The applicant relied on an affidavit dated 29 November 2024, of Mr Grisenti, Associate Director at Blackstone Legal Costing and an LIV Accredited Costs Law Specialist, which provided an opinion as to a reasonable sum to be paid by way of security up to the first day of trial based on Mr Richards' estimate. Mr Grisenti's estimate was effectively an opinion as to the costs likely to be allowed pursuant to the Federal Court scale.
In Mr Grisenti's opinion, a reasonable sum payable for security for costs up to and including mediation would be $21,125.50 and $201,122.50 from mediation up to the first day of trial. A breakdown of Mr Grisenti's estimate is set out in the table below.
Costs up to and including mediation $10,560.00 (disbursements)
$10,565.50 (charges)
Joinder of MAWF $10,560.00 (disbursements)
Mediation $9,605.00 (charges)
10% loading for skill, care, and attention to professional fees $0.00
$960.50
Total $21,125.50
Costs from mediation up to the first day of trial $160,560.00 (disbursements)
$40,562.50 (charges)
TBC (disbursements)
TBC (charges)
Discovery $1,760.00 (disbursements)
Subpoena $2,640.00 (charges)
Expert evidence $7,700.00 (disbursements)
Particulars $0.00 (charges)
Preparation for trial $1,100.00 (disbursements)
10% loading for skill, care, and attention to professional fees $2,825.00 (charges)
$150,000.00 (disbursements)
$31,410.00 (charges)
$3,687.50
Total $201,122.50
[2]
The parties accepted that in determining the amount of security, I need not accept the entirety of Mr Richards', or Mr Grisenti's, evidence. Rather, the court could, in exercising its discretion, arrive at its own figure to be provided by way of security. I have adopted that course. I have had regard to the entirety of Mr Richards' affidavit and Mr Grisenti's report and arrived at the figures, and for the reasons, set out below.
I deal with the relevant categories of costs in turn.
[3]
Preparation for trial
Mr Richards estimated the respondent's costs of preparing for trial, taking into account the involvement of two instructing solicitors and junior and senior counsel, to be $280,500, of which $200,000 was sought as a reasonable sum. The breakdown was as follows:
Lawyer Time Rate Total
Senior Counsel 10 days $11,000 $110,000
Junior Counsel 20 days $4,400 $88,000
Senior solicitor 10 days $6,600 $66,000
Junior solicitor 10 days $1,650 $16,500
Total (incl GST) $280,500
[4]
Mr Grisenti's estimate of the respondent's costs of preparing for trial was $180,410, broken down as follows:
Description Disbursements Charges
General attendances and correspondence (for senior and junior solicitors) $16,890
Senior solicitor's attendance in conference with witnesses - 6 witnesses, 2 hours per conference, 12 hours $7,920
Senior solicitor's attendance reading schedules of objections to evidence, draft list of agreed facts, draft list of issues to be resolved at trial, draft Court Book index, and statement of agreed facts - 5 hours $3,300
Senior solicitor's attendances in conference with Counsel regarding documents for trial - 5 hours $3,300
Senior Counsel's fee to confer and settle documents - 1 day $8,800
Junior Counsel's fee to confer and settle documents - 2 days $8,800
Senior Counsel's fee for general preparation for trial - 10 days $88,000
Junior Counsel's fee for general preparation for trial - 10 days $44,400
$150,000 $31,410
[5]
One of the differences between Mr Richards' and Mr Grisenti's estimates is the proper allowance for senior counsel's fees. This proceeding raises serious allegations and, in my view, there should be an allowance of fees for counsel of the standing chosen by the respondent.
I would allow $203,500 for the respondent's costs of preparation for trial, comprising $154,000 for counsel's fees and $49,500 for solicitor's fees. I have accepted Mr Grisenti's opinion that it is appropriate to reduce the time allowed for the senior solicitor in Mr Richards' estimate.
[6]
Discovery
Mr Richards' estimate of the respondent's costs in respect of discovery was $51,230, broken down as follows:
Task Time Rate Total
Junior counsel preparing requests of specific documents or limited categories of documents pursuant to steps (a) and (b) of the Redfern Discovery Procedure 2 hours $440 $880
Senior counsel settling such requests 1 hour $1,375 $1,375
Junior counsel preparing objections and response to Fine China's objections 3 hours $440 $1,320
Senior counsel settling those documents 1 hour $1,375 $1,375
Junior counsel preparing for and appearing on hearing of objections 1.5 days $4,400 $6,600
Senior solicitor assisting with above tasks 4 hours $660 $2,620
Junior solicitor assisting with above tasks 4 hours $165 $660
Senior counsel preparing for and appearing on hearing of objections 1.5 days $11,000 $16,500
Senior solicitor instructing on hearing, including preparation 1.5 days $6,600 $9,900
Travel and accommodation costs for hearing on objections $10,000
Total (incl GST) $51,230
[7]
Mr Grisenti did not include an estimate in relation to discovery because his instructions were to assume the Redfern Discovery Procedure would not apply and discovery of categories of documents would occur.
Mr Richards' estimate was prepared on the assumption that the Redfern Discovery Procedure would be adopted. However, I directed the parties to exchange categories of documents. The respondent requested discovery of four categories by the applicant, which were agreed. The applicant's categories for discovery by the respondent were produced shortly before the hearing of the application to join MAWF and I determined the disputed categories at the hearing on 16 December 2024. As a result, the time associated with the steps referred to in Mr Richards' estimate was significantly less than estimated.
In my assessment, $13,475 is a reasonable sum to allow for the respondent's costs of discovery. This includes the fees for senior and junior counsel included in Mr Richards' estimate (but limited to a half day for appearances) and half a day for a junior solicitor to instruct at the hearing. I did not allow solicitor's fees for "assisting" to avoid duplication. I have not included an allowance for travel or accommodation as the respondent has chosen to instruct solicitors and brief counsel from interstate and, in any event, no breakdown of the amount claimed was provided.
[8]
Subpoenas
Mr Richards' estimate of the respondent's costs in respect of subpoenas was $44,540, broken down as follows:
Task Time Rate Total
Junior counsel considering subpoenas and advising as to their efficacy 2 hours $440 $880
Correspondence with AJH with respect to efficacy of subpoenas (by senior solicitor) 1 hour $660 $660
Preparation for an appearance on application to set aside subpoenas (Senior Counsel) 1.5 days $11,000 $16,500
Preparation for and appearance on application to set aside subpoenas (Junior Counsel) 1.5 days $4,400 $6,600
Senior solicitor instructing on that hearing 1.5 days $6,600 $9,900
Travel and accommodation costs for hearing $10,000
Total (incl GST) $44,540
[9]
Mr Grisenti's estimate of the respondent's costs in respect of subpoenas was $4,400, broken down as follows:
Description Disbursements Charges
Senior solicitor's attendance reading subpoenas - say 5 units $330
Junior Counsel's fee to consider subpoenas and advising - 1 hour $440
Senior solicitor's attendance on respondent obtaining instructions - 5 units $330
Reading documents produced under subpoena - say 3 hours at senior solicitor's rate $1,980
Junior Counsel's fee to read subpoenaed documents - say 3 hours $1,320
Subtotal $1,760 $2,640
[10]
While the applicant has issued subpoenas in the past, the respondent did not identify any subpoenas that might be on the horizon. I would adopt Mr Grisenti's estimate of $4,400 for the respondent's costs in respect of subpoenas because I regard Mr Richards' estimate as excessive in the circumstances.
[11]
Mediation
It is unnecessary to make an allowance for the respondent's costs of the mediation because, on 7 November 2024, the court made orders by consent that the parties would bear their own costs of the mediation.
[12]
Expert evidence
Mr Richards' estimate of the respondent's costs for expert evidence was $7,700. That estimate was agreed by Mr Grisenti. I would allow $7,700 for the respondent's costs for expert evidence.
[13]
Particulars
Mr Richards' estimate of the respondent's costs in respect of requests for particulars was $24,760, broken down as follows:
Task Time Rate Total
Junior counsel drafting request 2 hours $440 $880
Junior counsel considering response and advising 2 hours $440 $880
Preparation for and appearance on application for further particulars (Junior Counsel) 1.5 days $4,400 $6,600
Senior solicitor instructing on that hearing 1.5 days $6,600 $9,900
Travel and accommodation costs for hearing $6,500
Total (incl GST) $24,760
[14]
Mr Grisenti's estimate of the respondent's costs in respect of requests for particulars was $3,925, broken down as follows:
Description Disbursements Charges
Junior Counsel's fee to draft particulars - 2 hours (agreed) $880
Solicitor's attendance reading request - 5 units $330
Service of request $55
Junior Counsel's fee to read response to request for particulars - 30 minutes $220
Solicitor's attendance reading response - 5 units $330
General attendances and correspondence (solicitor's attendances) $2,110
Subtotal $1,100 $2,825
[15]
At present, there are no foreshadowed requests for particulars. However, a request for particulars may arise from the filing of the third further amended statement of claim. Mr Richards' and Mr Grisenti's estimates are somewhat similar apart from Mr Richards' allowances for the filing of an application and hearing. I would allow $3,925 for the respondent's costs in respect of requests for particulars. This does not include an allowance for an application or hearing as they do not seem likely at this stage.
[16]
Joinder
Mr Richards' estimate of the respondent's costs in relation to the application to join MAWF was $43,000, broken down as set out in the table below. I assume the reference to "subpoenas" is an error and should refer to the application to join MAWF:
Task Time Rate Total
Preparation for and appearance on application to set aside subpoenas (Senior Counsel) 1.5 days $11,000 $16,500
Preparation for and appearance on application to set aside subpoenas (Junior Counsel) 1.5 days $4,400 $6,600
Senior solicitor instructing on that hearing 1.5 days $6,600 $9,900
Travel and accommodation costs for hearing $10,000
Total (incl GST) $43,000
[17]
Mr Grisenti's estimate of the respondent's costs in relation to the application to join MAWF was $20,165, broken down as follows:
Description Disbursements Charges
General attendances and correspondence (solicitor's attendances) $6,580
Reading application - say 5 units at senior solicitor's rate $330
Reading submissions - say 5 units at senior solicitor's rate $330
Junior Counsel's fee to prepare submissions opposing application - 5 hours $2,200
Senior Counsel's fee to settle submissions - 2 hours $1,760
Reading submissions - say 5 units at senior solicitor's rate $330
Service of summons, affidavit, and submissions $55
Instructing Counsel on return on application - 3 hours at solicitor's rate $1,980
Senior Counsel's fee to appear - half day $4,400
Junior Counsel's fee to appear - half day $2,200
Subtotal $10,560 $9,605
[18]
The application to join MAWF, which was opposed, was heard on 16 December 2024. As mentioned above, I would grant leave to join MAWF and leave to file and serve the proposed third further amended originating application and proposed further third amended statement of claim and that the respondent should have his costs. The hearing on 16 December 2024 also addressed the application for security for costs and discovery, for which I have allowed a half day for counsel's and solicitors' fees. I would allow $25,300 for the respondent's costs of the joinder of MAWF. This amount reflects Mr Richards' estimate, but I have reduced counsel's and solicitors' fees to appear to half a day to avoid double-counting and I have made no allowance for travel or accommodation for the reasons mentioned.
[19]
Conclusion - security for costs
For the reasons set out, there will be an order that the applicant provide security for the respondent's costs up to trial in the sum of $258,300, as follows:
$100,000 by 4.00pm on 31 January 2025; and
$158,300 by 4.00pm on 31 March 2025.
The parties are directed to confer in relation to the form of security and, if agreement on the form cannot be reached, there is liberty to apply.
The applicant resisted the application for security. There is no apparent reason why the applicant should not pay the respondent's costs of the application.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Neskovcin .
In the second further amended statement of claim dated 15 April 2024, the applicant alleged that in breach of fiduciary duties owed to the applicant, the respondent transferred $19,747,000 from a bank account in the name of CSJH (Australia) Pty Ltd to a bank account of MAWF, a company controlled by the respondent. The second further amended statement of claim, which was filed pursuant to leave granted by O'Callaghan J on 8 April 2024, raised a knowing receipt claim and knowing assistance claim against MAWF and sought to add MAWF as a second respondent. The applicant required, but had not sought, leave to join MAWF: see Fine China Capital Investment Limited v Qi (No 4) [2024] FCA 343 (Fine China (No 4)) at [64]-[65] (O'Callaghan J).
The applicant now seeks leave pursuant to r 9.05 of the Rules to join MAWF as the second respondent and leave to file and serve a proposed third further amended originating application and proposed third further amended statement of claim. The proposed third further amended statement of claim includes knowing receipt and knowing assistance claims against MAWF and the applicant seeks, among other things, tracing orders and equitable compensation by way of relief against MAWF.
The respondent conceded that the proposed pleading raises an arguable claim for knowing assistance under the second limb of Barnes v Addy (1874) LR 9 Ch App 244 and that, if such a claim were to succeed, the relief to which the applicant might be entitled might include a declaration of constructive trust and an order for an account of funds received in breach of fiduciary duties. I raised with the applicant whether the proposed amended application and proposed pleading clearly articulates the relief sought by the applicant in the event that it is successful on this aspect of the claim.
The respondent submitted, however, that a knowing receipt claim was not open on the facts as pleaded because such a claim, based on the first limb of Barnes v Addy, applies to a recipient of trust property (or property to which a fiduciary duty attaches): see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [112]-[115] (Gleeson CJ, Gummow, Callinan, Heyden and Crennan JJ), and it is not alleged that MAWF is a recipient of trust property.
The proposed third further amended originating application seeks, by way of relief, the taking of accounts, tracing orders, a declaration that the respondent and MAWF hold certain sums on constructive trust for the applicant and orders for equitable compensation. The respondent further submitted that the tracing orders sought must relate to the knowing receipt claim and alleged receipt of trust property. Because such a claim was not open on the facts as pleaded, it was submitted, the proposed amended application and pleading should not be allowed insofar as they seek tracing orders. The applicant, however, submitted that the respondent had not pointed to, and was unable to point to, an authority for the proposition that tracing orders are not available in a knowing assistance claim and that the matters raised by the respondent are issues for trial.
The proposed amended application and relief claimed by the applicant are substantially in the form considered by O'Callaghan J at the time of the respondent's application for summary judgment: Fine China (No 4) at [59]. His Honour declined to grant summary judgment in respect of the applicant's claims, finding that (at [61]), "each of those claims for relief, which are founded on the cause of action I have concluded is reasonably arguable, should be left for determination at trial." I respectfully agree. Furthermore, I am satisfied that the respondent has been aware of the claims in the proposed pleadings for some time and that allowing the amendments should not add significantly to the time and effort of responding to the applicant's claims.
I would therefore grant leave pursuant to r 9.05 of the Rules to join MAWF as the second respondent and leave to file and serve the proposed third further amended originating application and proposed third further amended statement of claim. There is no apparent reason why the applicant should not pay the respondent's costs of the application to join MAWF and costs thrown away by the amendments.
SECURITY FOR COSTS
The respondent sought an order pursuant to s 56 of the Federal Court Act and s 1335 of the Corporations Act that the applicant provide security for the respondent's costs up to trial in the amount of $350,000, or such other amount as the court deems just, by paying such amount into court. The basis for the application was that the applicant is a foreign corporation with no assets in Australia.
The applicant submitted that it should not be ordered to provide security for the respondent's costs on the following grounds:
the applicant has substantial enforceable assets within the jurisdiction;
the applicant has significant enforceable assets in reciprocal enforcement jurisdictions;
the respondent owes the applicant SG$1.71 million pursuant to a prior settlement agreement and the respondent could set off any costs order against that debt;
if the court is minded to make an order for security for costs, it is just and fair that the quantum of any security should be limited to the cost of enforcing any costs order in the relevant jurisdiction;
the respondent's foreign residency or international profile undermines his reliance on the applicant's foreign residency as a justification for security for costs;
the applicant has strong prospects of success; and
the amount sought by way of security for costs is excessive.
Legal principles
The principles governing the grant of an order for security for costs are well-established. Whether or not the court in fact makes such an order is a matter of discretion. This discretion is a broad one and is unfettered, subject only to the limitation that it must be exercised judicially, having regard to the merits of each case: see Derma Pen LLC v Biosoft (Australia) Pty Ltd (Security for Costs) [2022] FCA 885 at [4]-[6] (Perram J), referring to Commissioner of Taxation v Vasiliades [2016] FCAFC 170; 344 ALR 558 at [71]-[75] (Kenny and Edelman JJ) and Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at [6] (Allsop CJ and Middleton J).
In Concrete Mining Structures Pty Ltd v Cellcrete Australia Pty Ltd (No 2) [2016] FCA 360, Edelman J (at [13]) listed a number of factors which the court may consider when determining whether to grant security for costs. These include:
the likelihood of an applicant being unable to pay a respondent's costs;
whether the application for security is oppressive;
whether the award of security would deny an impecunious applicant a right to litigate;
whether any persons standing behind an applicant have offered any security or personal undertaking to be liable for the costs, and if so, the form of that security or undertaking;
The likelihood of the applicant being unable to pay the respondent's costs
The respondent submitted that, should the applicant not succeed in its claim, the applicant will be unable to pay the respondent's costs. The respondent bore the onus and adduced no evidence as to the applicant's financial position. The respondent relied principally on the assertion that the applicant is a foreign corporation with no assets in Australia.
The applicant submitted that it holds assets that are substantial and accessible, submitting that this significantly reduces any risk of non-recovery by the respondent, on the following bases.
First, the applicant submitted that it has substantial enforceable assets within the jurisdiction, including a 55% shareholding in Sunshine Scenery (Australia) Pty Ltd which owns land in Queensland valued at A$25 million.
This 'asset' is in issue in the proceeding and, as the respondent submitted, was the only asset in the jurisdiction identified by the applicant and will not be available to meet the respondent's costs if the applicant is unsuccessful, because the court will have found that the applicant is not the beneficial owner of shares in Sunshine. The applicant submitted that contested ownership of an asset does not preclude its consideration, relying on Yara Australia Pty Ltd v Oswal (2013) 41 VR 245; [2013] VSCA 156 at [118], [120] (Priest JA, Redlich JA and Macaulay AJA agreeing). In Yara, however, the respondent to the application for security for costs had a beneficial ownership in a fund within the jurisdiction which would have been available to meet a costs order and the 'contested ownership' was as to the extent of the interest in the fund.
Secondly, the applicant submitted that the applicant has significant enforceable assets in reciprocal enforcement jurisdictions including assets in Hong Kong and CHF13.5 million in accounts receivable in Switzerland. As the respondent submitted, however, the evidence adduced by the applicant did not attest to the value of the assets in Hong Kong, the recoverability of the loan in Switzerland or whether there are any competing claims against those assets. Furthermore, the respondent submitted that the mere fact that an Australian judgment can be enforced in a reciprocal enforcement jurisdiction, without more, is not a decisive factor against ordering security, relying on Maxim's Caterers Limited v Magnona Pty Ltd (No 1) [2010] FCA 450 at [5] (Jagot J) and Farmitalia Carlo Erba SrL v Delta West Pty Ltd (1994) 28 IPR 336 (Heerey J).
Thirdly, the applicant alleged that the respondent owes the applicant SG$1.7 million pursuant to a prior settlement agreement which exceeds any amount of security that might be ordered and the respondent could set off any cost order against that debt. The affidavit of Ms Mei dated 28 November 2024 stated that there was a court proceeding in Singapore, the proceeding was resolved, a settlement agreement was entered into and the respondent has made payments to the applicant pursuant to the settlement agreement. Ms Mei's affidavit attached the settlement terms which, according to Ms Mei, provides that the respondent agreed to pay the applicant the sum of SG$3,930,000 in exchange for the applicant discontinuing proceedings it had initiated against the respondent in Singapore, Australia, Hong Kong and Luxembourg. Ms Mei stated that the respondent had made nine payments between 8 July 2024 and 19 August 2024 totalling SG$2.2 million, leaving an amount outstanding of SG$1.71 million. The applicant submitted that the respondent has acknowledged a debt owed to the applicant and is able to set off any cost order in his favour against that debt.
whether an applicant has any rights which it can exercise against assets of the respondent to satisfy an order for costs in its favour; and
the prospects of success of an applicant's claim.
What weight, if any, is to be afforded to each of these factors will turn upon the particular circumstances of the case: Derma Pen at [6] (Perram J).
The court's purpose in ordering that a foreign applicant give security for costs is to ensure that a successful respondent will have a fund available within the jurisdiction of this court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement: Energy Drilling Inc v Petroz NL [1989] ATPR 40-954 at 50-422 (Gummow J); Vasiliades at [72] (Kenny and Edelman JJ).
The respondent did not file any evidence regarding the purported settlement agreement, did not dispute the translated settlement agreement (which was translated from Mandarin) and did not seek to challenge Ms Mei's evidence. The respondent submitted, however, that the terms of the settlement agreement provide that the settlement was conditional upon withdrawal of certain legal proceedings, including the present proceeding which is ongoing. Furthermore, the respondent submitted that the settlement agreement is unsigned, does not appear to be a binding agreement, has the character of a 'without prejudice' communication and should be treated with caution. The applicant did not seek to contradict the point that the settlement agreement is unsigned and, as a result, I am not prepared to proceed on the basis that the settlement agreement evidences a debt owed to the applicant which the respondent has acknowledged.
For the reasons set out above, I am not satisfied that the applicant holds accessible assets within the jurisdiction of this court or elsewhere that significantly reduces the risk of non-recovery of costs ordered in favour of the respondent.