New South Wales Supreme Court CITATION : Zhu v Yingle Culture Exchange (Australia) Pty Ltd ACN 113 089 759 (In Liquidation) (No 2) [2010] NSWSC 305 HEARING DATE(S) : Written submissions consequential on earlier hearing JUDGMENT DATE : 21 April 2010 JURISDICTION : Common Law JUDGMENT OF : Rothman J (i) The second and third defendants serve upon the plaintiffs a supplementary verified list of documents in respect of all documents, within their possession, custody or control, in the following categories: (a) all documents relating to the overseas loans, investments or assets in respect of which the withholding tax payments were made by the First Defendant as appear in the Yingle account Bank Statements at documents 1, 2, 3 and 4 of the Second and Third Defendants' verified list of documents; (b) all documents identifying the bank account from which monies were transferred into the Yingle account in May 2005. DECISION : (ii) The aforesaid supplementary verified list of documents shall be served upon the plaintiffs by 4.00pm on Wednesday 12 May 2010. (iii) The plaintiffs are to inspect the aforesaid further discovered documents by Wednesday 26 May 2010. (iv) The second and third defendants provide a written submission on the costs of the notice of motion dealt with in the judgments of this Court of 26 February 2010 and of 21 April 2010 by close of business 28 April 2010. CATCHWORDS : PRACTICE AND PROCEDURE – discovery – objection to categories as irrelevant – supplementary categories – consideration of relevance – no issues of principle – objection disallowed CATEGORY : Procedural and other rulings CASES CITED : Zhu v Yingle Culture Exchange (Australia) Pty Ltd ACN 113 089 759 (In Liquidation) [2010] NSWSC 107 Yi Lin Zhu (First Plaintiff) Lei Jiang (Second Plaintiff) PARTIES : Yingle Culture Exchange (Australia) Pty Ltd ACN 113 089 759 (In Liquidation) (First Defendant) Qin Fen Dai (Second Defendant) Carter Bai (Third Defendant) FILE NUMBER(S) : SC 20211/2008 A Di Francesco (Plaintiffs) COUNSEL : No appearance (First Defendant) M A McDonogh (Second Defendant / Third Defendant) Thomson Playford Cutlers Lawyers (Plaintiffs) SOLICITORS : No appearance (First Defendant) Colin Biggers & Paisley Lawyers (Second Defendant / Third Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ROTHMAN J 21 APRIL 2010 20211/2008 Yi Lin Zhu & Anor v Yingle Culture Exchange (Australia) Pty Ltd ACN 113 089 759 (In Liquidation) & Ors (No 2) JUDGMENT 1 HIS HONOUR: On 26 February 2010, the Court issued reasons for judgment in relation to a notice of motion seeking discovery. The Court directed the plaintiff to file a short minute of order reflecting the reasons for judgment. Two categories of documents remain to be dealt with and this judgment deals with those categories. These reasons for judgment should be read in conjunction with the reasons for judgment of 26 February 2010 (Zhu v Yingle Culture Exchange (Australia) Pty Ltd ACN 113 089 759 (In Liquidation) [2010] NSWSC 107) (hereinafter referred to as "the first judgment"). 2 As set out in the first judgment, the substantive proceedings allege misleading and deceptive conduct relating to assistance offered for a visa application for work in Australia. Two loans were made by the plaintiff allegedly relying on those misrepresentations. As noted in the first judgment, the first defendant has gone into liquidation and the proceedings continue only against the second and third defendants, allegedly principals of the first defendant. 3 In relation to the principles to be applied for the grant of discovery, I rely upon the first judgment and in particular at paragraph [8] and following. 4 The two categories [Category 13 and Category 14] with which the Court is required to deal are in the following terms: "13. All documents relating to the overseas loans, investments or assets in respect of which the withholding tax payments were made by the First Defendant as appear in the Yingle account Bank Statements at documents 1, 2, 3 and 4 of the Second and Third Defendants' verified list of documents. 14. All documents identifying the bank account from which monies were transferred into the Yingle account in May 2005." Submissions of the Defendants 5 The submissions of the defendants in opposition to discovery of the Category 13 documents relies upon what is said to be an erroneous assumption that the notation in bank statements "TFN withholding tax" is a reference to withholding tax payments made by the first defendant. It is conceivable, and I accept that it is conceivable, that the reference is a reference to the failure to supply a tax file number. Withholding tax, generally, is an amount withheld in relation to payments overseas. 6 In relation to the Category 14 documents, for the reasons outlined in the first judgment, it seems discovery in this category ought be granted. The documents sought are documents that identify the transferee accounts from which monies were transferred into the Yingle account over a very specific time period, namely, May 2005. One of the significant issues between the parties is the lack of differentiation between the personal accounts of the second and third defendants, on the one hand, and the corporation on the other hand. Payments were made, allegedly, to and by Yingle and/or the second and third defendants, without regard to whether the funds were corporate funds or corporate income. Of course, the foregoing restates the allegations and is not a finding of fact. However, on the basis of that which is alleged, and the evidence that has been adduced, the transferee identities are relevant, as defined, and I would order discovery in those terms. 7 As to Category 14, the defendants' submission that there is a misunderstanding by the plaintiffs of the notation on the accounts "TFN" and submit that the notation relates to the absence of a tax file number, as a consequence of which the bank was required to withhold tax payments or notional tax payments. There is a possibility that the submission is correct. Withholding tax generally relates to tax that is held in relation to transfers overseas. However, the category seeks "overseas loans, investments or assets". The term "overseas" qualifies each of loans, investments and assets and if there were no overseas loans, investments or assets to which those tax payments (or the withholding of tax) relate, then no documents would need to be discovered. Undoubtedly, documents relating to overseas loans, investments or assets, howsoever described, would be relevant, in the defined sense of the term. 8 In those circumstances, I also order that discovery be provided in relation to those documents described in paragraph 13. 9 The Court makes the following orders: (i) The second and third defendants serve upon the plaintiffs a supplementary verified list of documents in respect of all documents, within their possession, custody or control, in the following categories: (a) all documents relating to the overseas loans, investments or assets in respect of which the withholding tax payments were made by the First Defendant as appear in the Yingle account Bank Statements at documents 1, 2, 3 and 4 of the Second and Third Defendants' verified list of documents; (b) all documents identifying the bank account from which monies were transferred into the Yingle account in May 2005. (ii) The aforesaid supplementary verified list of documents shall be served upon the plaintiffs by 4.00pm on Wednesday 12 May 2010. (iii) The plaintiffs are to inspect the aforesaid further discovered documents by Wednesday 26 May 2010. (iv) The second and third defendants provide a written submission on the costs of the notice of motion dealt with in the judgments of this Court of 26 February 2010 and of 21 April 2010 by close of business 28 April 2010. ********** 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.