Supreme Court New South Wales Medium Neutral Citation: In the matter of Mulberry Capital Management Pty Ltd v Shen – AVL Application [2022] NSWSC 1023 Hearing dates: 22 July 2022 Decision date: 29 July 2022 Jurisdiction: Equity - Corporations List Before: Hammerschlag CJ in Eq Decision: Direction for witnesses to give evidence by audio visual link Catchwords: PRACTICE AND PROCEDURE – Evidence (Audio and Visual Links) Act 1998 (NSW), s 5B – contested application for witness to give evidence by audio visual link (AVL) from Beijing, China – where witness will give evidence through a translator – where witness claims an inability to travel to Australia because he is not permitted to do so as he is assisting government authorities in an investigation – where witness does not wish to travel to Australia because of the risks posed by COVID-19 – where defendant opposes AVL evidence on the basis that it will be unfair to him because credit is in issue, the allegations are serious and he is an individual, a translator will be used, and there is increased risk of a protracted hearing due to technical difficulties – where the Court is not satisfied that making the order for AVL evidence will be unfair to the defendant in all the circumstances, including where the Court imposes specific conditions including giving the defendant the election to have his evidence taken remotely as well – exercise of discretion – where the Court considers the witness' claimed inability to travel to Australia not made out, but considers that credence should be given to COVID-19-related travel concerns – HELD – order for AVL evidence made – orders a NSW legal practitioner to be present with witnesses and translators to be present in Court – plaintiffs to arrange facilities and bear costs, to become costs in the cause – Court may revoke orders if necessary Legislation Cited: Evidence (Audio and Visual Links) Act 1998 (NSW) Cases Cited: Antov v Bokan (No 2) (2019) 101 NSWLR 142 Category: Procedural rulings Parties: Mulberry Capital Management Pty Ltd - First Plaintiff Wealth Resources Pty Ltd - Second Plaintiff Wealth Mining Pty Ltd - Third Plaintiff Northshore Investment (HK) Ltd - Fourth Plaintiff Peng Shen - Defendant Representation: Counsel: B Katekar SC with S Gaussen - Plaintiffs A Munro - Defendant Solicitors: Deutsch Miller - Plaintiffs Webb Henderson - Defendant File Number(s): 2019/216782 JUDGMENT 1. HIS HONOUR: The trial of these proceedings is currently fixed to commence before me in the third week of August 2022 on a current (I think generous) estimate of eight days. 2. The plaintiffs are four companies associated with and owned by China Kingho Energy Group Co Ltd, apparently a large, privately-owned energy and resources company in China associated with Mr Qinghua Huo (Mr Huo), who it is said is its ultimate owner. 3. The defendant (Mr Shen) is resident in Australia and was a director or employee of the plaintiffs between 2013 and 2017. 4. The plaintiffs allege that Mr Shen misused his position as a director or employee to advance his own interests to their detriment. They sue for damages exceeding $9 million. 5. In broad terms, there are three categories of claims: 1. It is alleged that Mr Shen used his position to cause the fourth plaintiff (Northshore) to enter into a consultancy agreement with Alpha, an entity which Mr Shen had incorporated in the British Virgin Islands, under which Northshore paid Alpha USD$5 million without disclosing this to his co-director, Mr Huo. Mr Shen's answer is that the agreement was disclosed and was a means of paying his salary. 2. It is alleged that Mr Shen caused the first plaintiff (Mulberry) to employ his wife on annual salary of $150,000 in circumstances where she did not undertake any work or provide any services. The substance of Mr Shen's defence appears to be that he reduced his own salary by an amount equivalent to that paid to his wife so that presumably Mulberry suffered no detriment by the conduct complained. 3. It is alleged the Mr Shen caused Mulberry to enter into a shareholders' agreement with Kapu Brand Management Co Pty Ltd (Kapu), under which Mulberry paid USD$1.5 million to Kapu without disclosure to his co-directors that he was personally interested in Kapu by way of Alpha holding shares in it. Mr Shen's answer is that his investment in Kapu was minimal and only made because the other shareholder (or joint venturer) required him to be invested in the project. He also maintains that these matters were discussed with and approved by Mr Huo. 1. The plaintiffs intend to call four witnesses, Mr Huo, Mrs Naren Zhou (who is married to Mr Huo and a director of Northshore), Ms Ping Chau Fok (their daughter and also a director of Northshore), and Mr Shichao Ding (who is married to Ms Fok and a director of Mulberry and two other of the plaintiffs). They are all resident in Beijing. None of them speak English. 2. Mr Huo is a central witness because it is to him that Mr Shen says disclosure was made, and he denies it. It is not necessary to give consideration to what, in the present context, is the juridical effect of disclosure, but it is plain that whether there was any is hotly contested. 3. The plaintiffs move for an order that their evidence be taken by audio-visual link (AVL order) pursuant to s 5B of the Evidence (Audio and Visual Links) Act 1998 (NSW) (the Act), which relevantly provides: 5B Taking evidence and submissions from outside courtroom or place where court is sitting—proceedings generally (1) Subject to any applicable rules of court, subsection (2A) and section 5BAA, a NSW court may, either on its own motion in, or on the application of a party to, a proceeding before the court, direct that a person (whether or not a party to the proceeding) give evidence or make a submission to the court by audio link or audio visual link from any place within or outside New South Wales, including a place outside Australia, other than the courtroom or other place at which the court is sitting. (2) The court must not make such a direction if— (a) the necessary facilities are unavailable or cannot reasonably be made available, or (b) the court is satisfied that the evidence or submission can more conveniently be given or made in the courtroom or other place at which the court is sitting, or (c) the court is satisfied that the direction would be unfair to any party to the proceeding, or (d) the court is satisfied that the person in respect of whom the direction is sought will not give evidence or make the submission. … 1. I had the benefit of written and oral submissions from both sides. Mr Shen's written submissions included a helpful aide memoire of examples of evidentiary dispute between Mr Shen and Mr Huo. 2. There is no opposition to an AVL order in respect of the witnesses other than Mr Huo. It may be inferred that Mr Shen has no issue with the availability of the necessary facilities in Beijing. No issue about them was raised. Apparently, the Zoom platform is available there. 3. Section 5B of the Act gives the Court a discretion to make an AVL order, but it must not make it if satisfied that it would be unfair to Mr Shen. The assessment of unfairness involves a broad evaluative judgment. If the Court finds that the AVL order would be unfair, the discretion is not engaged: Antov v Bokan (No 2) (2019) 101 NSWLR 142. 4. The Court must also not make an order if the necessary facilities are unavailable or cannot be made available (s 5B(2)(a)), if it is satisfied that the evidence can more conveniently be made or given in the courtroom or other place at which the Court is sitting (s 5B(2)(b)), or if it is satisfied that the person in respect of whom the direction is sought will not give evidence (s 5B(2)(d)). These are factors of a different quality to unfairness, not requiring the same broad evaluative judgment. 5. In practical terms, in the process of determining whether the order should be made, the Court considers the overall facts before it on the application, and, relevantly for present purposes, whether to make the order would be unfair to a party to the proceedings. If it is satisfied that it would be unfair, there is no discretion to exercise. 6. If it is not satisfied, and none of the other impediments in s 5B(2) apply, the discretion to make the order may be exercised. The Court will take into account all the relevant circumstances before it, which may include those pertinent to s 5B(2). 7. The application relies on two factors. 8. First, an asserted inability on the part of Mr Huo to leave China because he is presently assisting the Chinese Government with an investigation and will not be permitted to leave whilst the investigation is underway. 9. Second, Mr Huo does not wish to travel to Australia because of the risks in connection with COVID-19. 10. The thrust of Mr Shen's opposition is that an AVL order in respect of Mr Huo's testimony will be unfair to him because: 1. credit will be in issue between them. He puts that a substantial element of the issues in dispute relates to the occurrence and content of discussions between them. Mr Shen deposes to various conversations, most of which Mr Huo denies happened or which he does not recall. These conversations were in Mandarin. His counsel will be deprived of the physical supervising presence of the judge. 2. the allegations against him are serious and he is an individual. 3. Mr Huo's evidence will be given with the use of a translator. Mr Shen contends that this will involve expanded scope for misunderstanding and error with respect to accurate translation. 4. there is an increased risk that the hearing will be protracted because of technical difficulties or failure. 1. In my judgment, taking into account all the circumstances, including specific conditions I intend to impose with respect to the taking of Mr Huo's evidence, I am not satisfied that making the AVL order would be unfair to Mr Shen. 2. It is preferable generally, and in particular where credit is in issue, for the protagonists to be present in Court. But it is also true that technical deficiencies such as unstable connections and transmission lag times which in the past were significant impediments to effective cross examination remotely are (to the extent that they still exist) no longer anywhere near as significant as they once were. 3. Since the commencement of the COVID-19 pandemic, there has, of necessity, been a vast increase in the number of cases that have been heard remotely, and significant experience has been gained. My experience has predominantly been in substantial commercial cases, including document-heavy ones. This case has a plain commercial flavour. 4. Since March 2020, the vast bulk of commercial cases heard in this Court have been determined by way of remote hearings. Unless practitioners or parties were too ill to participate, matters, including multi-party ones, proceeded almost with no exception. 5. The experience of individual courts and other judges may differ, and of course specific experiences will be in the context of particular circumstances, but with almost no exceptions, my experience over the past two years has been that AVL has worked satisfactorily, including in cases where credit has been heavily in issue. That is not to say that physical hearings would not have been preferable. 6. Specifically with respect to credit findings, experienced trial judges know that assessing the credit of a witness whose evidence is given via a translation has limitations not present when the evidence is given in English. Evidence given via a translator has the capacity to undermine (in whole or in part) some of the forensic advantages which cross examining counsel would otherwise have. In my opinion, where evidence is given by translation, the disadvantage suffered by that fact will not be intensified by dint only of the evidence being given remotely, particularly if the translator is present in and under the control of the Court. The presence of the disadvantage because of translation reduces the significance of any disadvantage suffered by lack of presence. 7. I do not accept that a remote hearing increases the scope for misunderstanding and error with respect to accurate translation. 8. A view could perhaps be taken that there is potentially an element of unfairness if counsel for Mr Shen has to cross examine Mr Huo remotely, but counsel for the plaintiffs could cross examine in Court with Mr Shen present. On the other hand, the view may be taken that it may be a forensic advantage for Mr Shen, if in fact he is a truthful witness, for him to be present in Court, whereas Mr Huo will not be. Nevertheless, to accommodate any perceived unevenness in the playing field which may be held by Mr Shen, I will permit him to elect to give his evidence remotely, or to be in Court with cross examining counsel being remote. Counsel for the plaintiffs made it clear that there would be no objection to this. 9. It will be a condition that the translator be present in the Court. It will be a condition that an independent legal practitioner admitted in this State, with a current practising certificate, be present with Mr Huo. It will be a condition that the plaintiffs, at their cost initially, arrange for the necessary platform, such costs to become, unless the Court otherwise orders, costs in the cause. 10. I will reserve to the Court the power to revoke the AVL order should during the evidence, for any reason, I come to the conclusion that to continue with it would be unfair to Mr Shen, unless Mr Shen opposes the revocation. I record that the plaintiffs agreed to this condition. 11. If it transpires that the hearing is appreciably lengthened because of technical or other difficulties, the prejudice to Mr Shen can be cured by an appropriate order as to costs. 12. Not being satisfied that to make the AVL order would be unfair to Mr Shen, I move to consider whether or not to make the AVL order. 13. I am not persuaded that Mr Huo's asserted inability to travel to Australia because of the investigation has been made out. No details of the nature of the investigation or its expected length are given. There is no evidence that he sought permission to leave and was refused. Of course, if it were properly established that Mr Huo could not leave, this would weigh heavily in favour of making an AVL order. 14. The situation with respect to COVID-19 is different. Evidence on information and belief is that Mr Huo has been vaccinated, but he is a diabetic and suffers from high blood pressure. Although there is no medical evidence, it is notorious that there has, in recent weeks, been a significant spike in COVID-19 infections in this country, and it is a matter of public record that hospitalisations due to COVID-19 are presently at something of an all-time high. Not long ago, Mr Huo could not have travelled to Australia and had the trial proceeded, his evidence would have had to have been taken by AVL. I consider that credence should be given to an objection not to travel to Australia with the COVID-19 conditions as they currently are, notwithstanding that Supreme Court Revised COVID-19 Protocols effective from 2 May 2022 informed parties that they should assume that substantive hearings will proceed by way of live hearing as far as possible. 15. What the COVID-19 conditions will be like at the scheduled time of the hearing is of course unknown, but it was not suggested that any significant improvement is likely (or even possible). 16. I do not think there are any discretionary considerations such as material delay in making the application which militate against making the AVL order. 17. I am mindful that the starting point must, of course, always be that it is preferable and desirable for trials to be conducted live and in open court, not least of all because the courtroom is an important symbol reflecting the rule of law. I also record that the defendant opposed the proceedings being adjourned. 18. I am also mindful that when, on 20 August 2021, the parties moved the Corporations List Judge to fix the matter for hearing, they said in a joint submission that, having regard to aspects of the proceedings including that witnesses would be cross examined with the assistance of an interpreter, it was in the interests of justice (to the extent possible) that the witnesses be cross examined in person. Sensibly, the defendant has not opposed the AVL order with respect to the witnesses other than Mr Huo. 19. In the circumstances that have transpired, I consider that justice dictates that the AVL order is properly to be made. 20. I will accordingly make an AVL order on the conditions I have described. I will hear the parties on any additional conditions or inclusions in the orders considered to be appropriate. 21. I make the following orders: 1. The following persons are directed to give evidence by audio visual link: Mr Qinghua Huo, Mrs Naren Zhou, Ms Ping Chau Fok, and Mr Shichao Ding. 2. The plaintiffs are to ensure that, at the time a witness gives her or his evidence, no one else will be present in the hearing room save for: 1. an independent legal practitioner admitted in New South Wales with a current practising certificate, and 2. an independent person whose presence is necessary to assist or deal with any technical or administrative issues whose names and details must be communicated to the defendant's solicitors in writing not later than seven days before the commencement of the hearing. 1. The plaintiffs are to arrange for a technically adequate platform, including the availability of a screen for documents to be shown to any witness, as well as a physical court book in the same form as that provided to the court. The plaintiffs are to bear the costs of the establishment of the platform and the making of all administrative arrangements for the taking of the evidence, those costs to become costs in the cause unless the Court otherwise orders. 2. The plaintiffs are to arrange for the presence of an official interpreter in the courtroom in Sydney. 3. The Court reserves the power to revoke or modify these orders should, during the taking of the testimony, the Court be satisfied that to continue doing so by audio visual link would be unfair to the defendant, noting that the Court does not propose to exercise this power if the defendant opposes it. Amendments 29 July 2022 - Renumber para 39 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 July 2022