Wu v Li

Case [2014] FCA 297

FEDERAL COURT OF AUSTRALIA

Wu v Li [2014] FCA 297

Citation: Wu v Li [2014] FCA 297
Appeal from: Li v Wu [2013] FCA 1067
Li v Wu (No 2) [2013] FCA 1265
Parties: TAO WU v YU XIN LI
File number: ACD 116 of 2013
Judge: FOSTER J
Date of judgment: 28 March 2014
Catchwords:

APPEAL AND NEW TRIAL – whether the Full Court should grant a stay of execution in respect of a money judgment pending determination of an appeal and cross-appeal from that judgment – relevant principles and considerations discussed.

PRACTICE AND PROCEDURE – whether the Full Court should grant a stay of execution in respect of a money judgment pending determination of an appeal and cross-appeal from that judgment – relevant principles and considerations discussed.

Legislation: Federal Court Rules 2011, r 36.08(2)  
Cases cited:

Li v Wu [2013] FCA 1067
Li v Wu [2013] FCA 1265
Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681 cited
Kalifair Pty Limited v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737 cited
Philip Morris (Australia) Limited v Nixon [1999] FCA 1281 cited
Date of hearing: 6 and 18 March 2014
Date of last submissions: 26 March 2014
Place: Sydney (via video link to Canberra)
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 56
Counsel for the Appellant: Dr C S Ward
Solicitors for the Appellant: Dibbs Barker
Counsel for the Respondent: Mr M J Heath
Solicitors for the Respondent: Goodman Law

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY

GENERAL DIVISION

ACD 116 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

TAO WU
Appellant
AND:

YU XIN LI
Respondent

JUDGE:

FOSTER J

DATE OF ORDER:

28 MARCH 2014

WHERE MADE:

SYDNEY (VIA VIDEO LINK TO CANBERRA)

THE COURT ORDERS THAT:

1.By 30 April 2014, the appellant provide security for the respondent’s costs of and incidental to the within appeal in the amount of $60,000 and also provide security in the amount of $30,000 in respect of post-judgment interest which has accrued and continues to accrue on the judgment ordered by Jagot J on 6 November 2013 in proceeding ACD 54 of 2011 in the amount of $1,170,387.73 (comprising the principal sum of $976,866.80 and interest thereon of $193,520.93), such security to be provided by cash or in the form of a bond or guarantee issued by an appropriate financial institution licensed to operate as such in Australia in a form to be agreed between the parties or, failing agreement, to be settled by a Registrar.

2.Upon condition that the security required to be provided by Order 1 above is provided by 30 April 2014, execution on and proceedings under the judgment and order ordered in pars 2 and 3 of the Orders made by Jagot J on 6 November 2013 in proceeding ACD 54 of 2011 and execution on and proceedings under the order made by Jagot J on 29 November 2013 in the same proceeding be…

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AGLC
Wu v Li [2014] FCA 297
Case
[2014] FCA 297
Decision Date

CaseChat Overview and Summary

In the case of Wu v Li, the Full Court was called upon to determine Mr Wu’s application for a stay of execution of a money judgment pending the outcome of an appeal and cross-appeal. The principal judgment was rendered in favour of Mr Li, who was the applicant in the original proceedings, against Mr Wu, the respondent. The primary judge found that Mr Wu was liable to pay Mr Li $976,866.80 under an indemnity provision in a shareholder agreement, along with interest on that sum. The primary judge dismissed other claims made by Mr Li, including those for misleading and deceptive conduct, breach of contract, and breach of fiduciary duty.

The Full Court was required to decide whether to grant a stay of execution of the judgment pending the appeal and cross-appeal. The decision turned on the relevant principles and considerations applicable to such stays, including the likelihood of success on appeal, the potential for prejudice to either party, and the effect of the judgment on the appellant’s ability to prosecute the appeal. Mr Wu argued that the appeal was bona fide and based on reasonably arguable grounds, and that refusal of a stay would result in his appeal being rendered nugatory due to Mr Li’s potential pursuit of Mr Wu in bankruptcy or other courts. Mr Wu also offered to provide security for the respondent’s costs and interest accruing on the judgment debt.

The Full Court, after considering the submissions and evidence, concluded that the application for a stay should be granted. The court was satisfied that the appeal was based on reasonably arguable grounds and that there was no evidence of actual prejudice to Mr Li if a stay were granted. The court also considered the potential for irremediable prejudice to Mr Wu if the stay were refused. Accordingly, the Full Court made an order that execution on and proceedings under the judgment be stayed until the determination of the appeal and cross-appeal, subject to Mr Wu providing specified security by a certain date. The court also reserved the costs of the interlocutory application and listed the appeal and cross-appeal for further directions.

Orders

Orders of the court

1. By 30 April 2014, the appellant provide security for the respondent’s costs of and incidental to the within appeal in the amount of $60,000 and also provide security in the amount of $30,000 in respect of post-judgment interest which has accrued and continues to accrue on the judgment ordered by Jagot J on 6 November 2013 in proceeding ACD 54 of 2011 in the amount of $1,170,387.73 (comprising the principal sum of $976,866.80 and interest thereon of $193,520.93), such security to be provided by cash or in the form of a bond or guarantee issued by an appropriate financial institution licensed to operate as such in Australia in a form to be agreed between the parties or, failing agreement, to be settled by a Registrar.

2. Upon condition that the security required to be provided by Order 1 above is provided by 30 April 2014, execution on and proceedings under the judgment and order ordered in pars 2 and 3 of the Orders made by Jagot J on 6 November 2013 in proceeding ACD 54 of 2011 and execution on and proceedings under the order made by Jagot J on 29 November 2013 in the same proceeding be stayed until the determination of the Appeal and Cross-Appeal herein, or until further order of the Full Court.

3. The costs of and incidental to the Interlocutory Application filed by the appellant on 25 February 2014 be reserved.

4. Both parties have liberty to apply on two (2) days’ notice or on such shorter notice as a judge might allow.

5. The Appeal and Cross-Appeal be listed for directions at 9.15 am on 2 May 2014 before Foster J.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

These Reasons for Judgment determine Mr Wu’s application for a stay.THE PRINCIPAL JUDGMENT The hearing of the proceedings before the primary judge occupied ten days. Mr Li was the applicant in the proceedings below. Mr Wu was the respondent. In the final iteration of his Statement of Claim (the Second Further Amended Statement of Claim filed on 19 September 2013), Mr Li made a number of claims against Mr Wu ranging across several transactions and involving dealings between the two men which took place over a number of years. In the principal judgment (at [2]), her Honour described those claims in the following way:There are four groups of claims. The first is the claim under the indemnity provisions of two shareholder agreements entered into in 2006. The second is the claim for misleading and deceptive conduct under the Fair Trading Act 1992 (ACT) (Fair Trading Act) by which Mr Wu is alleged to have induced Mr Li to enter into another agreement in February 2008. The third is the claim for alleged breaches of contract, including express and implied terms, of an agreement entered into in March 2005. The fourth is the claim for equitable compensation for loss Mr Li is said to have suffered by reason of Mr Wu’s breaches of fiduciary duties. Her Honour found that Mr Li had established his claim against Mr Wu under the indemnity in cl 5 of a Shareholder Agreement dated 11 August 2006 entered into between Mr Wu, Mr Li, Ms Xiu Zhen Ji and Golden Enterprise Investments Pty Limited (GEI) (the GEI Shareholder Agreement). Her Honour found that Mr Wu was liable to pay to Mr Li the sum of $976,866.80 pursuant to the said indemnity. Her Honour also held that Mr Li was entitled to interest on that sum. GEI is part of the Golden Group of Companies. The other companies in that group are Golden International Investments Pty Limited, Golden Crop Pty Limited, Golden Constructions Pty Limited and Spring Grove Enterprise Investments Pty Limited (SG). The primary judge also found that Mr Wu had engaged in misleading and deceptive conduct in procuring Mr Li to enter into a further agreement in 2008 but had failed to prove any loss or damage flowing from that conduct. Her Honour rejected Mr Li’s claims for damages for breach of contract. Her Honour also rejected Mr Li’s claim for equitable compensation for breach of fiduciary duty on a number of grounds. In particular, her Honour refused leave to Mr Li to amend his Statement of Claim in order to plead this particular claim. The primary judge held that the GEI Shareholder Agreement was entered into in effect as a joint venture agreement amongst the members of GEI (Mr Li, Mr Wu and Ms Ji) for the development of certain land at Fox Place, Lyneham, in the ACT. Clause 5 of the GEI Shareholder Agreement provided that, in the event that GEI was unable to repay any “Member loan” (including interest), the other members, jointly and severally, agreed to indemnify that Member for their Proportionate Share of the loan amount. The primary judge held that GEI was unable to repay to Mr Li the total of several amounts advanced to GEI by other persons and entities at the direction of Mr Li and that accordingly cl 5 had been triggered with the consequence that Mr Wu was obliged to pay to Mr Li a share of the balance of Mr Li’s loan account with GEI. Her Honour quantified that amount at $976,866.80.

Ratio Decidendi

Legal Principle Established

The Court went on to fashion the stay order in that case with a view to protecting the judgment creditor as much as was possible consistent with granting a stay.CONSIDERATION Counsel who appeared for Mr Wu before me submitted that the following matters should lead the Court to exercise its discretion in favour of a stay:(a) The appeal was lodged bona fide and is based upon reasonably arguable grounds;(b)The continued prosecution of the appeal will be stultified if a stay is refused because Mr Li, as judgment creditor, will vigorously pursue Mr Wu in the Bankruptcy jurisdiction of this Court or the Federal Circuit Court of Australia thus rendering the appeal negatory; and(c)Although there may theoretically be the potential for some prejudice to be caused to Mr Li by the grant of a stay, there is no evidence of actual prejudice. By way of contrast, Mr Wu will suffer irremediable prejudice by having his appeal rendered nugatory. In support of his application for a stay, Mr Wu swore that he did not presently have sufficient assets to satisfy the judgment debt and that, if he were made bankrupt, he would almost certainly be unable to prosecute his appeal. He offered to provide security for Mr Li’s costs of the appeal in the amount of $60,000 and also offered to provide security in the amount of $26,200 in respect of interest which continues to accrue on the judgment debt. In a subsequent affidavit filed on behalf of Mr Wu (his Affidavit of 24 March 2014), Mr Wu said (at pars 3 to 7):I do not own any real property, personal property or assets in Australia in which there is any significant equity or in relation to which I am able to provide an undertaking [referring to an undertaking not to deal with or dispose of assets].The property located at 17 Pindari Crescent, O’Malley (the Property) is subject to a mortgage to AMP, and the equity in that Property is presently worth approximately $300,000.The Property is owned by my wife, Yaji Feng.I receive ongoing financial support from my wife and from friends in Australia and China. This support allows me to pay my debts as they fall due (with the exception of the judgment sum and costs awarded to Mr Li). In particular, the financial support from my wife and friends has enabled me to retain DibbsBarker and Counsel to act for me in these and related proceedings, and enables me to pay the fees of my legal representatives.The financial support from my wife and friends in Australia and China is voluntarily given. I am not able to demand or compel my wife or friends to continue providing that financial support. Mr Wu also endeavoured to explain the delay in filing his application for a stay. He said that, in response to a request for instructions from his former solicitor, on or about 28 November 2013, he instructed that solicitor to make application to the Court to stay the judgment until the appeal had been determined. He said that he terminated the retainer of his former solicitors on 19 February 2014 and retained his present solicitors the very next day. He did not explain why he terminated the retainer of his former solicitors nor did he offer any explanation as to why his instruction to apply for a stay given on 28 November 2013 had not been put into effect before 25 February 2014.