Donghao Capital Pty Ltd v Guo [2024] NSWSC 52

Supreme Court New South Wales

Medium Neutral Citation: Donghao Capital Pty Ltd v Guo [2024] NSWSC 52 Hearing dates: 31 January and 5 February 2024 Date of orders: 06 February 2024 Decision date: 06 February 2024 Jurisdiction: Common Law Before: Harrison CJ at CL Decision: (1) Vacate the hearing before me. (2) Grant liberty to the parties forthwith to approach the List Manager with a view to obtaining the first available hearing date after 8 April 2024. (3) Order the defendant to pay the plaintiffs' costs thrown away or occasioned by reason of order (1), including the costs of Mr Guo's motion filed 31 January 2024. (4) Stand the matter over before me for directions on 4 March 2024. (5) Grant liberty to the parties to apply on three days' notice. Catchwords: CIVIL PROCEDURE – application to vacate hearing – where solicitor ceases to act in response to client's non-payment of fees – where client at fault – whether client should be forced to proceed without legal representation Category: Consequential orders Parties: Donghao Capital Pty Ltd (First Plaintiff) Donghao Li (Second Plaintiff) Shao Yong Guo (Defendant) Representation: Counsel: H B Durack (Plaintiffs)

Solicitors: Keypoint Law (Plaintiffs) File Number(s): 2020/361953 Publication restriction: Nil

JUDGMENT 1. HARRISON CJ at CL: These proceedings were listed before me today with an estimate of four days. The plaintiffs sue upon a Deed of Acknowledgment entered into between the parties on or about 24 May 2017. The plaintiffs claim approximately $8 million from the defendant. The circumstances that give rise to the claim can be briefly described as follows. 2. On or about 22 July 2016, Donghao Capital Pty Ltd entered into an agreement, called an Investor Agreement, with DG88 Pty Ltd. Mr Guo was a guarantor, presumably of the obligations of DG88, under the Investor Agreement. Pursuant to the Deed of Acknowledgment entered into 10 months later, Mr Guo agreed with Donghao Capital and Donghao Li that: 1. The plaintiffs were investors under the Investor Agreement; 2. The plaintiffs invested monies at the request of Mr Guo to acquire shares in two companies, namely 545 Queen Street Developments Pty and Maida 545 Development Pty Ltd; 3. Mr Guo, as a guarantor under the Investor Agreement, guaranteed to the plaintiffs a return on investment of not less than 8% per annum, and indemnified the plaintiffs for all monies applied by the plaintiffs in relation to the Investor Agreement; 4. The investment contemplated by the Investor Agreement failed, meaning (at least) that no return of income was expected to be declared. 1. Pursuant to the Deed of Acknowledgment, Mr Guo agreed to pay the plaintiffs a principal sum of $5,775,673 by way of a series of instalments commencing on 24 May 2017 and concluding on 23 May 2022. Mr Guo has not paid any money to the plaintiffs. 2. The statement of claim commencing the proceedings was filed on 21 December 2021. Mr Guo's defence was filed on 17 September 2021. The statement of claim and the defence have since been amended in terms that are presently irrelevant. Deutsch Partners have acted for Mr Guo at all times since his defence was filed and up until 25 January 2024, when that firm ceased to act for Mr Guo in circumstances to which it will be necessary to return. 3. The burden of Mr Guo's defence to the claim is that the Deed of Acknowledgment was entered into by him as the result of unconscionable conduct on the part of the plaintiffs, including threats and unfair pressure exerted by them upon him and without giving him any opportunity to seek or obtain legal advice. For example, but by no means exclusively, Mr Guo maintains that the failure of the original venture was the result of the plaintiffs' inability to complete the purchase of shares contemplated by the Investor Agreement by paying the balance of the purchase price and that the Deed of Acknowledgment was only signed by him following threats by Mr Li that he would use his political and business influence in the Peoples Republic of China to ensure that all business contacts, financial support or patronage to Mr Guo would cease if he did not sign it. 4. In these circumstances, as one would expect, the events surrounding and including the execution of the Deed of Acknowledgment by Mr Guo have figured prominently in the parties' respective affidavit evidence filed for each of them. Mr Li has affirmed several affidavits and he relies upon an affidavit from his solicitor, Samuel Li, concerning the events at the heart of the dispute. Mr Guo has affirmed several affidavits in response and relies upon an affidavit from Jianhua Lu to support his account of what occurred. 5. Last Wednesday, 31 January 2024, Mr Guo filed a notice of motion seeking, among other things, orders that the hearing listed to commence on 5 February 2024 be vacated and that it be adjourned for at least three months. Mr Guo's affidavit of 30 January 2024 deposed to the following matters in support of his motion: "1. I am the defendant in the proceedings herein. 2. These proceedings are listed for hearing commencing 5 February 2024 for four days. 3. I had instructed David Deutsch and Partners, solicitors (the Firm) to conduct these proceedings on my behalf. That Firm has acted for me at all times in respect for these proceedings. 4. On 25 January 2024 (one day before Australia Day) the Firm served a Notice of Ceasing to Act upon me. 5. The Firm relied upon a Notice of Intention of Ceasing to Act which was purportedly served upon me on 19 October 2022. Since that time the Firm has continued to act on my behalf, including preparing and filing evidence, attending at Court and participating in mediation. 6. The Firm at no time, served any other or subsequent Notice of Intention of Ceasing to Act upon me. 7. Since that time, I have sought alternate [sic, alternative] legal representation to appear at the hearing on my behalf. I sought the assistance of Mark Williams, who acted on my behalf when he was employed as solicitor at the Firm. Mark sent me an email dated 29 January 2023 a true and correct copy of which is ANNEXED hereto and marked 'A'. I sought the assistance of Mark because of his knowledge of the matter. 8. I do not have the Firm's files. I understand the Firm is exercising a lien over those files. 9. I have paid the Firm about $150,000 in legal fees during the conduct of this matter. 10. I attended the Registry of this Honourable Court on 29 January 2024. As a consequence of a conversation I had with an officer of the Registry, I sent an email to Plaintiff's solicitors, a true and copy of which is ANNEXED and marked 'B'. The Plaintiff will not consent to a vacation of the hearing. 11. I seek for the hearing to be vacated and to be adjourned for at least 3 months." 1. Mr Guo annexed two documents to his affidavit to which reference is necessary. First, a Notice of Intention of Ceasing to Act filed on 19 October 2022. That notice was in these relevant terms: "1. After 7 days from the date of service of this notice, I, David Deutsch, will file in the registry of the court and serve a notice that I have ceased to act as your solicitor in these proceedings." 1. Secondly, on 25 January 2024, Mr Deutsch filed a Notice of Ceasing to Act in the usual terms, informing Mr Guo and the Court that his firm "has ceased to act as the legal representative of Shao Yong Guo…in these proceedings". 2. At the hearing of the motion, Mr Durack of counsel for the plaintiffs appeared in opposition to the orders that were sought. 3. At that time, I took the view that I had insufficient information or material before me properly or adequately to understand where the merits of Mr Guo's application lay. I therefore adjourned the application until 2.00pm in order, if possible, to obtain some assistance from Mr Deutsch, the principal of the firm that had acted for Mr Guo. Although Mr Deutsch was unable to appear, as he was at the time interstate, he assisted me by agreeing to take part in the hearing by telephone from Queensland. The extent of his involvement at that time will be apparent from the transcript on that day. In the events that occurred, I adjourned Mr Guo's notice of motion to the first day of the scheduled hearing. 4. Since then, further evidence has been filed. First, Mr Li's solicitor, William Addison, has sworn an affidavit dated 2 February 2024 that deposes to a conversation between him and Mr Deutsch by telephone on the morning of 31 January 2024 in the following relevant terms: "Addison: David, Harrison CJ [at CL] has requested that you attend Court today at 2pm to answer some of his questions regarding Mr Guo's application to vacate the hearing. He wants further details on the circumstances surrounding you ceasing to act for Guo. Deutsch: I cannot be there as I am interstate, and will be for the rest of the week. I have already spoken to Guo this morning. The reason for ceasing to act was that a day or two before I filed the Notice of Ceasing to Act, I had a discussion with our counsel, Ben Phillips. He told me that he had made an error in failing to record this matter for hearing in his diary, and that he had taken a brief in another matter for the same period. We were therefore left in the lurch, and I filed the Notice of Ceasing to Act. Addison: That isn't in Mr Guo's affidavit of yesterday. Deutsch: No, because I only told Guo that this morning. I think he may be making another affidavit now. Addison: You hadn't told Guo of that reason until today? Deutsch: That's right. Addison: Do you have any issue with me informing the Court of this development? Deutsch: No." 1. Secondly, Mr Deutsch swore an affidavit dated 5 February 2024 to the relevant terms of which it is necessary to refer: "1. I was the solicitor on record for the defendant, Mr Shao Yong (David) Guo in these proceedings from approximately January 2021 to 25 January 2024. 2. I have had carriage of this matter since approximately September 2023. Prior to this time, Mr Mark Williams of my firm had carriage of the matter. Mr Williams is no longer employed by Deutsch Partners. 3. My primary method of communication with Mr Guo is via WhatsApp. A copy of a record of my WhatsApp messages with Mr Guo from September 2023 onwards is attached hereto and marked 'A'. 4. On 7 September 2023, I sent an email to Mr Phillips requesting he advise Ms Madeline Furchtmann, my employed solicitor, of his availability for a hearing commencing in 2024. A copy of this email is attached hereto and marked 'B'. 5. On 8 September 2023, Ms Furchtmann sent an email to myself and Mr Phillips advising of the orders made listing the matter for hearing commencing 5 February 2024. A copy of this email is attached hereto and marked 'C'. 6. Ms Furchtmann has provided me with a screenshot of her text messages with Mr Phillips on 8 September 2023 regarding his availabilities for hearing. A copy of this screenshot is attached hereto and marked 'D'. 7. On 11 September 2023, an email was sent to Mr Guo advising him that the matter had been listed for final hearing commencing 5 February 2024 for four days. A copy of this email is attached hereto and marked 'E'. 8. On 27 October 2023, I sent an email to Mr Guo which is attached hereto and marked 'F'. 9. On 10 November 2023, an email was sent to Mr Guo. A copy of this email is attached hereto and marked 'G'. 10. On 24 January 2024, I sent an email to Mr Guo forwarding an email from Mr Mark Addison, the plaintiff's solicitor, and noting that we would come off the record the following day if payment of fees was not received. A copy of this email is attached hereto and marked 'H'. 11. On 25 January 2024 at 12.35am, I sent an email to my secretary, Paula Wollmann, requesting she draft a notice of ceasing to act for filing that day. Mr Guo was copied into this email correspondence. A copy of this email is attached hereto and marked 'I'. 12. On 25 January 2024 at 3.22pm, Ms Wollmann sent an email to Mr Guo serving a sealed copy of the notice of ceasing to act. A copy of this email is attached hereto and marked 'J'. 13. Following the motion on 31 January 2024, I contacted Ben Phillips, Counsel at Nine Wentworth Chambers. I requested that he send me an email outlining his understand[ing] of his instructions in this matter. A copy of the email I received from Ben Phillips is attached hereto and marked 'K'." 1. The WhatsApp messages extracted in annexure "A" are instructive. They span the period between 3 August 2023 and 31 January 2024. It is in my view a fair summary of the messages that Mr Deutsch was constantly pressing Mr Guo to put his firm in funds for the proceedings and that Mr Guo was, for whatever reason, not doing so. For example, the following exchanges form part of the total sequence: "[20/9/2023] DD: David how are you? We need to do mediation in next 2 weeks [20/9/2023] DD: Are you around? [20/9/2023] DD: Can we please do another 20k on credit card ? [20/9/2023] David GUO: Yes very soon [21/9/2023] DD: Thank you … [3/10/2023] DD: Hi David. Are we good to do the second instalment on credit card ? [4/10/2023] DD: Hi David. They want to mediate on 17 October. Does that suit ? [4/10/2023] David GUO: Yes [4/10/2023] David GUO: Funds you can take in 3 days [4/10/2023] DD: Ok David. [4/10/2023] DD: Monday can I take the 23k plus 5k for mediation??? [9/10/2023] DD: Hi David. Looks like we need to do the mediation during week of 30 October. What days during that week work for you , m [9/10/2023] David GUO: Very good [10/10/2023] DD: Hi mate. Can we please do credit card transaction and bring balance down ??? [10/10/2023] David GUO: Sure as I am waiting for the transfer happening now [10/10/2023] David GUO: China deal will do the transfer today to me [10/10/2023] DD: Fantastic [10/10/2023] DD: Can we do 25k? There is 30k owing. I will write off 5k if we can do 10/10/2023] David GUO: Sure [11/10/2023] DD: Card declined [11/10/2023] David GUO: Organize payments now [11/10/2023] David GUO: Will let you know soon when you can use the card again [11/10/2023] DD: Ok mate [16/10/2023] DD: Hi David. Does 1 November work for the mediation? [16/10/2023] DD: Also we good to go on credit card? [16/10/2023] David GUO: Yes [16/10/2023] David GUO: Credit card Wednesday [18/10/2023] DD: Hi David. Trying to arrange the mediation details in court today. [18/10/2023] DD: Can we do credit card this morning???? [20/10/2023] DD: Hi David. Can we do card now ? [20/10/2023] David GUO: Next week all good [20/10/2023] David GUO: I am flying back tonight [23/10/2023] DD: Hi David. Mediation is next Wednesday 1 November. Need to sort out all overdue fees and my fees for mediation by this Wednesday please. [23/10/2023] David GUO: Ok [24/10/2023] DD: Hi David. When can we use card ??? [24/10/2023] David GUO: Not yet [24/10/2023] David GUO: That 20k declined … [24/10/2023] DD: U have no money [24/10/2023] David GUO: I am fixing up the Amex now [24/10/2023] David GUO: Money on the way [24/10/2023] David GUO: To my bank [24/10/2023] David GUO: Then to your bank [24/10/2023] DD: Okay … [24/10/2023] DD: I need to have 30k this week!!! [24/10/2023] David GUO: Ok … [25/10/2023] David GUO: Very close [26/10/2023] DD: Hi David. We will need to sort out fees etc by Monday at the latest ! We have a mediation on Wednesday [26/10/2023] David GUO: Ok [29/10/2023] DD: Assume you now have funds ? [29/10/2023] David GUO: Not yet, monday they said … [2/11/2023] DD: Is credit card good to use now ? [2/11/2023] David GUO: In about 2 days [6/11/2023] DD: Hi David. Are we good to go mate ? [6/11/2023] David GUO: Card not yet need a few more days [6/11/2023] DD: Jesus [6/11/2023] David GUO: And settlement in china is imminent [13/11/2023] DD: Hi mate. Credit card ready???? Please [13/11/2023] David GUO: Yes [13/11/2023] David GUO: Next 2 days [21/11/2023] DD: Hi David. Need funds please. [21/11/2023] DD: Can you assist? [21/11/2023] David GUO: Yes this week [28/11/2023] DD: David need funds this week or we will cease to act. Mediation is listed in less than 2 weeks and we need to tell other side a week before we will not he appearing if you can't fund us etc [28/11/2023] David GUO: Yes this week [28/11/2023] David GUO: No problem [28/11/2023] DD: You have been saying that for 10 weeks mate [28/11/2023] David GUO: Yes but deal just got approved [28/11/2023] David GUO: To settle [29/11/2023] DD: Any funds at all to pay me please???? [29/11/2023] David GUO: This Friday [29/11/2023] David GUO: Should be all good [3/12/2023] DD: Hi David. If we can't access funds by tomorrow I will have to inform other side we aren't paid and can't continue to act. … [3/12/2023] David GUO: Pls wait till Wednesday [3/12/2023] David GUO: You will get paid [3/12/2023] David GUO: Can use my Amex but I lost the old one, new one coming this Wednesday … [6/12/2023] DD: Hi David. You have new card ? [6/12/2023] DD: I need to let other side if we are appearing next week or not [6/12/2023] David GUO: Yes new card will arrive today [6/12/2023] David GUO: Waiting [7/12/2023] DD: Hi mate. How we looking? … [7/12/2023] David GUO: I got new card and old card got hacked … [7/12/2023] David GUO: It went through … [6/12/2023] David GUO: Confirmed gone through … [14/12/2023] David GUO: February hearing? [14/12/2023] DD: Yes [14/12/2023] David GUO: Do we have a date? [14/12/2023] David GUO: Let the judge decide. [14/12/2023] DD: 5 to 8 feb [14/12/2023] David GUO: Sure [14/12/2023] David GUO: Can we delay? [14/12/2023] DD: No [14/12/2023] David GUO: Okay … [24/12/2023] DD: Our hearing is 5 to 9 Feb. U will need to get us 70k by 15 Jan at the latest. This will cover overdue fees, barrister fees and out fees for 4 day hearing. Also do you have our witness mobile number? … [14/1/2024] DD: Hi David. Need that money this week or we will have to withdraw. [14/1/2024] David GUO: Sure [14/1/2024] David GUO: Will transfer this week la [14/1/2024] David GUO: I am still in china [14/1/2024] DD: Quite a lot to do ! ! ! [14/1/2024] DD: For 5 day hearing. Need to prepare a lot and do it well for Supreme court. [14/1/2024] David GUO: Sure I understand [15/1/2024] DD: Pls eft asap [22/1/2024] DD: Hi David. Need that money in next day or 2 ! ! ! [22/1/2024 20:02:02] DD: If we don't receive by this week, we will need to come off the record. [22/1/2024] David GUO: Understood [22/1/2024] David GUO: You will [24/1/2024] DD: David if we don't receive 70k TODAY, we will cease to act. … [30/1/2024] David GUO: Hi David, can I come to pick up the files? I have to represent myself next week [30/1/2024] DD: You still owe us 25k mate [30/1/2024] DD: I don't like holding files and would prefer to do a deal … [30/1/2024] DD: Are you seriously going to represent yourself? [30/1/2024] David GUO: You left me with no choice [30/1/2024] DD: I gave you months to sort this out. [30/1/2024] DD: U told me months ago you would sort it. [30/1/2024] DD: I owe barristers money still for you" 1. Annexure "B" is an email sequence between Madeline Furchtmann at Deutsch Partners and Mr Benjamin Phillips of counsel on 8 September 2023. Mr Phillips was asked if he could supply his available dates for a hearing in 2024. Mr Phillips responded, indicating his unavailable dates, which did not include the week commencing 5 February 2024. 2. On that same day, Ms Furchtmann sent an email (annexure "C") to a number of recipients, including Mr Phillips, as follows: "Hi team, Orders made: 1. … 3. List the matter for final hearing on 5 February 2024 with a maximum of four days." 1. Ms Furchtmann advised Mr Guo of the hearing date by email three days later (annexure "E"). 2. Annexure "F" is an email from Mr Deutsch to Mr Guo dated 27 October 2023. Among other things, Mr Deutsch wrote, "We need to sort out overdue and mediation fees urgently. I will not be preparing for and attending a mediation without fees sorted." 3. Despite the tone and substance of these emails, Mr Deutsch wrote to Mr Guo as late as 24 January 2024 (annexure "H") in these terms: "As foreshadowed, we will come off the record tomorrow unless $70,000 is received TODAY. Note I have been following you up for weeks now." 1. As already noted, Mr Deutsch filed a Notice of Ceasing to Act the following day. 2. The final annexure ("K") to Mr Deutsch's affidavit is an email sent by Mr Phillips to Mr Deutsch at 2.40pm on 31 January 2024. Mr Phillips wrote this: "David, As discussed last week, I confirm I do not consider myself briefed for the final hearing of this matter. As you're aware, my involvement has been limited to assisting with some reply evidence back in March and April last year (for 7.5 hours in total) and I have not done any work on the matter since then. Your office did previously advise me when it had been set down for hearing and I initially pencilled it in my diary. However, given certain advice I gave regarding the prospects of success of the defence and the appropriate strategy for dealing with the matter, I assumed that I was not briefed for the final hearing and am now briefed in another matter next week. In addition, given I have still not been paid for the work I did in March and April last year, I would not have agreed to accept a brief to appear at the final hearing without confirmation you hold money in trust." (Emphasis added) 1. One further matter should also be noted. Mr Addison swore another affidavit dated 3 February 2024 to which is annexed an email sent by him to Mr Guo on 3 February 2024. The letter is as follows: "Dear Mr Guo, I refer to my email to you of 31 January 2024, which I have attached for your reference. I also attach a copy of my email to David Deutsch (your former solicitor) dated 14 December 2023. Both emails put you on notice that we required Mr Jianhua Lu available at the final hearing for the purpose of cross-examination. I received a telephone call today from Mark Williams, formerly of Deutsch Partners Solicitors. Mr Williams informed me that apparently you had not been informed by Mr David Deutsch of any need to have Mr Jianhua Lu available at the hearing for the purpose of cross-examination, and that Mr Lu is still in China and is not available to attend the hearing. Please urgently confirm this. Given the request by his Honour Harrison CJ at CL to be provided with all relevant information regarding your application to vacate the hearing, we intend to bring this latest information to his Honour's attention." 1. It is clear that Mr Addison advised Mr Deutsch by email on 14 December 2023 that Mr Lu was required for cross-examination and that Mr Guo was himself advised by Mr Addison by email on 31 January 2024 at 3.49pm of the same thing. For present purposes, I understand Mr Durack to accept that the first that Mr Guo actually learned of this requirement himself was following Mr Addison's 31 January 2024 email, by which time Mr Deutsch had ceased to act for him, and that, to like effect, Mr Durack accepts that Mr Addison's request of Mr Deutsch that Mr Lu be available had not been passed on to Mr Guo by Mr Deutsch.