Federal Court of Australia

Connelly (liquidator), in the matter of CIMC Rolling Stock Australia Pty Ltd (in liq) v One Rail Australia (FLA) Pty Ltd (No 3) [2021] FCA 1183

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 10.43(2) and r 10.44(1) of the Federal Court Rules 2011 (Cth) (FCR), the cross-claimant is granted leave to serve on the second cross-defendant the following documents (Documents):

(a)    Notice of Cross-Claim filed by the cross-claimant on 1 July 2021;

(b)    Statement of Cross-Claim filed by the cross-claimant on 1 July 2021;

(c)    Amended Statement of Cross-Claim filed by the cross-claimant on 16 August 2021;

(d)    Amended Interlocutory Application filed by the cross-claimant on 9 September 2021;

(e)    this Order, these reasons and a notice containing the following statement:

Mr Zhan, this is a notice to inform you that the next case management hearing in the Federal Court of Australia, matter QUD134/2021 – Anthony Norman Connelly and William James Harris as Liquidators of CIMC Rolling Stock Australia Pty Ltd (In Liquidation) ACN 083 334 696 & Anor v One Rail Australia (FLA) Pty Ltd (Formerly Freightliner Australia Pty Ltd) ACN 122 522 123, shall be held at 10.00 am (AEST) on Thursday, 28 October 2021 by Microsoft Teams;

in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965.

2.    Pursuant to r 1.34 FCR, the requirement for service of the Documents on the second cross-defendant in accordance with one of the methods in r 10.43(3)(c) and r 10.44(1) of the FCR is dispensed with.

3.    Pursuant to r 10.49 FCR, copies of the Documents may be served by the cross-claimant upon the second cross-defendant by way of:

(a)    email to rui.zhan@cimc.com;

(b)    email to the solicitors for the plaintiffs at the email address of tsmith@tglaw.com.au marked with attention to Mr Rui (Raymond) Zhan;

(c)    express, registered post to “CIMC Australia Road Transport Equipment Pty Ltd, 20 Whitfield Boulevard, Cranbourne West, Victoria 3977”, marked “URGENT” and “Attention Mr Rui (Raymond) Zhan”.

4.    Subject to order 5, the plaintiffs are directed to instruct their solicitors to forward the email which is received pursuant to order 3(b) to the second cross-defendant at the email address which their solicitors used to communicate with the second cross-defendant on 9 September 2021.

5.    The plaintiffs are not required to give the direction in order 4 if the only email address which their solicitors used to communicate with the second cross-defendant on 9 September 2021 is rui.zhan@cimc.com.

6.    Pursuant to r 10.49(c)(ii) FCR, service on the second cross-defendant be deemed to have been effected 21 days from the later of the day on which copies of all of the Documents are posted, or the emails are sent, in accordance with order 3 above.

7.    Costs reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DOWNES J

1    By an amended interlocutory application filed on 10 September 2021 (interlocutory application), the cross-claimant (Freightliner) seeks the following orders in relation to the second cross-defendant (Mr Zhan):

1.     Pursuant to rules 10.43(2) and 10.44(1) of the Federal Court Rules 2011 (Cth) (FCR), an order that the Cross-Claimant be granted leave to serve the:

(a)     Notice of Cross-Claim filed by the Cross-Claimant on 1 July 2021; and

(b)     Statement of Cross-Claim filed by the Cross-Claimant on 1 July 2021;

(c)     Amended Statement of Cross-Claim filed by the Cross-Claimant on 16 August 2021;

(d)     Amended Interlocutory Application filed by the Cross-Claimant on 9 September 2021; and

   (e)     the orders made by the Court,

and any other document required by any order of the Court (together, the Cross-Claim Originating Documents) on the Second Cross-Defendant.

2.     Pursuant to rules 1.34 and 10.49 of the FCR, an order that the requirement for service of the Cross-Claim Originating Documents on the Second Cross-Defendant in accordance with one of the methods in rule 10.43(3)(c) of the FCR be dispensed with.

3.     Pursuant to rule 10.24 or, in the alternative, rule 10.49 of the FCR, an order that copies of the Cross-Claim Originating Documents, be served upon the Second Cross-Defendant by way of:

   (a)     email to rui.zhan@cimc.com;

(b)     express, registered post to “Huaxin Village Huaqiang North Road 4001, Hua Qiang Bei, Futian Qu, Shenzhen Shi, Guangdong Sheng, China 516048”, marked with attention to Rui Zhan;

(c)     express, registered post to “CIMC R&D Center, No. 2, Gangwan Avenue, Shekou Industrial Park, Nanshan District, Shenzhen, Guangdong Province, China 518067”, marked with attention to Rui Zhan;

(d)     express, registered post to “20 Whitfield Boulevard Cranbourne West, Victoria Australia 3977”, marked with attention to Rui Zhan; and

(e)     express, registered post to “116 Deerpark Road, Toomebridge, County Antrim, Northern Ireland BT41 3SS”, marked with attention to Rui Zhan.

4.     Pursuant to rule 10.24(c)(ii) of the FCR or, in the alternative, rule 10.49(c)(ii) of the FCR, an order that service on the Second Cross-Defendant be deemed to have been effected 21 days from the later of the day the Cross-Claim Originating Documents are placed in an Australian Post box and the email being sent in accordance with order 3 above.

2    Pursuant to leave granted on 27 August 2021, Freightliner filed supplementary submissions, an affidavit of Teng Haidi affirmed 3 September 2021 (Teng affidavit) and a third affidavit of David Paul Cowling sworn 9 September 2021 (third Cowling affidavit). Freightliner also reads and relies upon an affidavit of Mr Cowling sworn 1 August 2021 (first Cowling affidavit) and an affidavit of Mr Cowling sworn 20 August 2021 (second Cowling affidavit), as well as earlier submissions which are exhibit 1.

3    For the following reasons, the orders sought should be made with certain modifications.

Relevant Rules

4    Rule 10.43 of the Federal Court Rules 2011 (Cth) (FCR) provides as follows:

10.43 Application for leave to serve originating application outside Australia

(1)    Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if:

(a)     the Court has given leave under subrule (2) before the application is served; or

(b)     the Court confirms the service under subrule (6); or

(c)     the person served waives any objection to the service by filing a notice of address for service without also making an application under rule 13.01.

Note: A respondent may apply to set aside an originating application or service of that application—see rule 13.01.

(2)    A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

(3)    The application under subrule (2) must be accompanied by an affidavit stating:

(a)     the name of the foreign country where the person to be served is or is likely to be; and

(b)     the proposed method of service; and

(c)     that the proposed method of service is permitted by:

(i)     if a convention applies—the convention; or

 (ii)     if the Hague Convention applies—the Hague Convention; or

 (iii)     in any other case—the law of the foreign country.

(4)    For subrule (2), the party must satisfy the Court that:

(a)     the Court has jurisdiction in the proceeding; and

(b)     the proceeding is of a kind mentioned in rule 10.42; and

(c)     the party has a prima facie case for all or any of the relief claimed in the proceeding.

Note 1:     The law of a foreign country may permit service through the diplomatic channel or service by a private agent—see Division 10.5.

Note 2:     Rules 10.63 to 10.68 deal with service of local judicial documents in a country, other than Australia, that is a party to the Hague Convention.

Note 3:     The Court may give permission under subrule (4) on conditions—see rule 1.33.

…

5    Rule 10.44 FCR provides:

10.44 Service of other documents

(1)    A party may apply to the Court for leave to serve a document filed in or issued by the Court, other than an originating application, on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

Note 1:     The law of a foreign country may permit service through the diplomatic channel or service by a private agent—see Division 10.5.

Note 2:     Rules 10.63 to 10.68 deal with service of local judicial documents in a country, other than Australia, that is a party to the Hague Convention.

Note 3:    The Court may give permission under subrule (4) on conditions—see rule 1.33.

(2)    An application under subrule (1) must be accompanied by an affidavit that includes the information mentioned in paragraphs 10.43(3)(a) to (c).

(3)    If a document, other than an originating application, was served on a person in a foreign country without the leave of the Court, a party may apply to the Court for an order confirming the service.

(4)    For subrule (3), the party must satisfy the Court that:

(a)    the service was permitted by:

(i)    if a convention applies—the convention; or

(ii)    if the Hague Convention applies—the Hague Convention; or

(iii)     in any other case—the law of the foreign country; and

(b)    there is a sufficient explanation for the failure to apply for leave.

6    Rule 10.49 FCR provides for substituted service:

10.49 Substituted service

If service was not successful on a person in a foreign country, in accordance with a convention, the Hague Convention or the law of a foreign country, a party may apply to the Court without notice for an order:

(a)     substituting another method of service; or

(b)     specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or

(c)     specifying that the document is taken to have been served:

(i)     on the happening of a specified event; or

(ii)     at the end of a specified time.

Note:    Without notice is defined in the Dictionary.

Application for leave to serve cross-claim outside Australia

Whether requirements established apart from prima facie case

Rule 10.43(2) FCR

7    Rule 10.43(1)(a) FCR states that service of an originating application on a person in a foreign country is effective if the Court has given leave under r 10.43(2) FCR.

8    Pursuant to r 10.43(2) FCR, a party may apply to the Court for such leave in accordance with a convention, the Hague Convention or the law of the foreign country.

9    Rule 10.41 FCR defines the Hague Convention as the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (Hague Convention).

10    Schedule 1 to the FCR relevantly defines originating application as an application starting a proceeding, including a cross-claim against a person who was not previously a party to the proceeding.

Rule 10.43(3)(a) FCR

11    Rule 10.43(3)(a) requires that an application for leave be accompanied by an affidavit stating the name of the foreign country where the person to be served is or is likely to be.

12    In the second Cowling affidavit, Mr Cowling identifies that Mr Zhan is or is likely to be in China, and that he believes that he resides there. Mr Zhan’s address recorded in the current and historical extract for the second plaintiff (Company) is Huaxin Village Huaqiang North Road 4001, Futian District, Shenzhen City, Guangdong, China (ASIC address).

Rules 10.43(3)(b) and 10.43(3)(c) FCR

13    Rule 10.43(3)(b) FCR requires the accompanying affidavit to state the proposed method of service and r 10.43(3)(c) FCR requires the accompanying affidavit to state that ‘the proposed method of service is permitted by…if the Hague Convention applies – the Hague Convention’.

14    The Teng affidavit discloses that the proposed method of service would be to serve Mr Zhan pursuant to Articles 276 and 277 of the Civil Procedure Law of the People’s Republic of China (Amended in 2017), which is service in accordance with the Hague Convention. This assumes that an order for substituted service was not made. The Teng affidavit also discloses that, although another method of service might be possible if Mr Zhan is an Australian citizen, Freightliner is not aware of Mr Zhan’s citizenship status.

Rule 10.43(4)(a) FCR

15    Rule 10.43(4)(a) FCR requires an applicant to show that the Court has jurisdiction in the proceeding. As to this, the cross-claim seeks relief under the Australian Consumer Law (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth)) (ACL).

16    Section 138(1) of the Competition and Consumer Act 2010 (Cth) confers jurisdiction on the Federal Court of Australia in relation to any matter arising under the ACL in respect of which a civil proceeding has been instituted under the ACL.

Rule 10.43(4)(b) FCR

17    Rule 10.43(4)(b) FCR requires the proceeding to be of a kind mentioned in r 10.42.

18    Freightliner submitted that this was satisfied because it is a proceeding in relation to Mr Zhan’s conduct as an officer of the Company, being a corporation incorporated in Australia (item 24(c)). I agree that this requirement is satisfied by reference to item 24(c).

19    However, having regard to Freightliner’s reliance on the decision of the Full Court in By Winddown Inc v Vautin (2016) 249 FCR 262; [2016] FCAFC 168 (Winddown), it is also relevant to have regard to item 20 which provides:

20    Item 20 is based on s 22 Federal Court Act 1976 (Cth), which provides:

The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.

Whether prima facie case established

21    Rule 10.43(4)(c) FCR requires Freightliner to establish that it has a prima face case for all or any of the relief claimed in the proceeding.

22    At the hearing of this application, counsel for Freightliner made the following submissions as to why r 10.43(4)(c) FCR was satisfied in this case:

That is to say, it’s correct to look at whether there is a prima facie case for any of the relief in the proceeding, the proceeding being the cross-claim as a whole, and if that is made good, it is not necessary to establish a prima facie case in respect of the particular defendant who is outside the jurisdiction. And the authority for those propositions, your Honour, is firstly the case of BY Winddown Inc v Vautin, and that is at 249 FCR 262 at paragraphs 42 to 52. And that reasoning was followed by Katzmann J in Fair Work Ombudsman v DTF World Square Proprietary Limited (2020) FCA 1178 at paragraph 13.

23    The Full Court decision of Winddown endorsed the approach taken by the Full Court in Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305 (Costa Vraca).

24    To understand the reasons in Winddown, one must therefore have regard to the reasons of Costa Vraca.

25    In Costa Vraca, the Full Court (consisting of Ryan and Gyles JJ and Kiefel J as her Honour then was) construed O 8 r 2(1) Federal Court Rules 1979 (Cth) (former FCR), which was the former rule concerning an application for leave to effect service outside Australia.

26    In that case, the applicants were growers of tomatoes who claimed to have suffered financial loss as a consequence of their tomato crops having been affected by bacterial canker. The applicants claimed that the source of the bacterial canker was certain seeds produced overseas by two companies (the Hazera respondents) and supplied by those respondents to companies which had sold the seeds to the applicants in Australia. Before the primary judge, the applicants had applied for leave to serve the Hazera respondents pursuant to O 8 r 2(1) FCR (being the previous rule concerning an application for service outside Australia).

27    In Costa Vraca at [13], the Full Court referred to O 8 r 1(g) of the former FCR which enabled an originating process to be served outside the Commonwealth where the proceeding is properly brought against a person served in the Commonwealth and the person to be served outside the Commonwealth is properly joined as a party to the proceeding.

28    At [17], the Full Court in Costa Vraca stated that:

[T]he proper approach here was to ask whether a local respondent has been properly joined, then determine whether the proposed foreign party would have been a proper party to the proceeding if it had been within the jurisdiction. It is accepted that the rules of Court relating to the joinder of parties provide a good guide to answering that second question.

29    In Costa Vraca at [21], the Full Court decided that the claims against the local respondents and the claims against Hazera respondents arose out of a common substratum of fact.

30    At [23] – [24], the Full Court stated that:           

This analysis makes clear that the application of O 8 r 2(2)(c) is not to be approached by considering only the Federal claim against the overseas party by reference only to conduct of the overseas party in Australia.  The question is whether there is a prima facie case that the foreign party is involved in the ‘matter’ which is the controversy to be determined.  The finding that there was a prima facie case that the bacterial canker had been caused by the Daniela seed is sufficient to involve the suppliers of that seed in the same ‘matter’ or ‘matters’ in the sense just discussed as the parties which have been served within the jurisdiction.

In those circumstances there would be no reason for the exercise of any residual discretion which may exist to not confirm service.  The policy of having all parties concerned in a controversy before the Court and all aspects of a controversy before the Court at the one time is sound.  It ensures that those with the knowledge and interest to do so bring forward all relevant material and so enable the adversarial system to work best.  In the present case the conduct of the actual supplier of the seed is an integral part of the factual matrix to be considered and determination of the issues would be very much hampered without the involvement of that party. 

31    The facts of the case before the Full Court in Winddown were summarised at [8] – [9]:

The background facts which are relevant to this interlocutory application were not in dispute. In October 2011, Mr Vautin purchased a yacht from Eagle Yachts. Mr Vautin resided in Australia and Eagle Yachts was carrying on a business buying and selling yachts in Australia. Eagle Yachts was the exclusive dealer in Australia appointed by BY Winddown (formerly known as Bertram Yacht, Inc but, for convenience, will hereinafter be referred to as BY Winddown). Mr Vautin paid a contract price of USD 3 million in cash and USD 75,000 for shipping costs together with a trade-in Bertram 630 motor yacht valued at AUD 1.2 million. The purchased yacht, named the “Revive”, was delivered in early 2012.

By separate contract, Eagle Yachts purchased the yacht from BY Winddown, who was its manufacturer. BY Winddown is incorporated in Delaware, USA, and its principal place of business is Florida. In the substantive proceedings which were commenced by way of an originating application dated 18 April 2016, Mr Vautin seeks damages from BY Winddown for failure to comply with guarantees in ss 54(1) and 59(1) of the Australian Consumer Law. Mr Vautin also seeks declaratory relief and damages from Eagle Yachts, essentially on the basis that there are defects in Revive which mean that it was not of acceptable quality when supplied and that it was manufactured defectively. These allegations are denied by Eagle Yachts.

32    At [18] – [19] of Winddown, the Full Court stated:

The primary judge further observed that the facts in the proceedings here were similar to those in Costa Vraca in that Mr Vautin’s claims arose out of a common substratum of fact. … The primary judge concluded at [37] that the approach in Costa Vraca applied to item 20 in the table to r 10.42 and to the Court’s obligation under s 22 of the FCA Act to deal with all matters in controversy where possible.

33    In dismissing the application for leave to appeal the decision of the primary judge in Winddown, the Full Court stated at [43] – [44]:

First, the Full Court’s construction of the previous rules [in Costa Vraca] is consistent with the text of [the previous Federal Court Rules], when viewed in their context and with particular reference to the overarching principle in s 22 of the FCA Act. The central focus of the Full Court’s approach there was to view the construction and application of O 8 r 2(2)(c) with the objective of determining whether there was a prima facie case that the foreign party was involved in the “matter” which gave rise to the controversy which had to be determined in the proceedings. This approach was consistent with s 22 of the FCA Act.

The same approach applies to the construction and application of relevant provisions of the 2011 FCRs. Although the previous rule, i.e. O 8 r 2(2)(c), spoke of “a prima facie case for the relief sought by the party in the proceeding”, and r 10.43(4)(c) speaks of the party having “a prima facie case for all or any of the relief claimed in the proceeding”, this change in terminology does not provide a sufficient basis for not continuing to apply the approach in Costa Vraca. That is primarily because, in both situations, central attention is directed to the question whether the foreign party is involved in the “matter”. It is sufficient in that context that a prima facie case for relief is made out in respect of the local party (significantly, the applicant acknowledged below that Mr Vautin had a prima facie case for relief against Eagle Yachts, as the primary judge himself had also found at [13] in his reasons for judgment on the ex parte application (see [10] above)). This approach to the construction of the relevant provisions of the 2011 FCRs gives full effect to s 22 of the FCA Act.

(emphasis added)

34    Applying this reasoning, in order to satisfy rule 10.43(4)(c) FCR, it will be sufficient if a prima face case for relief is made out in respect of the local party in circumstances where the foreign party is involved in the “matter” (and not as a general proposition).

35    That is, if an overseas party would have been a proper party to the proceeding if it had been within the jurisdiction, then, in that context, it is sufficient that a prima facie case is made out for all or any of the relief claimed in the proceeding in respect of the party in Australia against whom a proceeding has been properly brought.

36    It would therefore be insufficient for Freightliner to show that it had a prima facie case for all or any of the relief against the Company (the local party in this case) unless Mr Zhan would have been a proper party to the proceeding if he had been within the jurisdiction.

37    The question then is whether Mr Zhan would have been a proper party to the proceeding if he had been within the jurisdiction.

38    The nature of the allegations which are made in this proceeding are summarised in the decision of Derrington J in Connelly (liquidator), in the matter of CIMC Rolling Stock Australia Pty Ltd (in liq) v One Rail Australia (FLA) Pty Ltd [2021] FCA 946 (Connelly No 1) at [2] – [13].

39    In particular, the cross-claim alleges that, as a result of certain representations made by the Company when entering into a settlement deed, the Company is liable to Freightliner for loss and damage consequential upon breaches of certain warranties contained in the deed.

40    Those representations are also relied upon as supporting a claim against the Company for damages for misleading or deceptive conduct.

41    Claims are also made by Freightliner in the cross-claim against the two directors (including Mr Zhan) and an officer of the Company on the basis that they were knowingly involved in misleading or deceptive conduct engaged in by the Company.

42    In essence, the facts relied upon to plead the case against the Company and the proposed case against Mr Zhan arise from “a common substratum of fact” relating to events which preceded the entry into a deed of settlement by the Company and Freightliner, as well as the terms of the deed itself.

43    That is, the pleaded case against the Company and one of its directors, Mr Zhan, demonstrates that Mr Zhan is involved in the “matter” which gave rise to the controversy which is to be determined in these proceedings.

44    Further, a separate proceeding could be brought against the Company and Mr Zhan in which the same questions of law or fact might arise for decision and all rights to relief claimed in the proceeding arise out of the same transaction or event or series of transactions or events. This satisfies r 9.02 FCR which relates to joinder of parties.

45    For these reasons, and applying Winddown, it is sufficient in this context for a prima facie case for relief to be made out in respect of the Company for the purposes of satisfying r 10.43(4)(c) FCR.

46    In Connelly No 1 at [22], Derrington J accepted that Freightliner has an arguable cause of action against the Company. However, the finding in Connelly No 1 was made in the context of deciding whether Freightliner should be granted leave to proceed against the Company, a company in liquidation.

47    Accordingly, I have considered whether the affidavit material relied upon by Freightliner establishes a prima facie case for the purposes of r 10.43(4)(c) FCR.

48    A prima facie case is made out if, on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed: Ho v Akai Pty Ltd (in liq) (2006) 247 FCR 205, 208 [10]; [2006] FCAFC 159 [10] (Akai).

49    The requirement to demonstrate a prima facie case in this context is ‘not particularly onerous’: Australian Information Commission v Facebook Inc (2020) 144 ACSR 88, 94 [30]; [2020] FCA 531 [30] (Facebook Inc). A substantial inquiry is not called for: Akai, 208 [10].

50    Save for an extreme case, it is not necessary to demonstrate a prima facie case for each cause of action said to support the relief: Tiger Yacht Management Pty Ltd (a company incorporated in the Cayman Islands) v Morris and Others (2019) 268 FCR 548, 557 [45]; [2019] FCAFC 8 [45].

51    It is pleaded in paragraph 3 of the Amended Statement of Cross-Claim that Mr Zhan was a director of the Company from 27 January 2016 to present (and this is established by the evidence in this application, although whether that is correct is a matter for trial).

52    It is pleaded in paragraph 33A of the Amended Statement of Cross-Claim that Mr Zhan (amongst others) was put on notice of Freightliner’s concerns that the Company may be impecunious and may not be able to meet its debts out of its own funds. The particulars state that Mr Zhan was the recipient of a letter dated 17 November 2017. The letter is in evidence in this application, although whether Mr Zhan received it is a matter for trial.

53    It is pleaded that Mr Zhan instructed the former solicitor of the Company to swear to certain facts in an affidavit in connection with certain assets of the Company: paragraph 53A(b) of the Amended Statement of Cross-Claim. A copy of the affidavit is in evidence in this application. It refers to instructions being given by Mr Zhan and deposes to the matters pleaded. Whether those instructions were given is a matter for trial, although it is unlikely that the deponent (a solicitor) was mistaken about the source of his instructions.

54    These facts are then relied upon by Freightliner to allege that the Company made certain representations in trade or commerce as to the present and future solvency of Company: paragraphs 36, 37, 38 and 39 of the Amended Statement of Cross-Claim. Whether the facts relied upon are sufficient to amount to the pleaded representations, and whether they were made in trade and commerce, is a matter for trial.

55    It is pleaded that further representations as to the solvency of the Company were made in trade or commerce “at or about the time of entry into the Settlement Deed on 22 December 2017” and reliance is placed on clause 8.1(d) of the deed as well as “the circumstances in which the Settlement Deed was entered into”: paragraphs 40 and 41 of the Amended Statement of Cross-Claim.

56    The settlement deed is in evidence on this application and appears to bear the signature of Mr Zhan. Clause 8.1(d) appears under a heading “Representations and warranties” and the chapeau states that “Each of Company and Freightliner represents and warrants that…”.

57    Whether clause 8.1(d) contains the alleged representation is a matter of trial, especially as the circumstances in which the deed was alleged to have been entered into are not identified in the particulars to paragraph 40 and these might affect any finding in that regard.

58    Facts are then pleaded to the effect that if the plaintiffs succeed in certain aspects of their claim, then the pleaded representations were misleading and deceptive in contravention of s 18 ACL: paragraphs 42 to 48 of the Amended Statement of Cross-Claim.

59    The facts relied upon to allege that Mr Zhan was knowingly concerned in the contraventions are set out in paragraph 53A of the Amended Statement of Cross-Claim which include the facts referred to above and a plea that, as a matter of inference from these facts, Mr Zhan was aware or ought reasonably to be aware of the (true) financial position of the Company.

60    It is pleaded that Freightliner relied upon the various representations when “determining to enter the Settlement Deed”: paragraphs 49, 50 and 51 of the Amended Statement of Cross-Claim.

61    By particulars contained in a letter dated 14 July 2021, which is at tab 9 of DPC-1 to the first Cowling affidavit, the persons who had the state of mind on behalf of Freightliner are identified as Jodie Sparrow and Luke Anderson. The signatures of those individuals appear on the deed.

62    Paragraph 52 of the Amended Statement of Cross-Claim pleads that Freightliner has suffered loss and damage in that, for example, if the representations had not been made, Freightliner would not have entered the deed.

63    There is no evidence before the Court, whether directly or on information and belief, to support the pleaded reliance or the plea of loss and damage.

64    However, in circumstances where clause 8.1(d) of the deed was expressed to be both a representation and warranty, and the persons who are alleged to have relied upon (at least) the representation in clause 8.1(d) are also apparent signatories to the deed, inferences are open which, if translated into findings of fact, would support a finding at trial that Freightliner relied upon the representation in that clause and would not have entered the deed of settlement had it not contained that clause.

65    For these reasons, I accept that r 10.43(4)(c) FCR has been satisfied in this case.

Residual discretion not to grant leave

66    This Court retains a residual discretion to refuse relief even where the requirements for service outside Australia are satisfied: Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2006) 154 FCR 425, 432 – 434 [30]; [2006] FCAFC 116 [30].

67    The residual discretion to refuse leave is not at large in the sense that, if the three necessary conditions for leave have been satisfied, there must be a good if not compelling reason why nevertheless leave should be refused in the face of such satisfaction: Trina Solar (US) Inc v Jasmin Solar Pty Ltd (2017) 247 FCR 1, 26 [117]; [2017] FCAFC 6 [117].

68    No such reason exists in this case.

Conclusion

69    For these reasons, leave will be granted to Freightliner pursuant to r 10.43 and r 10.44 FCR to serve the following documents on Mr Zhan outside Australia, namely the Notice of Cross-Claim filed by the Cross-Claimant on 1 July 2021, the Statement of Cross-Claim filed by the Cross-Claimant on 1 July 2021, the Amended Statement of Cross-Claim filed by the Cross-Claimant on 16 August 2021, the Amended Interlocutory Application filed by the Cross-Claimant on 9 September 2021, the orders made by the Court on this application, these reasons and a notice which contains certain information relating to the next case management hearing.

Application for Substituted service

70    Freightliner seeks orders for substituted service on Mr Zhan pursuant to r 10.49 FCR or, in the alternative, r 10.24 FCR.

71    As part of its application for substituted service, Freightliner seeks an order pursuant to rr 1.34 and 10.49 FCR that the requirement for service of the documents on Mr Zhan in accordance with one of the methods in r 10.43(3)(c) FCR be dispensed with. Such an order would also be required in relation to r 10.44(1) FCR.

72    Having regard to the opening words of r 10.49, namely “If service was not successful on a person in a foreign country, in accordance with a convention, the Hague Convention or the law of a foreign country”, r 10.49 requires that some attempt needs to be made to serve the person before bringing an application for substituted service: see Park (as trustee of the bankrupt estate of Tschannen) v Tschannen (2016) 341 ALR 452, 456 [15]; [2016] FCA 137 [15] (Park).

73    Rule 1.34 FCR enables the Court to dispense with compliance with this requirement. However, such cases are likely to be rare, such as “where there is real urgency for service and where the evidence suggests an impossibility or serious impracticability in service by means contemplated in the Convention”: Park, 456 [18]; Facebook Inc, 102 [63].

74    For the following reasons, I accept that there is a serious impracticability in effecting service upon Mr Zhan by the means contemplated by the Hague Convention, and that there is some need for expedition in the progress of this proceeding, such that substituted service ought to be ordered pursuant to r 10.49 FCR notwithstanding that no attempt has been made to effect service.

75    First, the ASIC address is an address for a residential community in Shenzhen, which includes over 20 buildings and over 500 apartments. For this reason, it is the opinion of Ms Teng, a partner of King & Wood Mallesons who is located in China, that, based on her experience, an application to serve Mr Zhan under the Hague Convention would not be granted because a precise address for service is required, and the ASIC address is not such an address.

76    Second, despite attempts to do so (including by making inquiries with the legal representatives of the liquidators of the Company), Freightliner has not located a more precise address for Mr Zhan that would enable service under the Hague Convention to be effected with any certainty.

77    Third, service in accordance with the Hague Convention is likely to take at least four to six months, but could take longer having regard to likely delays caused by the COVID-19 pandemic, of which I take judicial notice.

78    Fourth, this proceeding is brought by the Company (which is in liquidation) and its liquidators, and there is a public interest in the liquidation (including this litigation) being finalised as soon as possible.

79    For the following reasons, there is a reasonable probability that the modes of substituted service, as identified in the orders which I will make, will bring the documents to the attention of Mr Zhan, as is required: see British American Tobacco Australasia Limited v Taleb (No 1) [2012] FCA 1065 [30], [34]; Rowe (by next friend Guscott) v Barton as Trustee for Barton Family Trust trading as Sealwerx WA [2021] FCA 196 [9], [11].

80    The email address of rui.zhan@cimc.com was listed as Mr Zhan’s email address in the settlement deed (being the central document which is referred to in the cross-claim). Mr Zhan remains a director of the Company. He is also a director of other companies which appear to be related to or associated with the Company, namely CIMC Australia Road Transport Equipment Pty Ltd and CIMC Vehicles UK Limited. Further, an email which was sent by a solicitor acting for the cross-claimant did not receive a response. That is, there is no suggestion that there was a “bounce-back” or any indication that the email was not received. I infer from these facts that the email address is a current one which is still used by Mr Zhan, and that documents sent to that email address are likely to be brought to his attention.

81    The liquidators (being the first plaintiffs) caused their solicitors to attempt to telephone Mr Zhan on two different telephone numbers as well as send an email to Mr Zhan and seek his permission to provide his contact details to the cross-claimant, but that permission was not granted. I will seek the aid of the liquidators’ solicitors to assist in notifying Mr Zhan of these proceedings and providing him with the documents also in the event that they have an email address which is different to the one on the settlement deed.

82    Mr Zhan is a director of four companies registered in the United Kingdom (UK Companies). The registered office address for each of the UK Companies is “116 Deerpark Road, Toomebridge, County Antrim, Northern Ireland BT41 3SS”. The third Cowling affidavit discloses that certain documents, including the Amended Statement of Cross-Claim filed by the cross-claimant on 16 August 2021, were sent via DHL Express to this address marked to the attention of Mr Zhan. These documents were delivered on 31 August 2021.

83    The proposed address for service which is located in Australia is the registered office of two Australian companies of which Mr Zhan is a director, being CIMC Australia Road Transport Equipment Pty Ltd and General Transport Equipment Pty Ltd. As Mr Zhan also uses the English name “Raymond”, I will include that name in the orders relating to posting documents within Australia. The name of one of the companies will also be stated in the address.

84    As I have determined that it is appropriate to order substituted service pursuant to r 10.49 FCR, I do not consider it necessary to consider the application which was brought pursuant to r 10.24 FCR.

85    I will reserve the costs to enable Mr Zhan to be heard on this issue.

Associate:

Dated:    30 September 2021

SCHEDULE OF PARTIES