Jianglong Shipbuilding Pty Ltd v Birdon Pty Ltd

Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) r 42.21

Cases Cited: Carrano Investment Holding Pty Ltd v Siennamia Investments Pty Ltd [2022] NSWCA 262
Chen v Golden Land Enterprises Pty Ltd (No 2) [2022] NSWSC 985
Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026
Li v New South Wales [2013] NSWCA 165
Prynew Pty Ltd v Nemeth [2010] NSWCA 94
Vintage Marine Art Pty Ltd v Henderson & Cremer (No 2) (2019) 101 NSWLR 77
Yara Australia Pty Ltd v Oswal (2013) 41 VR 245
Zisti v Bartter Enterprises Pty Ltd [2013] NSWCA 146

Category: Procedural rulings

Parties: Jianglong Shipbuilding Co Ltd (plaintiff)
Birdon Pty Ltd (defendant)

Representation: Counsel:
E Cox SC with D Ratnam (plaintiff)
S Kanagaratnam with B Hord (defendant)
Solicitors:
JC Legal Practice (plaintiff)
Corrs Chambers Westgarth (defendant)

File Number(s): 2024/00469065

Publication restriction: Nil

JUDGMENT

1. On 27 June 2025, I indicated that security for costs would be ordered against the plaintiff, Jianglong Shipbuilding Co Ltd, in the sum of $600,000. I now provide reasons for those orders.

2. Jianglong is a shipbuilding company domiciled in the People’s Republic of China. It has no assets in Australia. It has sued the defendant, Birdon Pty Ltd, for payment of $1,132,830 under a contract to build a number of ferries, and for the return of $1,105,200 in security called upon by Birdon. Those ferries were transferred into the possession of Birdon on 9 November 2020. The contract price was to be paid in United States Dollars.

3. In its defence and a cross-claim, Birdon alleges that the ferries are defective in many ways, and claims a set-off, a reduction in the contract price for delay, an entitlement to retain a proportion of the invoiced amounts, and the payment of damages to be quantified.

4. On 16 April 2025, Birdon filed a notice of motion seeking security for costs from Jianglong in the sum of $750,000 pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 42.21.

Principles

5. The legal principles relevant to a security for costs application are well known and were not in dispute.

6. The discretion to order security for costs is wide and ought to be exercised having regard to all the circumstances. Its purpose is “to secure justice between the parties”: Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026 at [89] (Ward J, as her Honour then was).

7. The discretion is essentially a balancing process between ensuring that adequate and fair protection is provided for the defendant, while avoiding injustice to an impecunious plaintiff by unnecessarily shutting her out or prejudicing her in the proceedings: Li v New South Wales [2013] NSWCA 165 (Li) at [12] and [32] (Ward JA, as her Honour then was, Macfarlan and Gleeson JJA agreeing).

Issues raised

8. There was no dispute that the discretion to order security for costs was engaged, because Jianglong is a foreign corporation with no assets in the jurisdiction. Further, Jianglong did not assert that awarding security would stultify the proceedings. Instead, Jianglong contended that it was a very wealthy company with assets in China worth many hundreds of millions of dollars. Senior counsel for Jianglong accepted at hearing that it must provide security, but the question was the purpose of that security: whether as security for the costs of the proceedings, or only as security for the costs of enforcing an adverse costs order against Jianglong.

9. Jianglong submitted that it ought only be required to give security representing a sum that would equate with the likely costs necessary for Birdon to enforce any costs judgment against it in China. Jianglong proffered that $50,000 would be a sufficient sum, but accepted that it had not proved the likely costs and that the Court may consider a different sum appropriate.

10. Jianglong resisted the Court making an order for security for costs of the proceedings as a whole primarily because:

11. Birdon’s cross-claim was not defensive, and therefore no security for costs ought to be ordered for Jianglong’s simple debt claim;

12. It was a corporation with substantial assets and a costs judgment could be enforced in China, so only security for enforcement costs ought to be ordered.

13. I reject each submission for the reasons below.

Is Birdon’s cross-claim in substance defensive?

12. The Court will not normally order security for costs in respect of a cross claim which is essentially defensive in nature in the sense that it impeaches the plaintiff’s claim. However, not all cross-claims will properly be regarded as defensive and factual analysis is required. Proceedings are properly regarded as defensive, inter alia, where they directly resist proceedings already brought: Prynew Pty Ltd v Nemeth [2010] NSWCA 94 at [20] (Beazley JA).

13. I accept that Birdon’s defence and cross-claim are defensive for the following reasons.

14. First, I accept the undertaking of Birdon through its solicitors that it will not seek to recover any amount from Jianglong beyond what is claimed by Jianglong in addition to Birdon’s costs. I also accept Birdon’s undertaking that it will not prosecute the cross-claim if Jianglong does not prosecute its claim or if Jianglong’s claim is stayed due to its failure to provide security.

15. Further, in its commercial list statement, Jianglong recognises that one issue to be determined at a final hearing is whether Birdon has any set off. The defence is in the nature of a set off. Birdon alleges that Jianglong is not entitled to be paid under the contract, by reason of many defects. Jianglong would need to demonstrate that it is entitled to be paid, which requires a consideration of the performance that was proffered when delivering the ferries. It is not disputed that Birdon would be entitled to sue for breach of warranties, whether pursuant to the contract or otherwise.

Is Jianglong’s wealth and possibility of enforcing a costs order in China sufficient?

16. I accept on the evidence that Jianglong has significant assets in China. I also accept that there is no reciprocal arrangement whereby Australian and Chinese judgments are enforced in the other jurisdiction.

17. Both parties relied on a recent decision of Parker J in Chen v Golden Land Enterprises Pty Ltd (No 2) [2022] NSWSC 985 (Chen). Jianglong accepted Parker J’s statements at [71], [75] and [78]:

… ordinarily the plaintiff’s residence overseas of itself is a good reason to order security. The second is that, as a matter of long-standing practice, it is then up to the plaintiff to put forward countervailing consideration if a security order is not to follow …

One way in which foreign plaintiffs may discharge this onus is, of course, if they can point to assets that they have in the jurisdiction which they can make available to meet the defendant’s costs … the same must be so for plaintiffs who can show that they can make assets available in some other foreign jurisdiction in which a costs order in favour of the defendant will be enforceable. The question which arises from Connop [v Varena Pty Ltd [1984] 1 NSWLR 71] and Barton [v Minister for Foreign Affairs (1984) 2 FCR 463] is whether, and to what extent, the existence of a means of enforcement in the plaintiff’s home jurisdiction … is also any answer to a security application …

In my view, the decisions in Connop and Barton are best seen as cases in which the foreign plaintiff was able to persuade the court that, in the circumstances of the case, the defendant’s entitlement to security would be sufficiently satisfied by ordering security in an amount necessary to register a costs judgment, rather than the full defence costs. Whether that will always be the case, irrespective of the type of litigation involved and the closeness of the foreign legal system involved, does not have to be determined in the present case. On any view, however, if it is suggested that some lesser sum than full security for the defendant’s costs will do justice in the particular case, the onus is on the plaintiff to prove the necessary facts. If Madgwick J intended to suggest to the contrary in Soh [v Commonwealth [2006] FCA 575] then, with respect, I do not agree.

18. Jianglong here did not prove any facts to support its submission that the only security that ought to be ordered was funds sufficient for Birdon to enforce a costs order in China, other than the fact that it had assets in China. No evidence was led about the process for enforcing a judgment in China, its likely success, and the costs involved in doing so.

19. I accept that in Chen, impecuniosity was an issue, which is not the case here. However, it is always a matter of discretion as to “how justice would best be served”: Yara Australia Pty Ltd v Oswal (2013) 41 VR 245 at [116] (Priest JA, Redlich JA and Macaulay AJA agreeing).

20. The only cases to which Jianglong referred, to support the limitation of security to a sum sufficient to enforce a foreign judgment, concerned situations where there is a reciprocal arrangement with the foreign jurisdiction, and therefore the process would be a relatively straightforward one of registering the judgment. I was not referred to any authority where an Australian court has only ordered security for costs for the costs of enforcing a judgment in a foreign jurisdiction where there was no reciprocal arrangement for the registration and enforcement of judgments between the foreign jurisdiction and Australia.

21. I accept that where there is no reciprocal arrangement for the enforcement of judgments, the difficulty in enforcing a judgment in the country of a non-resident is a discretionary matter which may be a significant factor. The “ease and convenience of enforcement procedures in the plaintiff’s country of residence will ordinarily be a primary consideration” in a security application against a foreign domiciled entity: see Li at [24].

22. For the reasons above and in circumstances where Jianglong emphasises the fact that it is wealthy and there is no impediment to it paying security for costs, and balancing that against the difficulty of Birdon enforcing a costs order in China, I consider the discretion ought to be exercised in favour of Birdon.

Quantum

23. The Court ought not set out to provide a complete indemnity to an applicant for security. Rather, what the Court is empowered to require is sufficient security. The appropriate amount of security should be assessed on a “broad brush” way, without recourse to a detailed costs assessment: Carrano Investment Holding Pty Ltd v Siennamia Investments Pty Ltd [2022] NSWCA 262 (Carrano) at [24] (Gleeson JA, Basten and Griffiths AJJA agreeing).

24. An order for security for costs cannot be made based merely on what is relayed in submissions as to quantum. Evidence as to quantum should be given in the usual way that allows any challenge or testing to be undertaken by the other party: Zisti v Bartter Enterprises Pty Ltd [2013] NSWCA 146 at [74] (Barrett JA, Beazley P and Ward JA agreeing).

25. It can be appropriate to order security at an amount lower than the quantum sought where an estimate contains a duplication of work between practitioners and where, at an early stage of proceedings, costs associated with a lengthy anticipated trial are sought: see eg Carrano at [25]-[27]. In the latter context, the matter can be resolved by an application for further security when the matter is more advanced, with the likely length of proceedings becoming more apparent.

26. It can be appropriate to order security for costs in tranches, such that security is provided progressively during proceedings: see eg Vintage Marine Art Pty Ltd v Henderson & Cremer (No 2) (2019) 101 NSWLR 77 at [14] (Brereton JA, Bell P, as the Chief Justice then was, and Macfarlan JA agreeing). This is particularly so where a case is of some complexity and likely to be lengthy.

27. In his evidence about the quantum of security sought, Birdon’s solicitor proceeded on the basis that Birdon if successful could recover 70% of counsel’s fees and disbursements, even though he opined that a party is typically entitled to recover 90% of such costs on a costs assessment.

28. Birdon therefore submitted that it sought $750,000 as a conservative approach, but accepted that if some of the concerns raised by Jianglong were taken into account, then the amount could be less.

29. Jianglong estimated an appropriate amount of security, if ordered, was $457,707.51. Jianglong’s senior counsel accepted that it might be appropriate to “pick the midpoint between the two”.

30. I consider it appropriate to reduce the amount sought by Birdon for various reasons including:

31. The hourly rates charged by Birdon’s lawyers may be higher than would be allowed on an assessment of costs;

32. It may not be necessary for a senior junior barrister to be briefed in addition to a silk;

33. Past costs incurred ought to be reduced in awarding security as they may be excessive;

34. The amount of time necessary for lawyers interacting with experts and lay witnesses may not be as great as estimated;

35. It is not possible to know the likely cost of a mediation, including who would be involved and their time commitment; and

36. There are many variables which render the likely length of a final hearing uncertain at this early stage.

37. Taking a broad brush approach as I was invited to do, I consider $600,000 is an appropriate amount of security.

Orders

32. Jianglong did not make any submission against the staggered approach to payment of security. I consider the approach submitted by Birdon is reasonable and I will adopt it.

33. For these reasons, the appropriate orders are as follows.

34. The Court accepts the undertaking of the defendant that:

(a) If the defendant obtains security for costs and the plaintiff complies with those orders, the defendant will not seek to recover any amount from the plaintiff beyond what is claimed by the plaintiff in the commercial list statement (or any amendment thereto) and the defendant’s costs in the proceedings; and (b) If the plaintiff does not proceed with the claim or if an order for security is made and not met with the consequence that the plaintiff’s claim is stayed, the defendant will not pursue its cross-claim against the defendant.

2. Pursuant to r 42.21 Uniform Civil Procedure Rules 2005 (NSW), the plaintiff is to provide security for the defendant’s costs of the proceedings in the sum of $600,000, paid in tranches on the following dates:

(a) Within 14 days, the plaintiff is to pay the sum of $200,000 into court. (b) Within 14 days of the completion of lay evidence in the proceedings, the plaintiff is to pay the sum of $200,000 into court. (c) At least 28 days prior to the date on which the trial of the proceedings is to commence, the plaintiff is to pay the sum of $200,000 into court.

3. The proceedings be stayed until such time as the security ordered pursuant to order 1 is provided.
4. The plaintiff is to pay the defendant’s costs of the notice of motion filed on the ordinary basis, as agreed or assessed.
5. Grant liberty to the parties to apply for an alternative costs order within seven days of today's date, setting out the application and any evidence and submissions of no more than three pages upon which they rely.
6. Should such an application be made for an alternative costs order, the responding party is to provide evidence and submissions of no more than three pages opposing any alternative costs order within seven days of receiving the first application.
7. The Court will determine any such alternative costs application on the papers, if appropriate.

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