Yang v Chen HC Auckland Civ 2007-404-1751
[2010] NZHC 891
•13 May 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2007-404-1751
BETWEEN LIMIN YANG AND YANG (JASMINE) LIU
Plaintiffs
ANDPAUL YU PO CHEN Defendant
CIV 2008-404-4287
AND BETWEEN DACHA INTERNATIONAL LIMITED First Plaintiff
ANDROTORUA INTERNATIONAL VILLAS LIMITED
Second Plaintiff
ANDTOP INTERNATIONAL LIMITED Third Plaintiff
ANDPAUL YU PO CHEN First Defendant
ANDHEARD PARK LIMITED Second Defendant
ANDCHOON KHIAW CHIN Third Defendant
Hearing: 5, 6 and 10 May 2010
Appearances: P J McPherson, G J Luen and S Brooks for plaintiffs R B Hucker, M S Chan and B Langsiu for defendants No appearance for Choon Khiaw Chin
Judgment: 13 May 2010
LIMIN YANG AND YANG (JASMINE) LIU V PAUL YU PO CHEN HC AK CIV 2007-404-1751 13 May
2010
JUDGMENT of ALLAN J
In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 2.30 pm on Thursday 13 May 2010
Solicitors:
Hesketh Henry Patri[email protected]
Paul Chen [email protected]
Queen City Law, Auckland [email protected] [email protected]
R B Hucker [email protected]
INDEX
Recent procedural history
Paragraph
005
The application for leave 036 Video link – legal principles 042 Video link evidence – Mr Chen 054 Video link evidence – Mr Liu 080 Leave to serve additional briefs 104 Leave to amend the statements of defence 149 Application for variation of freezing order 187 Result 211 Costs 212
[1] Limin Yang and Liu Yang allege that Mr Chen holds all the shares in Dacha International Ltd (Dacha), Rotorua International Villas Ltd (Rotorua), and Top International Ltd (Top) in trust for them. They further claim that, in breach of his fiduciary duties, Mr Chen has misappropriated the assets of the companies.
[2] In CIV-2007-404-1751, they seek to recover their losses. In an alternative proceeding, CIV-2008-404-4287, they seek the Court’s leave to commence derivative proceedings in order to recover the same losses on behalf of the companies concerned.
[3] The trial of these proceedings commenced on Monday 26 April 2010. The plaintiffs were ready for trial; Mr Chen was not. For reasons outlined below very little progress was made during the first week of the trial. On Monday 3 May 2010, Mr Hucker, newly briefed for Mr Chen, applied for the following orders:
a) Granting leave to Mr Chen and Heard Park Ltd (Heard) to file amended statements of defence and counterclaim;
b)Granting leave to those parties to adduce at trial evidence from four witnesses who had not previously served briefs of evidence upon the plaintiffs’ solicitors;
c) Directing that the evidence of Mr Chen be taken by video link from
China;
d)Granting leave to Mr Chen and Heard to serve upon Mr Guiting Liu (husband of Limin Yang and father of Liu Yang) in China, a subpoena issued by this Court;
e) Directing that the evidence of Mr Liu be similarly given by way of video link from China;
f) Directing that the terms of a Mareva injunction (now a freezing order) granted on 4 April 2007 be varied to enable the video link costs to be paid from the frozen fund and to permit a further $100,000 to be released to solicitors acting for Mr Chen and Heard, in order that they might meet their legal costs in the proceedings;
g) That leave be granted to bring each of the foregoing applications after the date of setting down for trial.
[4] Each of these applications was vigorously opposed by counsel for the plaintiffs. I heard argument over two and a half days. This judgment deals with each of the defendants’ applications.
Recent procedural history
[5] These proceedings were set down in November 2008 when a four week fixture to commence on 26 April 2010 was allocated; so the parties had 18 months to work towards the hearing. During 2009, Mr Chen’s financial position deteriorated. He had been involved in parallel proceedings in the Supreme Court of New South Wales, which were heard earlier than the present proceedings, and in which the present plaintiffs were largely successful. The proceedings in each jurisdiction were relatively complex. Legal costs were high. Towards the end of
2009 it became apparent that Mr Chen was running out of funds and that his New
Zealand lawyers (Lee Salmon Long) would be unable to continue to represent him.
[6] Nevertheless, he was still represented in December 2009 when he agreed through his counsel to pre-trial directions which included a requirement to serve his briefs by Monday 22 March 2010. On 30 January 2010, Mr Salmon of Lee Salmon Long filed and served a memorandum of counsel in which Lee Salmon Long gave notice of their desire to withdraw as solicitors on the record for Mr Chen.
[7] On 8 February 2010, Mr Chen filed and served, in his own name, an application for adjournment of both a forthcoming interlocutory hearing, and the substantive trial itself.
[8] On 3 March 2010, Mr Chen, by then in China, filed an unsworn affidavit in support of his application for an adjournment. Asher J heard the adjournment application on 4 March 2010. Mr McPherson appeared for the plaintiffs. Messrs Salmon and O’Neill appeared for Mr Chen, but were granted leave to withdraw. Mr Chen participated in the hearing by telephone from China. Mr Chen sought to have the Court adjourn both the interlocutory hearing scheduled for 11
March 2010, and the present trial. The interlocutory hearing involved various applications, including one by the plaintiffs for the imposition of sanctions for alleged contempt of Court by Mr Chen.
[9] Asher J declined the adjournment applications. The nub of his decision was that Mr Chen’s application was made on largely tactical grounds. Asher J did not accept that Mr Chen was unable to pay his legal costs, or that he was embarrassed by an inability to pay his lawyers. The Judge noted that the claim had not been backed up by detailed affidavit evidence.
[10] Mr Chen also sought to rely upon a claimed inability to return from China for the trial. He told Asher J that the Chinese authorities had indicated that they would not permit him to leave China, because he was required to remain there in order to assist the authorities with their investigations into the affairs of Mr Liu and the embezzlement by Mr Liu of very large sums from state owned corporations. Asher J noted that no evidence had been produced to the Court to verify Mr Chen’s claimed inability to come to New Zealand. The Judge did not accept therefore, that Mr Chen was unable to return, remarking at [20] that:
Mr Chen should immediately return to New Zealand, and if he is unable to brief counsel he should appear for himself at that hearing, which involves serious issues including allegations of a deliberate breach of New Zealand Court orders.
[11] In his decision of 4 March 2010, Asher J revised the existing timetable directions so as to oblige the plaintiffs to serve their briefs on 8 March 2010, with Mr Chen to serve his briefs of evidence by 5 pm on 29 March 2010. The plaintiffs duly served their briefs of evidence on 8 March 2010.
[12] On 10 March 2010, Mr Chen filed detailed and comprehensive affidavits in respect of the interlocutory hearing scheduled for 11 March 2010. It appears that Mr Chen prepared those affidavits himself. At the interlocutory hearing of 11 March
2010 Mr Chen was represented by Mr Chesterman, who, then and since, has made it clear to the Court that his instructions were limited to the matters before the Court on that date. In other words, he has no instructions in respect of preparation for, or an appearance at, the present trial.
[13] Mr Chen did not serve his briefs of evidence by 29 March 2010. Indeed, he was completely silent for a period of several weeks. Eventually, on 12 April 2009, Mr McPherson, having become concerned on behalf of the plaintiffs at Mr Chen’s inactivity, filed a memorandum pointing out to the Court Mr Chen’s failure to comply with timetable directions and seeking an unless order.
[14] I was appointed to be the trial Judge during that week. On 16 April 2010 I convened a telephone conference in order to deal with the matters raised in Mr McPherson’s memorandum of 12 April 2010. Mr Chen was still in China. Although arrangements had been made for him to participate by telephone, he elected to be represented by Mr Machee, who, although not a lawyer, had been assisting Mr Chen to some degree with matters related to the trial. It is appropriate to record here that Mr Machee has, then and since, rendered great assistance to the Court (and incidentally to Mr Chen), by placing before the Court in a comprehensive and articulate fashion, a range of factual issues of relevance to this case.
[15] Having heard Mr McPherson and Mr Machee, I agreed that an unless order was appropriate and directed that Mr Chen must serve his briefs of evidence by 5 pm on Monday 19 April 2010, less than a week prior to the commencement date of the trial. No briefs of evidence were served by that time. However, it subsequently emerged that Mr Chen had sent an e-mail to Mr McPherson prior to 5 pm on 19
April, indicating that although work on Mr Chen’s brief was far advanced, service could not be achieved until early the following morning. Mr Chen sought Mr McPherson’s consent to a brief delay. It appears that Mr McPherson did not receive that e-mail.
[16] On the morning of 20 April 2010 Mr McPherson filed a memorandum in which he advised the Court that no briefs had been received from Mr Chen. He asked the Court to make an order barring Mr Chen from calling any evidence in support of the defendants. I issued a ruling to that effect.
[17] Later in the day it emerged that Mr Chen’s lengthy brief had been sent to Mr McPherson on the morning of Tuesday 20 April, shortly after Mr McPherson filed his memorandum of that date. There was a further telephone conference on
21 April 2010, at which Mr Machee again appeared for Mr Chen. Although concerned about the lateness of Mr Chen’s brief, Mr McPherson was not disposed to pursue his earlier contention that Mr Chen ought to be debarred from giving any evidence himself. There was no mention on 21 April of Mr Chen’s desire to serve any other briefs.
[18] The trial commenced on 26 April 2010. Mr Chen was not then formally represented by counsel, but Mr Machee appeared along with Mr M Beveridge of Queen City Law. Mr Beveridge indicated that he had no instructions at that point to appear for Mr Chen, but was there in order to monitor developments at the commencement of the trial. Mr Machee renewed Mr Chen’s adjournment application, effectively on the same grounds as had been advanced earlier to Asher J. The Court was advised that Mr Chen’s remaining funds were insufficient to pay for legal representation at trial, and that Mr Chen remained unable to leave China. That was the position as at the morning adjournment on Monday 26 April.
[19] Remarkably however, there was a change of circumstance over the morning adjournment. When the Court resumed, Mr Machee and Mr Beveridge advised the Court that Mr Chen and his family had now been able to raise funds which would enable him to be represented by counsel at trial. Indeed, the Court was advised that those funds extended to the possibility of retention of Queen’s counsel, and a particular name was mentioned in that regard. At that point, financial difficulties appeared to have dropped away as an inhibiting factor. Regrettably, within a day or so it emerged that the expected funding source would not be able to assist.
[20] As to Mr Chen’s detention in China, the Court was on 26 April provided with a notice dated 20 April 2010, apparently issued by the Ministry of Justice of the People’s Republic of China. The notice directed Mr Chen to remain in China for a period of eight weeks, in order that he might assist the Ministry with its on-going investigations. The notice included a list of companies and enterprises which are the subject of that investigation. Mr Chen himself was not one of those under investigation. The notice concluded with the indication that:
If you, without having sought permission to exit China, make unauthorised exit from China during the aforesaid period, you shall be liable for the legal consequences.
[21] The 20 April 2010 notice was annexed to a draft unsworn affidavit from Mr Chen. There was no evidence that Mr Chen had made any request to the Chinese authorities for temporary permission to leave China, although the possibility of such a request was reserved in the 20 April notice.
[22] I considered that there ought to have been evidence as to the making of any request for temporary permission to leave China and the response to it. I also considered that it was remarkable that the term of the notice was for a period of eight weeks, being a period largely co-extensive with the time allocation made for the present fixture. I was in effect asked to revisit the decision of Asher J to refuse an adjournment. Having considered a variety of factors more particularly set out in my Ruling No.1, I concluded that the trial must proceed. In that respect I took into account the fact that, although it appeared that Mr Chen may well have difficulty in leaving China, he was now better off than he had been before Asher J, when it was assumed that he would have no legal representation. It seemed to me, as I noted in my Ruling, that there remained the prospect that Mr Chen may be able to give evidence by video link. Accordingly, the adjournment application was refused.
[23] For completeness I should refer also to the fact that there was an appearance on the morning of 26 April by Mr A E Liew, instructed as counsel by the Ministry of Justice of the People’s Republic of China. Mr Liew sought in the first instance to obtain an order joining the Ministry as a party in the proceeding, pursuant to r 4.56. The position of the Ministry of Justice appears to be that the funds in dispute in the present proceeding (or at least some of them) should ultimately pass to the Ministry
in its capacity as administrator of the corporations which Mr Liu is said to have defrauded.
[24] Having heard from Mr Liew, I indicated that I could not see that there was a basis upon which the Ministry ought to be joined as a party. The proper course was for the Ministry of Justice, if it chose, to commence a fresh proceeding which might then be case managed in a fashion which would enable it to be involved in the progress of the present trial. Mr Liew accepted that that was a better alternative. He did however advise the Court that his instructions were that the Ministry did not wish to disrupt the progress of the present trial. He did not therefore support Mr Chen’s application for an adjournment.
[25] Against that background Mr McPherson opened the plaintiffs’ case during the afternoon of Monday 26 April 2010. Mr Machee remained in Court, as did Mr Beveridge, who was regarded by the Court as counsel for Mr Chen, at least until other trial counsel was instructed in the light of the funding now available for the conduct of the defence.
[26] On the morning of Tuesday 27 April 2010, Mr McPherson concluded his opening address, but that was preceded by another remarkable development. Mr Beveridge appeared at 10 am with Mr Chan, a litigation solicitor in his office. Between them, Mr Beveridge and Mr Chan advised the Court that, contrary to the advice conveyed during the first day of the trial, and despite the availability of funding, they were unable to represent Mr Chen because they simply had insufficient time within which to prepare and run an appropriate defence. They considered their ability to represent Mr Chen to be further compromised by the fact that, in terms of my earlier ruling, Mr Chen was debarred from calling witnesses other than himself because no briefs had been served in terms of earlier timetable directions.
[27] In my Ruling No.2 I recorded this turn of events and noted that it appeared the case would proceed on a formal proof basis. It was against that background that Mr McPherson completed his opening address, and called his first witness, a police document examiner who gave evidence in chief, but of course was not cross- examined, Mr Chen being at that time formally unrepresented.
[28] When the Court reconvened at 2.15 pm on Tuesday 27 April, there was a further major development. Mr Hucker appeared for Mr Chen to advise that he had now been briefed to conduct the case for the defence. Mr Hucker sought an adjournment until Monday 3 May 2010 to enable him to formalise his instructions, and to determine what steps needed to be taken in order to advance Mr Chen’s defence. I was not prepared to grant an adjournment for such a long period, but allowed 24 hours for Mr Hucker to gain some appreciation of the case, he having been approached only on the morning of 27 April.
[29] When the Court reconvened on Wednesday 28 April 2010 at 2.15 pm, Mr Hucker confirmed both his brief and the availability of funding for the defence. He advised also that he proposed to make a number of applications to the Court in respect of outstanding interlocutory issues, including the need for an amended statement of defence, the giving of directions for Mr Chen’s evidence to be taken by video link, and the calling of additional defence witnesses despite the absence of any briefs for such witnesses. Mr Hucker signalled that Mr Chen would be seeking to call Amanda Chen, William Liew, Xing Zhang, and Yan Xu. Amanda Chen is Mr Chen’s wife. She had sworn affidavits earlier in the proceeding. Mr Liew is Mr Chen’s brother-in-law and the accountant to the plaintiff companies. His evidence was expected to be both factual and professional (accounting) in nature, and was intended in part to counter the evidence of the plaintiffs’ forensic accounting expert, Mr Hussey. The evidence of the two remaining witnesses was intended to cover certain admissions said to have been made by the plaintiffs. Mr Hussey confirmed that if Mr Chen was granted leave to call the proposed witnesses then the trial time was likely to be two to two and a half weeks.
[30] Mr McPherson indicated to the Court that the plaintiffs would oppose all of the applications signalled by Mr Hucker.
[31] Reluctantly but responsibly, Mr McPherson conceded that Mr Hucker was entitled to further time, but expressed his concern regarding the loss of trial time, in circumstances where the plaintiffs were blameless.
[32] I allowed Mr Hucker until the morning of Monday 3 May 2010 within which to prepare his applications and any supporting material. On that morning, he duly filed a compendious application in which all of the foreshadowed orders were sought. Of course, Mr McPherson had been given no prior notice of the detail of the applications, or of the material which supported them. Of necessity, I allowed him a further two days within which to consider the material and prepare his argument in opposition. Accordingly, I directed that the hearing resume at 10 am on Wednesday
5 May 2010.
[33] On the morning of 5 May counsel duly appeared, along with Mr C R Pidgeon QC, newly briefed on behalf of the Ministry of Justice of the People’s Republic of China. Mr Pidgeon appeared as a matter of courtesy to indicate that, as earlier contemplated, separate proceedings were being prepared for filing. The objective of the Ministry of Justice is to lay claim to substantial sums said to be beneficially owned by certain Chinese companies, and fraudulently paid to Top. Mr Pidgeon advised, however, that his client did not now seek to become involved in the present hearing. Nor, in particular, did it seek to take any step in respect of Mr Chen’s application for an order varying the freezing order.
[34] Mr Pidgeon was granted leave to withdraw and the Court then embarked upon the hearing of the various interlocutory applications, which continued throughout 5 and 6 May. On 7 May I was sitting in Gisborne and the hearing was accordingly adjourned to Monday 10 May when Mr Hucker completed his submissions in reply.
[35] The trial was then adjourned to enable this judgment to be prepared and delivered. At that stage the parties had embarked upon the third week of a four week trial in which almost no progress had been made: the Court has heard only Mr McPherson’s opening address and the evidence of one expert witness.
The application for leave
[36] Rule 7.18(2) provides that no statement of defence or amended pleading or affidavit may be filed and no interlocutory application may be made or step taken in the proceeding after the setting down date without the leave of a Judge.
[37] Self-evidently, the trial having been commenced before the present applications were filed, the setting down date has passed. Accordingly, all of the present applications require the leave of the Court.
[38] Of necessity the Court must, in determining an application for leave, bear in mind that the applicant is seeking an indulgence. Ultimately the Court must determine what outcome will best meet the overall justice of the case: Fordham v Xcentrix Communications Ltd (1996) 9 PRNZ 682; Dong Won Fisheries Co Ltd v Attorney-General (1991) 4 PRNZ 159.
[39] The plaintiffs oppose the grant of leave in respect of any of the defendants’ applications, upon the ground that it would not be in the interests of justice to grant the applications because each, if granted, is likely to involve irremediable prejudice to the plaintiffs. Mr Hucker argues that, although a degree of prejudice is inevitable, it can be significantly ameliorated by allowances in respect of time and costs.
[40] In determining applications to which r 7.18(2) applies, the Court must be astute to ensure that it takes proper account of the lateness of the applications and of the prejudice caused to the plaintiffs thereby.
[41] Against that background I turn to the various applications.
Video link – legal principles
[42] Prior to the enactment of the Evidence Act 2006, it had become a matter of routine for the Court to entertain and grant applications for the taking of evidence overseas by way of video link. The Evidence Act draws together a number of
principles in making provision for the taking of evidence from a witness who is not personally present in the courtroom at the trial. Section 103 of the Act provides:
103 Directions about alternative ways of giving evidence
(1) In any proceeding, the Judge may, either on the application of a party or on the Judge's own initiative, direct that a witness is to give evidence in chief and be cross-examined in the ordinary way or in an alternative way as provided in section 105.
(2) An application for directions under subsection (1) must be made to the Judge as early as practicable before the proceeding is to be heard, or at any later time permitted by the court.
(3) A direction under subsection (1) that a witness is to give evidence in an alternative way, may be made on the grounds of—
…
(i) the absence or likely absence of the witness from New
Zealand:
…
(4) In giving directions under subsection (1), the Judge must have regard to—
(a) the need to ensure—
(i) the fairness of the proceeding; and
(ii) in a criminal proceeding, that there is a fair trial; and
(b) the views of the witness and—
(i) the need to minimise the stress on the witness; and
(ii) in a criminal proceeding, the need to promote the recovery of a complainant from the alleged offence; and
(c) any other factor that is relevant to the just determination of the proceeding.
[43] Section 103(3)(i) is relied upon by the defendants in the present case. [44] Section 103 is supplemented by s 105, which provides:
105 Alternative ways of giving evidence
(1) A Judge may direct, under section 103, that the evidence of a witness is to be given in an alternative way so that—
(a) the witness gives evidence—
(i)while in the courtroom but unable to see the defendant or some other specified person; or
(ii) from an appropriate place outside the courtroom, either in New Zealand or elsewhere; or
(iii) by a video record made before the hearing of the proceeding:
(b)any appropriate practical and technical means may be used to enable the Judge, the jury (if any), and any lawyers to see and hear the witness giving evidence, in accordance with any regulations made under section 201:
…
(3) The Judge may admit evidence that is given substantially in accordance with the terms of a direction under section 103, despite a failure to observe strictly all of those terms.
[45] Counsel are agreed that these sections ought to be applied in a manner that gives effect to s 6 of the Act, which provides:
6 Purpose
The purpose of this Act is to help secure the just determination of proceedings by—
(a)providing for facts to be established by the application of logical rules; and
(b) providing rules of evidence that recognise the importance of the rights affirmed by the New Zealand Bill of Rights Act 1990; and
(c) promoting fairness to parties and witnesses; and
(d)protecting rights of confidentiality and other important public interests; and
(e) avoiding unjustifiable expense and delay; and
(f) enhancing access to the law of evidence.
[46] The applicable principles have been considered in several recent decisions. Among them is the judgment of Stevens J in Deutsche Finance Ltd v Commissioner of Inland Revenue (2007) 18 PRNZ 710. There, his Honour said:
[24] In deciding the application in respect of each witness, the first inquiry is whether one of the grounds in s 103(3) has been made out. Counsel for the plaintiffs accept that, once any such ground is made out, the Court will carry out a balancing exercise whereby the ground(s) established and other applicable factors from s 103(3) will be considered, bearing in mind the matters to which regard must be had as set out in s 103(4)(a) to (c). Indeed, counsel for the defendant did not really challenge this approach.
[25] Such balancing will involve consideration of any expense, stress, and inconvenience in bringing the witness to New Zealand in the present day and age where alternative modes of giving evidence are readily and reliably available, the importance of the evidence the witness is proposing to give, the desirability of hearings being in open Court with the witness being present, and the broader concerns of natural justice and fairness for all parties. If the conclusion is that it is not necessary to bring one or both witnesses to New Zealand, then a further question is whether the Court can be satisfied that appropriate practical arrangements can be made to, amongst other things, help ensure veracity and that there are legal sanctions in place for perjury. A finding that such safeguards cannot reliably be put in place may ultimately override any conclusion under the balancing process and result in it being necessary for the witness to come to New Zealand to give evidence.
[26] While meeting the statutory grounds and fairness to the parties properly remain central concerns of the Court, I consider that it is still appropriate to be cognisant of the standard set at common law. In Ra Ora, evidence that went to the “very heart” of proceedings and as such drew attention to its quality was not sufficient to mandate that evidence be given in person. Fisher J concluded at 356 that video-link evidence “provides an adequate opportunity to assess the nuances of the giving of the evidence and in particular credibility” (see also Ithaca at [23]). Such an approach is implicitly recognised in the Act by virtue of the fact that s 105(1)(a)(ii) specifically provides that one of the alternative ways of giving evidence can be “from an appropriate place outside the courtroom, either in New Zealand or elsewhere”.
[47] Earlier in his judgment, Stevens J discussed what he took to be the modern approach to evidence by video link:
[14] Evidence by video-link is no longer the unusual or novel mode of giving evidence it once was. As Giles CJ noted over a decade ago in Sunstate Airlines (Qld) Pty Ltd v First Chicago Australia Securities Ltd (unreported, NSWSC, 11 March 1997) at 6, it is now an “accepted feature of litigation”. Operating in a world where improvements in technology increasingly enable people to enter into complex and global business arrangements, the courts must be attuned to the needs of modern litigants and to the practicality of conducting modern litigation in today’s business
world. Indeed, Williams J in R v Wong HC AK CRI 2005-004-15296
16 May 2006 stated at [56] “…it would be odd if, in the 21st century, courts were to refuse to use such technology and insist on compliance with an
aphorism which long pre-dates the electronic age”.
[15] Being attuned to this changing climate is more than being cognisant of it: the Courts strive to provide enhanced and efficient processes. Use of technology such as video-link communications may well contribute to the just, speedy, and inexpensive conduct of litigation. Such technology enables litigants overseas to be spared the cost and, in some circumstances, the stress of travelling significant distances to give evidence. It also promotes access to justice for a party proposing to call a witness who may not be able to give evidence if required to fund or travel long distances to make an appearance in person.
[16] Experience in this Court has shown video-link technology to be reliable. Recent personal experience in a criminal trial involving a witness from the United States of America has confirmed this. Moreover, the experience of other High Court Judges has generally been positive.
[17] With the benefits of video-link technology come challenges that the Court must actively consider and deal with, lest enhancement and efficiency in process come at the expense of the requirements of natural justice, more specifically fairness to all parties. An issue in the present application is whether it would be fair to the defendant for his counsel to have to cross- examine the plaintiff’s witnesses by video-link. It was argued on behalf of the defendant that there is the potential risk of compromising the extent to which he will be able fully and vigorously to pursue his case.
[48] More recently still, Hugh Williams J approved what had been said by Stevens J and took the opportunity to reinforce his own comments in R v Wong (cited by Stevens J at [14] above) in Inverness Medical Innovations Inc v MDS Diagnostics Ltd HC Auckland CIV-2007-404-748, 13 May 2009.
[49] As noted by Stevens J in Deutsche Finance, the application of s 103 involves a two stage test. First, the Court must consider whether one of the grounds in s
103(3) has been made out. Here, the defendants say it is s 103(3)(i). If they are right, then the Court must carry out a balancing exercise, which involves a consideration of the factors set out in s 103(4).
[50] Rodney Hansen J captured the proper approach in Chu v Han (2003)
17 PRNZ 9 at [22]:
These authorities have established that the overriding consideration is, as is to be expected, the interests of justice. If appropriate procedural safeguards can be put in place, evidence may be given by video link provided that unfairness is not caused to any party. This requires a balancing exercise as to
whether the inconvenience, to use that term in its broad sense, of requiring a witness to be present is outweighed by considerations of fairness to the opposite party.
[51] Although this judgment was delivered prior to the Evidence Act 2006, the cited passage nevertheless succinctly records the necessity for the Court to take into account both the position of the witness and that of the opposite party.
[52] Earlier concerns about the desirability of witnesses giving evidence at a distance where credibility was in issue have dissipated in recent times. It is now widely accepted that credibility findings may confidently be made in respect of a witness who gives evidence by way of video link: Ellison Trading Ltd v Liebherr Export AG (2002) 17 PRNZ 1 at [15]; Chu v Han at [25].
[53] To the same general effect are the comments of Fisher J in Ra Ora Stud Ltd v
Colquhoun (1997) 11 PRNZ 353 at 356:
However, it seems to me that the concern expressed by Mr Jones that the evidence of Mr Lloyd goes to the very heart of the trial and therefore makes the quality of his evidence critical, is not a reason for declining a video-link. My own experience with closed circuit television, with the support of authorities as to evidence by video-link, suggests that the latter provides an adequate opportunity to assess the nuances of the giving of the evidence and in particular credibility.
I also consider that, while there is an overlap, Mr Holdsgrove's evidence will not be an adequate substitute for Mr Lloyd's. I accept that the unavailability of Mr Lloyd and Mr Nelson must be regarded as a matter of inconvenience only but it seems to me that in this day and age, particularly when dealing with key commercial figures, the threshold for allowing evidence of this kind by this means ought not to be set too high. In all the circumstances, and subject to the qualifications that follow, I am prepared to grant the application that the evidence of these two witnesses be taken by video-link.
Video link evidence – Mr Chen
[54] Mr Chen asks the Court to make an order directing that his evidence be given by video link from China. He does so because he is prevented from leaving that country in the circumstances set out below. Mr Hucker argues that the first requirement for a s 103 order is thereby met. He relies upon s 103(3)(i), which provides that a direction that a witness is to give evidence in an alternative way may be made where a witness is absent from New Zealand.
[55] Among the grounds upon which Mr Chen sought an adjournment in the days leading up to trial was his inability to leave China. The Court has been furnished with an English translation of a notice from the Ministry of Justice of the People’s Republic of China, which reads:
Department of Judicial Assistance & Foreign Affairs Ministry of Justice of the People’s Republic of China NOTICE OF EXIT RESTRICTION
TO: Mr CHEN Yu Po
The Chinese law enforcement authorities are currently investigating Chinese citizens Guiting LIU, Limin YANG and Yang LIU who are suspected of committing the offence of transnational money laundering. As you are critically related to the following enterprises which are involved in this case, I have received an order to notify you that you must not exit China during the next eight weeks in order that you may assist us with the investigation.
The companies and enterprises associated with the aforesaid offence of transnational money laundering include, but are not limited to, the following:
Beiya Industrial Group Co Ltd, China
Suifenhe Fuquan Economic Trade Co Ltd, China
Top International Limited, New Zealand Dacha International Lmited, New Zealand LYM International PTY Limited, Australia Rotorua Int’l Villas Limited, New Zealand Heard Park Limited, New Zealand
If you, without having sought permission to exit China, make unauthorized exit from China during the aforesaid period, you shall be liable for the legal consequences.
Yours faithfully,
Xiaoming ZHANG (signature: Xiaoming ZHUANG (sic)] Director
Judicial Assistance in Criminal Matters Division
Department of Judicial Assistance & Foreign Affairs
Ministry of Justice
Date: 20 April 2010
[56] During the course of earlier chambers hearings, Mr McPherson observed that there was no evidence that Mr Chen had endeavoured to obtain permission to exit China in order to attend the trial in New Zealand. Mr Hucker accordingly wrote to
the Ministry of Justice for further information on that topic. He received the following letter from the Ministry, dated 30 April 2010:
Mr R B Hucker Hucker & Associates PO Box 3843
Shortland Street
Auckland
New Zealand
BY FACSIMILE: +649-368-1814
By E-mail: [email protected]
Dear Mr Hucker
RE: Yu Po Chen
I understand from Mr Chen that you are his counsel.
By way of background, I append the copy of a letter to Mr Chen dated 20 April
2010. We have transmitted a copy to the New Zealand High Court at Auckland.
1.As clearly explained to Mr Chen in the course of his 3 most recent requests to the Ministry of Justice of the People’s Republic of China (“MOJ”) for authorisation to depart China, these were declined because of the significance of his testimony in the embezzlement of RMB $2.5 billion involving Mr Liu Guiting.
2.Mr Chen has made promises and undertakings to continue assisting MOJ and other agencies in our inquiries however, after the unauthorised exit of our witness in the Australian inquiries, we cannot risk losing another key witness.
3.The investigation has reached a critical stage so it is now impossible to consider any further requests from Mr Chen to exit China within the next 7 weeks.
4.I understand the urgency of Mr Chen’s civil matters in New Zealand. On the other hand, the scheme our investigation against (sic) involves a complicated transnational criminal matters for which China has sought assistance from the Government of New Zealand and also Australia. Mr Chen remains one of our key witnesses.
5.For the avoidance of doubt, we confirm that the relevant Chinese government agencies have been notified of the prohibition upon Mr Chen. To avoid any complications and legal consequences, Mr Chen is advised to refrain from trying to leave China within the next 7 weeks.
Yours faithfully
ZHANG Xiaoming
Director
Division of Legal Assistance in Criminal Matters Department of Judicial Assistance & Foreign Affairs Ministry of Justice
People’s Republic of China
By: WANG Xiaoxin
Senior Assistant
Division of Legal Assistance in Criminal Matters
Phone: 86 10 6520 5236
Fax: 86 10 6520 5211
[57] It appears from the notice of 20 April 2010, that Mr Chen himself is not among the parties under investigation, although his company, Heard (the second defendant) is. The remaining entities are all connected with the plaintiffs and/or Mr Liu.
[58] Mr McPherson complains that the position of the Ministry of Justice ought to have been conveyed to this Court by way of affidavit from an appropriate official within the Ministry, and suggests that the Court ought not to rely on the correspondence set out above. In my view the documents sufficiently convey to this Court the Ministry’s position. There is nothing to suggest that the documents are not genuine. I am satisfied that Mr Chen is in fact unable to leave China for the duration of the trial. It therefore follows that he is absent from New Zealand and the requirements of s 103(3)(i) are met.
[59] It is therefore necessary to turn to the second of the two relevant considerations, namely whether it is in the interests of justice that Mr Chen be permitted to give his evidence by way of video link from China.
[60] At this point in the argument, Mr McPherson raises a range of factors which he contends militate against the giving of evidence by video link. As a preliminary matter, he argues that Mr Chen’s inability to leave China is of his own making, and that he ought not to be permitted now to rely upon it.
[61] On 3 March 2010, Mr Chen swore an affidavit confirming that he was not formally detained in China. In his judgment of 4 March 2010, Asher J held that he
was not satisfied that it was not possible for Mr Chen at that stage to return to New Zealand immediately. Mr McPherson argues that it was incumbent upon Mr Chen to return to New Zealand immediately, or to take steps to secure the agreement of the Ministry of Justice to his temporary return to New Zealand for the duration of the trial.
[62] I do not consider that the circumstances in which Mr Chen is now detained in China ought to count against him. The Court now has a great deal more information than was available to Asher J. It is a proper inference that, had Mr Chen endeavoured to leave China in March, he would have been restrained. I note that the
30 April 2010 letter from the Ministry of Justice refers to three prior attempts by
Mr Chen to secure the Ministry’s approval for his return to New Zealand.
[63] Mr McPherson’s next ground relates to delay. Section 103(2) requires that any application for directions in respect of an alternative mode of giving evidence:
… must be made to the Judge as early as practicable before the proceeding is to be heard, or at any later time permitted by the court.
[64] Mr McPherson argues that, on his own account, Mr Chen knew by 3 March
2010 that he would not be able to leave China. That being so, he ought, it is contended, to have made the present application much earlier. In an ideal world that is so. It is to be remembered however that Mr Chen was, at the time, largely without legal advice (save for a limited instruction to Mr Chesterman for the 11 March hearing) and that he may well have been unaware of his ability to make an application. Mr Machee earlier contended on Mr Chen’s behalf that that was indeed the position.
[65] I accept that delay is a factor, but the issue is simply whether, despite delay, the interests of justice can still be served.
[66] Next, Mr McPherson argues that it is unfair to the plaintiffs to be required to give their evidence in person, when Mr Chen would not be required to do so. This is a case, he points out, in which Mr Chen is not only a party to the proceeding, but also a witness who is central to the case, and whose evidence will be the subject of
very close scrutiny, his credibility being very much an issue. Mr McPherson refers to Ithaca (Custodians) Ltd v Perry Corp (2002) 16 PRNZ 773, where Paterson J declined an application for an order that certain Perry Corporation executives give evidence by video link.
[67] His Honour referred to the fact that the outcome of the proceeding might well depend on the trial Judge’s assessment of those witnesses in the witness box. At [36], he said:
The other factor which weighs against Perry Corp is the credibility issue in this case. On GPG’s allegation of a collateral undertaking or agreement, credibility is an essential factor. The submission that a witness from each of the other parties to the agreements (Deutsche and UBS) is not a complete answer (sic). Just as there were three persons from Perry Corp closely involved in the transactions there may have been more than one person involved in each of the brokers. Before briefs are exchanged it is premature to determine whether one witness from each broker will bring before the Court all the knowledge of the transactions held by each broker. The success or otherwise of GPG’s proceeding is very likely to depend on the Judge’s assessment of the New York witnesses. Their evidence, which is likely to take several days, will be crucial. They are the witnesses who will give the evidence of what was in the corporate mind of Perry Corp. As Giles CJ said in the Sun State Airlines case the effectiveness of cross-examination as a weapon in the fight for truth should not be unduly hindered. This is one of those cases which in my view require the primary witnesses of Perry Corp to be present in Court. A considerable amount of money is involved. The disadvantages of cross-examination by way of video-link are such that they are capable of affecting the balance in this case. Cross-examination will, in my view, be more difficult because of the documents involved and the delays in transmission. The hearing will be prolonged. The evidence of the executives is so crucial that this is one of the cases where they should attend Court and give their evidence orally. The prejudice to GPG outweighs the inconvenience to Perry Corp. Perry Corp has not established the inconvenience to it outweighs the considerations which favour GPG.
[68] Mr McPherson indicates that the plaintiffs have deep seated concerns about the quality and reliability of Mr Chen’s evidence. He points to interlocutory judgments of this Court, and the substantive judgment in the Supreme Court of New South Wales, in which Mr Chen’s evidence has been rejected where it conflicted with other material. He argues that the plaintiffs will be at a tangible disadvantage if Mr Chen is to be cross-examined by video link, whereas the plaintiffs themselves may be cross-examined in person.
[69] I accept credibility is very much an issue in this case, but I am less troubled than Mr McPherson about the prospect of Mr Chen giving evidence by video link. By and large, Judges are less concerned than hitherto about the giving of evidence in that way, even where credibility is in issue. It is of course routine for young complainants in criminal cases involving alleged sexual offending to give their evidence and be cross-examined in that manner.
[70] Moreover, although I accept that not all of the issues in this case are the subject of documentary material, many are. It will be possible for the plaintiffs to test Mr Chen’s evidence against those documents, and so to challenge his credibility in a manner that would not be possible if the parties were simply relying on recollection of what passed between them orally.
[71] I turn to the last of the major factors referred to by Mr McPherson, namely the absence in China of a sanction for perjury committed by Mr Chen when giving evidence there. There is evidence from a solicitor practising in China to the effect that there exists no sanction in China in respect of perjury committed while a witness gives evidence by video link to this Court. That is because the evidence is not given in proceedings before a duly constituted Chinese Court. While it is common ground that perjured evidence given by video link would amount to an offence in New Zealand, the position is that Mr Chen is not in this country. While he remains in China, he could not be pursued in respect of perjured evidence because there are no relevant reciprocal arrangements between the two countries.
[72] I accept that the absence of an immediately enforceable sanction for perjury is of relevance: Ellison Trading Ltd v Liebherr Export AG at [17], and Omni Marketing Group, Asia Pte Ltd v Transactor Technologies Ltd [2008] 3 NZLR 252 at [16]. The absence of an immediate sanction for perjury in China is therefore a matter to be taken into account.
[73] On the other hand, Mr Chen has been a resident in this country for about
20 years. He has significant assets here; his family also resides here. So this is not a case of someone who is likely to remain beyond the jurisdiction indefinitely. In
that sense the case is a little different from that of a witness who has no connection at all with this country.
[74] All of these considerations must be weighed in the course of a determination as to where the interests of justice lie. It seems to me that the balance must ultimately fall in favour of the making of an order. If it is refused then Mr Chen will be unable to give any evidence at all. He is the central figure in the defence case; without his evidence the defence must fail.
[75] The point about this case which distinguishes it from those such as Ithaca is that Mr Chen simply has no ability to come to New Zealand in the event that an order is refused. In Ithaca the Perry executives sought to give their evidence by video link on grounds of conflicting business commitments and personal inconvenience. The order having been refused, the executives concerned did in fact come to New Zealand, in order to give evidence in person. That option is not available here.
[76] I have reached the conclusion that the interests of justice require that
Mr Chen give his evidence by video link. There will be an order accordingly.
[77] It is necessary therefore to turn to the protocols which will govern the taking of the evidence. While there is now a measure of agreement on the topic, the protocols set out below are based largely upon the draft protocols set out as Schedule C to the defendants’ applications of 3 May 2010. There are certain amendments, some of them resulting from Mr McPherson’s proposals. In addition, I point out that the protocols differ from the draft in two important respects:
a) I have directed that it is for the defendants (and not the plaintiffs as appears in the draft protocols) to make arrangements for the video link through the Registrar of the Court at Auckland, and to confirm that Mr Chen has received written instructions from Mr Hucker as to the New Zealand requirement that there be no communication with anyone connected with the conduct of the case during his cross-
examination. A copy of that written instruction is to be provided to counsel for the plaintiffs before Mr Chen’s evidence commences;
b)Costs are to be borne in the manner directed later in this judgment, when I deal with the application to vary the freezing order.
[78] The following protocols are to apply, subject to the entitlement of counsel to make further application for variation should any one or more of the protocols prove unworkable or arguably unfair in practice:
a) The defendants shall make arrangements for the video link and any related matters with the Registrar of the High Court at Auckland, and shall co-operate with the Registrar to ensure that this mode of evidence is feasible;
b)The video link terminal in China is to be at the conference room at REMS Ltd, fifth floor, China Life Tower, 16 Choo wai Street, Cha Dyang District, Beijing 100 020, China.
c) The conference room must be such as to allow a reasonable part of the interior of the room in which the witness is to be situated to be shown on the screen, yet retain sufficient proximity to depict the witness himself;
d)The witness is to give his evidence either sitting at a plain desk or standing at a lectern;
e) A copy of the paginated common bundle of documents is to be made available to the witness (it is noted that a copy of the bundle has already been sent to China), and all written materials or exhibits already discovered between the parties which are to be referred to the witness, must be clearly identified;
f) A facsimile machine is to be located at the Beijing venue, and is to be operated there under the supervision of a solicitor from the office of Norton Rose, Beijing, appointed for the purpose;
g) Video link facilities are to include a separate camera and monitor for documents;
h)The only persons to be present in the Beijing conference room, other than the witness, are to be those operating the video and facsimile facilities, and an independent solicitor from Norton Rose, to be approved in advance by the Court;
i)The witness will be sworn in by the presiding Judge. The witness is to swear both that the witness statement which is to constitute his evidence in chief, and any other evidence given in the proceeding, are true, before he commences to give his evidence;
j)The Court may terminate the video conference at any time if it becomes apparent that the taking of evidence by video link has become unfair to any party. Leave is reserved to counsel to apply for an order revoking the video link should that become appropriate;
k)The following timetable will be observed (subject to the exigencies of the case) during the period of the video link (New Zealand time);
i) 12 noon to 1.30 pm;
ii) 2.30 pm to 4 pm;
iii) 4.15 pm to 5.30 pm.
l)Counsel for the defendants is to file a memorandum prior to the commencement of Mr Chen’s evidence, to the effect that Mr Chen has received written instructions from him, as to the New Zealand requirement that there be no communication with anyone connected
with the case during his period of cross-examination. A copy of such written instructions is to be provided to senior counsel for the plaintiffs beforehand;
m) Mr Chen’s evidence is not to commence prior to Wednesday 26 May
2010;
n)The costs of the video link are to be borne in the manner set out later in this judgment;
o) Leave to apply is reserved generally.
[79] Mr McPherson sought a direction that the Court permit the plaintiffs to have present in the conference room in Beijing a legal representative of their own, the costs of such representative to be paid by the defendants. I am not persuaded at this stage that such an appointment is necessary. The solicitor from Norton Rose will be present in order to manage proceedings in the conference room, effectively as the agent of the Court. As such he or she must be independent. I am assuming that Norton Rose has been instructed only very recently by the defendants in order to provide logistical assistance. If however, I am wrong in that, and Norton Rose has given advice to Mr Chen or his solicitors or counsel, then the position might well be different. For the time being I proceed on the basis that Norton Rose remains truly independent.
Video link evidence – Mr Liu
[80] Mr Liu is serving two concurrent sentences of life imprisonment in China for offences involving his business activities. The plaintiffs do not seek to call him as a witness. Mr McPherson advises the Court that on the plaintiffs’ approach to the issues in dispute Mr Liu’s evidence is unnecessary.
[81] Mr Hucker takes a different view. The defendants propose to call Mr Liu as a witness for the defence. They have taken out a subpoena which has not yet been served on Mr Liu, but which has been transmitted to the Ministry of Justice by
facsimile transmission. The Ministry has responded on 6 May 2010 to the defendants’ solicitors in the following terms:
Mr R B Hucker Hucker & Associates PO Box 3843
Shortland Street
Auckland
New Zealand
BY FACSIMILE: 649-368-1814
By E-mail [email protected]
Dear Mr Hucker
1. By this letter we acknowledge your facsimile transmission.
2.We have received a court subpoena issued by Liu Gui Ting attached to your transmission.
3. In the first instance, we will review the requirements outlined in
the subpoena to ensure any specifics can be properly complied with from our side.
4.Please detail any court protocol required by the issuing court. We will communicate any issues back to you for comment, otherwise
we accept the subpoena in principle subject to the above review.
5.I also confirm that Liu Gui Ting does not read English, accordingly please advise if you and/or the Court in Aukland (sic)
will remit a Mandarin translation from your end?
6.Once we have completed a procedural review, we will serve the subpoena upon Mr Liu Gui Ting and provide you with written
confirmation.
7.Although Mr Liu Gui Ting is an inmate and prisoner of the state, he retains his civil rights and accordingly it will be his own
decision whether or not he will accept the subpoena or participate
in a video link. Our role is simply to facilitate service and render assistance to a foreign court.
8. We have made enquiries concerning a proposed video link as
requested by Chen Yu Po and if a link is to take place, then it is likely that Liu Gui Ting will be moved to Beijing from where such links are regularly made.
9.We have undertaken many video links for trials in Canada, USA, Australia and it would normally take 30 days to plan and approve a
video link however, we note your courtroom trial has commenced and in this situation we would use our best endeavours to obtain
approval and complete necessary arrangements within 7 to 10 working days.
10. Please also confirm that you will be liable for all costs and
expenses related to the video link exercise.
11.As is standard, kindly advise how you will make available trial documents to brief Liu Gui Ting?
12. Aside from Liu Gui Ting’s normal visitation and telephone
privileges, once we have finalised all of the necessary arrangements, Liu Gui Ting will be able to discuss his testimony
with his family or with his solicitor subject to strict rules and protocol which govern access to prisoners. Any abuse, breach or misuse of these facilities other than for service to the court of a foreign jurisdiction will see the privilege cancelled forthwith.
13.Most importantly, during the court hearing, any irrelevance and/or no foundation issues with your case, raised by whoever plaintiff and defendant and their attorneys, such as the Communist Party, one Child policy, Falungong and others, will subject to cut off the video link.
14.The designated officials from MOJ and other Government agencies may be observed the whole process of legal assistance for the Video-link.
We await your response in due course. Yours faithfully
ZHANG Xiamong
Director
Division of Legal Assistance in Criminal Matters Department of Judicial Assistance & Foreign Affairs Ministry of Justice of PR. China
Phone: 86 10 6520 5234
Fax: 86 10 6520 5211
E-mail [email protected]
[82] Initially Mr Hucker sought an order granting leave to the defendants to serve a subpoena on Mr Liu in China, but there is no provision in the High Court Rules or elsewhere for the making of any such order. The position is that the defendants are free to serve the subpoena on Mr Liu in China, but they are unable to compel him to give evidence. A subpoena to a witness overseas cannot be enforced by this Court: Hurtigbat Vestfold Sverige Line AS v The Ship ‘Om’ (2000) 16 PRNZ 469 at 474.
[83] Mr Hucker has not therefore pursued his application for an order granting leave to serve the subpoena in China.
[84] Mr Hucker submits that Mr Liu’s position is no different from that of an inmate of a New Zealand penal institution, who could be brought before the Court to give evidence by application made to the Court under s 65 of the Corrections Act
2004. I am unable to accept that contention. Mr Liu cannot be required to give evidence against his will, because this Court is unable to enforce the subpoena, which, it is inferred, will ultimately be served upon him in China.
[85] As is recognised at paragraph 7 of the Ministry’s letter of 6 May 2010, the decision about compliance with the subpoena will be that of Mr Liu; so will his decision whether to participate in any video link arrangements which might be made pursuant to the order of the Court.
[86] Mr Liu is of course aligned with the plaintiffs. He is the husband of Limin Yang and the father of Liu Yang (known as Jasmine). The interests of the plaintiffs and Mr Liu are diametrically opposed to those of Mr Chen. There are mutual accusations of fraud and dishonest dealing.
[87] A person served with a subpoena in New Zealand may move to set it aside if he or she does not wish to give evidence and believes that there are grounds to justify that course. A person served with a subpoena in China need take no such step, because the subpoena is simply unenforceable there.
[192] Against that background there is force in Mr McPherson’s submission to the effect that where, as here, there is a strongly arguable case that the plaintiffs are the true owners of Top and the other companies, and that accordingly they have a proprietary claim to the frozen fund, the burden upon the defendants is correspondingly higher. In such circumstances it is incumbent upon the defendants to establish by proper evidence that there are no funds or assets available to utilise for the payment of legal fees, other than the asset to which the plaintiffs maintain their proprietary claim: Fitzgerald v Williams at 669.
[193] Mr McPherson is critical of the quality of the affidavit evidence offered in support of the present application. His criticisms are levelled in part at the earlier affidavit evidence provided by Amanda Chen. On 10 May 2010 (the last hearing day in respect of the present applications), Ms Chen swore and filed a further affidavit setting out in detail her financial position. The relatively brief affidavit is accompanied by a great many exhibited documents, intended to corroborate her evidence. The affidavit tends to establish that her liabilities exceed her assets.
[194] I do not propose to deal with her financial position in any detail, because in my view Mr Hucker is right when he submits that because Amanda Chen is not a party in the present proceedings, her financial position is largely irrelevant for present purposes. Having said that, her evidence suggests she has done what she can to assist Mr Chen in funding the conduct of the proceedings to date and that her own asset position is very limited.
[195] With respect to Mr Chen, Mr McPherson submits that:
a) He has failed to disclose the ownership of a further motor vehicle;
b)He has overstated the likelihood of his obtaining reimbursement from the Australian proceedings, in that the most likely outcome is that Mr Chen will be left with a further liability;
c) A Westpac mortgage of AU$5.3 million, referred to as a liability, is secured against the Australian property which is subject to dispute in the Supreme Court of New South Wales;
d)There is evidence that he has accessed frozen funds or other assets without authority, in breach of the freezing order. In this respect reference is made to evidence concerning Mr Chen’s dealings with the Kiwi Hotel property in Rotorua, which was arguably transferred from Rotorua International to Mr Chen’s mother-in-law for inadequate consideration, after Mr Chen had consented to the making of the freezing order, which covered the property concerned. Mr McPherson submits that the evidence tends to indicate that upon the subsequent sale of this property, funds totalling about $500,000 appear to have been paid to Amanda Chen. Mr Chen’s mother-in-law remains the registered proprietor of three other properties formerly owned by Rotorua, which are covered by a freezing order dated 18 December
2009.
[196] I accept that the evidence tends to show that there are grounds for concern (to use a neutral expression) concerning Mr Chen’s dealings with the properties formerly owned by Rotorua. I accept Mr McPherson’s submissions that those grounds for concern are properly to be taken into account in determining the outcome of the present application.
[197] I am however satisfied on the evidence adduced by the defendants and Amanda Chen, that Mr Chen is effectively without the funds with which to pursue this litigation. Here and in Australia (particularly the latter) he has been involved in on-going litigation over several years, which has effectively drained the family resources. There is evidence that his total legal costs over that period have run to several million dollars.
[198] I am satisfied that the pre-conditions for the making of an order have been met, notwithstanding the plaintiffs’ distinctly arguable claim that the funds held by Burton & Co are impressed with a trust of which they are the beneficiaries. In deciding to make an order I have taken into account the fact that the interest accumulated upon the initial fund will be more than sufficient to meet all of the present claims upon it. In other words, the fund itself will not be depleted by those claims.
[199] But I do not consider it appropriate for the fund to bear the whole of the defendants’ solicitor/client costs. For one thing, in the light of the concerns which Mr McPherson very properly expresses about dealings with Rotorua’s assets in apparent breach of the freezing order, it is not for the defendants to ask the Court to authorise funding on a Rolls Royce basis of litigation by resort to a fund to which the plaintiffs have mounted a strong claim. As well, Mr Chen awaits a decision on his application for legal aid, made more than two months ago. Mr Hucker very fairly and responsibly advises the Court that if and when a grant of legal aid is made, he and his team would thereafter work within the terms of the legal aid grant.
[200] At the outset of the trial, Mr Chen had effectively no legal representation. He now has Mr Hucker, a very experienced civil litigation practitioner, Mr Beveridge, also a senior practitioner, and two junior counsel. Without in any way suggesting that Mr Chen is not entitled to retain such lawyers as he wishes, the cost of running a team of that size is not to be charged to a fund to which the plaintiffs lay claim. Recognising the practical realities of the situation, Mr Hucker limits the defendants’ claim to the costs of senior counsel and of one junior (although I acknowledge that there might from time to time be two juniors in court). Mr McPherson accepts that the case is such as to justify two counsel. Indeed, he himself is accompanied by two juniors.
[201] I consider the proper approach to be to permit Mr Chen access to the frozen fund to the extent of meeting the level of costs envisaged by the High Court Rules for senior counsel and one junior. The prescribed daily recovery rate for party and party costs in Category 2 proceedings (applying here) is $1,600 per day. Rule
14.2(d) provides that that appropriate daily recovery rate will normally be two-thirds
of the daily rate considered reasonable in relation to the proceeding. So the assumed underlying rate is $2,400 per day. The Schedule 3 rate for junior counsel is one-half of that, namely $1,200 per day (item 9.2).
[202] In my view, an appropriate daily allowance for the defendants’ legal representation is therefore $3,600. That figure very considerably exceeds the daily rate that would be payable upon a grant of legal aid.
[203] The defendants are to be entitled to have recourse to the fund for their legal costs at that rate for each sitting day during the trial, irrespective of the time the Court actually sits during that day. In my view, the defendants are also entitled to an allowance in respect of out of Court work. Schedule 3 provides for an allowance for preparation, equivalent to twice the time occupied by the hearing. If the trial runs for its scheduled four weeks (excluding lay days), then on a party and party basis, an allowance of eight weeks would be justified.
[204] But here of course, Mr Chen did not retain his present solicitors and counsel until the very eve of the trial, and in the case of Mr Hucker, after the trial had commenced. Nevertheless, I consider it appropriate to make an allowance for preparation and out of Court work. The figure must necessarily be arbitrary. I fix 15 days, being a relatively conservative estimate of the non-sitting days upon which senior and junior counsel will be required to devote themselves to this trial.
[205] The result is that the defendants will be entitled to have recourse to the fund held by Burton & Co for legal expenses at the rate of $3,600 per day for:
a) Each sitting day regardless of the amount of time for which the Court actually sits on that day; and
b) 15 additional days in respect of preparation and out of Court work.
[206] Bills of costs may be prepared by the defendants’ solicitors in respect of work carried out up to and including 14 May 2010, and again, at the conclusion of the trial. Such bills are to be submitted to the solicitors for the plaintiffs for approval (as
to the calculation of sitting days) and once approved may be forwarded to Burton & Co for payment from the fund.
[207] Earlier, I directed that in the first instance the costs associated with the establishment and utilisation of the video link to China would be the responsibility of the defendants. I direct that all such costs (including the cost of an independent solicitor in China), be paid by the defendants from the fund held by Burton & Co. Before any video link invoice is submitted to Burton & Co for payment, it is to be approved as reasonable by the plaintiffs’ solicitors. In the event of disagreement as to reasonableness, counsel may file memoranda for the Court’s attention.
[208] It would seem highly desirable in respect of video link costs that fixed rates be obtained in advance and that there is prior agreement between counsel as to reasonableness. Indeed, prior agreement will be obligatory if the video link providers require payment in advance.
[209] In the event that the plaintiffs are successful in these proceedings, so that the cost of the video link has in the result fallen upon them, those costs will be claimable from the defendants as part of the relief to which the plaintiffs are entitled.
[210] The existing freezing order is accordingly varied to the extent necessary to give effect to these directions.
Result
[211] In summary, I have determined the defendants’ various applications in the following manner:
a) There is an order directing that Mr Chen give his evidence from Beijing by video link (paragraph 76) in accordance with the protocols listed at paragraph 78;
b)The defendants’ application for an order directing Mr Liu to give evidence by video link from Beijing is dismissed (paragraph 103);
c) There is an order granting leave to the defendants to serve briefs of evidence by Amanda Chen (paragraph 120) Xing Zhang and Yan Xu (paragraph 125);
d)The application for leave to serve a brief by William Sin Vui Liew is dismissed (paragraph 148);
e) The defendants’ application for leave to file and serve amended statements of defence and counterclaim is granted (paragraph 181);
f) The defendants’ application for a variation of the freezing order is granted (paragraph 198) on the basis set out in paragraphs 201-206;
g) The application to vary the freezing order is further granted in respect of video link costs (paragraphs 206-210).
Costs
[212] I have not heard from counsel as to the costs of the present applications. Costs are accordingly formally reserved. Counsel are asked to convey their respective positions to the Court either by memorandum or by oral submission at some convenient point during the trial.
C J Allan J
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