Federal Court of Australia

Lu v Beijing Hua Xin Liu He Investment (Australia) Pty Ltd (No 2) [2022] FCA 654

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal is dismissed.

2.    The applicant must pay the respondent's costs of the application, fixed on a lump sum basis.

3.    The determination of the appropriate lump sum is referred to a registrar.

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

REASONS FOR JUDGMENT

JACKSON J:

1    The applicant, Mr Lu, seeks leave to appeal from the orders made in Beijing Hua Xin Liu He Investment (Australia) Pty Ltd v Lu (No 3) [2022] FCA 108 (Primary Judgment or PJ). The orders dismissed Mr Lu's application for summary judgment in respect of part of proceeding WAD 563 of 2016. That part of the proceeding concerned whether Mr Lu and the respondent in this application (Beijing) had entered into an oral contract for the sale by Mr Lu of shares in a company called Zeus Technology HQB Pty Ltd (Zeus Technology), alternatively whether there was a conventional estoppel to similar effect. The proceeding also involves an application for orders in respect of a resolution to subdivide shares in Zeus Technology, which was not the subject of any summary judgment application.

2    For the following reasons, the application will be dismissed.

Proceeding WAD 563 of 2016

3    Beijing is one of three applicants in proceeding WAD 563 of 2016. The other two applicants are Yujun He and Jian Tu. The respondents to the proceeding are Zeus Technology and Mr Lu.

4    The central controversy between Mr Lu and Beijing concerns the existence of the oral contract or conventional estoppel already mentioned (for convenience I will only refer to the contract from now on, unless the context requires otherwise). According to Beijing, the contract was formed in Singapore in May 2011. It is said to have been entered into on behalf of Beijing by Yihua Zheng (Beijing's company secretary) and Shan Chen (a director of Beijing). Its alleged terms were for Beijing to acquire 75 shares in Zeus Technology for AUD$1.2 million, with the shares to be held on trust by Mr Lu pending formal transfer.

5    Mr Lu denies any such contract. He did provide an executed undated share transfer form for the shares to Beijing. But he says that it was at most a proposal and that any agreement would have been subject to due diligence and approval by Mr Tu.

6    According to Beijing, it has made payment under the contract in three tranches: a tranche connected with invoices rendered to Beijing by Zeus Technology in April to June 2011; a tranche connected to cash payments and bank transfers that Mr Lu had received previously; and a final payment alleged to have been made (and invoiced) in September 2011. These tranches are said to be reflected in an email from Mr Lu to Ms Chen on 15 August 2011 which says, in part:

Following our conversation here is the summary of the account about Zeus acquisition:

•    Zeus invoices $696,000.00

•    Historic payment $347,287.00

•    Balance to be transferred $156,713.00

Mr Lu contends that payments apparently referable to these tranches were not, in fact, attributable to the contract for the sale of shares but are explained on other bases.

7    In broad terms, the estoppel by convention is said to have arisen from Mr Lu's conduct in giving Ms Chen access to Zeus Technology's bank accounts from around September 2012, from which she made various payments, and also an email from Mr Lu to Ms Chen confirming that Zeus Technology was now owned by Beijing. Beijing says that it paid the final balance identified in the email of 15 August 2011 on the basis of an assumption induced by those matters.

8    It is relevant to note two aspects of the procedural history of WAD 563 of 2016. The first is that Mr Lu brought an earlier application for summary judgment against Beijing in 2017. It was successful at first instance but that was overturned on appeal: Beijing Hua Xin Liu He Investment (Australia) Pty Ltd v Lu [2017] FCAFC 186 (Full Court Judgment or FC). The second application which resulted in the Primary Judgment appears to have been prompted by the discovery of documents that were not before the Court at the time of the first application or the appeal. I will describe those documents below.

9    The second aspect of the procedural history to be noted is that at the time of the second application for summary judgment, there had been substantial compliance with most of the orders programming the matter for trial. They relevantly included orders for the filing of affidavits by way of evidence in chief, with the proviso that evidence of oral statements or conversations was not to be included, and was to be led orally. Outlines of evidence of that kind were exchanged between the parties but not filed with the Court. Affidavits in reply had not been filed because the second summary judgment application intervened. But for that application, there is no reason to believe that the trial would not have been completed by the end of February 2022.

10    The documents that are said to justify the second summary judgment application are as follows:

(1)    An email dated 9 May 2011, apparently internal to Beijing, from Ms Chen to Mr Zheng and others, which is in Chinese, and which refers to an attachment that sets out three structures for the acquisition of Zeus Technology as well as (according to the English translation in evidence) 'reasons behind the acquisition'. The email says 'Can this report be submitted to the village head?' The first structure described starts, according to the English translation in evidence:

Accept the full price proposed by Xin Lü

Xin Lü has proposed AUD 1.2 million for Zeus, including the following items …

(2)    Two drafts dated 9 August 2011 (in English) and 18 August 2011 (in Chinese) of a due diligence report apparently prepared by King & Wood Mallesons for the benefit of Beijing. The 9 August 2011 draft refers to the acquisition of 100% of the shares in Zeus Technology as a 'proposed transaction'.

(3)    Two electronic fund transfer documents that evidence receipts totalling $347,286.50 from two different entities to an account in Mr Lu's name in 2007, which are said to be consistent with Mr Lu's evidence that this sum (just short of the 'historic payment' component of $347,287 referred to in the 15 August 2011 email) was in fact something called 'save life money' that Mr Tu paid to Mr Lu to be held on Mr Tu's behalf. Mr Lu says that in the end that amount was, at Mr Tu's direction, applied to expenses incurred in relation to another company in which Mr Tu and Mr Lu were involved, Biostarch Technology Pte Ltd (Singapore).

(4)    Tax returns and financial statements of Beijing that are said to indicate that invoices were paid by Beijing to Zeus Technology for management or professional fees in satisfaction of services provided, and not for the purpose of acquisition of the shares, along with general ledgers for Zeus Technology which are said to indicate that it treated the payments as part of its taxable income, rather than as receipts of a capital nature that were attributable to the acquisition of shares in Zeus Technology.

11    Mr Lu contended before the primary judge that these documents established that Beijing had no tenable claim against him. He submitted that it was necessary to wait until a forensic report on the 9 May 2011 email had been obtained in July 2021 before he could proceed with the application for summary judgment, because Beijing was disputing the authenticity of the email. However he did not explain why that report was not commissioned until April 2021.

The Primary Judgment

12    The primary judge set out the background of the matter, in detail, in a manner consistent with the briefer summary above, and then set out the principles applicable to summary judgment applications. Her Honour then turned to consider the merits of the application. She identified at the outset that while Mr Lu appeared to be proceeding on the basis that the affidavits that had been filed revealed the limits of the evidence that might be given on behalf of Beijing, there was a practical difficulty with that argument, because the affidavits did not cover the evidence of conversations that had been ordered to be adduced orally. Her Honour said that it was apparent from the affidavits, and from the identification (by Beijing at least) of evidence to be adduced orally, that there were a number of conflicts in the facts deposed to, with the result that there were real factual issues in dispute which were required to be tested at trial.

13    The primary judge described those issues, non-exhaustively, at PJ [93]. I will set that paragraph out in full, as criticisms of it comprised the main thrust of Mr Lu's submissions in support of his application for leave to appeal:

Areas of conflicting facts include the following:

(a)    whether or not any oral agreement was formed during conversations in Singapore, and if so, its terms;

(b)    what was meant (if anything of substance) by the use of different expressions such as 'report' (to Mr Tu), 'plans', 'proposals', and 'acquisitions', noting that some of the evidence has been translated and there may be subtleties that will be addressed or disclosed by oral evidence including cross-examination;

(c)    the 9 May 2011 email is not conclusive for this reason - it is not apparent whether as a 'report' it is intended to report on future options or justify a past acquisition, although I acknowledge that on its face it provides some support to Mr Lu;

(d)    whether Mr Tu 'directed' Mr Lu to apply funds against debts of Biostarch prior to 15 August 2011 - there is a clear conflict of evidence as to this matter and the documentary evidence does not clearly resolve such conflict;

(e)    whether Mr Lu was involved in instructing the external accounting firm as to the preparations of Beijing's accounts and to what extent, a matter of direct conflict between Mr Lu's evidence and that of Ms Chen;

(f)     the basis upon which the various invoices and payments in the accounts were described and at whose direction, having regard also to the involvement of external accountants, and their legal status;

(g)    whether or not Mr Zheng was able to make cash payments to Mr Tu, having regard to geographical limitations and if so, when;

(h)    whether cash payments were made and received, an issue that may require credibility findings;

(i)    issues relating to the invoices touched on by the Full Court … some of which remain unexplained but no doubt will otherwise be tested at trial;

(j)    the fact that ambiguities and conflict still remain as to the effect and terms of the 15 August 2011 email, and such ambiguity is not removed by other unambiguous or persuasive documentary evidence;

(k)    the content of a conversation between Mr Zheng and Mr Lu after Mr Zheng had a discussion with Mr Tu about a proposal to buy shares in Zeus and the purchase price;

(l)    the conflicting evidence as to why the signed transfer form was provided;

(m)    the content of a conversation between Mr Zheng and Mr Lu about the transfer form after the Singapore meeting; and

(n)    the content of conversations between Ms Chen and Mr Lu about the share transfer form.

14    The reference in sub-paragraph (i) is to the following paragraph [17] from the Full Court Judgment:

The applicants also observed that there are any one of a number of reasons why Beijing and Mr Lu might have chosen for the consideration for Mr Lu's shares to be recorded as $75 on the share transfer form and for the consideration to be paid to Zeus rather than Mr Lu on apparent account of goods and services rendered by Zeus to Beijing. In circumstances where Mr Lu was the author of the 15 August 2011 email which refers to a summary of the 'account about Zeus acquisition' and identifies each of the amounts which Beijing claims it paid as relating to the purchase of Mr Lu's shares in Zeus, the contractual claims, the applicants said, cannot be characterised as fanciful or lacking a real prospect of success. This was supported by the fact that it is apparent that:

(1)    Zeus and Beijing were in an ongoing commercial relationship, with Mr Lu being both the sole director and shareholder of Zeus but also the company secretary of Beijing.

(2)    The invoices show that Zeus and Beijing were located within the same office.

(3)    Each invoice from Zeus bears the same date as the 'Recipient Created Tax Invoice' of Beijing. In other words, the invoice requiring payment and payment seem to have been made on the same day.

(4)    None of the invoices describe the date on which the services were provided or describe the goods and services provided.

(5)    Every invoice before that of 12 September 2011 is for a pre-GST amount which is a multiple of $63,800. The 12 September 2011 invoice for a pre-GST amount of $156,713 is the exact amount required to be make [sic] the total of $1.2 million, and is not a multiple of $63,800.

(6)    Mr Lu subdivided the shares immediately on hearing of Beijing's claim that it owned the 75 shares, the effect of which would be to ensure Mr Lu retained control of Zeus if Beijing was the owner of the 75 shares.

15    It is worth adding at this point the next two paragraphs in the Full Court Judgment ([18]-[19]):

We agree that these circumstances mean that the contractual claims were not amenable to summary dismissal on the basis that the applicants had 'no reasonable prospect of successfully prosecuting' those claims.

Contrary to the respondents' submissions, this is not a case of 'unanswered evidence' as referred to in Spencer v the Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [22]. Nor was Mr Lu's evidence 'unanswerable'. To a sufficient extent for the purpose of an application for summary dismissal, Mr Lu's affidavit evidence was answered by Mr Lu's own email of 15 August 2011 and the ensuing chain of emails. Mr Lu made no attempt to explain the emails. He also made no attempt to explain the signed Memorandum of a Resolutions by Zeus approving the share transfer.

16    Then at [20], the Full Court went on to identify numerous ambiguities in the evidence concerning matters which Mr Lu sought to reagitate in the second summary judgment application, including as to the invoices and the tax treatment of the payments made against them, and as to the historical payments. The Full Court concluded that 'on the available material the applicants' [i.e. Beijing's] case was arguable without the applicants having to depose to anything'.

17    Returning to the Primary Judgment, it went on to consider whether the documents on which Mr Lu relied were of such probative force that Beijing had no reasonable prospect of successfully prosecuting the proceeding. The primary judge considered the tax treatment of payments of invoices that Beijing had made. Her Honour noted that Mr Lu had not amended his defence to place reliance on the alleged tax treatment, so that Beijing had prepared its trial affidavits on the basis that he would not. But when it became apparent in the course of the summary judgment application that he would, Beijing issued a notice to produce communications involving external accountants and an internal bookkeeper. Mr Lu sought in response to produce a large bundle of documents at the hearing of the summary judgment application. Her Honour considered that it would have been unfair to Beijing to assume that the documents would be of no real assistance to Beijing, which had had no opportunity to read or consider them before the summary judgment hearing.

18    The primary judge also considered the issues concerning the invoices that had been identified by the Full Court. Her Honour accepted that Mr Lu had addressed the services he said were provided with respect to the period of each invoice, but she did not consider that the other issues had been addressed. In circumstances where further documents had only recently been produced, her Honour concluded that the questions raised as to the invoicing practices ought to be aired and tested at trial.

19    As for the conventional estoppel claim, the primary judge considered that Mr Lu had not addressed all of the particularised evidence of conduct upon which Beijing relied. In her Honour's view, Mr Lu had not engaged with the evidence that indicated, in broad terms, that Beijing's director Ms Chen had been given a significant role in Zeus Technology that was consistent with Beijing holding the shares in Zeus Technology. While her Honour accepted that the claim may be of considerable difficulty for Beijing, it was pleaded and pursued and, given the evidence and the inferences the Court might be invited to draw from the conduct relied upon, she was not satisfied that it was amenable to summary judgment.

20    The primary judge noted that the power to give summary judgment for one party against another was not to be exercised lightly, and for the reasons her Honour had given she was not satisfied that Beijing's prospect of success on its claims is 'no more than fanciful' or that there is 'no reasonable prospect' of success (PJ [101]). Her Honour also expressed concern about the timing of Mr Lu bringing the second summary judgment application, finding that he could have brought the application based on the documents on which he relied before the parties had embarked on trial preparation, but instead waited until after that, when the matter was ready for trial. Her Honour said (at PJ [102]-[103]):

… Bringing a summary judgment application in such circumstances is to be discouraged. The resources of the parties and the Court could have been utilised in hearing and determining the trial. The trial has been deferred by this application, and further resources must inevitably be expended.

The question of delay may be less significant in a case where there are strong grounds for summary judgment, but that is not this case.

21    The primary judge also refused Mr Lu leave to rely on a supplementary affidavit he had filed before the summary judgment application without leave.

22    The primary judge therefore dismissed the summary judgment application and ordered that the matter was to be listed for trial.

The proposed appeal

23    In his draft notice of appeal Mr Lu seeks to raise the following grounds:

1.    The primary judge erred in law and fact in failing to hold (a) that the 9 May 2011 email and attachment was evidence which, on its face, contradicted the claim by Beijing Australia that it had concluded an oral agreement with Mr Lu to purchase his shares in Zeus; (b) that there was no evidence capable of explaining or refuting that evidence; and (c) that therefore that claim had no reasonable prospect of success and should be summarily dismissed.

2.    The primary judge erred in law and fact in holding (at [95]) that the tax treatment of the payment of the Zeus invoices 'remains the subject of contest' between the parties. The sworn evidence of Mr Lu, that the payments to Zeus were for management services provided to Beijing Australia, were not payments to him for his shares in Zeus, and were treated by Beijing Australia in its accounts as deductible business expenses, not as capital payments, was corroborated by documentary evidence. In the absence of any sworn evidence to refute that evidence, her Honour should have held that Beijing Australia had no reasonable prospect of establishing that the payments were consideration for the purchase of Mr Lu's shares, and should have ordered that the claim be summarily dismissed.

3.    The primary judge erred in fact and law in holding that the alleged payments by Mr Tu and Mr Zheng to Mr Lu (pleaded in paragraph 15(b) of the Amended Statement of claim) were capable of discharging the Respondent's alleged obligation to pay the sum of $347,287. Her Honour should have held that the sworn evidence of Mr Lu was that the sum of $347,287 referred to in the 15 August 2011 email was a reference to the two EFT payments which were made to Mr Lu for reasons unrelated to the Zeus shares, there was no sworn evidence to refute that, and therefore should have held that in the absence of any evidence to the contrary, it must be accepted that Beijing Australia had never paid any consideration for the alleged purchase of Zeus shares.

4.    The primary judge erred in fact and in law in not allowing into evidence Mr Lu's affidavit, sworn 1 December 2021, which established that according to Beijing Australia's records, the payments made on the tax invoices had at all times been treated and continued to be treated by its directors as deductible outgoings, not capital payments for shares.

5.    The primary judge erred in law and in fact in holding ([100]) that she was not satisfied on the evidence that the claim by Beijing, based on 'estoppel by convention' was 'amenable to dismissal by summary judgment'. Her Honour should have held that there was no evidence capable of supporting, as a matter of law, an 'estoppel by convention'.

24    Subsequent to the filing of the application for leave to appeal, Mr Lu sought leave to amend the draft notice to add the following further ground of appeal:

6.    The primary judge erred in fact and in law by holding ([92]-[93]) that the matters identified therein gave rise to 'conflicting facts' which thereby required a factual determination, and that an order for summary judgement of dismissal was not appropriate in those circumstances. Her Honour should have held that there was no evidence adduced by Beijing which was capable of supporting, or did support, any conflict with the facts relied upon by Mr Lu.

Beijing opposed leave being granted to make that amendment.

Mr Lu's submissions in support of leave to appeal

25    Mr Lu's submissions refer to the two considerations which, it is well established, usually govern the outcome of applications for leave to appeal, as commonly drawn from Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399, namely whether the decision sought to be appealed from is attended by sufficient doubt to warrant its being reconsidered by an appellate court, and whether substantial injustice would result if leave were refused, supposing the decision to be wrong. Mr Lu submits that 'it goes without saying' that the first of these, sufficient doubt about the decision to be appealed from, is the primary consideration for a court when exercising the discretion. His submissions then go on to caution against treating the second of the considerations, substantial injustice, as a rigid rule. While Mr Lu acknowledges that his rights have not been finally determined by the dismissal of the summary judgment application, he submits that it would be a proper exercise of the discretion to grant leave to appeal where there are good reasons why summary judgment should have been granted, and that would have avoided subjecting him to the time and expense of a lengthy trial. In oral submissions his senior counsel emphasised that the concept of injustice in this context was a nebulous one and where the case for error in the Primary Judgment is strongly arguable or there is an irrefutable answer to the primary claim, that should lead to a grant of leave to appeal.

26    Mr Lu's submissions said little more about the subject of substantial injustice, and were instead mostly devoted to the proposed grounds of appeal, that is, to whether there was sufficient doubt about the correctness of the Primary Judgment. In the first three grounds, and in the submissions about them, a common theme emerges, namely that it is said that there was no evidence capable of explaining or refuting the evidence on which Mr Lu relies. Mr Lu submits, relying on Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [22] (French CJ and Gummow J), that summary judgment may be granted in circumstances where there is a fact fatal to the non-moving party's case which is unanswered (or unanswerable).

27    According to Mr Lu's submissions, that is the case here in relation to the first three grounds of appeal. In relation to ground 1, he has denied on oath the formation of any agreement at the meeting in Singapore with Ms Chen and Mr Zheng on which Beijing relies. It appears to be common ground that there was a meeting on 3 May 2011 between those three individuals but Mr Lu denies that any agreement was made at it. The affidavit evidence of Ms Chen and Mr Zheng does not contradict that, as when it comes to the content of the discussion at the meeting it says (in accordance with the trial directions) that the oral testimony of the witness is yet to be provided. Similarly, oral evidence about conversations that Mr Zheng and Mr Lu are said to have had about the share transfer form is yet to be provided. Mr Lu submits that although the omission of that evidence from the trial affidavits is explained by the directions made about oral evidence of conversations, that does not explain why the evidence was not given in the summary judgment application.

28    The oral submissions of senior counsel for Mr Lu put emphasis on the attachment to Ms Chen's email of 9 May 2011 which (in English translation from the original Chinese) refers to an 'Acquisition plan' which includes, as an option, to 'Accept the full price proposed by Xin Lü' and says that Mr Lu 'has proposed AUD 1.2 million for Zeus'. This email was not before the Court on the first summary judgment application and senior counsel for Mr Lu described it as the primary reason for the second summary judgment application. Mr Lu submits that the email 'can only reasonably be interpreted to mean that no agreement had been as yet concluded for the alleged arrangements for the transfer of Mr Lu's shares'. He said Beijing's trial affidavits do not seek to explain the email and nor does any affidavit Beijing filed in the summary judgment application when, according to senior counsel, that application was 'the moment of truth'.

29    Similarly in relation to ground 2, Mr Lu submits that there was no evidence to support the primary judge's findings that there were areas of conflicting facts in relation to the treatment in Beijing's accounts and tax documents of the invoices and related payments. He submits that he gave sworn evidence explaining the meaning of terms used in the email thread that started with his 15 August 2011 email, and there was no witness evidence from Beijing to the contrary, so that it was 'only open' to the primary judge to accept Mr Lu's interpretation. Also, Beijing has provided no explanation for the fact that its accounts treat the payments totalling $696,000 as outgoings for management services rather than capital payments for the acquisition of shares.

30    In relation to ground 3, Mr Lu submits that his affidavit evidence provides a clear explanation of the payments totalling $347,287, as well as what he says is repayment of those amounts that occurred before 2011. He submits that Beijing's explanation that it paid a sum as an advance payment against the alleged agreement for the sale of shares is not plausible. That explanation is not supported by evidence from Beijing that might establish how payments in the past can be consideration for an agreement said to have been formed on 3 May 2011.

31    The submissions about ground 4, challenging the decision not to permit Mr Lu to rely on an affidavit sworn 1 December 2021, were brief and I will return to them when I come to consider the ground below.

32    Ground 5 concerned Beijing's conventional estoppel plea. Mr Lu submits that it was not supported by evidence, but in substance his submissions express disagreement with Beijing’s interpretation of the evidence, for example on the basis that 'convenient banking arrangements between two closely related companies are not evidence that Beijing has acquired Mr Lu's shares in Zeus, but are explicable by reference to the trading relationship between the companies'. He also submitted, however, that there could be no estoppel by convention unless there was evidence of an agreement having been formed. He also submitted that the act to its detriment on which Beijing relied in order to found the estoppel was a payment of an invoice for services rendered, and that was not capable of being a relevant detrimental act.

Principles

33    The two major considerations that typically govern applications for leave to appeal have already been stated above: doubt about the decision appealed from and substantial injustice. In the interests of consistency in the administration of justice they provide an appropriate litmus test for the general run of cases. They bear on each other, in the sense that if one is particularly strong, the other may not need to be satisfied to a high degree. But there are no rigid rules and in the end the discretion is unfettered. All these principles may be found in Decor Corporation at 399, and the unfettered nature of the discretion also appears on the face of s 24(1A) of the Federal Court of Australia Act 1976 (Cth).

34    On the basis of those principles I accept Mr Lu's submission that if, in a case involving an application for leave to appeal against an order refusing summary judgment, there were strong or irrefutable reasons for considering that the case should not go to trial, the costs and strain of the trial may be enough to amount to a substantial injustice. To force a person to submit to a trial of a case that is plainly wrong may well be unjust, in substance. That is, however, a high bar for an applicant to clear. I also accept that it is not always necessary to show that an interlocutory decision has foreclosed all an applicant's rights before leave will be given.

35    I do not, however, accept Mr Lu's submission that the consideration as to whether there is sufficient doubt about the decision sought to be appealed from is somehow the primary one, with the question of substantial injustice somehow secondary. No authority was cited to support that proposition and I am unaware of any authority that does support it. The point of the requirement for leave is to minimise the delay and expense that would come with numerous attempts to allege error in decisions that do not finally determine the rights of the parties: see Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564 at [42] (French J, Beaumont and Finkelstein JJ agreeing). So even if there is an error, it may be permitted to stand unless there is reason to think that it might materially affect the ultimate outcome of the proceeding. In some cases an absence of any substantial injustice, if the decision to be appealed from is wrong, may be enough to warrant the dismissal of the application.

36    Mr Lu relied on a number of judicial statements that are collected in Bux Global Ltd v Hooke [2018] FCA 882 at [18] (McKerracher J), to the effect that it can be consistent with the general principles above to make a final determination of a matter in advance of a full hearing, if that will correct an erroneous interlocutory order which allows proceedings to be continued, or if it will render a substantive trial otiose. But those statements need to be understood in the context of their particular cases, such as a case where many procedural steps remained before trial (Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1794 at [29], [32]) or one where the appeal has substantial prospects of success (Moskios v Splendid Developments Pty Ltd [2011] NSWCA 210 at [19]). In any event, at that point in Bux, McKerracher J was reciting the submissions of the unsuccessful applicant for leave to appeal. When his Honour came to dispose of that application at [42]-[43], he placed weight on the fact that the trial was relatively imminent and relied on the following passage from QUYD Pty Ltd v Marvass Pty Ltd [2008] QCA 257; [2009] 1 Qd R 41 at [6], where Fraser JA said (McMurdo P and Philippides J agreeing) (footnotes omitted):

Numerous authorities establish that leave to appeal will usually be granted only where there is a reasonable argument that the primary judge erred and an appeal is necessary to correct a substantial injustice to the applicant caused by that error. The refusal of the defendant's application for summary judgement did not determine any substantive rights. The defendant remained free to repeat and elaborate upon its arguments at trial. Accordingly, if the primary judge erred that error was not productive of any substantial injustice. That is a sufficient basis to dispose of the application for leave to appeal against the refusal of the defendant's application for summary judgment. …

In truth each case must be judged on its own particular mix of circumstances.

37    As to the principles that apply on applications for summary judgment, there was little argument about them. The application was made under s 31A(2) of the Federal Court Act, which in broad terms permits the Court to order summary judgment against an applicant if the Court is satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding. It may be doubted that it is useful to adopt any gloss, paraphrase or lexicon as to the criterion of no reasonable prospect of success: Spencer at [58] (Hayne, Crennan, Kiefel and Bell JJ); see also at [22] (French CJ and Gummow J). The assessment required under s 31A as to whether a proceeding has no reasonable prospects of success necessitates the making of value judgments in the absence of a full and complete factual matrix and argument, with the result that the provision vests a discretion in the Court: Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117; (2009) 178 FCR 401 at [28]. A practical judgment as to the case at hand is required, by reference to the stage it has reached: Spencer at [25]; Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; (2013) 220 FCR 256 at [46].

38    The applicant for summary judgment bears the onus of persuading the Court that the proceedings should be determined summarily: Cassimatis at [45]. The power to dismiss an action summarily must be exercised with caution and is not to be exercised lightly, including where it is a case for summary judgment based on evidence; the power to award summary judgment should be exercised with great care and only where it is clear that there is no real question to be tried: Spencer at [24] (French CJ and Gummow J); [60] (Hayne, Crennan, Kiefel and Bell JJ). Where that requires consideration of apparently complex questions of fact, it is unlikely to be appropriate to resolve those questions at a summary judgment stage by conducting 'a mini-trial' on the documents, without discovery and without oral evidence. That is not the object of the rule. It is designed to deal with cases that are not fit for trial at all: Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 at 261 [95], endorsed in Spencer at [26].

39    As has been observed, much of Mr Lu's case as to why the Primary Judgment was wrong rested on the proposition that once he had tendered a document or given sworn evidence that was inconsistent with Beijing's case in some important respect, Beijing was required to go into evidence to contradict him, and if it did not, then there could not be any factual contest that would militate against summary judgment. With respect, I do not consider that any such rule emerges from the principles just described. The onus is on the applicant for summary judgment, and it is an onus that must be discharged in all the circumstances of the case bearing in mind that what is ultimately called for is an evaluative judgment, in the absence of complete evidence and argument, about whether there are reasonable prospects of success.

Consideration - substantial injustice

40    I commence my consideration of the appropriate outcome in this application with the question of substantial injustice because, contrary to Mr Lu's submissions, I consider it to be determinative in this case. The simple fact is that if leave to appeal is not given then, even if the Primary Judgment is wrong, Mr Lu will have lost no opportunity to persuade the Court that Beijing's claim should be dismissed. The case was all but ready for trial. If the present application is dismissed, it remains only for the parties to file affidavits in reply before proceeding to trial. At that trial, Mr Lu will of course have every opportunity to put forward full evidence and make submissions in order to seek to defeat Beijing's case. It is difficult to see how any substantial injustice will be occasioned to him if that is what occurs.

41    Doubtless the costs and emotional strain of proceeding to trial will be substantial, and are not to be discounted. But those are concerns that attend every case, and Mr Lu's evidence does not take this case out of the ordinary run in that regard. As I described in a previous judgment (Lu v Beijing Hua Xin Liu He Investment (Australia) Pty Ltd [2022] FCA 440 at [9]), his evidence on that point resolves to a statement that the trial would impose a huge emotional burden and stress on him and his family. That may be accepted, but put at that level of generality it is a regrettable consequence of many trials. By itself, it cannot amount to substantial injustice that would warrant leave to appeal.

42    I therefore consider that the application should be dismissed on this basis alone. Each case depends on its own facts. But in circumstances where the matter is close to trial, where the issues addressed in the summary judgment application are the very issues that will be addressed at that trial, and where only generally expressed evidence of the disadvantage of proceeding to trial has been adduced, the approach taken in the passage from QUYD that has been quoted above is the approach that should be taken. That was, in substance, also the approach the primary judge took in dismissing the summary judgment application, where the discretionary considerations were similar.

Consideration - sufficient doubt about the correctness of the Primary Judgment?

43    In deference to the full argument presented in relation to the other usual consideration, I will also express my views on the subject of whether there is sufficient doubt about the correctness of the decision. I do not consider that there is, certainly not in light of the weakness of the other consideration just addressed. To put it the other way around, this is not a case where the weakness of the case against the applicant for summary judgment is so clear that it would be a substantial injustice to him for the matter to be permitted to proceed to trial. But whichever way one looks at it, it is palpable from the brief description of the case, the issues and the documents that I have given above, let alone the more detailed description given in the Primary Judgment, that this is a matter replete with factual controversies of the kind that can only properly be resolved after a full trial.

44    The first ground of appeal rests, in part, on what is said to be an absence of evidence supporting Beijing's central contention that an agreement was formed at the meeting in Singapore in early May 2011. But the reason that evidence does not appear in any trial affidavits filed by Beijing is that evidence of that nature is going to be adduced orally. It is also relevant that outlines of that evidence have been served on Mr Lu but not filed with the Court. In the summary judgment application, rightly, neither party disclosed the content of those outlines to the primary judge, who is also likely to be the trial judge. In those circumstances it would be a risky course to take to dismiss the claim because no evidence appears on the face of the materials as to the formation of the agreement that Beijing has pleaded.

45    Nor do I consider that Ms Chen's email of 9 May 2011, which is the document that Mr Lu's senior counsel identified as the primary reason for the second summary judgment application, establishes with irrefutable clarity that Beijing's case must fail. Certainly, in view of its use of the language of proposed acquisition and acceptance of an offer, it may well prove to be an important piece of evidence forming part of reasons why Beijing's claim may fail at trial. The primary judge recognised as much when her Honour acknowledged that on its face it provides some support to Mr Lu. But her Honour was also, with respect, plainly correct to say that the document is not conclusive, for reasons including subtleties of translation that may become apparent during oral evidence, and questions that will arise in the context of the facts, as fully presented at trial, as to whether the document was instead prepared in order to justify a past acquisition or, potentially, to consider a restructuring of a transaction that had already been agreed.

46    The same may be said of the draft due diligence reports (which are not mentioned in the proposed grounds of appeal but on which Mr Lu's senior counsel relied at the hearing). For example, it may emerge from the evidence as a whole that the references in them to a proposed transaction were references to a transaction that was the subject of an agreement but had not yet been completed. It may be that Beijing wished to investigate Zeus Technology even though it had agreed to purchase the shares. To acknowledge those possibilities is not to speculate; it is to identify limitations that are inherent in the evidence on which Mr Lu relies.

47    Further, it is simply not the case that the inferences Mr Lu seeks to draw from the email of 9 May 2011 were uncontradicted by the evidence that was before the Court on the summary judgment application. To use the words from Spencer at [22] on which Mr Lu relies, Mr Lu's evidence was neither unanswerable nor unanswered. That is because, as the Full Court Judgment points out as extracted above, on the face of Mr Lu's email of 15 August 2011 quoted above there was an agreement as pleaded. The existence of that agreement also finds potential support in Mr Lu's provision of the share transfer form. The Full Court also listed other matters concerning the invoices which support Beijing's case. None of that is to say that any of those matters will prevail in the end. But they do provide ample justification for the primary judge's conclusion that there are several areas of factual controversy that warrant a trial. As a result, there was no need for Beijing's witnesses to go into evidence in the summary judgment application. The summary judgment application was not 'the moment of truth'. That moment will come at trial.

48    It is not to the point that Mr Lu has provided affidavit evidence and further documents to explain his 15 August 2011 email and the invoices, and to support his contention that the invoices and relevant payments were, in truth, for services rendered. In large part that further evidence appears to be an attempt to fill gaps in Mr Lu's case for summary judgment that the Full Court identified. The bringing of a further summary judgment application for that purpose is to be discouraged. It is true that the existence of those gaps were influential in the Full Court's decision (see FC [17] and [23]), but their Honours also concluded (FC [25]) that:

The fact that it may be inferred to have been within the applicants' power to adduce more and better evidence in support of the contractual claims does not mean that, on an application for summary dismissal, they were bound to do so; at least not where contemporaneous emails from one of the respondents, who owned (or owns) the disputed shares, are reasonably open to be construed as supporting the applicants' case.

49    In any event I consider that the areas of factual controversy remain even when Mr Lu's subsequent explanations are taken into account. It is, again, no speculation to observe that those explanations are likely to be tested at trial, including by cross examination, and that they, as well as the further documents about the accounting treatment of the invoices and the payments and the draft due diligence reports, will need to be assessed in the full context of the oral and documentary evidence adduced at trial to assess whether they do indeed establish the matters for which he contends. His explanations seek to neutralise matters which on their face indicate that an agreement as pleaded was formed. They can hardly provide a sound platform for summary judgment. And the further documents concerning accounting treatment of payments and invoices are, at most, circumstantial evidence that decreases the probability of the alleged event on which Beijing places central reliance, that is, the formation of the alleged oral agreement. They do not discount the likelihood of that event with such force as to warrant a conclusion that the matter should not go to trial.

50    That is enough to indicate that proposed grounds 1 and 2 do not raise sufficient doubt about the correctness of the Primary Judgment to warrant leave to appeal. Ground 3 is no stronger. Once again, Mr Lu's sworn evidence about the payment of the sum of $347,286.50 is in the nature of an explanation of his email of 15 August 2011 which should be tested at trial. That conclusion is reinforced by the fact that there is sworn evidence of Mr Tu concerning Mr Lu's allegation that the past payments were applied to expenses incurred by the company Biostarch Technologies. The description I have given of the issues around these payments shows that there is a long and complicated history of dealings between various persons and companies. There are issues of factual complexity about the existence, particulars and proper characterisation of the payments which are obviously issues that must be determined at trial.

51    As for ground 4, the primary judge's decision to refuse leave for Mr Lu to rely on the affidavit sworn 1 December 2021 was an entirely discretionary one, and Mr Lu has not identified any House v The King (1936) 55 CLR 499 error in it. But, as his senior counsel properly conceded, it is in any event further evidence to explain the accounting treatment of the invoices 'so it doesn't matter all that much'. In light of the views I have reached about proposed grounds 1 to 3, ground 4 cannot raise sufficient doubt about the correctness of the Primary Judgment to warrant leave to appeal.

52    Having reached those conclusions, I consider it neither necessary nor appropriate to comment on ground 5 concerning conventional estoppel. Even if there were abundant merit in the points Mr Lu makes about that claim, the matter would still need to go to trial and it is appropriate for the conventional estoppel claim to be determined as part of the full evidentiary context about the formation of any agreement.

The proposed amendment

53    It remains only to deal with the proposed amendment to add ground 6 (see [23] above), which amendment was the subject of full argument. Beijing opposed it on the basis that the further proposed ground was vague and unclear, that it prejudiced Beijing, and that no explanation had been advanced for the delay in raising it. In the course of argument it became clear that the ground was intended to cover only matters raised in the last part of Mr Lu's written submissions, pertaining to the share transfer form that Mr Lu gave to Beijing, and alleged conversations about it. These are the areas of conflicting facts listed at sub-paragraphs [93](l) to (n) of the Primary Judgment (see [13]) above.

54    Mr Lu sought leave to add the ground on the basis that it had already been raised in the written submissions, so Beijing was on notice of the issues. The strongest argument for opposing leave for Beijing, and the basis on which I deny leave, was that the share transfer form was before the Court at the time of the first summary judgment application and was dealt with by the Full Court. The Full Court noted Mr Lu's evidence that he said he provided the signed but undated share transfer form as an act of good faith in anticipation of an agreement for the transfer of his shares being reached (FC [5], [7]). He had also admitted that he gave Beijing an undated memorandum of resolution of Zeus Technology to approve the share transfer, signed by him (FC [5]). The Full Court held (FC [20]) that:

… Mr Lu may have signed and given the share transfer form and resolution of Zeus approving the share transfer to Beijing assuming an agreement would be reached which was not reached. But those documents may also evidence the existence of such an agreement.

55    This was one of several bases on which the Full Court held (FC [21]) that the case was one where there were factual issues capable of being disputed and in dispute, and so not suitable for summary judgment. No fresh evidence has since emerged that would cast the share transfer form in a significantly different light. The only further evidence has come from trial affidavits filed by Beijing which may or may not advance its case, but do not call for any reconsideration of the factual basis on which the Full Court dealt with the share transfer forms. I consider that the proposed ground, as understood in light of Mr Lu's written submissions, is an attempt to reopen without good cause an issue that the Full Court determined and, in the exercise of the broad discretion whether to permit leave to amend, I would deny that leave.

Outcome

56    The application for leave to appeal will be dismissed. I will hear the parties as to costs.

Associate:

Dated:    8 June 2022