Supreme Court New South Wales Medium Neutral Citation: Lin v Wu [2019] NSWSC 1666 Hearing dates: 20 November 2019 Decision date: 29 November 2019 Jurisdiction: Equity - Commercial List Before: Ball J Decision: The defendants' notice of motion filed 19 September 2019 be dismissed with costs. Catchwords: CIVIL PROCEDURE – Service outside Australia – whether to set aside service of originating process – ex parte application for substituted service – duty of candour owed to the court – whether there was a failure to disclose relevant information at hearing of ex parte application PRIVATE INTERNATIONAL LAW – Jurisdiction – service outside of jurisdiction without leave of the court – whether service of originating process valid – whether to set aside service – whether schedule 6 of the Uniform Civil Procedure Rules applies PRIVATE INTERNATIONAL LAW – Jurisdiction – Forum non conveniens – whether to stay proceedings – rule 11.6 of the Uniform Civil Procedure Rules – whether New South Wales is inappropriate forum for the trial of the proceeding – connecting factors Legislation Cited: Uniform Civil Procedure Rules (2005) (NSW) Cases Cited: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 Texts Cited: A Bell, M Davies & P Brereton, Nygh's Conflicts of Laws in Australia (10th ed, 2019) Category: Procedural and other rulings Parties: Zi Rong Lin (Plaintiff | Respondent) Zhangqiang Wu (First Defendant | First Applicant) Ziaoyi Zhu (Second Defendant | Second Applicant) Representation: Counsel: AP Cheshire SC (Plaintiff | Respondent) S Burchett (Defendants | Applicants) Solicitors: McLachlan Thorpe (Plaintiff | Respondent) Jason Li Lawyers (Defendants | Applicants) File Number(s): 2019/247456 Judgment Introduction 1. In these proceedings, the plaintiff, Rong Lin Zi, seeks to recover two loans he says he made to the first defendant, Zhangqiang Wu, and the second defendant, Xiaoyi Zhu, who is Mr Wu's wife. The first loan of RMB7,000,000 is alleged to have been made in October 2017 and the second loan of RMB3,000,000 is alleged to have been made in December 2017. Both loans were expressed to bear interest at the rate of 1.8 percent per month and both loans were said to be repayable 18 months after they were advanced. Apart from one interest payment of RMB756,000 in May 2018, the defendants have not made any payments in respect of the loans. It appears that the loans were used by Mr Wu in businesses he conducted in the People's Republic of China (PRC). 2. The proceedings were commenced on 9 August 2019 by way of Summons and Commercial List Statement. Attempts to serve Mr Wu and Ms Zhu were unsuccessful and, on 9 September 2019, Mr Lin discovered that the defendants were in the process of selling their family home in Sydney (the Property), which is owned by them as tenants in common. 3. On 13 September 2019, Mr Lin obtained ex parte an order for substituted service and a freezing order, the effect of which was to require $3,000,000 from the proceeds of sale of the Property to be paid into Court. 4. The defendants have not filed a Commercial List Response. It appears, however, that Mr Wu proposes to defend the proceedings on the basis that the company or companies to whom the loans were paid were the borrowers, not him, and that Ms Zhu proposes to defend the proceedings on the basis that she was not a party to any loan agreement. 5. On 19 September 2019, the defendants filed a notice of motion seeking to have service of the originating process on both of them set aside or an order that the proceedings against both be stayed on the basis that the proceedings were not properly served or on forum non conveniens grounds. The defendants also seek an order that the freezing order be dissolved. That order is said to follow from the other relief claimed in the notice of motion. However, the defendants also contend that the freezing order should be dissolved because it was obtained ex parte and Mr Lin failed to make full disclosure to the Court at the time it was obtained. It is that motion with which this judgment is concerned. Factual background 1. Before addressing the defendants' contentions, it is necessary to set out some further background. 2. Mr Lin came to Australia approximately 30 years ago. He became an Australian citizen in about 1999. He lives with his wife in a house in Kogarah, New South Wales. He has two children, one of whom still lives at home. He worked in Australia as a builder and plasterer, but has now retired. He has family in the PRC and over the past eight years has spent much of his time there. 3. Mr Wu came to Australia in or around January 2007. He obtained a permanent residency entitlement in Australia in or around May 2011. Although the evidence is somewhat vague, it appears that Mr Wu's main business interests, which include a restaurant and a property development company, remain in the PRC, where he continues to spend most of his time. According to his evidence, for that reason, since 2016 he has applied for and obtained a resident return visa each year to enable him to re-enter Australia from the PRC. 4. Mr Wu suffered from lung cancer which appears to have been operated on successfully in the PRC. He has ongoing health issues which are treated in the PRC and which appear to have restricted his travel to Australia. However, the evidence does not go so far as establishing that Mr Wu would be incapable of travelling to Australia in 2020. 5. Ms Zhu came to Australia with her husband and children in or around January 2007. She became an Australian citizen on 26 March 2013. The evidence is that Ms Zhu spends significant amounts of her time in the PRC. However, the majority of her time is spent in Sydney. When in Australia, she resides at the Property with one of her daughters and her daughter's family. 6. The precise circumstances in which Mr Lin came to make the loans is a matter of dispute. It is neither necessary nor appropriate to attempt to resolve those disputes as part of the current application. However, it is necessary to give a brief account of the circumstances in which they were said to be made. 7. Mr Lin met Mr Wu and Ms Zhu about 10 years ago and they became friends. They came from the same home city, Fuqing, in the PRC. 8. According to Mr Lin, in a conversation denied by Mr Wu, in about mid-2017, Mr Wu told Mr Lin that he was experiencing some difficulties with cash flow and asked Mr Lin for a loan. Mr Lin replied that he did not have money at the time, but would let Mr Wu know when he had funds available. 9. On or about 24 October 2017, Mr Lin and Mr Wu had a telephone conversation apparently when they were both in the PRC. In that conversation Mr Lin told Mr Wu that he could lend him RMB7,000,000 immediately and a further RMB3,000,000 in several months. He said that the loan needed to be repaid in 18 months' time and that the interest rate would be 1.8 percent per month payable every six months. Mr Wu responded "Agreed". Mr Lin asked what security could be offered to which Mr Wu replied that his house in Australia was worth AUD12,000,000 and that it could be used as security. Mr Lin also said that the borrower had to be Mr Wu and his wife jointly. According to Mr Lin, Mr Wu replied "I will discuss with my wife. She will agree to this". 10. The money available to be lent by Mr Lin was held in a bank account in the PRC. According to Mr Lin, he had sold some properties in Australia and had used the proceeds of sale to lend to his brothers who were Chinese residents. They had repaid the money into Mr Lin's Chinese bank account, which he kept to be used when he visited the PRC. 11. On 25 October 2017, Mr Wu sent by WeChat details of the bank account into which the money was to be paid. 12. Later that day Mr Wu sent a WeChat message which has been translated as follows: B: Loan receipt Today I borrow from Zirong LIN RMB 7 million, with a monthly interest of RMB 126,000 at an interest of 1.8%. … The interest shall be paid every six months. Borrower: Zhangqiang WU 25 October 2017 1. After receiving that message, Mr Lin transferred RMB5,000,000 to the bank account, the details of which he had been given. This appears to have been his maximum daily limit for electronic transfers. He transferred a further RMB2,000,000 the following day. Mr Wu sent Mr Lin WeChat messages acknowledging receipt of both those amounts. 2. In early November 2017, Mr Lin and his wife were in the PRC. While there, they visited Mr Wu, and Mr Wu's business partner, Hong Jiang, in their company's offices in Fujian Province. During that meeting, according to Mr Lin, Mr Wu said: I will write and sign an acknowledgement of loan, but my wife is in Australia at the moment. We can ask her to sign when you are back in Australia. 1. Mr Wu then wrote out in hand in Chinese an acknowledgement of the loan for RMB7,000,000 which corresponded closely to the Loan Receipt that he had send Mr Lin by WeChat. He dated it 25 October 2017 and signed it and put his thumbprints on it in accordance with Chinese custom and handed the original to Mr Lin. 2. At the end of 2017, while in the PRC, Mr Lin telephoned Mr Wu and told him that he had another RMB3,000,000 which he could lend. Mr Wu accepted the loan and the money was transferred to the same account as the previous loan on 3 January 2018. On the same day, Mr Wu sent Mr Lin a WeChat message acknowledging receipt of the money. 3. Mr Lin and his wife returned to Sydney in late January 2018. On 24 February 2018, they met Mr Wu and Ms Zhu at the Property. 4. During that meeting, Mr Lin said that he needed Ms Zhu to sign an acknowledgment of the loan. Mr Wu wrote out another acknowledgement of the loan for RMB3,000,000, which followed closely the wording of the previous acknowledgment. He signed it and dated it 3 January 2018. At Mr Wu's request, Ms Zhu then signed both documents underneath the date and handed them to Mr Lin. 5. On 4 May 2018, after some prompting from Mr Lin, Mr Wu transferred RMB756,000 to Mr Lin's account in the PRC. No further payments have been made in respect of the loan. 6. Following a number of conversations between Mr Lin, and Mr Wu and Ms Zhu concerning repayment of the loans, Mr Lin arranged for a letter of demand to be sent by his solicitors. At no stage did Mr Wu or Ms Zhu assert that the loan was owed to a company associated with Mr Wu rather than Mr Wu and Ms Zhu personally. Relevant legal principles 1. Uniform Civil Procedure Rules (2005) (NSW) (UCPR) r 11.4(1) provides: Originating process may be served outside of Australia without leave in the circumstances referred to in Schedule 6. 1. Schedule 6 relevantly provides: An originating process may be served outside of Australia without leave in the following cases: (a) … … (g) when any relief is sought against any person domiciled or ordinarily or habitually resident in Australia (whether present in Australia or not), (h) when any person outside of Australia is: (i) a necessary or proper party to a proceeding properly brought against another person served or to be served (whether within Australia or outside Australia) under any other provision of these rules, or (ii) a defendant to a claim for contribution or indemnity in respect of a liability enforceable by a proceeding in the court, … 1. UCPR r 11.6 provides: 11.6 Court's discretion whether to assume jurisdiction (1) On application by a person on whom an originating process has been served outside of Australia, the court may dismiss or stay the proceeding or set aside service of the originating process. (2) Without limiting subrule (1), the court may make an order under this rule if satisfied: (a) that service of the originating process is not authorised by these rules, or (b) that the court is an inappropriate forum for the trial of the proceeding, or (c) that the claim has insufficient prospects of success to warrant putting the person served outside Australia to the time, expense and trouble of defending the claim. 1. Apart from the power given by UCPR r 11.6, the Court has an inherent power to set aside service and to stay proceedings on forum non conveniens grounds. It was not suggested that the principles were substantially different depending on the source of the power or that they would or might produce a different result in this case. Consequently, it is sufficient for present purposes to focus on the requirements of the UCPR. Should service be set aside? 1. It was common ground that an order for substituted service could not overcome the requirements of UCPR rule 11.4. The defendants were in the PRC at the time service was effected. Consequently, the first issue raised by the motion is whether Mr Lin was entitled to serve the Summons on the defendants in the PRC without leave. If he was not, service must be set aside. 2. Mr Lin's primary case is that he was entitled to serve Ms Zhu outside of Australia without leave because she was a person "domiciled or ordinarily or habitually resident in Australia" and therefore fell within para (g) of Schedule 6. Mr Lin's case was that Mr Wu was "a necessary or proper party to a proceeding properly brought against another person" – that is, Ms Zhu – who was to be served in accordance with the rules and therefore fell within para (h) of Schedule 6. In the alternative, Mr Lin submitted that Mr Wu also fell within para (g). Mr Lin also relied on a number of other provisions of Schedule 6 (not reproduced above). However, those paragraphs were not seriously pressed at the hearing; and for reasons which will become apparent, it is not necessary to consider them. 3. In my opinion, Ms Zhu was domiciled in Australia at the time the Summons was served. She had (and continues to have) a permanent place of residence in Australia, which is properly described as the family home. She lives there with her daughter. The evidence is that Ms Zhu usually spends two to three months each year in the PRC and the remainder of her time in Sydney. Ms Zhu swore an affidavit but she gave no evidence to suggest that she was domiciled anywhere other than Australia. The Court is entitled to infer that had there been any evidence to suggest that Ms Zhu was domiciled elsewhere, she would have given it: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 per Handley JA. 4. The defendants contend that Ms Zhu was not properly joined in the proceedings because Mr Lin did not have an arguable case that she was a party to the loan agreements. The loan agreements were said to have been entered into in October 2017 and late December 2017. However, Ms Zhu did not sign the acknowledgments until February 2018. She could not have been a party to the loan agreements before then; and at the time she is alleged to have become a party, Mr Lin gave no consideration in exchange for her agreement. Consequently, the defendants submit that it is plain that the case against Ms Zhu must fail. 5. I do not accept that submission. The loans were informal ones. There is evidence that at the time Mr Lin agreed to make the loans, he did so only on the understanding that both Mr Wu and Ms Zhu agreed to repay them. According to Mr Lin, Mr Wu said that Ms Zhu would agree to that requirement. It is arguable that her agreement can be inferred from the fact that the following day Mr Wu provided the details of the bank account into which the first loan was to be paid. In other words, by providing the bank account details, Mr Wu accepted on his own behalf and on behalf of his wife the terms on which Mr Lin had agreed to advance the money. The documents signed by Ms Zhu provide evidence that, in accepting the terms proposed by Mr Lin, Mr Wu was acting with her authority. It is not necessary to decide whether Mr Lin will be successful in making out a case along those lines. It is sufficient that such a case is arguable, which it seems to me it is. 6. Mr Cheshire SC, who appeared for Mr Lin, advanced other ways in which Mr Lin could put his case at trial. Some of them involved a departure from the case as set out in the Commercial List Statement because they suggest that the agreements on which Mr Lin sues did not come into effect until Ms Zhu signed the acknowledgements in February 2018 (because, for example, the agreement was conditional on Ms Zhu's agreement). Another relies on an estoppel. Having regard to the conclusions I have reached, it is not necessary to consider those alternative ways in which Mr Lin might formulate his case. 7. It follows that both Mr Wu and Ms Zhu were properly served. 8. Having regard to the conclusions I have reached, it is also unnecessary to decide whether Mr Wu was domiciled in Australia. However, had it been necessary to decide that question, I would have concluded that he was not. The evidence on the issue is limited. Mr Wu describes the Property as "our home". That is where his wife and one of his daughters live. Up until he became ill, he returned to Australia a number of times each year, although only for short periods of time. He gives no evidence of his living arrangements in the PRC. However, he has not returned to Australia since February 2019. He chose to have his medical treatment in the PRC and it appears from his evidence that he has no intention of returning to Australia in the foreseeable future. The likelihood, then, is that he has chosen to abandon his Australian residency and for that reason could not be said to have been domiciled or ordinarily or habitually resident in Australia at the time the summons was served. Forum non conveniens 1. Under UCPR r 11.6, the Court may stay the proceeding if it is satisfied that the Court is an inappropriate forum for the trial of the proceeding. 2. I am not satisfied that that requirement is met in this case. Mr Lin appears to be domiciled in Australia, since his home is in Sydney and that is where his immediate family lives and where he spends a substantial part (although not the majority) of his time. As I have explained, Ms Zhu is also domiciled in Australia. On the conclusion I have reached, Mr Wu is not domiciled in Australia. However, he has substantial connections with Australia. His immediate family continues to live in Sydney. Until he became ill, he visited Sydney frequently. As I have said, the evidence does not go so far as to establish that Mr Wu would be unable to come to Sydney in 2020 to give evidence if that became necessary. On the material before me, the only other possible lay witness is Hong Jiang. He gives evidence that he is a mutual friend of Mr Lin and the defendants. On the current application, he gave some evidence of the circumstances in which Mr Lin came to provide the advances he did. Mr Hong gives his address as North Strathfield, NSW. There is nothing in his affidavit to suggest that it would cause him any inconvenience to give evidence in Sydney. 3. The evidence is that the defendants have assets in Australia against which any judgment could be enforced – that is, the Property or the proceeds of sale of the Property. There is no evidence that Ms Zhu has any assets outside of Australia. There is evidence that Mr Wu has extensive business interests in the PRC. However, there is no evidence of how those interests are held, what they are worth or whether it would be possible to enforce any judgment obtained against Mr Wu against them. The fact that the defendants have assets in Australia against which judgment could be enforced provides a further reason for thinking that this Court is an appropriate forum to determine the proceeding: A Bell, M Davies & P Brereton, Nygh's Conflicts of Laws in Australia (10th ed, 2019) at 193, citing Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 at 478. 4. The defendants submit that Australia is an inappropriate forum to determine the dispute for a number of reasons. First, most of the events giving rise to the dispute occurred in the PRC. That is where the agreement was negotiated, where the money was lent and where any agreement sued on would need to be performed. Second, all the documents relevant to the dispute are in the PRC and are written in Chinese. Third, the negotiations occurred in Mandarin and all of the witnesses will have to give their evidence in Australia through interpreters. Fourth, the agreement will be governed by the laws of the PRC. 5. In my opinion, none of these matters either alone or in combination make Australia an inappropriate forum when considered with the factors that make it an appropriate forum. 6. I accept that most of the events that are relevant to the dispute occurred in the PRC. However, not all of them did. In particular, the important meeting at which Ms Zhu signed the acknowledgments of debt occurred in Sydney. Moreover, the transaction was a commercial transaction which occurred between people all of whom had a substantial connection with Australia. The location of the particular meetings is not of itself important; and there is no reason to think that the PRC would have a particular interest in determining the dispute for public policy reasons. The defendants submit that it is apparent that the agreement was to be performed in the PRC and, if they were parties to it, that was a benefit for which they contracted. However, if Mr Lin obtains judgment against the defendants in Australia, there is nothing to prevent the judgment from being given in RMB and there is nothing to prevent the defendants from satisfying that judgment by paying the amount they owe in the PRC. Consequently, if the case is determined in Australia, they will not be deprived of that benefit. 7. As I have said, the agreement on which Mr Lin sues was an informal one. There appears to be a limited number of documents relevant to the resolution of the dispute. It appears that some of them were already located in Australia. Some of the documents are electronic messages. The evidence is unclear about where those documents are located, but it seems clear that there is no difficulty in printing them in Australia. Most of the documents relevant to the dispute have already been translated. There is no evidence that there are further documents in the PRC relevant to the dispute and which have not been translated. The defendants submitted that documents belonging to Mr Wu's companies may be relevant. However, there is no evidence of what those documents are or how they might be relevant. In the absence of evidence, I am not prepared to infer that it will be necessary to obtain them from the PRC or to translate a substantial number of additional documents, or that there will be any difficulties in obtaining any relevant documents if the case is heard in this Court. 8. It is apparent that all the witnesses will need to give their evidence in Mandarin. However, it is not uncommon in Australia for witnesses to give evidence through interpreters. Interpreters are readily available; and recently the UCPR have been amended to make specific provision for the giving of evidence through interpreters: see UCPR Pt 31, Div 3. 9. I accept that it is likely that the agreement will be governed by the laws of the PRC. The defendants led evidence from an expert in the laws of the PRC. However, that expert did not give any evidence to suggest that the laws of the PRC were relevantly different from the laws of New South Wales. Nor is there any evidence to suggest that any differences that might exist will be difficult for an Australian court to apply. Non-disclosure 1. As put at the hearing, the defendants' case in relation to non-disclosure was that, at the time the application for substituted service and a freezing order was made, Mr Lin failed to disclose the defendants' extensive ties to the PRC. Put in those terms, the attack was on the order for substituted service and not on the freezing order itself. It is not clear precisely what it is said Mr Lin should have disclosed but did not. The submission appears to be that, in relation to the application for substituted service, Mr Lin should have disclosed additional information which was relevant to the question whether he was entitled to serve the proceedings without leave. However, if that is the submission, I do not accept it. It is not suggested that Mr Lin knew that the defendants were outside of Australia at the time that the order for substituted service was obtained. But even if he did, the question for the Court, at the time the order for substituted service was made, was whether the Summons could be served outside of Australia without leave. Mr Lin placed before the Court some information relevant to that question, such as where the money was advanced and the location of some later conversations relating to the loans. However, the critical information was information relating to where Mr Wu and Ms Zhu were domiciled, which only they knew. In those circumstances, it was to be expected that the question of service would have to be resolved on an application to set aside service under UCPR r 11.6. Had the relevant information been placed before the Court, for the reasons I have given, the Court would have concluded that the Summons could have been served without leave. Given that, there is no substance in the complaint that Mr Lin failed to make full disclosure at the time the application for substituted service and a freezing order was made. Orders 1. The orders of the Court are: 1. The notice of motion filed on 19 September 2019 be dismissed with costs; 2. The matter be stood over to the directions list on 6 December 2019. ********** 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 November 2019