Xu, Humphrey (Otherwise known as Jian Xu) v Liu, Helen (Otherwise Known as Hai Yan Liu)

[1997] FCA 691

FEDERAL COURT OF AUSTRALIA

COMPANIES - oppression  - whether to appoint a receiver and manager.

REMEDIES - interlocutory relief - undertaking as to damages necessary.

PRACTICE AND PROCEDURE - unrepresented litigants - difficulties - restrictions on ability of Court to assist.

Federal Court of Australia Act

1976 (Cth), s 23
Corporations Law, s 260

Federal Court Rules, O 20 r 2

Leaney v Olmstead Pty Ltd (1994) 51 FCR 240
Maddocks v D.J.E. Constructions Proprietary Limited (1982) 148 CLR 104
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360

Parsons v Sovereign Bank of Canada [1913] AC 160

National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271
Re Enterprise Gold Mines NL (1991) 3 ACSR 531
Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 8 ACLC 330

HUMPHREY XU (OTHERWISE KNOWN AS JIAN XU) v
HELEN LIU (OTHERWISE KNOWN AS HAI YAN LIU) & ORS
NG 3108, 3118, 3119 of 1997

JUDGE:         BRANSON J
PLACE:         SYDNEY
DATED:        31 JULY 1997

GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA            )
NEW SOUTH WALES DISTRICT REGISTRY          )  NG 3108 of 1997
GENERAL DIVISION  )
  BETWEEN:  HUMPHREY XU
  (OTHERWISE KNOWN AS JIAN XU)        
  Applicant
  AND:  HELEN LIU
  (OTHERWISE KNOWN AS HAI YAN LIU)
  First Respondent
  LIU CHENG MAY
  (OTHERWISE KNOWN AS QUEEN LIU)
  Second Respondent
  DIAMOND HILL INTERNATIONAL PTY LTD
  ACN 050 722 122
  Third Respondent
  VISION WISE HOLDINGS COMPANY LIMITED
  ACN 072 022 890
  Fourth Respondent
  WINCOPY PTY LTD
  ACN 062 572 669
  Fifth Respondent

IN THE FEDERAL COURT OF AUSTRALIA            )
NEW SOUTH WALES DISTRICT REGISTRY          )  NG 3118 of 1997
GENERAL DIVISION  )
  BETWEEN:  HUMPHREY XU
  (OTHERWISE KNOWN AS JIAN XU)        
  Applicant
  AND:  HELEN LIU
  OTHERWISE KNOWN AS HAI YAN LIU)
  First Respondent
  CHUN MEI LIU
  (OTHERWISE KNOWN AS QUEEN LIU)
  Second Respondent
  WINCOPY PTY LTD
  ACN 062 572 669
  Third Respondent

IN THE FEDERAL COURT OF AUSTRALIA            )
NEW SOUTH WALES DISTRICT REGISTRY          )  NG 3119 of 1997
GENERAL DIVISION  )
  BETWEEN:  HUMPHREY XU
  (OTHERWISE KNOWN AS JIAN XU)        
  Applicant
  AND:  HELEN LIU
  (OTHERWISE KNOWN AS HAI YAN LIU)
  First Respondent
  CHUN MEI LIU
  (OTHERWISE KNOWN AS QUEEN LIU)
  Second Respondent
  VISION WISE HOLDINGS COMPANY LIMITED
  ACN 072 022 890
  Third Respondent
JUDGE:         BRANSON J
PLACE:         SYDNEY
DATED:        31 JULY 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

The application for an interlocutory order for the appointment of a receiver and manager of the property of the third respondent in each of matters Nos NG 3108, 3118 and 3119 of 1997 is dismissed.

Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.

GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA            )
NEW SOUTH WALES DISTRICT REGISTRY          )  NG 3108 of 1997
GENERAL DIVISION  )
  BETWEEN:  HUMPHREY XU
  (OTHERWISE KNOWN AS JIAN XU)        
  Applicant
  AND:  HELEN LIU
  (OTHERWISE KNOWN AS HAI YAN LIU)
  First Respondent
  LIU CHENG MAY
  (OTHERWISE KNOWN AS QUEEN LIU)
  Second Respondent
  DIAMOND HILL INTERNATIONAL PTY LTD
  ACN 050 722 122
  Third Respondent
  VISION WISE HOLDINGS COMPANY LIMITED
  ACN 072 022 890
  Fourth Respondent
  WINCOPY PTY LTD
  ACN 062 572 669
  Fifth Respondent

IN THE FEDERAL COURT OF AUSTRALIA            )
NEW SOUTH WALES DISTRICT REGISTRY          )  NG 3118 of 1997
GENERAL DIVISION  )
  BETWEEN:  HUMPHREY XU
  (OTHERWISE KNOWN AS JIAN XU)        
  Applicant
  AND:  HELEN LIU
  (OTHERWISE KNOWN AS HAI YAN LIU)
  First Respondent
  CHUN MEI LIU
  (OTHERWISE KNOWN AS QUEEN LIU)
  Second Respondent
  WINCOPY PTY LTD
  ACN 062 572 669
  Third Respondent

IN THE FEDERAL COURT OF AUSTRALIA            )
NEW SOUTH WALES DISTRICT REGISTRY          )  NG 3119 of 1997
GENERAL DIVISION  )
  BETWEEN:  HUMPHREY XU
  (OTHERWISE KNOWN AS JIAN XU)        
  Applicant
  AND:  HELEN LIU
  (OTHERWISE KNOWN AS HAI YAN LIU)
  First Respondent
  CHUN MEI LIU
  (OTHERWISE KNOWN AS QUEEN LIU)
  Second Respondent
  VISION WISE HOLDINGS COMPANY LIMITED
  ACN 072 022 890
  Third Respondent
JUDGE:         BRANSON J
PLACE:         SYDNEY
DATED:        31 JULY 1997

REASONS FOR JUDGMENT

These three applications for interlocutory relief were heard together. 

In matter No NG 3108 of 1997 the applicant by his application seeks the following relief which is described by the application as “interlocutory relief”:

“1.       A Declaration that the affairs of the Third, Fourth and Fifth Respondents are being conducted by the First and Second Respondents in a manner that is oppressive or unfairly prejudicial to or unfairly discriminatory against the Applicant as  member of the companies.

2.A Declaration that the First and Second Respondents have acted in the affairs of the Third, Fourth and Fifth Respondents in their own interests rather than in the interest of the members as a whole, or in a manner that is unfair or unjust to the Plaintiff as a member of the Third, Fourth and Fifth Respondents.

3.An Order that the First, Second, Third, Fourth and Fifth Respondents be restrained from paying to any person by their authority or direction any money of the Third, Fourth and Fifth Respondents or charging, spending, disposing of or otherwise dealing with any property or assets of the Third, Fourth and Fifth Respondents.

4.An Order that David D J Lombe, Registered Liquidator of Court be appointed Receiver and Manager of the property of the Third, Fourth and Fifth Respondents.

5.An order that Keith William Skinner by appointed Receiver jointly with David J Lombe.

6.An Order that the First and Second Respondents deliver to the Receiver all books, moneys and property of the Third, Fourth and Fifth Respondents.

7.An Order that the Receiver have in addition to the powers conferred by Section 420 Corporations Law the powers set out in the schedule.

8.Costs.”

No express claim for final relief is made by the application in matter No NG 3108 of 1997.

There may be room for doubt about whether the drafter of the application in matter No NG 3108 of 1997 intended each of the above claims to be understood as a claim for interlocutory relief.  For the purpose of the hearing before me, the application was treated as claiming for interlocutory relief the appointment of a receiver and manager of the property of Diamond Hill International Pty Ltd (“Diamond Hill”).

In matter No NG 3118 of 1997 the applicant by his application seeks the following interlocutory relief:

“1.An Order that David D J Lombe, Registered Liquidator of Court be appointed Receiver and Manager of the property of the Third Respondent [ie Wincopy Pty Ltd].

2.An order that Keith William Skinner be appointed Receiver jointly with David J Lombe.

3.An Order that the Third Respondent deliver to the Receiver all books, moneys and property of the Third Respondent.

4.An Order that the Receiver have in addition to the powers conferred by Section 420 Corporations Law the powers set out in the schedule.

5.Costs.”

In matter No NG 3119 of 1997 the applicant by his application seeks the following interlocutory relief:

“1.An Order that David D J Lombe, Registered Liquidator of Court be appointed Receiver and Manager of the property of the Third Respondent [ie Vision Wise Holdings Company Limited].

2.An order that Keith William Skinner be appointed Receiver jointly with David J Lombe.

3.An Order that the Third Respondent deliver to the Receiver all books, moneys and property of the Third Respondent.

4.An Order that the Receiver have in addition to the powers conferred by Section 420 Corporations Law the powers set out in the schedule.

5.Costs.”

The applications in matters Nos NG 3118 of 1997 and 3119 of 1997 do include claims for final relief, including in each case a declaration that the affairs of the third respondent are being conducted in a manner that is oppressive or unfairly prejudicial to or unfairly discriminatory against the applicant in breach of s 260 of the Corporations Law and an order that the applicant purchase the shares in the third respondent currently held by the first and second respondents.

The proceedings in these three matters were initiated on behalf of the applicant by a firm of solicitors.  Such solicitors continued to act on behalf of the applicant until the date when these matters came on for argument on the claims for interlocutory relief.  On that day a solicitor attended before the Court to advise that his firm’s instructions had been terminated by the applicant.  The applicant confirmed this advice.  The solicitor was granted leave to withdraw.  Nonetheless, it may be noted that the applicant had the benefit of legal representation in the preparation of the affidavits which were filed in support of his applications, and, presumably, in his consideration of the affidavits filed on behalf of the respondents.

The applicant advised the Court that his limited resources had “dried up” and that he therefore proposed to appear in person.  I informed the applicant that, in my view, he would be seriously disadvantaged if he did seek to act for himself in these matters and that he should understand that, if he did so, I would not be able to act as his legal advisor.  The applicant responded that he “understood completely”.  He indicated that he was ready to proceed immediately with the interlocutory hearings.

I should make some observations concerning the conduct of the hearing before me.  Although the applicant was granted leave to cross-examine deponents to affidavits read on behalf of the respondents, and to place evidence before the Court that had not been filed and served in accordance with directions made by the Court, in circumstances in which a represented party would almost certainly not have been granted such leave, he was refused leave to seek to place before the Court certain evidence which, if it was to be obtained at all, would have to be sought in the People’s Republic of China or from expert witnesses.  I also refused a request from the applicant that the Court call a witness on the interlocutory applications.  Exchanges between the applicant and me concerning such evidence reveal that the applicant may not, despite his earlier legal representation, have earlier understood, if indeed he ever fully understood, the distinction between an interlocutory hearing and a final hearing.  It is a matter of considerable regret that the applicant may have assumed the conduct of his claims for interlocutory relief in these matters without a full understanding as to the true nature of those claims.  However, the very real restrictions on the ability of the Court to ensure that unrepresented parties properly understand its processes and technical aspects of the law relevant to their proceedings in complex matters must be acknowledged.  Moreover, although the Court must do what it reasonably can to assist unrepresented parties in the presentation of their cases to the Court, it cannot do so in disregard of the entitlement of opposing parties also to receive fair treatment from the Court.  In this case the applicant initially asserted a readiness to proceed with the interlocutory hearing at the appointed time.  The hearing was well advanced before any indication was given that the applicant wished to have time to seek to obtain additional evidence.  I could not be certain that, even were I to grant an adjournment, that the evidence which the applicant asserted that he could obtain would in fact be obtained.  If the applicant is able to obtain such evidence, and it is of relevance to his application, he will presumably be able to rely on it at the final hearing of his applications.  I did not consider it appropriate to adjourn the interlocutory hearing to allow the applicant to seek further to supplement the evidence before the Court on the interlocutory applications.

Before turning to consider the evidence in respect of the three companies, it is appropriate to note that no submission was put to me to the effect that any of the companies was in substance a partnership (see, for example, Ebrahimi v Westbourne Galleries Ltd [1973] AC 360). The affidavit evidence of the applicant, which was filed on his behalf by his former solicitors, does not appear to have been drawn with an intention to raise this issue. I do not suggest that the results of these applications would have been different had the issue of the true nature of the companies been explored. However, it is appropriate to note that, whilst I may have raised the issue with counsel for the respondents had the applicant never been legally represented, I did not consider it appropriate to do so in the circumstance that the applicant’s former legal representatives had not sought to formulate his case on that basis, and the respondents had presumably not prepared to meet interlocutory claims presented on that basis.

VISION WISE HOLDING COMPANY LTD
(“Vision Wise”) (No NG 3119 of 1997)

There is some dispute between the applicant and the respondent Helen Liu (“Ms Liu”) as to the circumstances surrounding the incorporation of Vision Wise.  However, it is not in dispute that Vision Wise is incorporated in the British Virgin Islands.  Although the issue is, in my view, far from clear, I am prepared to consider the interlocutory application concerning Vision Wise on the assumption, but without so deciding, that this Court has jurisdiction to make the final orders sought in matter No NG 3119 of 1997 in respect of a company incorporated in the British Virgin Islands.

The memorandum of association of Vision Wise provides for its authorised capital of US$50,000 to be made up of one class and one series of shares divided into 50,000 shares of US$1 par value with one vote for each share.  The memorandum of association further provides for such shares to “be issued as registered shares or to bearer as may be determined by a resolution of directors”.  Two share certificates for shares in Vision Wise are in evidence.  Each purports to be a bearer share certificate although it names the relevant shareholder.  In one certificate Ms Liu is shown as the shareholder of 49,500 bearer shares, and in the other certificate the respondent Chun Mei Liu is shown as the shareholder of 500 bearer shares.  The two certificates, one of which is dated 3 September 1993 and the other of which is dated 5 August 1993, together cover the whole of the authorised share capital of Vision Wise.  There is no evidence before me to support a finding that the applicant has at any time been a shareholder of Vision Wise.

The claim for final relief made in matter No NG 3119 of 1997 is based upon s 260(1)(a) of the Corporations Law. An application for an order under s 260(1)(a) of the Corporations Law may only be made by a member of the company concerned. Section 184 of the Corporations Law provides that:

“A person who agrees to become a member of a company and whose name is entered on the company’s register of members becomes a member of the company.”

Ms Liu has deposed that Vision Wise’s register of members was kept at her residence.  She has deposed to being unable to locate the register since her move from that residence in 1993.  However, going by the share certificates referred to above, it seems a fair inference that the name of the applicant would not be entered on the register of members of Vision Wise.

It may be that the applicant claims to have a beneficial interest in certain shares of Vision Wise.  Certainly he has given evidence of his understanding that it was agreed between him and Ms Liu that he would hold 80% of the shares in Vision Wise.  However, I remain of the view which I expressed in Leaney v Olmstead Pty Ltd (1994) 51 FCR 240 that a person who enjoys no more than an equitable interest in shares in a company is not a member of that company within the meaning of s 260(1)(a) of the Corporations Law. See also Maddocks v D.J.E. Constructions Proprietary Limited (1982) 148 CLR 104 at 117.

As the applicant has not shown that it is reasonably arguable that he is a person entitled to the final relief sought by him in matter No NG 3119 of 1997, it is not appropriate for interlocutory relief to be granted to him in that matter (Federal Court of Australia Act 1976 (Cth) s 23).

The application for interlocutory relief in matter No NG 3119 of 1997 is refused.

By a notice of motion dated 17 June 1997 the respondents in matter No NG 3119 of 1997 gave notice that they would move the Court for an order pursuant to O 20 r 2 of the Federal Court Rules that the proceedings be stayed or dismissed generally.  I am not satisfied that the applicant was on notice that such motion was to be entertained together with the interlocutory applications initiated by him.  Further consideration of the notice of motion will be stood over to a date to be fixed.

WINCOPY PTY LTD
(“Wincopy”) (No NG 3118 of 1997)

Wincopy is a company incorporated under the Corporations Law, I presume, of New South Wales. Ten ordinary shares in Wincopy have been allotted for cash with one such share being allotted to the applicant. I am satisfied for the purposes of the present application that the applicant is a person entitled to make an application to the Court for an order under s 260 of the Corporations Law in relation to Wincopy.

The applicant has deposed to being concerned about the dismissal of two persons from their employment with “the group [of companies]”.  These two persons were authorised to act as the applicant’s attorney during his absence.  The applicant has also deposed to being concerned about the difficulties experienced by him in obtaining information concerning the affairs of “the group”.  He has further deposed to a belief that Wincopy is presently unable to discharge certain obligations to the Bank of China.  The applicant has provided a guarantee and indemnity to the Bank of China with respect to moneys payable by Wincopy to the Bank of China.

The applicant indicated in his oral submissions that his real concern with respect to Wincopy was that he did not have enough information about its operations and financial position.  I was informed by Mr Forster SC, who with Mr Climpson appeared for the respondents, that the applicant had subpoenaed and thereafter, with the leave of the Court, inspected the financial records of Wincopy and Diamond Hill for the year 1994/1995.  I was further advised by Mr Forster that the accounts of Wincopy and Diamond Hill for the year ending 30 June 1996 would soon be ready.  On behalf of Ms Liu, Mr Forster gave an undertaking that Ms Liu will cause the financial statements for Wincopy and Diamond Hill for the financial year ending 30 June 1996, which are expected to be prepared within a matter of weeks, to be provided to the applicant when they become available.

The interlocutory relief sought by the applicant in matter No NG 3118 of 1997 is the appointment of a receiver and manager of the property of Wincopy.  The appointment of a receiver can have severe financial repercussions for a company and will result in a company losing “its title to control its assets and affairs” (the phrase of Viscount Haldane LC in Parsons v Sovereign Bank of Canada [1913] AC 160 at 167 cited in National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277). The Court will only appoint a receiver where it is convinced of the need to do so (Re Enterprise Gold Mines NL (1991) 3 ACSR 531 at 591; Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 8 ACLC 330). The Court will be particularly reticent to appoint a receiver on an interlocutory application and will not do so where some lesser remedy is adequate (Bond Brewing Holdings Ltd v National Australia Bank at 348 - 356).  Moreover, it will not ordinarily do so in the absence of an appropriate undertaking as to damages being given by the party seeking the order (National Australia Bank Limited v Bond Brewing Holdings Ltd at 277).  No such undertaking was here offered; nor, in view of the applicant’s statement as to his financial position, does it appear that any meaningful undertaking as to damages could be offered by him.

In any event, I am not satisfied on the evidence before me that an interlocutory order for the appointment of a receiver of the property of Wincopy is necessary to protect the position of the applicant pending a final hearing or, indeed, for any other reason.

The application for interlocutory relief in matter No NG 3118 of 1997 is refused.

DIAMOND HILL INTERNATIONAL PTY LTD
(“Diamond Hill”) (No NG 3108 of 1997)

Diamond Hill was a shelf company apparently purchased from Company Planners Pty Ltd in January 1991. On 25 January 1991 100 shares were allotted in Diamond Hill of which twenty were allotted to the applicant. There is a dispute between the applicant and Ms Liu as to the validity of a purported transfer of a further eighteen shares in Diamond Hill to the applicant. It is not necessary for me to attempt to resolve this dispute. I am satisfied for the purposes of the present application that the applicant is a person entitled to make an application to the Court for an order under s 260 of the Corporations Law.

It is not in dispute that in early 1991 Diamond Hill entered into a contract to purchase a backpackers hostel in Cleveland Street, Surry Hills (“the hostel”).  On 30 October 1995 Diamond Hill entered into a contract to sell the hostel for the sum of $540,000.  The applicant contends, and it is not, I think, disputed, that this contract was entered into without his knowledge.  The applicant has expressed the belief that the hostel was in reality sold for the sum of $1.32 million and not for the contract price of $540,000.  The applicant cross-examined Donald Martin Junn, the solicitor for the respondents, on this topic.  Mr Junn agreed that it had been suggested to him by a third party that the hostel had been sold for more than $540,000 but, as I understand Mr Junn’s evidence, the person making the suggestion did not provide to him any proof of its accuracy.  Mr Junn denied seeing any document faxed from the People’s Republic of China to Diamond Hill dealing with the sale price of the hostel.  On the evidence presently before the Court, I am unable to find that there is a serious question to be tried as to the possible deception of the applicant as to the sale price of the hostel.

The applicant is concerned that he has not had access to financial records of Diamond Hill and that Diamond Hill may not be able to discharge its obligations to the Bank of China.  The applicant is a guarantor of obligations of Diamond Hill to the Bank of China.  The undertaking referred to above as to the financial accounts of Diamond Hill for the financial year ending 30 June 1996 goes some way to meeting the applicant’s concerns as to his knowledge of the financial affairs of Diamond Hill.

As in the case of Wincopy, no undertaking as to damages has been offered by the applicant; nor is it not clear that any such undertaking, if given, would be meaningful.  In any event I am not satisfied on the evidence before me that an interlocutory order for the appointment of a receiver of the property of Diamond Hill is necessary to protect the position of the applicant pending a final hearing or for any other reason.

The application for the appointment on an interlocutory basis of a receiver of the property of Diamond Hill is refused.

I will hear counsel on the question of costs.

I certify that this and the preceding
seven (7) pages are a true copy of the
Reasons for Judgment of the
Honourable Justice Branson.

Associate:

Date:

The applicant in matters Nos NG 3108, 3118, 3119 of 1997 appeared in person.

Matters Nos NG 3108, 3118, 3119 of 1997

Counsel for the respondents:  Mr R. Forster SC with Mr S. Climpson

Solicitor for the respondents:  Donald Junn

Dates of hearing:  25 and 26 June 1997