Australia Abalone World Pty Ltd v Yin [2020] QDC 190

DISTRICT COURT OF QUEENSLAND CITATION: Australia Abalone World Pty Ltd v Yin [2020] QDC 190 PARTIES: AUSTRALIA ABALONE WORLD PTY LTD ACN 136 651 913 (plaintiff) v WEI GUANG YIN (AKA ANTHONY WEI GUANG YIN) (first defendant) and B.N.Y TRADING PTY LTD ACN 098 709 886 (second defendant) and JILOON PTY LTD ACN 124 914 263 AS TRUSTEE FOR YIN FAMILY TRUST (third defendant) FILE NO/S: 4582/11 DIVISION: Civil PROCEEDING: Application DELIVERED ON: 7 August 2020 DELIVERED AT: Brisbane HEARING DATE: 6 August 2020 JUDGE: Barlow QC DCJ ORDER: 1. The proceeding be listed as a reserve trial for a five day trial commencing on 16 November 2020, subject to orders 2 and 3 below. 2. Provided that the plaintiff provides to the registrar, in a form satisfactory to the registrar, security for the defendants’ costs of the proceeding, in the sum of $40,000, by 4.00pm on 21 August 2020, the plaintiff have leave to take further steps in this proceeding. 3. If the plaintiff does not provide security in accordance with order 2, the proceeding be dismissed for want of prosecution. -- 1 of 10 -- 2 4. If the plaintiff provides security in accordance with order 2, then the following orders and directions apply. 5. The plaintiff file and serve any further amended statement of claim by 24 August 2020. 6. The defendants file and serve any further amended defence by 2 September 2020. 7. The plaintiff file and serve any amended reply by 8 September 2020. 8. The parties complete any further disclosure by serving a list of documents, together with copies of any documents in that list not already provided to the other parties, by 10 September 2020. 9. The proceeding be listed for review and any further directions on 11 September 2020. 10. The plaintiff pay the defendants’ costs of and incidental to the applications filed on 9 July 2020 and 28 July 2020, on the indemnity basis. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COURT SUPERVISION – WANT OF PROSECUTION OR LACK OF PROGRESS – proceeding commenced in 2011 – plaintiff has not taken a step in the proceeding for over two years – defendants seek an order dismissing the proceeding for want of prosecution – plaintiff seeks an order giving it leave to proceed Uniform Civil Procedure Rules 1999 r 280, r 389(2) Artahs Pty Ltd v Gall Standfield & Smith [2011] QSC 273, considered Chapman v Australian Stock Exchange Ltd (unreported, Federal Court of Australia, NG20/1994, Tamberlin J, 25 August 1995), considered Eltran Pty Ltd v Westpac Banking Corporate (1990) 25 FCR 322, considered Paradise Grove Pty Ltd v Stubberfield [2000] QSC 214, considered COUNSEL: C Templeton for the plaintiff CW Chiang for the defendants SOLICITORS: ACLG Lawyers for the plaintiff Rice Legal, as town agents for Francis Lim Lawyers, for the defendants -- 2 of 10 -- 3 [1] This proceeding commenced on 14 November 2011. Yesterday I heard two applications. The first, filed by the defendants on 9 July 2020, seeks an order dismissing the proceeding for want of prosecution. The second, filed by the plaintiff on 28 July 2020, seeks an order giving it leave to proceed, as it has not taken a step in the proceeding for over two years. [2] Plaintiff sues for a debt of $300,000 plus interest, alleged to be due to it under a written loan agreement with the second defendant, BNY, made in November 2010 and guaranteed by the first defendant, Mr Yin. [3] The loan agreement provided that the principal was repayable after two years and interest at $2,250 per month was payable monthly in arrears. [4] At the time, Mr Yin was one of four directors of AAW, having effectively replaced his accountant, Mr Fung as director in June 2010. Apparently the other three directors then lived in China. Mr Yin signed the loan agreement as director of the plaintiff lender, as director of the borrower, BNY, and as guarantor. [5] Mr Yin gave evidence that he made the loan agreement at the request of Mr Fung, who told him he had three clients who lived in China and wanted to invest money in a business in Australia so that they could obtain permanent residence here. That investment was to be by setting up a business in Australia selling abalone and other products and, for that purpose, they wished Mr Yin to set up the business at the front of the abalone processing plant that BNY operated (or intended to operate) from premises owned (or to be owned) by the third defendant, Jiloon. The loan was to pay for the renovations and initial stock. Mr Yin pleads in his defence and gave evidence that he and Mr Fung agreed that the loan was to be offset against the cost of the renovations and stock that he purchased for the shop and the interest would be offset against rent in the same sum payable to Jiloon for the use of the premises. Mr Yin would manage the shop on behalf of the plaintiff and would be paid a salary of $30,000 a year to do so. [6] The plaintiff alleges that Mr Fung orally demanded that BNY and Mr Yin repay the loan in October 2011, on the ground that BNY had defaulted in payment of interest under the loan agreement. The plaintiff then commenced this proceeding against Mr Yin alone, relying on the guarantee. [7] Mr Yin did not initially file a notice of intention to defend and defence, leading to default judgment being entered against him on 24 February 2012. That judgment was set aside, on his application, on 3 May 2012 and Mr Yin filed a defence and a notice of intention to defend on 15 and 16 May 2012 respectively. [8] In the meantime, the plaintiff had served a statutory demand for the debt on BNY. In November 2011, BNY filed an application in the Federal Court of Australia seeking to have that demand set aside. That application was heard by the Court on 10 February 2012 and on 22 February the Court ordered that the demand be set aside. The documents (including affidavits) filed in that proceeding and the Court’s reasons for its decision were exhibited to an affidavit before me on the plaintiff’s application. (The defendants’ counsel, Ms Chiang, noted that no leave had been sought to do so, under rule 395, but did not object to that evidence being given and relied on by the plaintiff. It seems that the documents were formally read before the Court. They therefore became evidence in that proceeding. Consequently, for the plaintiff to use them in this proceeding was not -- 3 of 10 -- 4 in breach of the implied undertaking to the Federal Court not to use documents produced in a proceeding other than for the purposes of that proceeding. Documents that have been tendered in evidence in a proceeding may be used for any legitimate purpose, not limited to the purposes of that proceeding.1 [9] After the reply was filed, nothing happened in the proceeding until, on 5 August 2014, the plaintiff filed an application seeking leave to proceed and for an order joining BNY and Jiloon as defendants. The plaintiff’s explanation for not having taken any step since the default judgment was set aside comprised assertions by its solicitor, on information and belief, that it had spent over $58,000 on legal fees in pursuing its claim, including obtaining and opposing the setting aside of the default judgment, and it had not been able to afford to continue further, but it could then afford to pursue its claim. Mr Yin did not oppose the application and the Court made the orders sought on 20 August 2014. [10] The next steps were that the plaintiff filed an amended claim and amended statement of claim on 29 August 2014, the defendants filed a defence on 26 September 2014 and the plaintiff filed a reply on 17 November 2014. [11] The plaintiff then changed its solicitors in September 2015 and filed and served a list of documents on 16 November 2015. The defendants served their list of documents on 12 January 2016. Then, on 20 January 2016, the plaintiff’s solicitors mailed to the defendants’ solicitor in Melbourne a request for trial date. They received no response and mailed another for request for trial date on each of 11 August 2016, 28 February 2017 and 21 August 2017. Despite receiving no response to any of those documents, the plaintiff made no application for an order to dispense with the defendants’ solicitor’s signature on the document and to have the matter set down for trial. Instead, its solicitors mailed another request for trial date on 16 October 2017, but that time they also emailed a copy to the defendants’ solicitor. That led the defendants’ solicitors to respond, by letter emailed to the plaintiff’s solicitor, to the effect that they had not received any of the earlier documents, the defendants wished first to have the proceeding mediated and they requested that the plaintiff’s solicitor provide the names of three persons for the defendants to choose from as mediator. [12] In response, the plaintiff’s solicitor sent a letter, by post but not also by email, to the defendants’ solicitor in which three persons were suggested as mediators. Again, he received no response. The defendants’ solicitor says he did not receive that letter. Apart from an email in which the plaintiff’s solicitor said he would obtain instructions about the matters he had raised in his letter, he heard nothing further from the plaintiff until he received the plaintiff’s application for leave to proceed. [13] It is incomprehensible to me why the plaintiff’s solicitors, having received no response to the first letter sending a request for trial date, did not follow up by letter and email asking for a response, or make an application to dispense with the defendants’ solicitor’s signature (or both). It is more incomprehensible why they did not take those steps after receiving no responses to their further requests for trial. It is beyond belief that, having received a response only when they emailed a copy of their letter and having been told that the defendants’ solicitor had not received any of the posted documents, they then posted a letter in response to the defendants’ request for a panel of mediators and did not 1 Chapman v Australian Stock Exchange Ltd (unreported, Federal Court of Australia, NG20/1994, Tamberlin J, 25 August 1995); Eltran Pty Ltd v Westpac Banking Corporate (1990) 25 FCR 322. -- 4 of 10 -- 5 email a copy of that letter. Their conduct in these respects itself caused substantial delay in the proceeding. [14] Both parties relied on and addressed the factors relevant to these types of application that were set out by Atkinson J in Tyler v Custom Credit Corporation Ltd [2000] QCA 178. Of course, those factors are not always all relevant and they are not the only factors that might be relevant, in any particular case, to the court’s consideration. But three factors that are always relevant and of substantial importance are the extent of the delay in progressing a proceeding, who caused that delay and whether there is a satisfactory reason for it. Other very important factors in every case are whether the delay has caused prejudice to any party and the nature and extent of any prejudice. The overriding question, though, is whether, because of the delay, it is no longer possible for the parties to have a fair trial of the proceeding. [15] There is authority that the service (but not the mere filing) of a list of documents is a step in advancing a proceeding toward trial.2 A “step” in a proceeding is a formal action taken by a party that is required by the rules to progress the action towards a conclusion.3 An application for leave to proceed is not a step in a proceeding; it is a necessary precursor to a dilatory party being permitted to take a step. Sending a request for trial date, which is ordinarily required under rule 467, is a step in a proceeding. However, in my view, having sent the first request for trial date, the later five requests were not proper steps in this proceeding. [16] Effectively, the plaintiff has taken no step in the proceeding since it served the first request for trial date in January 2016. By then, it had substantially delayed in progressing the proceeding toward trial, having left long periods of time between each earlier step after the default judgment was set aside. In total, it appears to have caused delays totalling 7 years and 9 months, in a proceeding that has been on foot for 8 years and 9 months. That is, from 16 May 2012, when the defence was filed, until it filed its amended statement of claim on 29 August 2014 (2 years, 3 months); from 17 November 2014 (filing its reply) to 16 November 2015 (serving its list of documents) (one year); and from 20 January 2016 (on sending the first request for trial date) to now (4 years, 6 months). [17] The plaintiff’s explanation for its delays in the last four years or so is that there was litigation in the Supreme Court of Queensland between its directors and shareholders that commenced in December 2016. The plaintiff was in voluntary administration from 21 December 2017 to 13 April 2018. The plaintiff’s solicitor deposes that he has been informed by one of the four directors, Mr Yan, that between that date and 20 July 2020 the directors could not agree on funding the prosecution of this proceeding, nor on giving instructions to the plaintiff’s solicitors to continue to prosecute it. On 20 July 2020, the directors’ proceeding was discontinued. Mr Yan is now the sole director and shareholder of the plaintiff and has instructed its solicitor to seek to have it listed for trial as soon as possible. [18] No evidence was placed before me about the plaintiff’s financial position, either during the first period of delay, in the last four years, or now, apart from broad statements to the effect that the plaintiff could not afford to conduct the proceeding and has spent 2 Paradise Grove Pty Ltd v Stubberfield [2000] QSC 214. 3 Artahs Pty Ltd v Gall Standfield & Smith [2011] QSC 273, [13]. -- 5 of 10 -- 6 substantial sums conducting this and the Federal Court proceeding. Nor was any detail given to me about any attempts that Mr Yan took to reach earlier agreement to take over the control of the plaintiff. [19] The fact that there were internal disputes within the plaintiff for the last four years or so may be an explanation for the delay, but it is not a satisfactory one. A plaintiff in this court has a duty and gives an implied undertaking to the Court to prosecute its claim in an expeditious way. If it cannot do so due to internal disputes it is still in breach of that undertaking. [20] The substantial delays in this proceeding are almost entirely due to the plaintiff’s conduct. That weighs heavily against the plaintiff in considering its application and that of the defendants: that is, it weighs heavily in favour of ending the proceeding by dismissing the plaintiff’s application and granting that of the defendant. [21] But that is not the only factor that I must consider. The plaintiff’s counsel, Mr Templeton, placed great emphasis on the apparent strength of the plaintiff’s claim and the defects and inconsistencies in the defence and in the evidence that Mr Yin has given over the years in this court and the Federal Court. I will not relate these aspects of his submissions in any detail. It suffices to say that the plaintiff does appear to have a strong case, as it relies on a written loan agreement, while the defendants rely on an alleged oral variation to that agreement. The defendants’ case in this respect faces a substantial hurdle, in that the written agreement includes a clause that provides: The terms of this Agreement are the whole Agreement between the parties. This Agreement may only be altered in writing signed by all parties. There are no other collateral bargains, agreements or representations or understandings. No party to this Agreement has relied on or been induced to enter into this Agreement by any representation (whether oral or in writing) by any person (whether a party to this Agreement or not) which is not set out in writing in this Agreement. [22] As I said, the defendants rely on what they plead as an oral variation of that agreement. Their prospects of success on that basis are virtually negligible in the face of that clause. [23] However, in an affidavit affirmed for the purpose of these applications, Mr Yin deposed to the circumstances in which he executed the loan agreement, particularly that Mr Fung had explained the reasons for and the nature of the agreement. Mr Yin said he has limited understanding of English and he was not able to read and understand the loan agreement before signing it. Mr Fung did not translate it or explain it to him. He trusted Mr Fung (who had been his accountant for many years) to draw an agreement that reflected the business relationship that Mr Fung had described to him. This affidavit is certified as having been translated to Mr Yin and affirmed through the interpreter. [24] It seems to me that, if Mr Yin’s description of the circumstances leading up to the agreement were pleaded and proved and if his evidence of how the funds were used were accepted, he may have good defences to the claim. Ms Chiang informed me that, until she was retained, the defendants had never retained counsel who spoke his native languages (Mandarin and Cantonese) and who can therefore receive his instructions and advise him in a manner in which he could give clear instructions and understand advice given to him. If the proceeding were to continue, she would obtain detailed instructions and consider and advise Mr Yin about any additional defences that may be available to him or the other defendants. -- 6 of 10 -- 7 [25] Although such defences are not currently pleaded, in considering the apparent strengths and weaknesses of the plaintiff’s claim and the defences open to the defendants if the matter were to proceed, I should take into account the facts to which Mr Yin has deposed in this application and in support of his application to set aside the default judgment, as well as in the Federal Court. Having regard to these matters and notwithstanding the inconsistencies in Mr Yin’s evidence over the years, I do not consider the plaintiff’s claim, in the face of reasonably open defences, to be as overwhelmingly strong as Mr Templeton submitted. But this is merely one factor that I take into account. [26] The real issue that I must consider is whether, notwithstanding the long and inexcusable delays that lie at the feet of the plaintiff, it would still be possible to conduct a fair trial of the proceeding. That depends substantially on any prejudice to the defendants if the matter were to proceed, balanced against the clear prejudice to the plaintiff if it were to be dismissed. [27] The defendants say that they are irremediably prejudiced in a number of respects, such that a fair trial would now be impossible. [28] First, Mr Yin says that, given the delay, his memory of the crucial events, and particularly of the exact words spoken to him by Mr Fung, has faded. He has to rely on affidavits he has affirmed in the past to refresh his memory and he fears that he may not be able to recall everything Mr Fung told him. I infer that he also fears that he will not be able to recall accurately and completely the events that might explain any apparent inconsistencies between documents and events and his evidence in the past. [29] It is not surprising that Mr Yin’s memory of events will have faded over the years. However, he did depose to the relevant facts on four occasions much closer to the relevant events (in the Federal Court on 22 November 2011 and 2 February 2012, in the Federal Magistrates Court – as it then was – on 19 April 2012 and in this court on 17 April 2012). The events were also no doubt important to him and I expect that he would still have a reasonably good memory of the true facts leading to the agreement. I am not satisfied that he would be so prejudiced by a fading memory as not to be able fairly to give his evidence. [30] Ms Chiang also submitted that the defendants may wish to call a number of other witnesses, such as past employees and customers of the plaintiff, building contractors and others involved in the establishment of the business, to demonstrate that it was the plaintiff’s business. There are likely to be considerable problems in finding relevant witnesses after so long, let alone that their memories would most likely be very poor. [31] The problem with that submission is that Mr Yin and Ms Chiang were unable to identify any witness, nor the issues to which such witnesses’ evidence might be relevant. It is unlikely that they would know or be able to give direct evidence of anything to do with the arrangements for the construction and operation of the business that Mr Yin says belonged to the plaintiffs. I consider this submission to be mere speculation. Also, there is no explanation why, if any such witnesses had been important, Mr Yin’s solicitors had not spoken to them soon after the litigation commenced in order to obtain relevant evidence (assuming that he did not do so, about which there is no evidence). [32] Ms Chiang also submitted that any cause of action that the defendants may have had against Mr Fung, such as for misrepresentations, breach of warranty of authority or -- 7 of 10 -- 8 misleading or deceptive conduct, will now be statute barred. That is obviously correct, if one takes as the date on which the defendants suffered loss the date on which they entered into the obligations under the loan agreement (which is likely to be the relevant date). [33] But the defendants have not explained why, if they had wanted to join Mr Fung as a third party and to prosecute claims against him, they did not join him when they first filed a defence or, at the latest, after the plaintiff first applied for leave to proceed and amended pleadings were filed in 2014. Any claims against Mr Fung would have been well within time then. The prejudice in not now being able to sue him derives from the defendants’ own dilatoriness, not that of the plaintiff. [34] The defendants point to the inevitable emotional distress that the continuation of this proceeding has caused and will continue to cause Mr Yin and his family. Ms Chiang referred me to a number of decisions in which it has been said that litigants are entitled to get on with their lives and to plan their affairs without litigation continuing to hang over them and the inevitable psychological effects of long-delayed proceedings. Mr Yin gave evidence to this effect, including that he has been unable to restructure his business affairs with this litigation hanging over him and his companies. Ms Chiang also pointed out that, as had also often been said, unnecessary and long delays in proceedings have a tendency to bring the legal system into disrepute. Unfortunately, any such disrepute in this case has already arisen. [35] I consider the plaintiff’s conduct of this pleading to have been atrocious. It has continually delayed taking any substantive steps. It does not have any acceptable explanation for much of the delay. It seems particularly curious to me that the plaintiff’s directors and shareholders only came to an agreement that Mr Yan take over the company and this proceeding after the defendants had served their application seeking to have the proceeding dismissed for want of prosecution. Taken with the absence of any details of the alleged attempts to resolve those differences over three years, or of the plaintiff’s true financial position, I treat the apparently fortuitous timing of that settlement with some suspicion. [36] However, the defendants have not showered themselves in glory either, starting with Mr Yin instructing his solicitors not to accept service of the claim and the solicitors not informing the plaintiff’s solicitors that, although they had been sent the claim, they would not accept it formally by way of service. That led to the default judgment and to the costs of having it set aside. (The plaintiff also sought to blame the defendant for the costs of the application to set aside the statutory demand, but they resulted naturally from the plaintiff having issued it and refusing to withdraw it notwithstanding that the debt was clearly in dispute.) [37] Overall, however, I consider that it is still possible to have a fair trial of this proceeding. That is the most important matter and it leads me to grant the plaintiff leave to proceed. [38] However, given the plaintiff’s past conduct and the absence of any information about its financial position, I consider that there should be important conditions for that leave and for the proceeding not being dismissed for want of prosecution. [39] First, the plaintiff should provide security for the defendants’ costs of the proceeding from this time on to trial. The trial is estimated to last 4 days but, given that witnesses -- 8 of 10 -- 9 are likely to have to give evidence through an interpreter, I consider there to be a real risk that it will take up to five days. I have considerable experience in the conduct of commercial litigation of this sort, including the costs of doing so. In my experience, for every anticipated day of trial, solicitors and counsel generally need about two days to prepare (including interviewing witnesses, reviewing all the documentary evidence and general preparation). The daily cost of such preparation and of conducting a trial of this nature would easily amount to over $4,000. There are yet to be further pleadings and quite possibly further disclosure. In essence, the proceeding will almost have to restart from now. Taking all these factors into account, I consider an appropriately conservative amount of security is $40,000. The plaintiff should have only a short time in which to provide that security. [40] The second condition of leave should be that the plaintiff pay the defendants’ costs of both applications before me on the indemnity basis. I have already commented on the plaintiff’s poor and largely unexplained conduct of this proceeding. Having already obtained leave to proceed on one occasion, it was even more duty bound to conduct the proceeding expeditiously than it already had been under its normal implied undertaking. The applications were only necessary because of its substantial delays. It served its application and supporting material (an affidavit of 14 pages and exhibits of 354 pages) only a few days before the original date for the hearing of the defendants’ application, necessitating an adjournment of both applications. I consider that its conduct merits that it provide a greater than normal indemnity to the defendants for their costs of these applications. [41] Finally, this proceeding should clearly now be prepared for a trial as soon as practicable. Although further pleadings and possibly further disclosure will be needed, I consider it likely that it could be ready for a trial late this year or, at the latest, early next year. I propose to set it down as a reserve trial of 5 days commencing on 16 November 2020. [42] Therefore, the orders I make are: 1. The proceeding be listed as a reserve trial for a five day trial commencing on 16 November 2020, subject to orders 2 and 3 below. 2. Provided that the plaintiff provides to the registrar, in a form satisfactory to the registrar, security for the defendants’ costs of the proceeding, in the sum of $40,000, by 4.00pm on 21 August 2020, the plaintiff have leave to take further steps in this proceeding. 3. If the plaintiff does not provide security in accordance with order 2, the proceeding be dismissed for want of prosecution. 4. If the plaintiff provides security in accordance with order 2, then the following orders and directions apply. 5. The plaintiff file and serve any further amended statement of claim by 24 August 2020. 6. The defendants file and serve any further amended defence by 2 September 2020. 7. The plaintiff file and serve any amended reply by 8 September 2020. -- 9 of 10 -- 10 8. The parties complete any further disclosure by serving a list of documents, together with copies of any documents in that list not already provided to the other parties, by 10 September 2020. 9. The proceeding be listed for review and any further directions on 11 September 2020. 10. The plaintiff pay the defendants’ costs of and incidental to the applications filed on 9 July 2020 and 28 July 2020, on the indemnity basis. -- 10 of 10 --