DRE Capital Pty Ltd v Wixels Property Holdings Pty Ltd

Legislation Cited: Competition and Consumer Act 2010 (Cth), r 42.21
Contracts Review Act 1980 (NSW)
Corporations Act 2001 (Cth), s 1335
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited: Armstrong Scalisi Holdings Pty Ltd v Piscopo (Trustee), in the matter of Collins [2017] FCA 423
Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd [2004] FCA 1334
Commissioner of Taxation v Vasiliades [2016] FCAFC 170; 344 ALR 558
Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 5) [2020] FCA 953
Eastgate Properties Pty Ltd v J Hutchinson Pty Ltd [2005] QCA 342; [2006] 2 Qd R 1
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 2) [2012] FCA 23
General Trade Industries Pty Ltd (in liq) v AGL Energy Ltd [2020] FCA 1562
Gumm v Commissioner of Taxation [2024] FCA 71
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Kupang Resources Ltd (subject to Deed of Company Arrangement) v Elias [2018] NSWSC 1553
Les & Zelda Investments Pty Ltd v Whitehaven Coal Ltd [2020] NSWSC 1091
Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2015] NSWCA 149
Save the Ridge Inc v Commonwealth of Australia [2004] FCA 1289
SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104

Category: Principal judgment

Parties: DRE Capital Pty Ltd (Plaintiff/Respondent)
Wixels Property Holdings Pty Ltd (First Defendant/Second Applicant)
Rosemarie Brenda Guerin (Second Defendant/First Applicant)

Representation: Counsel:
R Glasson (Plaintiff)
A P Cheshire SC (Defendants)
M McGirr (Defendants)
Solicitors:
AHD Lawyers (Plaintiff)
Needham Ainsworth (Defendants)

File Number(s): 2025/00128330

Publication restriction: Nil

JUDGMENT

1. This judgment involves an application by the defendants seeking security for costs.

2. The plaintiff/respondent is DRE Capital Pty Ltd (DRE Capital). It is represented by R Glasson of counsel. The first defendant/second applicant is Wixels Property Holdings Pty Ltd (Wixels). The second defendant/first applicant is Rosemarie Brenda Guerin. Both defendants are represented by A P Cheshire SC with M McGirr of counsel.

3. The defendants relied on the affidavit of Jenny Needham affirmed on 30 April 2025 (Needham affidavit). The plaintiff relied upon the affidavit of Vincent Zhiqing Zhu dated 23 May 2025 (Zhu affidavit) and the affidavit of Yucheng Yang (Mr Yang) dated 18 June 2025 (Yang affidavit).

Background

4. On or around 20 December 2021, KD Funds Pty Ltd (KD Funds), as trustee of the Fairfax Road Trust, provided $1,392,646 to the first defendant in order for it to settle the purchase of a property, XX Fairfax Road, Bellevue Hill. At this time, KD Funds and the first defendant entered into a Secured Loan Agreement, guaranteed by the second defendant. The loan went into default in March 2022. The plaintiff replaced KD Funds as trustee of the Fairfax Road Trust in November 2022, and the mortgage was transferred to it.

The amended notice of motion

5. By an amended Notice of Motion (NOM) filed 5 May 2025, the defendants now seek the following:

6. Pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.21 and or s 1335 of the Corporations Act 2001 (Cth) (Corporations Act), the plaintiff is to provide security for the defendants’ costs by paying the sum of $200,000 or such other amount as the Court deems appropriate, by way of payment into Court by otherwise providing security of that value within 14 days of the date of these Orders.

7. If the security referred to in above order 3 is not provided within 14 days, the claim be dismissed pursuant to r 42.21(3) UCPR.

8. In the alternative to above order 4, if the security referred to in order 3 is not provided within 14 days of the date of these orders, the plaintiff’s claim be stayed until such time as the security is provided.

9. At the outset of this hearing, the plaintiff accepted that par 11 of the statement of claim requires amendment. I granted leave to the plaintiff to file and serve an amended statement of claim within 28 days. I made an order that the plaintiff is to pay the defendants’ costs thrown away by the amendments. The only issue that is left to decide is whether DRE Capital should be required to lodge security for costs.

The pleadings

7. On 3 April 2025, the plaintiff filed its Statement of Claim (SOC) seeking recovery of the loan of $1,392,646 plus interest for a total of $2,853,512.57, or alternatively, damages.

8. The entitlement to relief is said to arise under:

9. a Secured Loan Agreement dated 20 December 2021 (SLA);

10. a General Security Deed (GSD); and

11. a registered Mortgage over the title of Unit XX, XX Fairfax Road, Bellevue Hill NSW (Property)

12. They entered between KD Funds (as lender), the first defendant (as borrower) and the second defendant (as guarantor) on or around 20 December 2021.

13. Relevantly, the SOC also alleges:

14. that KD Funds entered into the SLA and GSD “as trustee for the Fairfax Road Trust” (see par 4 of the SOC); and

15. the plaintiff replaced KD Funds as trustee and thereby became entitled to bring these proceedings (see pars 10 and 11 of the SOC).

16. Further issues that are likely to arise at the hearing include:

17. whether there were deficiencies in the SLA, including as to KD Funds’ position as a trustee and as to its formal execution by a non-director, such that it cannot be enforced generally and in particular against the second defendant as guarantor;

18. whether there are remedies available to relieve the second defendant of any liability as a guarantor, such as under the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (ACL) or the Contracts Review Act 1980 (NSW);

19. the provision for a higher rate of interest upon default, in circumstances where it is compounded, being a penalty;

20. the manner in which payments made by the defendants have been credited;

21. the charging of GST by apparently non-registered entities; and

22. a contention that the delays in payment (and therefore the accruing interest) were caused by the plaintiff's own misconduct, in particular in failing to provide payout figures for proposed refinancing by the defendants.

23. The defendants have not yet filed any defence in the proceedings.

The law – security for costs

13. The principles concerning security for costs are well established and not in dispute.

14. The threshold issue is set out in r 42.21 UCPR that relevantly reads as follows:

42.21 Security for costs

(1) If, in any proceedings, it appears to the court on the application of a defendant—

…

(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or

…

the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant’s costs of the proceedings and that the proceedings be stayed until the security is given.

15. Similarly, s 1335 of the Corporations Act relevantly reads as follows:

1335 Costs

(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. [The threshold issue]

16. If the threshold issue is established, then the discretionary factors to be considered when making an order for security for costs are non-exhaustively set out in UCPR r 42.21(1A). The discretionary facts identified by the parties as being relevant in this case have been extracted below:

(1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant—

(a) the prospects of success or merits of the proceedings,

…

(j) the costs of the proceedings,

(k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute,

…

17. The discretion to award security for costs is broad and unfettered. However, in determining the quantum of security the Court’s discretion must be exercised judicially and is guided by the following principles (Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 5) [2020] FCA 953 at [10] per Middleton J):

(a) the Court is to order an amount which it thinks is “just and reasonable” having regard to all of the circumstances of the case; (b) the purpose of security for costs is not to provide full protection or a complete indemnity for the estimated costs of the party seeking security; (c) the Court is to adopt a “broad-brush” approach taking into account the “feel” of the case to determine the amount of security to be ordered, which should be based upon evidence; (d) the Court is not bound to give security in the amount sought and is not bound by the estimates of the parties, subject to according natural justice to the parties if the Court proposes to go outside these estimates; (e) in making its assessment of the appropriate quantum, the Court may scrutinise individual items but not to the extent of minute examination akin to a taxation; (f) the amount ultimately fixed by the Court must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide security; and (g) insufficiency in the evidence substantiating a claim for security may be reason for the Court to look critically at the estimate provided and may be reason for the Court to apply a heavier percentage discount to the amount sought.

18. A conservative approach should be taken while having regard to the estimate of a respondent: Carey*-*Hazell v Getz Bros & Co (Aust) Pty Ltd [2004] FCA 1334 at [36] (French J). There must be proper evidence to substantiate a claim for security for costs: Save the Ridge Inc v Commonwealth of Australia [2004] FCA 1289 at [24] (Emmett J).

19. The onus of leading evidence to establish its entitlement to an order for security in the amount sought lies with the party seeking security. This must be done by evidence having “some characteristic of cogency”: *Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.*V. (No 2) [2012] FCA 23 at [74] and [89] (Edmonds J) referring to Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [60]-[62].

20. Fairness lies at the heart of the exercise of the discretion, both as to whether security should be ordered and also in what amount: Commissioner of Taxation v Vasiliades [2016] FCAFC 170; 344 ALR 558 at [90] citing Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at [92].

21. Even where a relatively detailed and realistic estimate of actual and apprehended costs of an appeal is provided in the evidentiary material, it is the ordinary course for only a fraction of those costs to be ordered by way of security*:* Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2015] NSWCA 149 at [8] per Leeming JA; SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104 at [14(4)] (‘SSABR’). The Court is not bound to accept a respondent’s assessment of the costs likely to be incurred or recovered: SSABR at [14(5)].

22. The courts have recognised that, unlike independent costs experts, solicitors giving costs estimates sometimes have difficulty proffering an impartial affidavit as to costs: General Trade Industries Pty Ltd (in liq) v AGL Energy Ltd [2020] FCA 1562 at [39]; Gumm v Commissioner of Taxation [2024] FCA 71 [128]-[130] (Derrington J).

23. As was said in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 204, the offer of an undertaking to accept personal liability for the applicant's costs is “a factor weighing heavily against the making of an order against the applicant for provision of a cash or other security for costs” (citing Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405).

The impecuniosity of the plaintiff (r 42.21(1A)(c)) – the threshold issue

The defendants’ submissions

24. Ms Needham, the defendants’ solicitor, deposed in relation to the plaintiff’s financial position:

(a) it has a total paid up capital of $100; (b) its registered office is a residential address, being XX Balmoral Street, Waitara NSW 2077 (a property owned by Mr Yang); (c) it has not registered any financial statements with ASIC; and (d) it owns no real property.

25. The defendants submitted that the Court can be comfortably satisfied that, should the plaintiff be ordered to pay costs, it will not be able to meet that order, and is essentially impecunious.

26. In reply, the defendants’ counsel submitted that given the funds in these bank accounts have mobility – referring to a balance of more than $1,000,000 followed by a withdrawal of $600,000 restoring the bank account to the usual $400,000 – proper security should be provided.

The plaintiff’s submissions

27. Ex 1 is an ASIC search of the properties owned by My Yang and with his wife, Lijue Wang. After the hearing took place, I granted leave for Mr Yang to file an affidavit as to his assets and liabilities. That affidavit was filed on 18 June 2025. His estimates as to the value of his properties are based on internet searches attached to his affidavit, so I have referred to these properties at their estimated value and I have listed the corresponding balance on each property. I have extracted the details of the ASIC search. They are as follows:

28. XX Balmoral Street, Waitara NSW 2077

(a) Estimated property value: $2,570,000. (b) Mortgage balance: $1,430,000. (c) Equity value: $1,140,000.

2. XX Balmoral Street, Waitara NSW 2077

(a) Estimated property value: $3,490,000. (b) Mortgage balance: $840,000. (c) Equity value: $2,650,000.

3. XX Park Avenue, Waitara NSW 2077

(a) Estimated property value: $760,000 (b) Mortgage balance: $399,000 (c) Equity value: $361,000

4. XX East Street, Granville NSW 2142

(a) Estimated property value: $530,000 (b) Mortgage balance: $475,000 (c) Equity value: $55,000

28. In total, the equity value for four properties combined is $4,605,000.

29. Also, he and his wife’s joint accounts have the following balances in the period from June 2024 to 22 May 2025: one with a balance over $400,000 and another one with $300,000. The bank statements were provided.

Resolution

30. I find the evidence of Mr Yang, as a director, as to the value of his properties (some owned with his wife) less the amount due on the mortgages over the properties together with his undertaking to be most persuasive and negates against awarding security for costs. It is my view that while the plaintiff may be insolvent, Mr Yang as the director of the plaintiff has substantial real estate assets and funds in the joint bank accounts held with his wife. He has proffered an undertaking that he personally will be jointly and severally liable for any adverse costs order made against the plaintiff. In the exercise of my discretion, in light of Mr Yang’s undertaking, security for costs is not required.

Quantum

31. If I am wrong and the security of costs should be ordered, it should only be ordered up to the completion of evidence as the proceedings may settle at that stage.

32. I have briefly set out the defendants’ calculation of the quantum of its costs and disbursements, that with which I do not necessarily accept.

The defendants’ submissions on quantum

33. In the Needham affidavit, Ms Needham (solicitor for the defendants) estimates the defendants’ costs of defending the claims in the SOC are likely to be between $328,930 and $386,940 (inclusive of costs and disbursements incurred to date). Ms Needham indicates that around $7,620 plus GST has been incurred in legal fees as at 30 April 2025, with another $10,750 in unbilled work in progress.

34. As such, the sum of $200,000 as security represents a just sum having regard to the circumstances of the case.

The plaintiff’s submissions on quantum

35. DRE Capital submitted that the estimated $328,930 to $386,930 was excessive for a straightforward debt claim such as this one. It submitted that Ms Needham’s estimates of counsel’s hourly rate and the time (and in turn, costs) spent on several tasks were also excessive.

36. The plaintiff further submitted that the costs of this security for costs application should be excluded from any quantum of security awarded. It referred to Eastgate Properties Pty Ltd v J Hutchinson Pty Ltd [2005] QCA 342; [2006] 2 Qd R 1 at 2 where Keane JA said that as the costs associated with the security application relate to a separate interlocutory proceeding, it is not usually appropriate that those costs “be provided as security for the appeal”. See also Les & Zelda Investments Pty Ltd v Whitehaven Coal Ltd [2020] NSWSC 1091 at [33] per Parker J and Kupang Resources Ltd (subject to Deed of Company Arrangement) v Elias [2018] NSWSC 1553 at [27], where it was said that the costs of the security application had to be determined separately.

37. The plaintiff submitted that security for costs applications require realistic estimates free from duplication and unnecessarily excessive amounts; and pointed to the decision of Rares J in Armstrong Scalisi Holdings Pty Ltd v Piscopo (Trustee), in the matter of Collins [2017] FCA 423 where only half of the estimated costs were awarded because counsel’s fees were significantly less than the solicitor’s fees and some tasks involved “a degree of waste and unnecessary duplication of effort” (at [28]).

38. The plaintiff reiterated that the time estimates for tasks like drafting a defence, correspondence and work related to documents produced under subpoena, reviewing evidence and preparing evidence in reply are excessive. The number of lay witnesses to be called, subpoenas and the documents to be sought have not been specified, and the need for expert evidence has also not been explained. The further interlocutory applications contemplated in Ms Needham’s affidavit have not been identified. It is submitted that the estimates of counsel’s fees, including reviewing the brief, settling advice and affidavit evidence are also excessive.

The result

39. On the written undertaking of Mr Yang that he will be personally and severally liable for any adverse costs order that may be made against the plaintiff, I make no order for security for costs. Such formal undertaking is to be given within 14 days.

Costs

40. The costs of the defendants’ amended Notice of Motion filed 5 May 2025 are reserved.

The Court orders that

1. Paragraphs (3), (4) and (5) of the defendants’ amended Notice of Motion filed 5 May 2025 are dismissed.
2. Mr Yang is to provide a formal undertaking that he will be personally and severally liable for a costs order that may be made against the plaintiff within 14 days.
3. Costs of the defendants’ amended Notice of Motion are reserved.

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