidavit evidences that on 18 June 2013 the defendant transferred to her respondent son all the shares for zero consideration. At the same time, she retained the Chinese equivalent role of sole director. The defendant’s sister, Dong Ying Zhao, retired from the office of ‘supervisor’ and the respondent son replaced the sister. The second Xiao affidavit evidences misleading representations.

The plaintiff says the first Xiao affidavit gives formal proof of three underlying loan agreements and three Chinese judgments of 10 October 2014 and so is the principal affidavit supporting the merits of claims in this proceeding.

Instead of making proper arrangements to pay debts in the People’s Republic of China, the plaintiff says that the defendant was busy acquiring property in Australia and intending to move there without paying creditors. It is proper to infer that she borrowed money from the plaintiff without any intention to repay it. It is arguable, and on the evidence, the plaintiff is entitled to put and say there is a serious danger of the defendant dissipating assets because of her history of avoiding responsibilities and running away from trouble. The plaintiff submits that a reasonable commercial bystander would fear further asset dealings affecting creditors that may defeat the effectiveness of proceedings. The relationship between the defendant and the timeline give inference to one course of conduct.

Finally, in response to the Court’s query about the dates of categories in the subpoenas in circumstances where some categories had no dates or were from June 2013 to date, the plaintiff submits that some categories are inherently confined by the nature of the subject matter.

The plaintiff says some categories commence in June 2013 as it is ‘on the cards’ that evidence about the financial position of the defendants and entities she controls or has association with are likely to be relevant to proof of her lack of bona fides regarding borrowings and subsequent response to the requirement of repayment, the obligation of contractual responsibilities under the loan agreements and indeed to being confronted with these proceedings.

Applicable principles – subpoenas

Orders 42 and 42A of the Rules are relevant. Rule 42.04 provides for objections to subpoenas. The subpoenas were issued under Order 42A as subpoenas for production to the Prothonotary. Rule 42A.01 provides:

(1)This Order applies where a party who has a solicitor in the proceeding seeks to require a person not a party to produce any document for evidence before—
(a)the hearing of an interlocutory or other application in the proceeding; or
(b)the trial of the proceeding.

(2)Order 42 applies so far as is practicable to a subpoena to produce under this Order.

The procedure under r 42A.01 is only available where the document is potentially required for evidence at the hearing of an application or the trial of the proceeding. The effect of r 42A.01(2) is that Order 42 applies so far as is practicable to Order 42A subpoenas.

Rule 42.04 of the Rules provides:

Setting aside or other relief
(1)The Court may, of its own motion or on the application of a party or of any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it.
(2)An application under paragraph (1) shall be made on notice to the issuing party.
(3)The Court may order that the applicant give notice of the application to any other party or to any other person having a sufficient interest

I adopt the follow statement of principles given by J Forrest J in Volunteer Fire Brigades:[12]
[12][2016] VSC 573 [55], [62].

In Messade v Baires Contracting Pty Ltd,[13] I set out the principles in relation to the provision of documents in relation to the adequacy of a subpoena. With one exception (which is irrelevant here), those principles were adopted by the Court of Appeal in Woolworths Ltd v Svajcer:
[13][2011] VSC 56 [6].
(a)it is necessary for the party at whose request the witness summons was issued to identify expressly and precisely the legitimate forensic purpose for which access to the documents is sought;
(b)the identification of such a legitimate forensic purpose is to be considered by the court without inspecting the documents sought to be produced;
(c)the applicant for the witness summons must also satisfy the court that it is ‘on the cards’, or that there is a ‘reasonable possibility’, that the documents sought under the subpoena ‘will materially assist the defence’.
(d)a ‘fishing expedition’ is not a legitimate forensic purpose and will not be permitted;
(e)the relevance of a document to the proceeding alone will not substantiate an assertion of legitimate forensic purpose. There is no legitimate forensic purpose if the party is seeking to obtain documents to see whether they may be of relevance or of assistance in his or her defence.
(f)a mere assertion of bad faith by an applicant or that something might be found demonstrating bad faith is not enough – the criteria set out in (c) must be satisfied.
(g)in criminal proceedings a ‘more liberal’ view is taken by a court in respect of the application of the test. Special weight is to be given to the fact that the documents may assist the defence of the accused.
(h)where a party fails to demonstrate a legitimate forensic purpose, the court should refuse access to the documents and set aside the witness summons. [14]
[14][2013] VSCA 270 [16].

To this list, should now be added the considerations mandated by the CPA and particularly, the overarching purpose (and associated powers of the Court) which I have set out at [28]-[29].
The distinction between a subpoena issued under O 42A and discovery is important and was emphasised by counsel for CFA and the Government Departments. The obligation on the party subject to a subpoena has been considered in a number of decisions in NSW and in this state. The leading decision is that of the NSW Court of Appeal in National Employers’ Mutual General Association Ltd v Waind and Hill:
Upon the first step the person to whom the subpoena is addressed may seek to, and have, the subpoena set aside on the ground that it was improperly issued and an abuse of the power to compel the production of documents in any one of a number of ways. Such a case is where the subpoena is used for the purpose of discovery. The essential feature of discovery in this connection, as appears from Burchard's case and Small's case is that the person to whom the subpoena is addressed will have to make a judgment as to which of his documents relate to issues between the parties. It is oppressive to place upon a stranger the obligation to form a judgment as to what is relevant to the issue joined in a proceeding, to which he is not a party. Hence it is an abuse of the use of a subpoena to impose this obligation. It follows that it is an abuse to use any subpoena, i.e. even to a party to obtain discovery. This was the reasoning in Small's case. Of course, discovery as such is otherwise available to a party. It follows that a subpoena can only properly be used for the production of documents described in particular or general terms which does not involve the making of such a judgment. It does not follow, however, that because the party who issues a subpoena is unaware of the precise description of a particular document, or whether a particular document or documents is in the possession of the witness, or even whether it exists, or is unaware of its contents, that the subpoena, or even a subpoena in general terms, amounts to the use of the subpoena for the purpose of “discovery”. [15]
[15][1978] 1 NSWLR 372, 381-382.

There is also a point to be noted about subpoenas issued under O 42A, which was made by Kaye J in Newnham v Davies:

Subparagraph (1) of that rule specifically provides that the rule applies where a party seeks to require a person, not a party, to produce any document “for evidence” before the hearing of an interlocutory or other application in the proceeding, or before the trial of the proceeding. Thus, by its express terms the rule only authorises the issue of such a subpoena where the document, the subject of the subpoena, may potentially be admissible as evidence in the proceeding. Obviously, in order to be admissible, the document, of which production is sought, must have at least some potential relevance to the issues defined in the proceedings. [16]
[16][2010] VSC 13 [6].

The words ‘may potentially be admissible’ are important. In coming to his conclusion, Kaye J cited Kennedy Taylor (Vic) Pty Ltd v Grocon Pty Ltd,[17] in which Gillard J emphasised this qualification:
[17][1999] VSC 242.
On a plain and literal interpretation of r42.10, aided by the definition and the forms, it is inescapable that the procedure under s42.10 is only available where the document is potentially required for evidence at the trial of a proceeding.

That is not to say that the procedure is not available if in the end result the document is not adduced into evidence but it is available to enable a party to inspect a document in order to make a decision whether or not to adduce it in evidence. [18]

The purpose for the rule was also considered by Beach J in Belsart Pty Ltd v Man Po Holdings (Australia) Ltd.[19] His Honour held that the rule was introduced to remove the inconvenience and injustice that could result from possible evidence produced on subpoena only being produced at trial.[20] As the above authorities indicate, the real question is not ‘admissibility’ at large – which is determined at trial - but rather relevance.
It follows then that in determining whether documents are to be produced under subpoena pursuant to O 42A, a court must be satisfied that the documents sought to be produced are potentially relevant (in the sense of s 55 of the Evidence Act 2008 (Vic): ‘the evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding’). But this Court on an interlocutory application should go no further.
I should add one further matter. Determining whether a subpoena is directed to discovery generally as opposed to matters of evidence is no easy task – particularly when it is not known what will be produced pursuant to the subpoena.[21] All of the authorities raised in oral submissions concerning the distinction between discovery and production pursuant to a subpoena predate the introduction of the CPA. The timely and efficient disposition of applications such as this cannot be achieved by trying to draw some form of bright line between the two categories – indeed I suspect this is impossible in this case. This is particularly so where the setting aside of a subpoena on the basis it amounted to discovery would result in an identical application being made under O 32.07 – with further delay and cost to the parties.[22]

[18]At [71]–[72].

[19][1998] VSC 46.

[20]At [11]–[13].

[21]Burchell v Hill [2010] VSC 96.

[22]Reference is made above to [28] and [29] of J Forrest J’s ruling above. Those paragraphs referred to ss 7 and 55 of the CPA.

Section 55 of the CPA deals with discovery and is not relevant to this application. Section 7 is relevant. It provides that the overarching purpose of the CPA and the Rules ‘is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.’ Section 9 of the CPA is also relevant. Section 9(1) provides that the Court shall further the overarching purpose by having regard to certain objects in a civil proceeding.

Court's powers to further the overarching purpose
(1)In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—

(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;

(c) the efficient conduct of the business of the court;
(d) the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and

(ii) the preparation of the case for trial;

(f)       the timely determination of the civil proceeding;
(g)       dealing with a civil proceeding in a manner proportionate to—
(i)        the complexity or importance of the issues in dispute; and
(ii)       the amount in dispute.

In Volunteer Fire Brigades, J Forrest J stated:[23]
[23]Volunteer Fire Brigades [2016] VSC 573, [32], [34].

There is no ambiguity about the application of the principles of the CPA. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited[24] the High Court said of its NSW analogue:
The evident intention and the expectation of the CPA is that the court use these broad powers to facilitate the overriding purpose. Parties continue to have the right to bring, pursue and defend proceedings in the court, but the conduct of those proceedings is firmly in the hands of the court. It is the duty of the parties and their lawyers to assist the court in furthering the overriding purpose.
That purpose may require a more robust and proactive approach on the part of the courts. Unduly technical and costly disputes about non-essential issues are clearly to be avoided. However, the powers of the court are not at large and are not to be exercised according to a judge's individualistic idea of what is fair in a given circumstance. Rather, the dictates of justice referred to in s 58 require that in determining what directions or orders to make in the conduct of the proceedings, regard is to be had in the first place to how the overriding purpose of the CPA can be furthered, together with other relevant matters, including those referred to in s 58(2). The focus is upon facilitating a just, quick and cheap resolution of the real issues in the proceedings, although not at all costs. The terms of the CPA assume that its purpose, to a large extent, will coincide with the dictates of justice.[25]

…
The overriding consideration of the CPA is to ensure that the parties receive a fair trial i.e. ‘a just resolution’ to use the words of the CPA. However, a fair trial is not a perfect trial.[26] It is, rather, the best trial that a court can provide to the parties within reason and in proportion to the issues in dispute and the court’s resources. Accordingly, demands for discovery of documents which are peripheral to the central issues cannot be entertained. The Court is obliged to focus on the central issues as best it can be determined at this point in the litigation.

[24](2013) 250 CLR 303 (‘Armstrong’); see also the observations of the Court of Appeal in Yara Australia Pty Ltd v Oswal (2013) 41 VR 302.

[25]Armstrong (2013) 250 CLR 303, 323 [56]–[57] (emphasis added).

[26]Holt v Wynter (2000) 49 NSWLR 128, 142 [79]; see also Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541.

There are numerous other authorities on subpoenas, and each party referred to some of them. It is unnecessary to refer to them all, some of which pre‑date the CPA. It is worthwhile noting that as J Forrest J observed in Volunteer Fire Brigades, the ‘Peruvian Guano’ test has been consigned to the dust bin’.[27]
[27]Volunteer Fire Brigades [2016] VSC 573, [33].

In Webb V Wheatley, Derham AsJ described fishing in the following manner.[28]

Because the plaintiff is self-represented, it is desirable to set out more fully what makes a subpoena a fishing expedition. It is an attempt to find out whether the person to whom the summons is addressed has or has not any documents relevant to an issue and, if so, what those documents are. In the Commissioner for Railways v Small,[29] Jordan CJ described fishing as endeavouring, not to obtain evidence to support the case, but to discover whether one has a case at all, or to discover the nature of the other side’s evidence. The most descriptive metaphor is the one used by Owen J in Associated Dominion Assurance Society Pty Ltd v Sir John Fairfax & Sons:
A ‘fishing expedition’, in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purposes of finding out whether there are any there or not.[30]

[28][2015] VSC 153 [53].

[29](1938) 38 SR (NSW) 564, 575.

[30](1952) 72 WN (NSW) 250, 254; see also Lyons v Kern Constructions (Townsville) Pty Ltd (1983) 47 ALR 114, 130.

The subpoena process cannot be used as a substitute for discovery by a party.[31]
[31]Commissioner for Railways v Small (1938) 38 SR (NSW) 564, 574.

In considering whether a subpoena should be set aside on the grounds that it was oppressive, Hill J in Trade Practices Commission v Kimberley Homes Pty Ltd[32] stated:
[32](1989) 217 ALR 110 [16].

It is a well-accepted rule that a subpoena may be set aside as oppressive and as an abuse of the process of the court if it requires the production of documents which are manifestly irrelevant to the issues between the parties. But the recipient of a subpoena, if a stranger to the litigation, will ordinarily not know what the real issues between the parties are. That is a matter which will be best known by the parties themselves. The rule would therefore have little real significance if a party to the litigation could not move the court to set aside the subpoena and so argue the question of relevance.

That rule is but an illustration of the wider rule that a subpoena will always be set aside if it is shown to be an abuse of the court’s process. The court has a real interest that its process be not abused but acceptance of the submission might well involve the proposition that the court could not act of its own motion. …
In Hamilton v Oades (1989) 166 CLR 486 at 502 ; 85 ALR 1 at 11 ; 15 ACLR 123 at 131–2 , Deane and Gaudron JJ said:
The inherent power of a court to control and supervise proceedings includes the power to take appropriate action to prevent injustice … [This power] is not restricted to defined and closed categories … In this context injustice is not simply a question of the purpose or motive for which the relevant proceedings were instituted but includes a consideration of the consequences of the proceedings for the person invoking the power.
The terms “oppressive” and “vexatious” are often used to signify those considerations which justify the exercise of the power to control proceedings to prevent injustice, those terms respectively conveying, in appropriate context, the meaning that the proceedings are “seriously and unfairly burdensome, prejudicial or damaging”, and “productive of serious and unjustified trouble and harassment”: Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247 ; 79 ALR 9 at 45 ; 62 ALJR 389 at 411 per Deane J (Gaudron J agreeing).

In my view, once it is accepted that the court has inherent jurisdiction to prevent an abuse of its process it must follow that a party to proceedings before the court is entitled to move the court in respect of some action that has been taken by another party where it is alleged that that action constitutes an abuse of the process of the court. In my view, a party to proceedings in this court has standing to move to set aside a subpoena where it is alleged that the subpoena, in some way, constitutes an abuse of the court’s process and it is accordingly appropriate that the court be moved by way of a motion, notice of which is to be given to those affected by it.

Applicable principles - freezing and ancillary orders

This ruling is not, of course, in relation to whether or not the plaintiff’s application for freezing and ancillary orders should be granted. Nevertheless, as it says the subpoenas are in support of that order, it is necessary to refer to the relevant principles.

Order 37A of the Rules applies to applications for freezing and ancillary orders. It is a mechanism by which such applications can be made. Rule 37A.02, 37A.03, 37A.04, 37A.05, 37A.06 and 37A.09 provide as follows:

37A.02 Freezing order
(1)The Court may make an order (a freezing order), upon or without notice to the respondent, for the purpose of preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.
(2)A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.

(3)       A freezing order may be in Form 37AA.
(4)In making a freezing order or an ancillary order, the Court shall have regard to the practice note concerning freezing orders.
(5)The affidavits relied on in support of an application for a freezing order or an ancillary order shall, as far as possible, address the following—
(a)information about the judgment that has been obtained, or if no judgment has been obtained, the following information about the cause of action—
(i)       the basis of the claim for substantive relief;
(ii)       the amount of the claim; and
(iii)if the application is made without notice to the respondent, the applicant's knowledge of any possible defence;

(b)the nature and value of the respondent's assets, so far as they are known to the applicant, within and outside Australia;

(c) the matters referred to in Rule 37A.05; and
(d)the identity of any person, other than the respondent, who the applicant believes may be affected by the freezing order and how that person may be affected by it.

37A.03 Ancillary order
(1)The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate.
(2)Without limiting the generality of paragraph (1), an ancillary order may be made for either or both of the following purposes—
(a)eliciting information relating to assets relevant to the freezing order or prospective freezing order;

(b) determining whether the freezing order should be made.

37A.04 Respondent need not be party to proceeding
The Court may make a freezing order or an ancillary order against a respondent, whether or not the respondent is a party to a proceeding in which substantive relief is sought against the respondent.
37A.05 Order against judgment debtor or prospective judgment debtor or third party
(1)       This Rule applies if—
(a)       judgment has been given in favour of an applicant by—
(i)        the Court; or
(ii)in the case of a judgment to which paragraph (2) applies, another court; or

(b)an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in—
(i) the Court; or
(ii)in the case of a cause of action to which paragraph (3) applies, another court.

(2)This paragraph applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the Court.

(3) This paragraph applies to a cause of action if—
(a)there is a sufficient prospect that the other court will give judgment in favour of the applicant; and
(b)there is a sufficient prospect that the judgment will be registered in or enforced by the Court.

(4)The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because any of the following might occur—
(a)the judgment debtor, prospective judgment debtor or another person absconds; or
(b)the assets of the judgment debtor, prospective judgment debtor or another person are—
(i)removed from Australia or from a place inside or outside Australia; or

(ii) disposed of, dealt with or diminished in value.

(5)The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that—
(a)there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because—
(i)the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii)the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or

(b)a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment of the Court, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.

(6)Nothing in this Rule affects the power of the Court to make a freezing order or an ancillary order if the Court considers it is in the interests of justice to do so.

37A.06 Jurisdiction of Court not limited
Nothing in this Order limits the inherent, implied or statutory jurisdiction of the Court to make a freezing order or an ancillary order.
37A.09 Application to be heard by Judge of the Court
An application under this Order shall be heard by a Judge of the Court.

The principles in determining whether or not to grant the freezing order are as follows:[33]
[33]Zhen v Mo [2008] VSC 300, [22]–[30] (citations omitted).

First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.
Second, the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.
Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.
Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.
Fifth, that before such an order can be made it is necessary that the applicant establish –
(a) an arguable case against the defendant; and
(b)that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value.

Sixth, the balance of convenience must favour the granting of the freezing order.
Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.
Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property.
Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.

In Distinctive FX v Wright, Elliott J added the following:[34]

In addition to the matters set out above, a further proposition may be added. The evidence relied upon by a plaintiff in seeking to establish an arguable case against a defendant may also be relied upon to demonstrate that there is a danger a prospective judgment will be wholly or partly unsatisfied as a result of the removal, disposal or diminishing of assets. Where the allegations made against a defendant concern serious dishonesty, that evidence of itself may satisfy the court that the requisite danger exists.

[34][2015] VSC 299, [39] (citations omitted).

In respect of freezing orders against third parties, I adopt the following principles usefully summarised in Deputy Commissioner of Taxation v Haritos & Ors.[35]
[35][2013] VSC 12 (per Ferguson J, as she then was) [12]-[15] (citations omitted).

In Deputy Commissioner of Taxation v AES (Aust) Pty Ltd his Honour observed that when freezing orders are sought against a third party, regard must be had to what the High Court said in Cardile v LED Builders Pty Ltd. In that case, Gaudron, McHugh, Gummow and Callinan JJ quoted the following passage from CSR Ltd v Cigma Insurance Australia Ltd:
The counterpart of a court’s power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion.
Their Honours continued in Cardile:
The integrity of those processes extends to preserving the efficacy of the execution which would lie against the actual or prospective judgment debtor. The protection of the administration of justice which this involves may, in a proper case, extend to asset preservation orders against third parties to the principal litigation. This appeal concerns the identification of such proper cases.

Later in their reasons, their Honours set out the relevant principles for making freezing orders against third parties:
What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which:
(i)the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including “claims and expectancies”, of the judgment debtor or potential judgment debtor; or
(ii)some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.

J Forrest J noted that r 37A.05(5) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) reflects those principles.

An applicant for an ancillary order to a freezing order must first establish they are entitled to a freezing order:[36]

Rule 37A.03(1) enables the court to make orders which are ancillary to freezing orders. Under Rule 37A.03(2), such orders include orders for the purposes of eliciting information relating to relevant assets.
Ancillary orders may be made against actual or intended parties to proceedings (such as Mr and Mrs Gashi) and also third parties (such as their three children and the family company).
An ancillary order is just that, not a free-standing order. To make an ancillary order, the criteria for making a freezing order in Rule 37.05(4) (parties or prospective parties) and (5) (third-parties) must first be satisfied. Then the court must consider whether to exercise its discretion in Rule 37A.03(1) to make the ancillary order. [underlining added]

[36]DCT v Gashi (2010) 27 VR 127 (per Bell J) (emphasis added).

A disclosure order that is ancillary to a freezing order ‘should be made for the purpose of rendering the freezing order effective.’[37] It must ‘not exceed what is necessary to make the freezing order effective’.[38] It is not the purpose of ancillary orders to compel ‘an open-ended inquiry forcing the third parties to provide information as to the ultimate source of funds’.[39]
[37]Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd (No.2) (‘DCT v AES’) [2009] VSC 527 [19] (J Forrest J).
[38]DCT v AES [21].
[39]DCT v AES [28].

Specific subpoena categories

The parties each made the following submissions about the categories of subpoenas using the categories in the Bankwest subpoena.

BankWest subpoena
Category 1

A copy of each finance application made to any bank or other financial institution since June 2013 by or for any of the following persons or entities (whether alone or in conjunction with any other person or entity):

a.   ZHAO Yue’e

b.   ZHAO Chen Heng

c.   ZCH Investment Pty Ltd

d.     ZHAO, Dong Ying

e.   Suzhou Bolun Technology Company Limited

f.    Coffee Kingdom Pty Ltd ACN 145 103 162

g.   Forbes Finance Holding Pty Ltd ACN 611 016 963

h.   Forbes Financial Holding Pty Ltd ACN 612 463 537; or

i.    First Capital Corporation Pty Ltd ACN 613 484 576

The plaintiff submits that the companies and persons referred to in this category have a relationship with the defendant or her respondent son. Dong Ying Zhao (referred to in sub-category (d)) is the sister of the defendant.

The plaintiff says the context (for the finance application sought in this category) is that the defendant represented to the plaintiff that she had a short term liquidity problem and that she intended to repay the loans when she got finance. The money she was borrowing from the plaintiff was for the purpose of discharging facilities that needed to be refinanced. The plaintiff says that representations were made that the loans from the plaintiff would be repaid when the bank finance came through. These matters make finance applications from this point in time, June 2013, relevant. The plaintiff says the absence of such applications is also relevant.

The plaintiff says that June 2013 is when the Coventry Street property is purchased. It is shortly before the defendant borrowed the first lot of money from the plaintiff and is the approximate period from when she began to approach the plaintiff to make borrowings. It says that this is relevant to the freezing order application because the circumstances of a principal claim can be relevant to the apprehension of risk of dissipation that a reasonable commercial person may have. This money was borrowed from banks under false pretences or for a different project than what was represented by the defendant [or others on her behalf]. Alternatively, the plaintiff says that if there was no arrangement by the defendant to borrow from the banks, then it would greatly assist it in making good the inference that the defendant is not honest.

The plaintiff says that in subsequent years, the dealings by the defendant [or others on her behalf] involved the acquisition of assets. It says that in 2014, the defendant made continued promises to the plaintiff of an intention to pay the monies owing but this was followed by her running away from the People’s Republic of China. She attempts to sell assets and discontinues her business. The plaintiff says that there is a course of dealing going on.

On the other hand, the defendant says that the allegations made by the plaintiff that she made representations for the loans for short-term finance is plainly wrong. In paragraphs 12 and 13 of the first Xiao affidavit, the plaintiff alleges the financing matter related to financing by two Chinese banks. This category has nothing to do with Chinese banks. It is strictly not relevant. There is no suggestion of financing in Australia.

The defendant says that even if she made an application for money to be advanced on a short term basis because of a financing application, that is an allegation the plaintiff makes, without evidentiary foundation, and the subpoena should not be used to test the veracity of that allegation.

Further, the defendant submits that, to the extent the plaintiff says the defendant ran away from the People’s Republic of China, that does not relate to the applications for finance.

The defendant submits that this category relates to many entities other than herself, and can have no nexus with any finance applications that she made.

The defendant submits that Forbes Finance Holding Pty Ltd and Forbes Financial Holding Pty Ltd are alleged to have shares that moved from the defendant to her respondent son during the course of the litigation. The share transfer was the other way: from the respondent son to the defendant. The shares came to the defendant not away from her. The defendant’s receipt of shares cannot be relevant to the allegation that she sought to remove assets.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category and it is too broad. Firstly, I do not accept the submission that documents since June 2013 are relevant to the freezing order application. The plaintiff must establish there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value. Action taken by the plaintiff prior to these proceedings or during either of the periods when the proceeding was dismissed, cannot satisfy this test. I do not accept the plaintiff’s submission that an inference should be drawn that there is a course of conduct commencing in June 2013 that links all the various dealings and should result in a conclusion there is a risk of dissipation of assets by the defendant and therefore a legitimate forensic purpose for the subpoenas.

I reject the plaintiff’s submission that the documents are necessary to show that it has a good arguable case for the freezing order. If that were the case, the documents would have the purpose of being for evidence of the central issue in dispute – namely whether or not the defendant owes the plaintiff monies. They have not been so limited. The plaintiff did not even refer to any specific part of the further amended statement of claim in an attempt to link the subpoenas to a specific pleading in this proceeding.

There is no evidentiary basis for the plaintiff’s submission that the documents are necessary to identify the extent of its exposure on its undertaking as to damages and if a freezing order is made, the framing of that order.

As to the plaintiff’s submission that, on a freezing order application, it should set out what inquiries have been made about the defendant’s business: this subpoena category is not confined to such inquiries, nor a particular period.

Given the factors above, I conclude that there is no precise legitimate forensic purpose for the documents sought in category 1.

Secondly, the documents relate to third parties, including the respondents. The plaintiff has not established a legitimate forensic purpose for those documents. The fact that at one stage the defendant or the respondent son owned or was a director of a company, or that a party is the defendant’s son or sister, is not sufficient admissible evidence to establish a legitimate forensic purpose concerning the disposal or dissipation of the defendant’s assets.

Thirdly, I do not accept the inferences that the plaintiff seeks be drawn regarding the respondent son. That is, that because of his age and lack of education, he would not have the financial means to purchase property in his own right. He deposes to being a tour guide. He may have monies from other sources, such as an inheritance. None of this is known. He admits the defendant transferred shares in the Bolun Company to him and he did not pay her for that. He says he transferred them back again and did not receive any money. The share transfers are not in dispute. However they occurred in 2013 and 2014 – prior to this proceeding. Whether the respondent son should be required to divulge further financial information is a question left to be determined after the freezing order has been determined. For the purpose of this application, I am not satisfied there is a legitimate forensic purpose in him being required to divulge financial information from June 2013. This category is too broad.

Fourthly, as the defendant submits, the allegation is that she made representations about obtaining finance from banks in the People’s Republic of China. The categories are not addressed to Chinese banks. Further, even if they did capture such information, that is an issue for discovery, not the freezing orders. It relates to representations prior to the commencement of the proceeding.

Categories 2 to 6

A copy of each statement of her, his or its income and/or expenses and/or assets and/or liabilities prepared since June 2013 by or for:

a.   ZHAO Yue’e;

b.   ZHAO Chen Heng;

c.   ZHAO Dong Ying;

d.     ZCH Investment Pty Ltd ACN 602 841 163;

e.   Suzhou Bolun Technology Company Limited;

f.    Coffee Kingdom Pty Ltd ACN 145 103 162;

g.   Forbes Finance Holding Pty Ltd ACN 611 016 963;

h.   Forbes Financial Holding Pty Ltd ACN 612 463 537; or

i.    First Capital Corporation Pty Ltd ACN 613 484 576.

A copy of each taxation return (including amended returns) lodged in any jurisdiction since June 2013 by or for each of:

a.   ZHAO, Yue’e;

b.   ZHAO Chen Heng;

c.   ZHAO Dong Ying;

d.     ZCH Investment Pty Ltd ACN 602 841 163;

e.   Suzhou Bolun Technology Company Limited;

f.    Coffee Kingdom Pty Ltd ACN 145 103 162;

g.   Forbes Finance Holding Pty Ltd ACN 611 016 963;

h.   Forbes Financial Holding Pty Ltd ACN 612 463 537; or

i.    First Capital Corporation Pty Ltd ACN 613 484 576.

A copy of each notice of assessment of taxation (including amended notices) issued since June 2013 to:

a.   ZHAO, Yue’e;

b.   ZHAO Chen Heng;

c.   ZHAO Dong Ying;

d.     ZCH Investment Pty Ltd ACN 602 841 163;

e.   Suzhou Bolun Technology Company Limited;

f.    Coffee Kingdom Pty Ltd ACN 145 103 162;

g.   Forbes Finance Holding Pty Ltd ACN 611 016 963;

h.   Forbes Financial Holding Pty Ltd ACN 612 463 537; or

i.    First Capital Corporation Pty Ltd ACN 613 484 576.

A copy of each taxation return lodged by any company, trustee or partnership since June 2013, where that document was provided to you by or on behalf of ZHAO Yue’e or ZHAO Chen Heng, or ZCH Investment Pty Ltd and copies of any notices of assessment accompanying those returns.

Copies of the statements issued by You since June 2013 on any account in the name of ZHAO Yue’e or in the name of ZHAO Chen Heng, or in the name of ZCH Investment Pty Ltd or in the name of Coffee Kingdom Pty Ltd, or in the name of Suzhou Bolun Technology Company Ltd or in the name of ZHAO Dong Ying and on any account to which either of them was or is a party.

The plaintiff says the same approach applies as for Category 1. The financial statements, taxation returns and bank statements are sought for this period.

The defendant objects to these categories on the same grounds as Category 1.

The defendant says there has been no legitimate forensic purpose identified. These categories are designed purely to seek to prove bold allegations of bad faith.

I find the plaintiff has failed to identify a legitimate forensic purpose for these categories and they are too broad. I reiterate my analysis in respect of category 1 above.

Category 7

Copies of diary notes of communications made by you or your staff with each of ZHAO Yue’e and ZHAO Chen Heng.

The plaintiff says this category goes to the defendant enriching her respondent son at the expense of creditors.

The defendant says there is no evidence that the respondent son has received anything other than the defendant’s 50 shares in ZCH Investments Pty Ltd. This is not in dispute. Seeking to obtain diary notes to lenders and lawyers that might give evidence as to what else happened in surrounding transactions is a fishing exercise.

The defendant says it is conceded by the plaintiff that nothing was done between registration of the company and transfer of the shares. There are no transfers from the defendant to the respondent son of money or real property, or property of any value, that would enliven any of the subpoenas.

The defendant says her transfer of shares to her son does not form a course of conduct as alleged by the plaintiff. The plaintiff has no evidentiary foundation to suggest the defendant has enriched her son. It is fishing to look for such evidence.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category and it is too broad. I reiterate my analysis in respect of category 1 above.

Category 8

Copies of each declaration of trust, agreement or memorandum entered into since June 2013 recording any undertaking or agreement by any third person to hold funds, shares or other assets for, or pay (or repay) funds or transfer shares or other assets to ZHAO Yue’e, or ZHAO Chen Heng, or ZCH Investment Pty Ltd, whether conditionally or unconditionally.

The plaintiff says this category is to catch money that has gone sideways. The defendant asks, ‘what monies?’ She says there is no suggestion of any trusts or sideways movement of monies, and there is no evidentiary foundation for this category. There is no legitimate forensic purpose.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category and it is too broad. I reiterate my analysis in respect of category 1 above.

Categories 9 – 11

Copy of any agreement for sale of any business formerly carried on by or on behalf of Coffee Kingdom Pty Ltd.

Copy of settlement statements, directions to pay and directions to account for any deposit, given on completion of any sale of any business formerly carried on by or on behalf of Coffee Kingdom Pty Ltd.

Copies of cheques, transfer authorities or other records of payment of the purchase money on the sale of any business formerly carried on by Coffee Kingdom Pty Ltd and of any other money paid by the purchaser of that business to or at the direction of any of Coffee Kingdom Pty Ltd, ZHAO Yue’e, ZHEO Chen Heng, ZHAO Dong Ying or ZCH Investment Pty Ltd.

The plaintiff says that these categories are about Coffee Kingdom Pty Ltd and the discontinuance of the business. It says that deregistration happened whilst these proceedings were on foot and, that while it is hotly contested that the business carried on for some years, it is now discontinued. That is a matter a reasonable commercial person would be concerned about and would have the effect of diminishing assets available for creditors because the business was no longer there.

On the other hand, the defendant says there is nothing surreptitious or irregular about discontinuance of the Coffee Kingdom business. There is no evidentiary basis to say the deregistration caused assets to go somewhere or was an attempt to avoid jurisdiction. The defendant says these categories are exploratory in nature and fishing. There is no basis for an exploratory search.

I find the plaintiff has failed to identify a legitimate forensic purpose for these categories and they are too broad. I reiterate my analysis in respect of category 1 above.

The fact that the Coffee Kingdom business was discontinued does not of itself establish a legitimate forensic purpose. There are many reasons businesses discontinue. Further, the company was registered in 2010 (prior to these proceedings and prior to the alleged loans) and deregistered on 8 February 2016 (at which time the defendant had an application for summary dismissal on foot). This timing does not support a legitimate forensic purpose in respect of the freezing orders. As discussed above, I do not accept the plaintiff’s submission there is a single course of conduct that forms a legitimate forensic purpose for the subpoenas.

Category 12

Copies of the contracts, settlement statements, cheques, directions to pay, transfer authorities, deposit receipts, duty receipts, invoices fee receipts and other records of the payments made upon completion of the purchase by ZHAO, Chen Heng of the property known as 8 Cluney Court, Blackburn South, in the State of Victoria (Certificate of Title Volume 8204, folio 279).

The plaintiff says this category is about the acquisition of the Cluney Court property. The respondent son is on the title. The plaintiff is attempting to find out where the money that he used to purchase this property came from.

The defendant says that there is no evidence of monies being transferred from the defendant to the respondent son in respect of the Cluney Court property. Unless there is some, these paragraphs are necessarily exploratory.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category. I reiterate my analysis in respect of category 1 above. The Cluney Court property was purchased in the period when the proceedings were dismissed.

Westpac subpoena
Category 12

Copies of the contracts, settlement statements, cheques, directions to pay, transfer authorities, directions to account for deposit and other records of payment of:

a. the price (including any deposit) on the sale of unit 4703/1 Freshwater Place, Southbank or 4703/1 Queensbridge Square, Southbank in the State of Victoria (Certificate of Title Volume 10928 folio 604) by ZHAO Yue’e;

b. any other payment made by Minarvi Pty Ltd or by any of its shareholders or directors to any of ZHAO Yue’e, ZAO Chen Heng, ZHAO Dong Ying and ZCH Investment Pty Ltd;

c. any other payment made by Minarvi Pty Ltd or by any of its shareholders or directors at the request or direction of any ZHAO Yue’e, ZHAO Chen Heng, ZHAO Dong Ying and ZCH Investments Pty Ltd.

The plaintiff says that this category of documents is sought from Westpac as the mortgagee of the Freshwater Place property.

The defendant says there is no suggestion of any wrongdoing in respect of the purchase of the Freshwater Place property. The defendant says the plaintiff relies on the settlement of the property being in 2013, at about the time it says it loaned monies to the defendant. However, the contract of sale was entered into in 2010 as a binding financial obligation. There is no suggestion the contract was entered into in 2013 or that the defendant purchased the property with freshly stolen and defrauded monies. The obligation in 2013 was to complete the financial obligation.

The defendant says the same analysis applies in respect of Minarvi Pty Ltd. How is it relevant and what is the evidentiary foundation? There are multiple people listed in this category including the defendant’s sister, Dong Ying Zhao. There is no suggestion she is involved in anything. This is a request for information in case she might be. It is exploratory.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category. I reiterate my analysis in respect of category 1 above. The property was purchased prior to this proceeding and ownership was transferred to Minarvi Pty Ltd during the course of the proceedings in September 2015. There is no evidence suggesting that Minarvi Pty Ltd has ceased to be the owner. Minarvi Pty Ltd is not a respondent to the application for a freezing order.

Category 13

Copies of the contracts, settlement statements, cheques, directions to pay, transfer authorities, deposit receipts, duty receipts, invoices fee receipts and other records of payments made in connexion with the purchase by ZCH Investment Pty Ltd of the property known as 1 Ottawa Avenue, Blackburn, in the State of Victoria (Certificate of Title Volume 8201, folio 583).

The plaintiff says this category is sought from Westpac as the mortgagee of the Ottawa Avenue, Blackburn property.

The defendant says the purchase of land is not in dispute. ZCH Investment Pty Ltd completed the sale and takes the title. It does not become the owner of the property until the respondent son is the sole shareholder of ZCH Investment Pty Ltd. This all happens after the proceeding is dismissed. It does not provide evidence of risk that the defendant is trying to avoid the Court’s jurisdiction.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category. I reiterate my analysis in respect of category 1 above. The Ottawa Avenue property was purchased in the period when the proceedings were dismissed.

NAB subpoena
Category 12

Copies of the contracts, settlement statements, cheques, directions to pay, transfer authorities, deposit receipts, duty receipts, invoices fee receipts and other records of payments made upon completion of the purchase by ZHAO, Dong Ying of the property known as 1 Davey Road, Montmorency, in the State of Victoria (Certificate of Title Volume 10193, folio 181).

The defendant says this category relates to a purchase by the defendant’s sister, Dong Ying Zhao, of a property in Montmorency. She is not a respondent to the freezing order. This category is fishing.

The plaintiff informed the Court that the NAB has informed the Registry it has nothing to produce.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category. I reiterate my analysis in respect of category 1 above. The property was purchased during the period the proceeding was dismissed. Dong Ying Zhao is not a respondent to the application for a freezing order.

Commonwealth Bank subpoena
Category 12

This category is the same as category 12 of the BankWest subpoena. No party made specific submissions in relation to this category. The plaintiff informed the Court that the Commonwealth Bank has informed the Registry it has nothing to produce.

I reiterate my findings in respect of category 12 of the BankWest subpoena.

Subpoenas to accountants and solicitors

Turning now to the submissions made in relation to the subpoenas addressed to accountants and solicitors. They contain the following additional categories.

Category 15

Copies of the settlement statements, cheques, directions to pay, transfer authorities, receipts and other records of the payment of consideration for the transfer of shares in Suzhou Bolun Technology Company Limited by ZHAO Yue’e to ZHAO Chen Heng.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category. I reiterate my analysis in respect of category 1 above.

Category 16

Copies of the settlement statements, cheques, directions to pay, transfer authorities, receipts and other records of the payment of consideration for the transfer of shares in Suzhou Bolun Technology Company Limited by ZHAO Chen Heng to ZHAO Yue’e.

I find the plaintiff has failed to identify a legitimate forensic purpose for this category. I reiterate my analysis in respect of category 1 above.

I will now address specific submissions made regarding the subpoenas. Given the findings concerning the categories above, it is unnecessary for further findings to be made in respect of each addressee. The subpoenas will be set aside because they do not identify a legitimate forensic purpose. In the analysis below, I also find that there has been an abuse of process by the plaintiff in causing the subpoenas to be issued.

Vandna Abichandani subpoena

The plaintiff says Ms Abichandani is the applicant for the registration of ZCH Investment Pty Ltd. She is someone who is likely to be the accountant assisting the defendant and who is likely to have financial information of the kind that is being sought.

The defendant says without there being some clear forensic purpose, it is not appropriate to wonder whether Ms Abichandani has documents which might assist.

Addsum Accountants (Mel) Pty Ltd subpoena

The plaintiff says this subpoena comes about because the addressee lodged the application for deregistration of Coffee Kingdom Pty Ltd with ASIC. The defendant noted that was the extent of relevance.

Hannah Lin subpoena

The plaintiff says this subpoena comes about because Ms Lin may be the present accountant of the defendant and her address happens to be the given address of First Capital Corporation Pty Ltd. Ms Lin’s address is given to ASIC for ZCH Investment Pty Ltd. The defendant says this cannot be the basis for a subpoena.

Ma & Company subpoena

The plaintiff says this subpoena is addressed to Ma & Co because they lodged the application for the registration of Coffee Kingdom Pty Ltd. The defendant says that happened in 2010, three years before the loan was advanced. It says the records of Coffee Kingdom Pty Ltd are not relevant.

Jennifer Yan, Jing Jiang, t/as JYJ Associates subpoena

The plaintiff says Ms Yan’s address is the registered office address of Forbes Finance Holding Pty Ltd. It is the address for the registered office of Forbes Financial Holding Pty Ltd only from May 2016. The defendant made no specific submission regarding this addressee. It makes a general submission asking what connection the advisors have to this proceeding, and says the subpoenas addressed to them do not have a legitimate forensic purpose.

The plaintiff informed the Court that Ms Yan has informed the Registry she has nothing to produce.

Andy Yeo & Co Pty Ltd subpoena

The plaintiff says Andy Yeoh & Co Pty Ltd’s address was the registered office of First Capital Corporation Pty Ltd before it was deregistered. The defendant says there was no transfer of the shares of that company. It was always held by the respondent son. The defendant says that there is no proper basis to seek information regarding him.

Reckon Docs subpoena

The plaintiff says Reckon Docs are the accountants who applied for registration of Forbes Finance Holding Pty Ltd.

Analysis

The orders of 7 December 2017 provide for any subpoenas to be issued on or before 22 January 2018. Having read the transcript of the hearing before Keogh J which led to these orders, it is evident that no ruling was made in respect of their validity. Indeed, at the hearing, the defendant’s counsel submitted that the subpoenas could be issued for no purpose other than for the application to amend the pleading to include the allegations of fraud and dishonesty, and that the defendant objected to them on the grounds they were a fishing expedition.[40] Keogh J indicated that any objection to subpoenas could be dealt with if and when subpoenas were issued and further observed that ‘if subpoenas are issued which aren’t justified, it will just cause further expense’.[41]
[40]Transcript 6 December 2017, p.46.
[41]Transcript 6 December 2017, p.46.

For reasons outlined in my findings regarding each subpoena category, I do not consider that the plaintiff has established there is a legitimate forensic purpose for the subpoenas. I agree with the defendant’s characterisation of the subpoenas as a fishing expedition.

In respect of its submission that the subpoenaed information sought is necessary for the freezing order, the plaintiff relied upon the following proposition.

Now that Cardile's case has defined more precisely the source of the jurisdiction to make the Mareva orders themselves, some inferences can be drawn as to the Court's jurisdiction to make ancillary disclosure orders. Since the source of the jurisdiction to make Mareva orders is the Court's inherent power to prevent abuse of its processes and stultification of the administration of justice by the removal of assets from the plaintiff's reach, the Court must also have the power to order disclosure of the nature and location of particular assets or assets of a class so that the Mareva relief is effective and not oppressive. As Robert Goff J pointed out in A v C (at 959), if the plaintiff does not know the number and location of (say) the defendant's bank accounts, a Mareva order in respect of bank accounts generally could be oppressive both to the defendant and to the bankers who are required to act in accordance with it, especially where there is more than one account or several defendants. Without information about the nature and location of the defendant's assets, the plaintiff may be unable to make the risk assessment which is necessary in order to give the undertaking as to damages, or if the undertaking is given, it may lead to an unexpected exposure. Robert Goff J concluded, as do I, that considerations such as these point to the conclusion that in the special cases where the court decides to make Mareva orders, it may make such disclosure orders as are necessary to ensure that the Mareva jurisdiction is properly and effectively exercised. While the power to do so does not depend upon the statutory discovery and interrogatory procedures, Cardile indicates (as I have mentioned) that these procedures should be considered as alternative methods of compelling disclosure, where they are available. [42]

[42]Bax Global v Evans [1999] 47 NSWLR 538 [23] (per Austin J).

Firstly, this proposition does not relate to subpoenas. It relates to disclosure orders ancillary to freezing orders. Secondly, as discussed above, ancillary orders may only be made once the plaintiff has established that a freezing order should be made. I therefore reject the plaintiff’s submission that this proposition provides an acceptable rationale for the subpoenas.

I reject the plaintiff’s submission that the subpoenas can be justified on the basis they will obtain further evidence to support the freezing order application. Having elected to issue the subpoenas, they must establish there is a precise legitimate purpose for each category sought. An application for a freezing order does not absolve the plaintiff of that obligation.

I do not accept the plaintiff’s submission that the subpoenas are justified because of a lack of material filed by the defendant in response to the freezing order application. The plaintiff must have a proper basis for making the application for the freezing and ancillary orders against the defendant and respondents. The plaintiff must establish an arguable case. Whether or not the plaintiff can do so is a matter to be ventilated at the hearing of the application for the freezing and ancillary orders.

It is common ground between the parties that subpoenas may be issued in support of any interlocutory application. However, subpoenas should not be used as a mechanism to avoid satisfying the requirements for an ancillary order which are, in turn, dependent on first satisfying the Court that a freezing order is necessary. That is what has occurred here and it is an abuse of process.

Subpoenas may not be used as a substitute for discovery. At the time that the subpoenas were issued, the plaintiff had its application to amend its statement of claim on foot. At that time the plaintiff proposed to join the respondents to this proceeding. The proposed amendment included allegations of fraud and dishonesty. However, as discussed above, that did not come to pass. That is, the plaintiff no longer pursues the joinder and the allegations of fraud and dishonesty in this proceeding. This is not a case where there is a barren exercise of drawing an artificially bright line (as discussed in Volunteer Fire Brigades[43] above) between subpoenas and discovery. Discovery needs to be relevant to the central issue in dispute in this proceeding: whether the defendant owes the plaintiff monies.
[43][2016] VSC 573.

For completeness, I do not accept the defendant’s submission that the subpoenas were issued to subvert the ruling against early discovery. The subpoenas were issued prior to that ruling. Further, they are so broad as to go beyond the central issue in dispute.

Nor do I accept the defendant’s submissions on oppression. There is no evidence to support that she or any of the subpoenaed parties are oppressed by the subpoenas.

Finally, I do not accept the plaintiff’s submission that the CPA supports the subpoenas. To the contrary, causing so many subpoenas with such wide categories to be issued, in the absence of a precise legitimate purpose, is contrary to the CPA. It has led to the unnecessary cost of this application to set aside the subpoenas and delay in the hearing of the freezing and ancillary orders, and the proceeding generally. The plaintiff and its lawyers have not assisted the Court to further the overriding purpose. This has been a costly dispute about a non-essential issue. It has occurred against a background of long delays and missteps by the plaintiff in this proceeding.

A copy of each finance application made to any bank or other financial institution since June 2013 by or for any of the following persons or entities (whether alone or in conjunction with any other person or entity):
a. ZHAO Yue’e
b. ZHAO Chen Heng
c. ZCH Investment Pty Ltd
d. ZHAO, Dong Ying
e. Suzhou Bolun Technology Company Limited
f. Coffee Kingdom Pty Ltd ACN 145 103 162
g. Forbes Finance Holding Pty Ltd ACN 611 016 963
h. Forbes Financial Holding Pty Ltd ACN 612 463 537; or
i. First Capital Corporation Pty Ltd ACN 613 484 576

A copy of each statement of her, his or its income and/or expenses and/or assets and/or liabilities prepared since June 2013 by or for:
a. ZHAO Yue’e;
b. ZHAO Chen Heng;
c. ZHAO Dong Ying;
d. ZCH Investment Pty Ltd ACN 602 841 163;
e. Suzhou Bolun Technology Company Limited;
f. Coffee Kingdom Pty Ltd ACN 145 103 162;
g. Forbes Finance Holding Pty Ltd ACN 611 016 963;
h. Forbes Financial Holding Pty Ltd ACN 612 463 537; or
i. First Capital Corporation Pty Ltd ACN 613 484 576.

A copy of each taxation return (including amended returns) lodged in any jurisdiction since June 2013 by or for each of:
a. ZHAO, Yue’e;
b. ZHAO Chen Heng;
c. ZHAO Dong Ying;
d. ZCH Investment Pty Ltd ACN 602 841 163;
e. Suzhou Bolun Technology Company Limited;
f. Coffee Kingdom Pty Ltd ACN 145 103 162;
g. Forbes Finance Holding Pty Ltd ACN 611 016 963;
h. Forbes Financial Holding Pty Ltd ACN 612 463 537; or
i. First Capital Corporation Pty Ltd ACN 613 484 576.

A copy of each notice of assessment of taxation (including amended notices) issued since June 2013 to:
a. ZHAO, Yue’e;
b. ZHAO Chen Heng;
c. ZHAO Dong Ying;
d. ZCH Investment Pty Ltd ACN 602 841 163;
e. Suzhou Bolun Technology Company Limited;
f. Coffee Kingdom Pty Ltd ACN 145 103 162;
g. Forbes Finance Holding Pty Ltd ACN 611 016 963;
h. Forbes Financial Holding Pty Ltd ACN 612 463 537; or
i. First Capital Corporation Pty Ltd ACN 613 484 576.

[2018] VSC 144

29 March 2018