Federal Court of Australia

Liu v Option Funds Management Limited [2022] FCA 444

ORDERS

THE COURT ORDERS THAT:

1.    The second plaintiff be permitted to give evidence at the trial via video link from the People’s Republic of China.

2.    The evidence of all witnesses at the trial is to be given orally other than the evidence of witnesses who have sworn and affirmed affidavits and are not required for cross-examination by the opposing party.

3.    Evidence is not to be adduced orally from a witness in respect of a topic, issue, event or circumstance if that topic, issue, event or circumstances is not addressed in substance in the affidavit which has been sworn by the witness, other than with the leave of the court or the consent of the opposing party.

4.    Witnesses are not to be examined or cross-examined about what is said or not said in their affidavit without the leave of the court or the consent of the opposing party.

5.    The costs of the interlocutory application dated 25 March 2022 be the plaintiff’s costs in the cause.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from transcript)

WIGNEY J:

1    The hearing of this matter has been listed to commence on 6 June 2022. The plaintiffs have applied for an order that the second plaintiff be permitted to give evidence at the hearing via video link from the Peoples Republic of China. That application is opposed by the defendant.

2    For the reasons that follow, I am prepared to permit the second plaintiff to give evidence at the hearing via video link.

3    It is necessary to first say something briefly about the nature of the proceedings and the second plaintiff’s anticipated evidence. Following is a short and simplified summary of the key allegations and claims in the proceeding.

4    The plaintiffs are husband and wife. The first plaintiff, Ms Hua Liu, resides in Sydney, while the second plaintiff, Mr Yuqing Zhu, resides in Yancheng City in Jiangsu province, China. The first defendant is a company, Option Funds Management Limited. The second defendant, Mr Howard Hao Ting Cao, was a director of Option at all relevant times. The third and fourth defendants were at relevant times trustees of various trusts. It is unnecessary, for present purposes, to say anything further about the third and fourth defendants.

5    The proceedings primarily concern a $2 million payment made by the Ms Liu and Mr Zhu to Option on 21 September 2015. Ms Liu and Mr Zhu allege, in short, that they were misled as to the terms upon which the payment was made. In particular, they allege that Mr Cao represented to Ms Liu that the payment was a loan to Mr Cao, repayable in two years, which Mr Cao would invest in a real estate development project.

6    The documents signed by Ms Liu in respect of the payment in fact record that the payment was a subscription for units in a trust in respect of which Option was the trustee. Ms Liu claims, however, that she is not able to read or understand legal documents in English, was not relevantly assisted by an interpreter or a lawyer, and was not a commercially sophisticated person.

7    Option and Mr Cao deny that Ms Liu and Mr Zhu were misled as to the nature of the payment. They maintain, in effect, that Ms Liu was aware that she was investing in units in a trust managed by Option.

8    Things came to a head in July 2017 when Ms Liu requested that the loan be repaid. Ms Liu was told that she would have to sign a redemption request. She did so, however her request to redeem the units was refused pursuant to cl 8.2 of the trust deed which gave Option the discretion to refuse a redemption request. This was, on her version of events, news to Ms Liu.

9    Ms Liu and Mr Zhu claim that, in misleading them as to the nature of the $2 million payment, Option and Mr Cau breached various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). They also allege that in refusing to repay the $2 million, or refusing to accept or approve the redemption request, Option and Mr Cao breached their fiduciary duties or acted unconscionably. They claim various forms of relief, both pursuant to the Corporations Act, ASIC Act and at general law, the general effect of which is that Option and Mr Cao be required to repay the $2 million paid to them, together with any unpaid interest.

10    Mr Zhu has affirmed an affidavit for the purposes of the proceeding. The affidavit is in Chinese, though it is being translated into English. I have determined that the witnesses in this case should give their evidence in chief orally, rather than by way of affidavit. This application should nevertheless be approached on the basis that Mr Zhu will give evidence broadly along the lines of that contained in his affidavit.

11    It is unnecessary to consider the contents of Mr Zhu’s affidavit in great detail. It suffices to note that the affidavit is fairly short, and its contents would appear to suggest that much of Mr Zhu’s evidence is likely to be relatively benign or uncontentious. Importantly, it is clear that Mr Zhu was not a party to any of the critical conversations in which the terms and conditions of the $2 million payment were allegedly misrepresented. The alleged misrepresentations were said to have been made in the course of conversations between Mr Cao and Ms Liu. Mr Zhu had some fairly peripheral discussions with Mr Cao, though those dealings occurred well before, and did not concern, the payment which is central to the proceeding. The earlier interactions between Mr Zhu and Mr Cao may turn out to have some relevance and importance in assessing the nature of the relationship between Mr Zhu and Mr Cao and the contention that Mr Cao took advantage of Mr Zhu and Ms Liu’s disadvantages. The nature of the earlier dealings do not, however, appear to be particularly contentious.

12    While it is somewhat difficult to analyse and be emphatic about the relevant importance or otherwise of Mr Zhu’s evidence in the overall context of these proceedings, I do not expect that Mr Zhu’s evidence will be particularly lengthy, complex or contentious. Certainly, the defendants did not point to any parts of Mr Zhu’s affidavit which were said to be contentious. Nor did they suggest that there are any significant issues of credit that are likely to arise in relation to Mr Zhu’s evidence. Rather, they focused on what was said to be potential subtleties or nuances that may arise in respect of Mr Zhu’s evidence when it comes to considering the allegations concerning unconscionability and the claim of special disadvantage. I also doubt that it will be necessary for Mr Zhu to be taken to a large number of documents. That is a circumstance which sometimes makes cross-examination via video link difficult.

13    It follows that, in all the circumstances, I do not consider that Option or Mr Cao will be disadvantaged in any material way in having to cross-examine Mr Zhu via video link. Nor do I consider that the Court will have any difficulties assessing the reliability of Mr Zhu’s evidence, or assessing any subtleties or nuances in his evidence, if it is given via video link.

14    Section 47A(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) provides that the Court may, for the purposes of any proceeding, direct or allow testimony to be given by video link, audio link or other appropriate means. Section 47C of the FCA Act provides that the Court must not exercise the power in s 47A(1) unless it is satisfied about certain matters that relate to the availability of appropriate video link facilities.

15    It is unnecessary to consider the terms of s 47C of the FCA Act in any detail. That is because the defendants did not raise any issue about the availability of the necessary facilities in the circumstances of this case. That said, it may be necessary for further orders to be made in due course concerning the precise details of the manner in which Mr Zhu is to give evidence via video link.

16    It is well established that the overriding consideration in relation to the exercise of the power in s 47A(1) is what the Court considers to be in the best interests of the administration of justice, including the need to ensure that justice is done between the parties: Australian Competition and Consumer Commission v Pirovic Enterprises Pty Ltd [2014] FCA 544 at [11] (Flick J); Auken Animal Husbandry Pty Ltd v 3RD Solution Investment Pty Ltd [2020] FCA 1153 at [28] (Stewart J). The exercise of the power essentially involves a balancing exercise having regard to the particular facts and circumstances of the case.

17    Ms Liu and Mr Zhu contended that it would be in the best interests of the administration of justice to permit Mr Zhu to give evidence via video link for the following reasons.

18    First, Mr Zhu resides in China and has not been to Australia for a number of years.

19    Second, Mr Zhu is not in good health. He was diagnosed with stomach cancer in late 2018. He underwent a fairly major operation which involved the removal of his stomach in 2019. He received chemotherapy for three years following that operation. Ms Liu and Mr Zhu tendered a translation of a certification of diagnosis and treatment issued by the People’s Hospital of Yanchengshi. That certification stated as follows in relation to Mr Zhu’s condition as at the date of issue of the certification on 10 March 2013:

Patient’s condition: for three years after the operation of the cancer of the cardia of the stomach, routine chemotherapy has been given. After the operation, after eating, the patient’s face would turn pale. He suffers from hyperhidrosis and dizziness. He needs to lie down in order to feel better. He has less appetite now. Progressive emaciation. He has lost 50 [sic] for his body weight. He currently lacks energy. He cannot walk for a long period of time. He has not been able to receive the COVID vaccine.

20    The certification also included the recommendation that Mr Zhu “[r]est, do less activities, immunological therapy”.

21    Third, Mr Zhu’s doctor had advised that, given the state of Mr Zhu’s health, he should not be vaccinated for COVID-19. That advice has been accepted and, as a result, Mr Zhu is currently unvaccinated.

22    Fourth, and related to the third point, Mr Zhu is said to be concerned that he may contract COVID-19 if he has to travel to Sydney to give evidence. He claimed in that regard that the reported number of COVID-19 cases in China is currently significantly less than the number of COVID-19 cases reported in Australia.

23    Fifth, Mr Zhu claimed that he may also encounter difficulties travelling to Sydney from China as a result of travel restrictions in China in respect of unvaccinated persons. The evidence concerning those travel restrictions was information and belief evidence from Ms Liu and Mr Zhu’s solicitor. That evidence was very general in nature. It did not identify any specific legislation, regulation, administrative order or other instrument which imposed any relevant travel restrictions. Ms Liu and Mr Zhu also tendered a recent media article concerning the imposition of a lockdown in Shanghai. Ms Liu and Mr Zhu also contended that various airlines had imposed travel caps in relation to unvaccinated passengers. The evidence in that regard was also fairly limited and general in nature.

24    Sixth, Ms Liu and Mr Zhu claimed that there may be issues with respect to Mr Zhu’s current visa. Those issues were said to arise from the fact that it was a condition of the visa, which was issued to Mr Zhu in May 2019, that he make his first entry into Australia by 24 July 2019. Mr Zhu did not enter into Australia by that date because of his cancer diagnosis and treatment.

25    The evidence adduced in support of the claim that there may be issues with Mr Zhu’s visa was very general and somewhat unsatisfactory. Even if there may be issues with respect to the visa which was issued to Mr Zhu in May 2019, that is not to say that he would not be able to obtain another short-term entry visa to permit him to enter Australia to give evidence if so required. The evidence did not indicate what, if any, inquiries had been made with the Department of Immigration in respect of Mr Zhu’s visa status.

26    Seventh, Ms Liu and Mr Zhu relied on the fact that the Court currently requires all persons who attend court to be double-vaccinated. That said, the requirement in that regard is subject to the discretion of the presiding judge. The most recent public advice issued by the Court also indicates that the Court may develop a protocol on a case-by-case basis to ensure the safety of Court staff and parties.

27    Eighth, Ms Liu and Mr Zhu submitted that even if Mr Zhu is able to travel to Australia and able to attend the Court in his currently unvaccinated status, he may present a risk to the other parties and the Court staff.

28    As already indicated, Option and Mr Cao opposed the application that Mr Zhu be permitted to give evidence via video link. They advanced the following reasons for why the Court should not permit that to occur.

29    First, Option and Mr Cao submitted that the nature of Mr Zhu’s evidence was such that it would be preferable for him to give his evidence in Court in person. While they conceded that much of Mr Zhu’s anticipated evidence was not particularly contentious, they submitted that his evidence was nonetheless important, particularly in respect of the claim that they had acted unconscionably. That claim required the Court to consider and assess the nature of the relationship between Mr Zhu, Ms Liu and Mr Cao and whether Mr Cao took advantage of any special disadvantage that Ms Liu and Mr Zhu may have laboured under. Those issues, so it was submitted, may be difficult to consider and address if Mr Zhu’s evidence was to be given via video link.

30    Second, Option and Mr Cao submitted that the evidence concerning the alleged impediments to Mr Zhu’s travel to Australia was, for the most part, unsatisfactory and unpersuasive. While they did not dispute the evidence concerning Mr Zhu’s cancer diagnosis and treatment, they noted that there was no medical evidence to support the proposition that Mr Zhu would encounter health problems or issues if he was required to travel to Australia. They also submitted that Mr Zhu’s concerns about contracting COVID-19, if he was required to travel to Australia in his current unvaccinated state, were not supported by any objective evidence.

31    Similarly, Option and Mr Cao submitted that the evidence concerning the alleged travel restrictions in China was deficient and, effectively, amounted to bare assertion. As already noted, no attempt was made to identify any legislation, regulation, administrative act or instrument which imposed any particular travel restrictions that might prevent Mr Zhu from travelling to an international airport in China for the purpose of travel to Australia. Option and Mr Cao submitted that the media article concerning the recent lockdown in Shanghai did not assist. That is because Mr Zhu did not reside in Shanghai and there was no evidence to suggest that he would not be able to travel to an international airport in China other than one in Shanghai. The evidence concerning passenger caps imposed by some airlines was also said by Option and Mr Cao to be less than compelling.

32    Third, Option and Mr Cao contended that Chinese law may prohibit or prevent Mr Zhu from giving evidence via video link from China. That was said to flow, in particular, from Article 284 (art 284) of the Civil Procedure Law of the People’s Republic of China, which is in the following terms:

The request for and provision of judicial assistance shall be conducted through the channels stipulated in the international treaties concluded or acceded to by the People’s Republic of China. Where no treaty relations exist, the request for and provision of judicial assistance shall be conducted through diplomatic channels.

The embassy or a consulate in the People’s Republic of China of a foreign state may serve documents on, investigate and take evidence from its citizens, provided that the law of the People’s Republic of China is not violated and that no compulsory measures are adopted.

Except for the circumstances set forth in the preceding paragraph, no foreign agency or individual may without the consent of the competent authorities of the People’s Republic of China, serve documents, carry out an investigation or collect evidence within the territory of the People’s Republic of China.

33    Option and Mr Cao relied on statements about the operation of art 284 of the Civil Procedure Law which were made in correspondence between their solicitor and the person who appeared to be a lawyer in an associated firm in Shanghai. That lawyer expressed the following view:

We are of the view that giving witness testimony virtually within the territory of PRC to foreign court proceedings is likely to be regarded as “evidence collection” in the PCR. Pursuant to articles 283 and 284 of the CPL, Chinese courts and foreign courts may requests each other to collect evidence in accordance with international treaties, concluded with or exceeded to by China or under the principle of reciprocity. Apart from the aforesaid circumstances, no foreign agency or individual may, without the approval of the competent PRC authority, collect evidence within the territory of the PRC (We assume this requirement would also apply to the situation of a virtual testimony.)

34    That somewhat less than emphatic or unequivocal view about the potential operation of art 284 was, however, effectively countered by expert opinion evidence about the operation of art 284, which was tendered by Ms Liu and Mr Cao. Professor Qiugui Tan is a professor in law from the China University of Political Science and Law. In a report tendered by Ms Liu and Mr Zhu, Professor Tan expressed the opinion that, if Mr Zhu gave evidence in this proceeding via audio-visual link from China, that would not be considered to constitute “evidence collection” for the purposes of art 284 of the Civil Procedure Law. In Professor Tan’s opinion, there was no “restrictions under the Civil Procedure Law or any other law in China which would restrict Mr Zhu from giving evidence in the Proceedings by audio-visual link from China”.

35    Option and Mr Cao did not directly challenge Professor Tan’s opinion. They did, however, submit that his opinions only related to whether Mr Zhu would contravene Chinese law by giving video-link evidence from China. They submitted that some parts of Professor Tan’s report suggested that this Court may be prohibited from collecting evidence from Mr Zhu via video link. The defendants submitted that, in those circumstances, considerations of comity or sovereignty between nations would weigh against the Court permitting Mr Zhu to give his evidence via video link. They relied, in support of that submission, on the judgment of the Full Court in Joyce v Sunland Waterfront (BVI) Limited & Anor (2011) 195 FCR 213; [2011] FCAFC 95 at [60]-[62] (Keane CJ, Dowsett and Greenwood JJ).

36    There is no merit in that submission. Nothing in the text of art 284 or the report of Professor Tan supports the proposition that by permitting Mr Zhu to give his evidence via video link, the Court would somehow contravene art 284 of the Civil Procedure Law or any provision of any other Chinese law. In those circumstances, considerations of sovereignty or comity do not arise or provide any basis for the Court refusing to exercise the power in s 47A(1) of the FCA Act. It may be accepted that it would be different if art 284 prohibited Mr Zhu from giving evidence via video link from China. That might provide a basis for the Court to refuse to exercise the power in s 47A(1) of the FCA Act: see Joyce at [60]-[61]. As already indicated, however, the unchallenged evidence of Professor Tan was that art 284 of the Civil Procedure Act does not prohibit Mr Zhu from giving evidence via video link.

37    The question for consideration for the Court is, essentially, whether it would be in the best interests of the administration of justice to permit Mr Zhu to give his evidence at the trial via video link from China. That question involves a balancing exercise, having regard to the particular facts and circumstances of the case. The exercise of the power in s 47A(1) of the FCA Act must also be considered in the context of s 37M of the FCA Act. That provision dictates that the civil practice and procedure provisions, which would include s 47A, must be interpreted and applied in a way which best promotes the overarching purpose, which is the facilitation of the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

38    Having considered all of the evidence and the arguments advanced by the parties, I am persuaded that the balance tips in favour of permitting Mr Zhu to give his evidence via video link. Permitting Mr Zhu to give his evidence via video link would be in the best interests of the administration of justice in all the circumstances.

39    I accept that, as a general proposition, it would ordinarily be preferable for oral evidence to be given in person in court. The Court is generally best assisted by being able to observe a witness in person when they give evidence, particularly when the demeanour of the witness may be relevant in assessing the credibility of the witness and the reliability of their evidence.

40    The Court has, of necessity, become more familiar in recent times with receiving evidence via video link. My own view, however, is that that process is very much a second-best alternative. It may be acceptable where necessary or appropriate, but is rarely preferable to receiving the evidence in person in court. There could also be little doubt that the examination-in-chief and cross-examination of a witness by counsel flows better and is much easier to follow when it occurs in person rather than via a screen. That is all the more so when interpreters are involved, or where the witness has to be taken to numerous documents.

41    There is also much to be said for the proposition that the overall process of taking evidence from a witness is aided by the solemnity of the occasion whereby the witness is required to enter a courtroom and give an oath or affirmation in the presence of the judge, counsel and solicitors. There is very little solemnity involved when evidence is given via video link from a remote location: see generally the discussion in Palmer v McGowan (No 2) [2022] FCA 32 at [38]-[45] (Lee J).

42    The fact that the interests of justice are generally best facilitated by oral evidence in court, as opposed to evidence via video link is no doubt relevant and in some cases important. It is not, however, determinative.

43    One of the critical consideration in this case is that, as discussed earlier, Mr Zhu’s evidence is fairly short and, for the most part, relatively uncontentious and concerns events or circumstances which, in the context of the case as a whole, are relatively inconsequential. I accept that the need to assess the nature of Mr Zhu’s relationship with Mr Cao and other issues surrounding the plea of special disadvantage and unconscionability may require the assessment of certain nuances or subtleties in Mr Zhu’s evidence. I do not, however, consider that those issues are likely to be materially harder to assess if Mr Zhu’s evidence is to be given via video link.

44    Mr Zhu’s current state of health also weighs heavily in favour of permitting him to give evidence via video link. There is no dispute that Mr Zhu was diagnosed with cancer and underwent a major operation just over three years ago. There is also no dispute that he received chemotherapy up until fairly recent times. That treatment has given rise to some deleterious side effects and conditions. While it is true that the medical evidence did not directly state that those side effects or conditions would be exacerbated, or would cause Mr Zhu any particular difficulties if he was required to travel to Australia, there is no real reason to doubt that that would be the case.

45    There is then also the issue of COVID-19. As has already been noted, Mr Zhu has not been able to be vaccinated because of the state of his health. His unvaccinated state is not a mere matter of choice. He has a legitimate medical reason for not being vaccinated. The fact that Mr Zhu is unable to be vaccinated against COVID-19 undoubtedly places him in a position of some vulnerability. I do not think that it was necessary for Ms Liu and Mr Zhu to adduce specific medical evidence in respect of that vulnerability. Nor do I consider that it was necessary for them to have adduced specific medical evidence or other direct evidence in support of the proposition that Mr Zhu’s chances of contracting COVID-19 may be increased if he is required to engage in international travel. It could not seriously be doubted that Mr Zhu’s chances of contracting COVID-19 would be increased if he was required to attend places, such as international airports, where large numbers of people congregate.

46    It may be accepted that the criticisms of some of the evidence relied on by Ms Liu and Mr Zhu, particularly in relation to travel restrictions in China, have some merit. That said, the evidence does tend to suggest that the situation concerning lockdowns and other restrictions in parts of China as a result of COVID-19 remains fairly fluid and unpredictable. While the barriers or impediments arising from the conditions in China may not be insurmountable, nor can they be dismissed as necessarily trivial or irrelevant. I do not, however, accept that Mr Zhu would be likely to encounter any material impediments in terms of entering Australia, either arising from his current visa situation or from his unvaccinated status.

47    As discussed earlier, I do not accept Option and Mr Cao’s submission that Chinese law prohibits or prevents Mr Zhu from giving evidence via video link. Nor do I accept the submission that the Court may somehow contravene art 284 of the Civil Procedure Law if Mr Zhu’s evidence is permitted to be given via video link from China. Considerations of comity or sovereignty accordingly do not arise. It may nevertheless be prudent for Mr Zhu’s legal advisers to take steps to notify relevant authorities in China that Mr Zhu will be giving evidence in these proceedings via video link from China at his request.

48    A final matter which tilts the balance towards permitting Mr Zhu to give his evidence by video link from China is the safety of Court staff, counsel, solicitors and others who will be attending court during the trial. If Mr Zhu was required to attend court, appropriate protocols could no doubt be put in place by the Court to deal with the fact that Mr Zhu is unvaccinated. There could, however, be little real doubt that some degree of risk would remain. The safety of Court staff is an important consideration.

49    In all the circumstances, the balance tips in favour of permitting Mr Zhu to give his evidence by video link. In my view, that would be in the best interests of the administration of justice. It would also be consistent with the overarching purpose of the Court’s civil procedure. Accordingly, I propose to make an order, in terms sought in the interlocutory application, that leave be granted to the second plaintiff to give evidence at the hearing of the proceeding commencing on 6 June 2022 for an estimate of five days by way of audio-visual link. As noted earlier, it may turn out to be necessary to make more specific orders in due course which deal with the precise location from which Mr Zhu is to give evidence and the particular facilities that are to be utilised. The parties should confer and liaise with the Court’s registry in relation to those matters.

50    As for the costs of this application, I consider that the appropriate order is that the costs of the application be the plaintiffs’ costs in the cause. While Ms Liu and Mr Zhu were the successful parties, Option and Mr Cao’s opposition to the application was not in any sense unreasonable. More significantly, in applying for Mr Zhu to give evidence via video link, Ms Liu and Mr Zhu were essentially seeking an indulgence from the Court. They should, therefore, only obtain their costs of the application if they are ultimately the successful parties in the cause.

Associate:

Dated:    11 April 2022