HER HONOUR: By notice of motion filed on 9 June 2021, the plaintiff seeks an order varying an interlocutory order that required it to provide security for the defendants' costs. It seeks this order on the basis that the circumstances have changed since the security for costs order was made last year.
In support of its application, the plaintiff relies on the affidavit of its solicitor, Shih-Yen Tu, affirmed 9 June 2021.
There was no appearance by the defendants at the hearing of the plaintiff's motion this morning. However, as there was evidence that the defendants had been given notice of the application by a letter dated 21 June 2021 sent by registered post to their most recent address, I was satisfied that it was appropriate to proceed with the application.
The background to the plaintiff's application is as follows.
These proceedings were commenced by the plaintiff in October 2019. In the Amended Statement of Claim filed on 20 December 2019, the plaintiff claims that the first defendant holds certain units in a unit trust (Shengji Group Unit Trust) on trust for the plaintiff and seeks orders that the first defendant account to it for distributions received and specifically perform a Deed for Transfer of Unit Shares dated 18 May 2017. The plaintiff also seeks to trace the proceeds of sale of real property held by the third defendant as trustee for various other trusts in which the fourth defendant, as trustee of the Shengji Group Unit Trust, has an interest.
On 26 February 2020, freezing orders were made against the defendants in an amount up to and including $2,790,155. Pursuant to those orders, the defendants were required to disclose certain information regarding their assets and the location of four properties within seven working days. The defendants did not comply with that disclosure order.
By orders made on 7 May 2020, the plaintiff was required to pay $60,000 into Court as security for the defendants' costs of the proceedings in two tranches of $30,000 each. Following a notice of motion filed by the defendants on 25 August 2020 seeking to dismiss the proceedings on the basis that the security had not been paid, the plaintiff paid the $60,000 into Court as security on or about 15 September 2020. The plaintiff was ordered to pay the defendants' costs of their motion, with those costs to be assessed and payable at the conclusion of the proceedings.
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On 26 April 2021, orders were made for the defendants to file and serve a Defence to the Amended Statement of Claim and any affidavit evidence upon which they rely by 21 May 2021. Those orders have not been complied with.
On 9 June 2021, the plaintiff filed its notice of motion the subject of these reasons. The motion seeks an order that the security of costs order made on 7 May 2020 be varied, an order for the funds which were paid into Court as security to be returned to the plaintiff in full or part, and orders for disclosure in accordance with the freezing order or, alternatively, extended discovery. The plaintiff's motion was returnable before the Registrar on 21 June 2021. Six days prior to that date, on 15 June 2021, the defendants' solicitor filed a notice of intention of ceasing to act.
On 17 June 2021, the Registrar made an order extending the date for compliance with the disclosure order to 9 July 2021 and also ordered the plaintiff to notify the defendants of that order at the defendants' last known address within three business days which, as noted above, the plaintiff did.
On 24 June 2021, the defendants' solicitor filed a notice of ceasing to act.
The defendants have not complied with the order requiring disclosure in accordance with the Registrar's order of 17 June 2021.
The Court has the power to set aside, vary or discharge an interlocutory order, such as a security for costs order, even though the order was made in contemplation that it will operate until the final disposition of the proceedings. The Court must only exercise that power if there has been a material change of circumstances since the original application was heard or on the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46; Ballard v Brookfield Australia Investments Ltd [2013] NSWCA 82 at [11]-[12].
The plaintiff submits, and I accept, that there has been a material change in circumstances in this case since the making of the security for costs order.
The defendants have repeatedly failed to comply with the Court's orders. Most recently, they have failed to comply with orders requiring them to file and serve an amended defence and evidence as well as for disclosure which was initially required to be made following the making of the freezing orders in February last year. The defendants' repeated failures to comply with the disclosure orders regarding their financial matters has caused prejudice to the plaintiff in progressing its claims and has led to the plaintiff incurring additional costs by reason of the defendants' delays.
The other material change in circumstances is the withdrawal of the defendants' solicitor. The defendants' failure to comply with the orders and current lack of legal representation means that they have not incurred legal costs in defending the proceedings for some time and will not be incurring such costs unless and until they obtain new representation. Accordingly, and subject to the existing costs order in their favour, there seems to be little if any need for the defendants' position to be protected in respect of legal costs by way of security from the payment of the monies into Court.
I also note that the plaintiff accepts that there is no restriction on the defendants making another application regarding security for costs if circumstances change again and the defendants become active in the proceedings and comply with past orders.
Having regard to the above, I am satisfied that, in light of the material changes in circumstances, the current order for security for costs is no longer appropriate and it should be varied so that some, but not all, of the security is paid out to the plaintiff to enable it to use those funds to prosecute its claims. I do not consider that all of the security should be returned to the plaintiff as an allowance should be made to take into account the benefit of the existing costs order in favour of the defendants.
The plaintiff submits that an amount of $10,000 for security would be appropriate as the costs order related to an application which was ultimately not contested. While I do not have any material before me to ascertain the appropriate amount, adopting a broad brush approach, I have come to the view that an allowance of $15,000 is more appropriate. That amount should protect the defendants' position, noting there are multiple defendants and they were not represented today.
For these reasons, I make the following orders:
1. Order that the orders made on 7 May 2020 be varied to provide that the amount of security for the defendants' costs be reduced from $60,000 to $15,000.
2. Order that the amount of $45,000 paid into court by the plaintiff on 14 September 2020 as security for costs be paid out to the plaintiff.
3. The defendants to pay the costs of and incidental to the plaintiff's notice of motion filed on 9 June 2021.
4. The plaintiff to file and serve any further evidence upon which it relies by 6 August 2021.
5. The proceedings are adjourned to the Registrar's List for further directions or allocation of a hearing date on 11 August 2021.
6. The plaintiff's notice of motion dated 9 June 2021 otherwise be dismissed.
7. The plaintiff to notify the defendants of these orders by writing to the defendants' last known address at Unit 8, 78-82 Burwood Road, Burwood NSW 2134 within three business days of the making of these orders.
8. The Court notes that if circumstances change again and the defendants become active in the proceedings, the above orders are without prejudice to the defendants' ability to make another application regarding future security for costs.
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Decision last updated: 26 July 2021