In the matter of Sunnya Pty Ltd

These reasons for judgment concern the application by the plaintiffs in these proceedings – Sunnya Pty Ltd (Sunnya) and Jatcorp Ltd (Jatcorp) – for leave to re-open their case to adduce evidence of two matters and to make submissions about that evidence.

The following non-exhaustive description of the issues in the proceedings, and the procedural history of the matter, is relevant to understanding the circumstances in which the application has been made.

Pursuant to leave granted under s 237 of the Corporations Act 2001 (Cth), Jatcorp claims relief on behalf of Sunnya in respect of alleged breaches by Mr Yinghan He and Ms Yanxia Lu (the first and second defendants) of their statutory and fiduciary duties as directors of Sunnya.

For most of the period of time relevant to these proceedings, Sunnya’s business included the export of “Neurio” brand infant formula and other powdered milk products to the People’s Republic of China, and the distribution and sale of those products in China. Sunnya engaged third parties to manufacture the products in Australia and New Zealand. The export, distribution and sale of the products in China primarily occurred through two different sales channels, described as the cross-border sales channel and the general trade sales channel.

The plaintiffs’ allegations against Mr He and Ms Lu include that they breached fiduciary duties that they continued to owe to Sunnya after their resignation as directors on 25 November 2022 by devising and managing a scheme whereby they would procure the manufacture of Neurio-branded products for export to China, which would then be distributed and sold in China by Guangzhou Aotea Biological Technology Pte Ltd (GABT) (the third defendant), Guangzhou Niurui Trading Co., Ltd (GNT) (the fourth defendant) and/or Sunlife Healthfood Pty Ltd (Sunlife) (the fifth defendant), without any payment or other benefit to Sunnya.

The plaintiffs allege that this was a dishonest and fraudulent scheme, in which Mr He and Ms Lu were knowingly assisted by Supermega Market Ltd (Supermega) and Megadairy Ltd (Megadairy) as the manufacturers and suppliers of the products (the eighth and ninth defendants), by GABT and GNT as the distributors and sellers of the products in China, and by Sunlife and its sole director Ms Yaqing He (who is the daughter of Mr He and Ms Lu, and the sixth defendant in these proceedings). The plaintiffs refer to this as the “Ongoing Neurio Sales Scheme”.

The plaintiffs allege that GABT, GNT and Sunlife are also liable as knowing recipients of the benefit of the Neurio-branded products that were manufactured under the alleged scheme. The plaintiffs characterise that benefit as “in essence, the diversion of Sunnya’s Neurio business in China”.

The plaintiffs also allege that GABT and GNT are jointly and severally liable with Mr He and Ms Lu for the alleged breaches of fiduciary duty on the basis that each of those companies were deployed as the corporate alter ego of Mr He and/or Ms Lu and, further or alternatively, on the basis that they acted in concert with Mr He and Ms Lu to secure a mutual benefit, which the plaintiffs characterise as the diversion of Sunnya’s trade in Neurio-branded products in China.

The plaintiffs pleaded case in relation to the Ongoing Neurio Sales Scheme does not involve any allegation or claim against HLW Investments Pty Ltd (HLW), which is the seventh defendant in these proceedings. Mr He and Ms Lu are the directors of HLW, and Ms Lu is its sole shareholder.

In these reasons, I use the term the He Parties to refer to Mr He, Ms Lu and Ms He collectively. I use the term the NZ Parties to refer to Supermega, Megadairy and NZFDA Ltd (the tenth defendant) collectively. Mr Yi Wu (also known as Easter Wu) is, directly or indirectly, the sole shareholder, of each of the NZ Parties. Mr Wu is also the sole director of each of these companies.

These proceedings were heard together with proceedings 333557 of 2022 over 15 days from 28 November to 21 December 2023. In the event that the plaintiffs succeed in establishing liability, there is to be a separate hearing in relation to quantum.

The proceedings, including the final hearing on all issues other than quantum in November and December 2023, have had a difficult history.

The commencement of the hearing on 28 November 2023 was jeopardised by an application by the plaintiffs for leave to make extensive further amendments, including material substantive amendments, to their Second Further Amended Statement of Claim. The Court accepted the defendants’ submissions that they would be materially prejudiced if the hearing dates were vacated. The plaintiffs’ application for leave to amend was dismissed in respect of the proposed amendments that would have required the hearing dates to be vacated if leave had been granted. [1]

Two days prior to the commencement of the hearing, the He Parties withdrew the authority of their legal representatives to act for them in these proceedings. There was no appearance for the He Parties at the hearing until 6 December 2023. The solicitor and counsel who appeared for the He Parties at that stage made two applications on 6 and 7 December 2023 to adjourn the hearing until 2024. The plaintiffs strenuously opposed each application, expressing a strong desire for the hearing to be concluded in 2023. The adjournment applications were dismissed. The hearing had been listed to conclude on 15 December 2023, but ultimately concluded on 21 December 2023 after various delays due to short adjournments that I permitted from time to time during the hearing to afford some time for the He Parties’ new legal representatives to bring themselves up to speed with the issues and the evidence in the proceedings.

Judgment was reserved on 21 December 2023, subject to leave being granted to the parties to file and serve written submissions about certain matters.

On 5 February 2024, Sunnya and Jatcorp filed an interlocutory application seeking leave to re-open their case in order to:

The He Parties and the NZ Parties oppose the plaintiffs’ application for leave to re-open.

There is no dispute between the parties about the principles to be applied in determining the application. Those principles were recently summarised by Stevenson J, with reference to relevant authorities, in Cappello v Scrivener (No 2). I respectfully adopt his Honour’s summary, which it is convenient to set out in full: [2]

Stevenson J’s summary of principles is consistent with the judgment of Brereton J (as his Honour then was) in Chao v Chao (No 2), on which the plaintiffs and the He Parties relied [3] . After referring to the discretion to grant leave to re-open even after the Court has reserved judgment, and stating that the ultimate question is whether the interests of justice are better served by allowing or rejecting the application to re-open, Brereton J said [4] :

The NZ Parties relied on the judgment of Henry J in Goodman Fielder Consumer Foods Pty Ltd v Graincorp Foods Australia Pty Ltd [5] . Her Honour’s summary of the applicable principles in that case is also consistent with Stevenson J’s summary extracted above. After referring to the four classes of case identified in paragraph (c) of Stevenson J’s summary, Henry J said [6] :

In support of their application in the present case, the plaintiffs read an affidavit of their solicitor, Mr Vincent ZhiQing Zhu affirmed on 5 February 2024, and a further affidavit of Mr Zhu affirmed on 15 February 2024 in response to the affidavits served by the He Parties and by the NZ Parties in opposition to the application. The He Parties read an affidavit of their solicitor, Mr Wilson Shen, affirmed on 13 February 2024. The NZ Parties read an affidavit of their solicitor, Mr Rhys Roberts, affirmed on 14 February 2024.

The plaintiffs submit that the judgment of the Chongqing First Intermediate People’s Court in respect of which they seek leave to re-open is relevant to the question whether Sunnya had a business opportunity in the period after 25 November 2022 to distribute and sell in China its Neurio-branded products manufactured in New Zealand. I will refer to this as the opportunity question.

The plaintiffs submit, and I accept, that the opportunity question is relevant to their claims in these proceedings, including the Ongoing Neurio Sales Scheme claims referred to at [6]–[9] above. Evidence adduced at the substantive hearing that is relevant to the opportunity question includes:

At the hearing of the application for leave to re-open, senior counsel for the plaintiffs candidly acknowledged that the opportunity question has always been an aspect of the plaintiffs’ case.

At the substantive hearing, the plaintiffs adduced evidence that Sunnya’s rights under the Trade Marks Act 2002 (NZ) as the registered owner of the relevant Neurio trade marks in New Zealand include the exclusive right to use the registered trade mark, including by applying the trade mark to goods manufactured in New Zealand that are to be exported from New Zealand. However, the plaintiffs did not adduce any evidence that addressed the question whether Sunnya had a business opportunity to sell its New Zealand manufactured Neurio-branded products in China following the withdrawal of the cooperation and consent of GABT – the registered trade mark holder in China.

The judgment of the Chongqing First Intermediate People’s Court in respect of which the plaintiffs now seek leave to re-open was delivered on 31 January 2024 in proceedings between GABT and Chongqing Beigou Network Technology Co., Ltd (Beigou). The plaintiffs’ solicitor, Mr Zhu, has given evidence that Beigou is one of the distributors in China to whom Sunnya sells its Neurio-branded products through its cross-border sales channel.

A copy of the reasons for judgment of the Chongqing First Intermediate People’s Court, and a certified English translation of those reasons, was admitted into evidence for the purpose of the plaintiffs’ application for leave to re-open only. [7] Those reasons record that GABT alleged that Beigou was infringing GABT’s registered Neurio trade marks in China by importing and selling Neurio-branded products. GABT sought an order restraining Beigou from engaging in that conduct, and compensation for economic losses that GABT claimed to have suffered by reason of the alleged infringement.

The reasons for judgment of the Chongqing First Intermediate People’s Court record that, having reviewed the parties’ claims, the Court identified two issues as the focus of the dispute in the case: (1) whether GABT was a “qualified plaintiff” in the case; and (2) whether Beigou’s behaviour infringes GABT’s rights as the registered owner of the Neurio trade marks in China.

In relation to the first issue, the Court referred to Article 3 of the Trademark Law of the People’s Republic of China as providing that:

The Court continued:

The Court’s reasons for judgment in relation to the second issue commenced with the following passage:

On the face of it, the second sentence in the passage extracted immediately above appears to be stating that the reference to the “using the same trademark” in Article 57 is interpreted as meaning use by the party accused of infringement of the same trademark as the plaintiff’s registered trademark.

The Court found that:

The reasons for judgment continue:

The reasons for judgment do not identify any Article of the Trademark Law of the People’s Republic of China, or any other rule or principle of Chinese law, that the Court applied in concluding on the basis of the matters referred to in the passage extracted immediately above that there was insufficient evidence to support GABT’s infringement claim, notwithstanding the Court’s finding that the Neurio trade mark on the goods imported and sold in China by Beigou was the same as GABT’s registered trade mark, and notwithstanding the provisions of Article 57 referred to by the Court.

The reasons for judgment conclude:

The reasons for judgment record that there is a right of appeal to the Chongqing Higher People’s Court. It is common ground that GABT has filed an appeal. A certified English translation of the notice of appeal was tendered at the hearing of the plaintiffs’ application for leave to re-open. [8] The appeal grounds set out in the notice of appeal challenge the factual findings made at first instance, stating that the Court “refused to authenticate the documented evidence, deliberately ignored, ignored and fabricated the basic facts, and made a serious wrong fact determination”. The factual findings challenged in the notice of appeal include the finding that the goods involved in the case were “genuine products”.

The notice of appeal also challenges the determination at first instance that the goods were obtained by Beigou “through parallel importation”. The notice of appeal states:

The appeal has not yet been heard or determined. There was no evidence adduced at the hearing of the plaintiffs’ application for leave to re-open about the status or effect of the judgment of the Chongqing First Intermediate People’s Court under Chinese law pending appeal.

Evidence adduced on the hearing of the application for leave to re-open establishes that GABT has commenced several other proceedings in China against other distributors of Neurio-branded products. Those proceedings are yet to be determined.

The plaintiffs accept that, by reason of s 91 of the Evidence Act 1995 (NSW), the judgment of the Chongqing First Intermediate People’s Court is not admissible in the proceedings in this Court to prove the existence of facts that were in issue between GABT and Beigou in the proceedings before the Chongqing First Intermediate People’s Court.

However, the plaintiffs submit that the judgment is admissible in the proceedings in this Court to prove the legal effect of the judgment. The plaintiffs submit that they will tender the judgment for that purpose if they are granted leave to re-open their case. The plaintiffs submit that the legal effect of the judgment is that “Sunnya is able to legally and properly sell its Neurio products into China (at least through cross-border sales) notwithstanding that GABT is presently the registered holder of the Chinese Neurio trademarks”. The plaintiffs submit that the legal effect of the judgment is relevant to the opportunity question in the present proceedings, and that s 157 of the Evidence Act facilitates proof of the judgment, and the reasons for judgment, by tendering in these proceedings a sealed copy of those reasons together with a certified English translation of those reasons.

The plaintiffs submit that the judgment, having been delivered on 31 January 2024, is evidence that was not available to them to tender during the hearing of these proceedings in November and December 2023. The plaintiffs do not cavil with the proposition that it was open to them during the hearing to adduce evidence of the trade mark laws of the People’s Republic of China that are relevant to the opportunity question, either in the form of expert evidence or by tendering evidence of the kind referred to in ss 174 and 175 of the Evidence Act. They did not do so. The plaintiffs have not adduced any evidence on the hearing of this application that their failure to adduce such evidence was anything other than a deliberate decision. Senior counsel for the plaintiffs accepted that, until the judgment of the Chongqing First Intermediate People’s Court was delivered on 31 January 2024, the plaintiffs were content for this Court to determine these proceedings, including the opportunity question, with no evidence about the trade mark laws of the People’s Republic of China bearing on the opportunity question. The plaintiffs do not submit that they were not aware of the proceedings in the Chongqing First Intermediate People’s Court at the time of the substantive hearing of these proceedings in November and December 2023. Evidence adduced on the hearing of the application for leave to re-open suggests that the plaintiffs and their legal representatives were aware of those proceedings.

The plaintiffs submitted that, if they had adduced expert evidence of Chinese trade mark law at the hearing in November and December 2023, that evidence would have been rendered otiose by the judgment delivered by the Chongqing First Intermediate People’s Court on 31 January 2024, which the plaintiffs contend establishes the “actual position in China” in a manner that is binding on GABT. The plaintiffs therefore submit that they would have been making their present application for leave to re-open to tender the judgment, even if they had earlier adduced expert evidence of Chinese trade mark law in these proceedings. It was submitted that the Court and the parties are in the same position as they would have been if the plaintiffs had adduced evidence of Chinese trade mark law at the substantive hearing, and that the present application for leave to re-open is therefore not productive of delay attributable to the plaintiffs.

The plaintiffs submit that the interests of justice are better served in the present case by granting leave to re-open so that this Court can determine these proceedings – specifically, the opportunity question – on the basis of “the actual position in China”. The plaintiffs accept that, if they are permitted to re-open, the defendants should have an opportunity to adduce evidence responsive to the plaintiffs’ tender of the judgment of the Chongqing First Intermediate People’s Court, and that this may involve the defendants adducing expert evidence of the relevant law in China. The plaintiffs submit that, in that scenario the further time that would elapse before the Court heard the further evidence, including any expert evidence adduced by the plaintiffs in reply and any cross-examination of expert witnesses, and submissions based on the further evidence, would be a matter of weeks rather than months.

Having considered all of the parties’ submissions, I have determined that the proper exercise of the discretion to grant leave to re-open in all of the circumstances of this case is to refuse leave. My reasons are as follows.

First, the plaintiffs’ application is founded on an erroneous characterisation of the legal effect of the judgment of the Chongqing First Intermediate People’s Court. GABT and Beigou were the only two parties to the proceedings in the Chongqing First Intermediate People’s Court. The legal effect of the judgment is that GABT’s claims for an order restraining Beigou from importing and selling Neurio-branded products in China, and for compensation for economic losses that GABT claimed to have suffered by reason of Beigou’s conduct, were dismissed. Under Australian law, the doctrine of cause of action estoppel would preclude GABT from subsequently asserting against Beigou the rights that were determined by the Chongqing First Intermediate People’s Court not to exist, or rights of a substantially equivalent nature that cover substantially the same subject matter. GABT would not be precluded from asserting the same or similar rights against other parties, arising from alleged conduct of those parties. [9] I am unable to discern from the reasons for judgment of the Chongqing First Intermediate People’s Court any ultimate issue of fact or law that was necessarily resolved by the Court’s dismissal of GABT’s claims against Beigou, which the doctrine of issue estoppel, as it applies in Australia, would preclude GABT from putting in issue in any separate proceedings. [10] There was no evidence adduced on the hearing of the plaintiffs’ application for leave to re-open that, under Chinese law, the judgment of the Chongqing First Intermediate People’s Court has some more general or far-reaching legal effect than it would have under Australian law. Thus, the plaintiffs’ contention that the judgment establishes the “actual position in China” – being that “Sunnya is able to legally and properly sell its Neurio products into China (at least through cross-border sales) notwithstanding that GABT is presently the registered holder of the Chinese Neurio trademarks” – is unfounded.

Second, as counsel for the He Parties submitted, the existence, nature and scope of any rules and principles of the law of a foreign jurisdiction are to be treated by this Court as an issue of fact upon which evidence is receivable. The application of those foreign law rules and principles, so ascertained, to the particular facts and circumstances of the case before this Court is a question of law about which evidence is not receivable. [11] The plaintiffs’ submission that this distinction between the substance of foreign law and its application to particular facts relates only to expert evidence of foreign law, and not to evidence of judgments of foreign courts, is unprincipled and unsupported by any authority relied on by the plaintiffs. Contrary to the plaintiffs’ submissions, judicial comity neither requires nor permits this Court declining to exercise its jurisdiction to determine proceedings before it on the basis of the claims and defences pleaded and the evidence adduced in those proceedings, on the ground that a foreign court has determined different proceedings between different parties on the basis of the claims and defences pleaded and the evidence adduced in those foreign proceedings. [12]

In submitting that the judgment of the Chongqing First Intermediate People’s Court is admissible in these proceedings as evidence of its legal effect, the plaintiffs: (1) conflate the statements in the reasons for judgment that identify the substance of relevant trade mark laws of the People’s Republic of China with the outcome of the case; (2) extrapolate from that conflation a more general proposition that “Sunnya is able to legally and properly sell its Neurio products into China (at least through cross-border sales) notwithstanding that GABT is presently the registered holder of the Chinese Neurio trademarks”; and (3) submit that the judgment is admissible as evidence in these proceedings of the truth of that general proposition which, for the reasons explained above, does not represent the legal effect of the judgment. It would be contrary to the principles referred to at [48] above and contrary to s 91 of the Evidence Act for this Court to admit the judgment of the Chongqing First Intermediate People’s Court as evidence of the truth of the proposition that Beigou did not infringe GABT’s rights as the registered owner of Neurio trade marks in China by importing and selling Neurio-branded goods purchased from Sunnya, let alone as evidence of the truth of the general proposition asserted by the plaintiffs. None of the authorities relied on by the plaintiffs as establishing that a foreign judgment may be admitted as evidence of its legal effect support the admissibility in Australian proceedings of the ultimate conclusion of a foreign court, which incorporates that court’s findings of fact, as evidence in the Australian proceedings of the truth of that conclusion, or as evidence of the truth of some more general mixed proposition of fact and law extrapolated from that conclusion. [13]

Third, I accept that, to the extent that the reasons for judgment of the Chongqing First Intermediate People’s Court contain statements of rules and principles of the law of the People’s Republic of China in relation to trade marks, those statements would be admissible in the proceedings in this Court as relevant evidence of foreign law, consistently with the principles referred to at [48] above. I also accept that s 157 of the Evidence Act facilitates the proof of that foreign law by the tender of the sealed reasons for judgment. However, the probative value of the reasons for judgment as evidence of foreign law would be slight because, as I have explained at [35] above, the Court does not appear to have articulated all of the rules or principles of Chinese law that it has applied in reaching the conclusion that it reached on the basis of the facts that it found in that case. Even if the Court had done so, questions would arise about whether such statements of rules and principles covered the field of Chinese trade mark law that is relevant in the present proceedings. That is one reason why foreign law is typically proved by expert evidence, including the expert’s summary of relevant foreign case law, rather than by tendering judgments delivered by Courts in the relevant foreign jurisdiction.

Fourth, having regard to the nature of the opportunity question, its relevance to the plaintiffs’ claims in these proceedings, and the fact that it has always been an aspect of the plaintiffs’ case, [14] I infer, in the absence of any evidence to the contrary, [15] that the plaintiffs’ failure to adduce evidence of foreign law during the hearing in November and December 2023 was a deliberate decision.

Fifth, as the He Parties submitted, the purpose for which the plaintiffs now seek leave to re-open their case is not to tender fresh evidence, but to tender a recent judgment that contains some evidence of the relevant foreign law about which the plaintiffs chose to adduce no evidence during the hearing in November and December 2023. For all of the reasons I have explained above, the judgment is not admissible evidence in these proceedings of the proposition that the plaintiffs seek to extract from it.

Sixth, I accept the submissions made on behalf of the He Parties and the NZ Parties that, if leave is granted to the plaintiffs to re-open their case to tender the judgment of the Chongqing First Intermediate People’s Court in these proceedings, procedural fairness would require that the defendants be afforded an opportunity to adduce responsive evidence. I accept the evidence and submissions made on behalf of the He Parties and the NZ Parties that this would most likely include expert evidence of relevant Chinese trade mark law. Senior counsel for the plaintiffs did not cavil with that proposition. Nor did he dispute that this would be likely to result in the plaintiffs seeking to adduce expert evidence in reply. In that scenario, there would almost certainly be a need to allocate further hearing time to the matter for cross-examination of those expert witnesses, preferably after they had conferred and prepared a joint report. I am not persuaded that the resulting delay to the hearing of this matter would be a matter of weeks rather than months. I accept the submissions made on behalf of the He Parties and the NZ Parties that such delay, with the resulting extension of the duration of the various freezing orders and interim injunctions that operate against them pending the determination of these proceedings, is inherently prejudicial to them. I note that the deferral of the conclusion of the hearing by some months into 2024 is the very outcome that the plaintiffs strenuously resisted when opposing the He Parties’ applications to adjourn the hearing made on 6 and 7 December 2023. [16]

Seventh, I reject the plaintiffs’ submission that any expert evidence of foreign law that they might have tendered in relation to the opportunity question during the hearing in November and December 2023 would have been rendered otiose by the judgment delivered by the Chongqing First Intermediate People’s Court on 31 January 2024. For the reasons that I have already explained, expert evidence of the relevant foreign law would be likely to have had greater probative value as evidence of the substance of that law than what can be gleaned by this Court from the reasons for judgment of the Chongqing First Intermediate People’s Court. The outcome in the proceedings before the Chongqing First Intermediate People’s Court does not render evidence of the substance of the relevant foreign law otiose. I therefore reject the plaintiffs’ submission that the parties and the Court would have been in the same position that they are presently in if the plaintiffs had adduced evidence of Chinese trade law at the substantive hearing. Even if the plaintiffs had decided to apply for leave to re-open in that hypothetical scenario, it would have been an application to tender the judgment as an additional piece of evidence to be considered by the Court in addition to expert evidence already adduced, with the expert reports having already been tendered and any cross-examination of the expert witnesses having already occurred. The proposed additional evidence would not have given rise to the same extent of delay that would flow if the Court were to grant the leave that is in fact sought by the plaintiffs, as referred to at [53] above.

Drawing all of these matters together, the plaintiffs’ application for leave to re-open their case to tender the judgment of the Chongqing First Intermediate People’s Court does not fall within any of the established classes of case in which leave to re-open may be granted. The interests of justice are better served by refusing rather than allowing the application in circumstances where judgment has been reserved, the plaintiffs made a deliberate decision not to adduce evidence of Chinese trade mark law during the hearing, the specific evidence that the plaintiffs now propose to tender is of slight probative value, the conclusion of the hearing would be materially delayed by a grant of leave to re-open to tender that evidence, and such delay would prejudice the He Parties and the NZ Parties. In my view, a grant of leave to re-open in those circumstances would undermine the public interest in the finality of litigation, which carries with it an expectation that the parties will present their evidence and submissions at one hearing. Any prejudice suffered by the plaintiffs as a result of the refusal of their application to re-open to tender the judgment of the Chongqing First Intermediate People’s Court will be modest, given the slight probative value of that judgment, and is a consequence of the plaintiffs’ deliberate decision not to adduce evidence of relevant foreign law during the hearing in November and December 2023.

For all of those reasons, the plaintiffs’ application for leave to re-open their case to tender the judgment of the Chongqing First Intermediate People’s Court delivered on 31 January 2024 is refused.

During the hearing in December 2023, the plaintiffs sought leave to re-open their case to adduce evidence that powdered milk products with lactoferrin in Neurio-branded tins were being marketed for sale in videos posted on 6 December 2023 on the Chinese social media app Little Red Book (which is similar to Instagram). The tins shown in the video identified Megadairy as the manufacturer, and GNT as the “general distributor in China”. The date of manufacture, together with the manufacturing batch number, was printed on the bottom of the tins. The date of manufacture was 13 October 2023.

Leave to re-open was granted, in the absence of any opposition from the He Parties or the NZ Parties. The NZ Parties served a further affidavit from Mr Wu responding to the new evidence, and Mr Wu was recalled for further cross-examination in relation to the new evidence.

Mr Wu's affidavit affirmed on 19 December 2023 annexed photographs of the sample milk powder sachets retained by Megadairy from the relevant manufacturing batch. The sachets did not bear any Neurio trade mark, and were stamped with the same manufacturing batch number as the tins seen in the Little Red Book video. Mr Wu's affidavit also identified the sales contract, and the commercial invoice and packing list relevant to that batch of products. The sales contract is a contract dated 21 July 2023 between Supermega (as seller) and Joho (as buyer) for 12,000 sachets, each containing 2g of modified milk powder with lactoferrin, to be delivered in cartons for a total price of CNY9,915,000. The sales contract required payment of 50 per cent of the total price within 60 days of the date of the contract, with the balance to be paid before loading in New Zealand. The commercial invoice and packing list recorded that 1,233 cartons, each containing 1,500 sachets of modified milk powder with lactoferrin, were packed for shipping to Joho in Shanghai on 13 November 2023. Neither the sales contract nor the commercial invoice and packing list refer to the brand name Neurio. In cross-examination, Mr Wu denied knowing that these sachets would ultimately be delivered to GABT, and denied knowing that they would be packaged in Neurio tins in China and sold under the Neurio brand name.

Joho had not been mentioned in any pleading or evidence in these proceedings until the NZ Parties read Mr Wu's affidavit affirmed on 19 December 2023. On 16 January 2024, the plaintiffs inspected documents produced on subpoena by Australia and New Zealand Banking Group Limited (ANZ) on 22 December 2023. Those documents recorded that Joho had paid the sum of AUD$421,195 into HLW's bank account on 25 October 2023. The plaintiffs had issued that subpoena, not for the purpose of obtaining further evidence in relation to the substantive issues in these proceedings, but in order to investigate their suspicions that the He Parties may have breached freezing orders made in these proceedings.

The plaintiffs filed their application for leave to re-open on 5 February 2024, approximately six weeks after ANZ produced the documents on subpoena and approximately three weeks after the plaintiffs inspected those documents.

The plaintiffs submit that, if they are granted leave to re-open to tender the bank statements of HLW evidencing the payment received from Joho on 25 October 2023, they will ask the Court to infer that there is a close connection between Joho and Mr He and Ms Lu, and that the payment received by HLW from Joho on 25 October 2023 was “related to” the sachets that Megadairy supplied to Joho under the sales contract dated 21 July 2023.

In support of the inference that there is a close connection between Joho and Mr He and Ms Lu, the plaintiffs intend to rely on an email that Mr He sent to his former solicitors in these proceedings on 18 October 2023 responding to their request for payment of AUD$825,000 into trust for legal costs of these proceedings in two instalments of AUD$412,500 each, by the end of October 2023. Mr He's email to his solicitors states: “I arranged to pay the money from China friend company to HLW account by business yesterday, I think it will arrive next Tuesday.” The plaintiffs will contend that the payment foreshadowed in Mr He's email is the payment that HLW received from Joho on 25 October 2023. The plaintiffs emphasise Mr He's description of Joho as a “friend company”, and Joho's willingness to fund the plaintiffs' legal costs, as evidence of the close connection that they will ask the Court to infer exists between Joho and Mr He and Ms Lu if leave is granted to re-open.

When pressed to articulate the nature of the relationship that the plaintiffs will contend should be inferred between Joho's payment to HWL, and Megadairy's supply of the sachets to Joho, senior counsel for the plaintiffs submitted that they will contend that Joho on-sold the sachets to GABT (as the sachets were ultimately packaged and marketed for sale in Neurio-branded tins in China), and that Joho’s payment to HLW represented Mr He and Ms Lu's share of Joho's profits from that transaction with GABT.

As I understand it, the plaintiffs will contend for those inferences be drawn in support of an argument that Megadairy's supply of the sachets to Joho, which were subsequently sold in Neurio-branded tins in China, was part of the Ongoing Neurio Sales Scheme that the plaintiffs allege was devised and managed by Mr He and Ms Lu in breach of their fiduciary duties as referred to at [6]–[9] above.

As the He Parties submitted, the plaintiffs' proposed inference that the payment received by HLW from Joho on 25 October 2023 represented Mr He and Ms Lu's share of Joho's profits from allegedly supplying the sachets to GABT is contrary to the following objective facts. First, Mr He's email - on which the plaintiffs rely for its description of Joho as a "friend company" - was sent to his solicitors in response to their request that the He Parties arrange for AUD$412,500 to be paid into their trust account. Second, both the timing and amount of the payment are consistent with it having been made for the purpose of putting HLW in funds to pay that amount to the He Parties' solicitors on trust for their legal costs of these proceedings (and most of the money was indeed paid into the solicitors’ trust account). Third, the amount of the payment bears no resemblance to the instalments of the total price payable under the sales contract dated 21 July 2023. Fourth, the sachets were shipped to Joho on or about 13 November 2023. If Joho delivered the sachets to GABT, then this can only have occurred after 13 November 2023. The plaintiffs have not presently identified any basis for inferring that GABT paid Joho for the sachets prior to delivery, and there is therefore no apparent basis for inferring that any profit share (if any) paid by Joho to Mr He and Ms Lu was paid into HLW’s account on or about 25 October 2023.

In short, as the He Parties and the NZ Parties submitted, the inferences that the plaintiffs will ask the Court to draw if leave is granted to the plaintiffs to re-open their case to tender evidence of the payment would involve impermissible speculation. [17] Moreover, the submissions made in support of the proposed inferences on the application for leave to re-open are internally inconsistent. The evidence on which the plaintiffs rely as demonstrating Joho's willingness to fund the He Parties' legal costs and thereby indicating a close connection between them, is also relied on as the basis for the proposed inference that the payment was made for a different purpose entirely.

I accept that the bank statement recording the payment that HLW received from Joho on 25 October 2023 is fresh evidence that was not available to the plaintiffs before 22 December 2023, when ANZ produced the bank statement in response to the subpoena issued by the plaintiffs. The plaintiffs' application for leave to re-open their case to tender the bank statement therefore falls within one of the established classes of case in which leave to re-open may be granted.

Nevertheless, the interests of justice are better served by refusing rather than allowing the application in circumstances where judgment has been reserved, the bank statement that the plaintiffs seek leave to tender has negligible probative value for reasons explained above, and the public interest in the finality of litigation would be undermined by the grant of leave to re-open to tender such a document, which the plaintiffs contend pertains to a specific batch of products that features in the evidence in these proceedings only by reason of an earlier grant of leave to re-open in favour of the plaintiffs.

If the plaintiffs suffer any prejudice at all as a result of the refusal of this latest application to re-open, that prejudice will be proportionate to the probative value that the bank statement would have had if tendered - negligible.

If the plaintiffs were permitted to re-open by tendering the bank statement, the He Parties have indicated that they may wish to adduce responsive evidence, and the plaintiffs, the He Parties and the NZ Parties would make submissions in relation to the evidence of the payment. This would delay the proceedings, and such delay would be prejudicial to the He Parties and the NZ Parties for the reasons explained at [54] above.

The plaintiffs' written submissions in support of their application for leave to re-open state that the further submissions that the plaintiffs would make would extend to the alter ego relationship between Mr He and/or Ms Lu, and GABT and/or GNT. The plaintiffs made submissions about those alleged alter ego relationships during the hearing in November and December 2023. If the plaintiffs now wish to supplement or enhance those submissions, that is not a reason for the Court to grant leave to re-open.

For all of those reasons, the plaintiffs' application for leave to re-open their case to tender HLW's bank statement recording the payment received from Joho on 25 October 2023, and to make submissions about that evidence, is refused.

For all of the foregoing reasons, the orders of the Court are: