New South Wales Supreme Court CITATION : Australian Guangzhou Association Inc v Huang and ors [2001] NSWSC 1214 revised - 4/12/2002 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5278/01 HEARING DATE(S) : Thursday, 6 December 2001 JUDGMENT DATE : 6 December 2001 Australian Guangzhou Association Incorporated (Plaintiff) Zhao Bang Huang (First Defendant) PARTIES : Cathy Zhang (Second Defendant) Zue Xin Xiao (Third Defendant) Shi Jun Zhuang (Fourth Defendant) JUDGMENT OF : Master McLaughlin COUNSEL : G. Watkins, K. Earl (Plaintiff) L. Ma (Defendants) SOLICITORS : Lewis Yee, Solicitor (Plaintiff) Lin Tang & Co, Solicitors (Defendants) DECISION : See paragraph 45. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER McLAUGHLIN Thursday, 6 December 2001 5278/01 AUSTRALIAN GUANGZHOU ASSOCIATION INCORPORATED -V- ZHAO BANG HUANG & ORS JUDGMENT 1 MASTER: On 27 November 2001 I appointed this day, 6 December 2001, for the hearing of an application by the defendants, Zhao Bang Huang, Cathy Zhang, Shi Jun Zhuang, Xiao Dan Su, made by way of amended notice of motion filed by those defendants on 27 November 2001. 2 By that amended notice of motion the defendants seek essentially an order in the terms of paragraph 2 thereof against the plaintiff, Australia Guangzhou Association Incorporated (to which I shall refer as "the Association" or "the plaintiff"), that: "The corporate plaintiff and all orders sought by the corporate plaintiff in the summons and notice of motion filed 31 October 2001 be struck out under Part 15 Rule 26 or Part 65 Rule 5 or Part 66 of the Supreme Court Rules or under the inherent jurisdiction of the Court upon the ground that plaintiff's solicitor has no instructions to commence proceeding in the plaintiff's name." 3 At the commencement of today's hearing, I granted leave to the defendants to amend the foregoing relief sought in paragraph 2 of the amended notice of motion by inserting a reference therein to Part 13 rule 5 of the Supreme Court Rules. 4 I have already, in the course of delivering my reasons for refusing an application for an adjournment, made on behalf of the plaintiff during the hearing this afternoon, referred in part to the procedural history of this matter. It is appropriate, however, to rehearse, at least in summary, that procedural history. 5 The substantive proceedings were instituted by summons filed on behalf of the plaintiff on 31 October 2001. That summons seeks injunctive relief against the defendants and an order that the defendants return certain property asserted to be property of the plaintiff. 6 The summons discloses the plaintiff's solicitor as being Lewis Yee, Suite 153, Level 4, 418 Pitt Street, Sydney, New South Wales 2000, the telephone number and facsimile transmission number then being set forth, and discloses that the plaintiff's address for service is Lewis Yee, Solicitor, of the foregoing address, and the telephone number and facsimile transmission number then being set forth. 7 There can have been no doubt between the parties that the essential nature of the application made by the defendants and appointed to be heard this day was a challenge to the retainer of the solicitor for the plaintiff, that challenge being grounded upon the assertion of the defendants that the plaintiff had not authorised Mr Yee, the solicitor named in the summons as solicitor for the plaintiff, to institute the proceedings. 8 The plaintiff is an incorporated Association under the Associations Incorporation Act 1984. The incorporation of the plaintiff was effected on 31 March 1994. The certificate of incorporation issued by the Department of Consumer Affairs on that date certifies in the following terms: "This is to certify that Australia Guangzhou Association Incorporated is on and from the 31st day of March 1994 incorporated under the Associations Incorporation Act 1984" 9 The evidence discloses that there has been what might be described as a dispute between two groups of members of the Association. The defendants come within one group; Mr Winson Ng, who has been and who may still be the President of the Association, comes within another group. 10 The plaintiff, having instituted the proceedings by the filing of a summons in Court before Justice Santow on 31 October 2000, also at the same time filed before his Honour a notice of motion of the same date, seeking relief in identical terms to the relief sought in prayers 1 to 5 of the summons. 11 The proceedings were stood over by Justice Santow, who was at the time the Duty Judge in the Equity Division, to 13 November 2001, when they came before Mr Justice Young, Chief Judge in Equity, who at that time was the Duty Judge in the Equity Division. 12 His Honour heard a contested application for injunctive relief of the nature sought in paragraphs 2 and 3 in the summons, and in the notice of motion. Upon the plaintiff's undertaking he made orders until further order: "(1) that the defendants and each of them be restrained from publishing, enforcing or carrying into effect the decisions of the meetings of the defendants of 23 September 2001 and 21 October 2001 as regards the plaintiff; (2) that the defendants be restrained from holding meetings on behalf of the plaintiff, conducting business on behalf of the plaintiff or otherwise acting for or on behalf of the plaintiff." 13 His Honour ordered that the costs be reserved. 14 I have already referred to the terms of the substantive relief which is sought by the defendants in their amended notice of motion filed on 27 November 2001, which is essentially that, on account of the solicitor named as the solicitor for the plaintiff not having proper or adequate instructions from the plaintiff, the constitution and institution of the proceedings are defective. The defendants seek an order that in consequence the substantive proceedings should be dismissed. 15 That essential relief which the applicants/defendants seek is grounded in paragraph 2 of their amended notice of motion upon various provisions of the Supreme Court Rules and also upon what is described in that paragraph as "the inherent jurisdiction of the Court". The Rules relied upon are, firstly, Part 13 Rule 5, in particular the following provision of subrule (1) thereof: "Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: … (c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings." 16 Further, they seek to rely upon Part 15 Rule 26 (1). But that subrule applies to a pleading. It will be appreciated that there is no pleading in the instant case, the proceedings having been instituted by way of summons; there has been no cross-claim filed on behalf of the defendants. Part 15 Rule 26 does not have application to the circumstances of the present proceedings. 17 They then seek to rely upon Part 65 rule 5, which provides: 18 "The Court may order to be struck out of any document any matter which is scandalous, frivolous, vexatious, irrelevant or otherwise oppressive." 19 I do not consider that that rule has application to the circumstances of the instant case or is adequate to ground an application of the nature which the defendants presently make, whereby they seek to challenge the retainer of the solicitor for the plaintiff. 20 The defendants also rely upon the provisions of Part 66 of the Supreme Court Rules. That Part is headed "Solicitors as representatives in proceedings in the Court". The introductory note in Ritchie, on Supreme Court Procedure, refers to the commencement of proceedings by a solicitor without being retained to do so by his alleged client. The retainer is invalid and there are consequences of a successful challenge to his retainer. Nevertheless the provisions of the Rules do not seem to me to address themselves to the question of the circumstances in which a retainer can be challenged. 21 I have no doubt, however, that, where a solicitor institutes proceedings without having an adequate retainer from the purported client, and there is a successful challenge to the solicitor's retainer by the parties named as defendants to the proceedings, the institution of the proceedings in those circumstances constitutes an abuse of the process of the Court, which will enliven the provisions of Part 13 rule 5, and will enable the Court in appropriate circumstances to order that the proceedings be stayed or dismissed. 22 I have already, during the course of today's hearing, delivered oral reasons for judgment upon an application for adjournment made on behalf of the plaintiff. I refused that adjournment. In the course of those reasons for judgment I adverted to the evidentiary situation in the proceedings, and it should be here emphasised that the Court is deciding the present application upon the evidence which is presently before the Court. Adequate opportunity has been given to the plaintiff and to the defendants to place before the Court evidence upon which those respective parties wish to rely. 23 During the course of the hearing application was made by the plaintiff to adduce evidence which, in the case of an affidavit, had been served upon the defendants very recently and no opportunity had been given to the defendants either to meet the affidavit or to reply thereto. I refused leave to the plaintiff to file that affidavit. 24 Further, application was later made to tender the documentary material which had, as I understand it, been annexed to the affidavit which I had refused leave to file. In the face of opposition by the defendants to the tender of that documentary material, I rejected the tender. 25 The evidence discloses that the solicitor on the record for the plaintiff, Mr Lewis Yee, was instructed to commence the proceedings by Mr Winson Ng on 18 October 2001. Paragraph 15 of Mr Ng's affidavit of 26 October 2001 states: "On the 18th October 2001, I instructed the plaintiff's solicitor to commence proceedings seeking an order restraining the defendant Zhao Bang Huang. I attach and mark with the letter "O" copy of letter dated from Lewis Yee to ... F.P. Nada & Co." 26 Mr Ng states in that same affidavit that he is the President of the plaintiff and that he was elected as President on 6 November 1999. 27 Affidavits have been filed on behalf of the plaintiff by six persons, each stating that they are committee members of the plaintiff. Each of those persons states in his respective affidavit as follows: "1. I am a committee member of the Australia Guangzhou Association Incorporated, the plaintiff herein; 2. I have read the affidavit of Winson Ng; 3. I confirm my agreement with Winson Ng to take action against the defendants and to retain the services of Lewis Yee, Solicitor, for this purpose." 28 I should here note that the defendants objected to a certain further passage in paragraph 2 of each of those affidavits, which passage I rejected. 29 The evidence also discloses that each of the four defendants asserts that he or she is a committee member of the plaintiff. On behalf of the defendants, thirteen persons have made affidavits asserting that they are members of the committee of the plaintiff, some of those persons asserting that they hold other office in the plaintiff as well, and those persons assert that they have not given consent to the institution of the proceedings. Each of those persons has made an affidavit in similar or identical terms, which include the following: "2. I never received notice of the any meeting with respect to commencement of these legal proceedings; 3. I would not have given consent or agreed to the proceedings to be commenced under the name of the plaintiff Association; 4. No resolution has ever been passed in relation to commencing the proceedings in the plaintiff Association name; 5. No resolution has ever been passed to instruct Lewis Yee, Solicitor, to act in such proceedings." 30 It is apparent from the evidence presently before the Court that Mr Ng took it upon himself to instruct Mr Yee as solicitor to institute the present proceedings and further, that, as appears from paragraph 2 in Mr Ng's affidavit of 26 October 2001, he has spoken to a number of persons who are committee members of the plaintiff and that he is authorised to take action on behalf of those committee members. The persons named in paragraph 2 are the six committee members who have made affidavits filed on behalf of the plaintiff, to which I have already made reference. 31 It should also be recorded, at least as background to the institution of the substantive proceedings, and to the present application by the defendants, that there was a purported general meeting of the Association, or of members of the Association and what might be described as other interested persons, called by the defendants on 23 September 2001, and that at that meeting there was carried a resolution that Mr Ng be removed from office as President. Nevertheless, that meeting, even if it be treated as a meeting of the plaintiff Association, appears not to have complied with the notice provision of the model rule of an incorporated association, which have application to the plaintiff. 32 It would also appear that Mr Ng has purported to dismiss the defendants from the committee of the Association. In this regard, I refer to a document which was published under the authority of Mr Ng in "The Daily Chinese Herald" on 29 September 2001, and which is exhibit H to the affidavit of Zhao Bang Huang of 12 November 2001. 33 There is no evidence of any authority in Mr Ng personally to dismiss members of the committee of the Association, or indeed of the committee of the Association to remove from office members of the committee. The model rules make specific provision that removal of a member of the committee from office can be effected only by the Association in general meeting. 34 For the purposes of the present application it is not necessary for me to express any concluded views concerning the validity of the purported meeting of the Association held on 23 September 2001, or the purported removal of Mr Ng from office at that meeting, or the purported removal from office of various committee members by Mr Ng on 29 September 2001. The only question with which I am called to deal today is the question of whether the proceedings were properly instituted in the name of the Association. 35 There is no evidence of any resolution by the committee of the Association authorising Mr Yee to institute the present proceedings in the name of the plaintiff. The only evidence relating to the authorisation of Mr Yee to institute the proceedings in the name of the plaintiff is that Mr Ng instructed Mr Yee to do so and that six committee members have made affidavits agreeing with the action of Mr Ng in that regard and that Mr Ng has spoken to those six committee members and that he considers that he is authorised to take action on behalf of those committee members. Mr Ng does not say in his affidavit evidence that the entire committee, which appears to consist of at least nineteen members, authorised him to do so. 36 It is apparent from the evidence presently before the Court that Mr Yee did not have the authority of the committee of the Association or of the Association in general meeting to institute the proceedings in the name of the Association. Accordingly, I consider that the challenge to the retainer of Mr Yee must be upheld. 37 That will not, of course, in any way determine the effect of the present proceedings. It is appropriate that I make an order staying the proceedings. But it is quite obvious that the dispute which exists between the two groups of members of the Association must ultimately be resolved and that there must be a resolution as to whether Mr Ng is still the President and as to whether the defendants still hold various offices of the Association. 38 An opportunity should be given to Mr Ng and to other members of the Association who support his cause in this matter to make application to be named as plaintiffs to the proceedings, but it is not appropriate that the Association itself should remain as plaintiff. 39 Accordingly therefore, the order which I propose to make is that the Australia Guangzhou Association Incorporated be removed as plaintiff from the proceedings and that the proceedings be stayed and an opportunity be given for application to be made by other persons to be named as plaintiffs in the proceedings. 40 I will also have it recorded that I have had the benefit of receiving a written outline of submissions from Counsel for the defendants which will be retained in the Court file. 41 In the light of the conclusion which I have just expressed, it is quite apparent that the applicants/defendants, having succeeded in their application, are entitled to a costs order. 42 There is authority in the decided cases that where the retainer of a solicitor who has instituted proceedings has been successfully challenged, even though the conduct of that solicitor is innocent, nevertheless a costs order may be made against the solicitor. 43 There is also provision in Part 52 rule 4 of the Supreme Court Rules concerning the general powers of the Court to make orders in respect to costs. Subrule (5) makes provision for the Court to make any order: "(f) against a person who purports without authority to conduct proceedings in the name of another person". 44 In the instant case I consider that that provision of the Rules is adequate to enable me to make a costs order against Mr Winson Ng. It seems to me in the circumstances of this case that it is appropriate that I should make an order for costs against both Mr Yee and Mr Ng and they can decide between themselves which of the two should ultimately pay the costs of the defendants, and I propose so to order. 45 I make the following orders: (1). I order that Australia Guangzhou Association Incorporated be removed as plaintiff in the proceedings. (2). I order that the proceedings be stayed until another person be substituted as plaintiff. (3). I grant leave for application to be made by any proposed plaintiff for an order that such person be substituted as plaintiff. (4). I order that the costs of the defendants of the amended notice of motion filed by them on 27 November 2001 and of the proceedings to date be paid by Winson Ng and Lewis Yee, the costs to be paid by Winson Ng to be on the indemnity basis, and the costs to be paid by Lewis Yee to be on the party and party basis. (5). I reserve to the defendants liberty to apply for an order that the foregoing costs to be paid by Lewis Yee be on the indemnity basis. (6). I grant leave to the defendants to proceed forthwith for assessment of the foregoing costs. (7). I order that, in the event that another person be substituted as plaintiff, the proceedings be stayed until the payment of the foregoing costs to the defendants. ********** Last Modified: 05/19/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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