Kuo v Barrow Yu

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: Kuo v Barrow-Yu (No 2) Citation: [2025] ACTSC 286 Hearing Date: 8 July 2025 Decision Date: 9 July 2025 Before: Mossop ACJ Decision: (1) The plaintiffs are to pay the defendants’ costs of the interlocutory freezing order application from 12 noon on 7 July 2025 and the costs of the affidavit of Stephen Barrow-Yu dated 7 July 2025 whether incurred before or after that time and there is otherwise no order as to the costs of application. (2) The proceedings are listed for directions before the Registrar on 22 September 2025 at 2:30 pm and the parties are directed to provide agreed or competing directions to the Registrar no later than 18 September 2025. Catchwords: PRACTICE AND PROCEDURE – FREEZING ORDERS – Lapse of freezing orders – where, at return date of freezing order, further evidence put before the court – where further evidence not consistent with an attempt to shield assets – appropriate to allow freezing order to lapse PRACTICE AND PROCEDURE – COSTS – Personal costs – where defence sought personal costs against plaintiffs’ solicitors or counsel – where defence counsel alleged plaintiffs breached obligations in ex parte hearings by misrepresenting or not disclosing certain matters – matters referred to by defence counsel are not misleading or otherwise insignificant – personal costs orders (1) potentially destructive of lawyer–client relationship and (2) productive of fragmentation and delay in litigation by the creation of procedural side issues – personal costs orders not made PRACTICE AND PROCEDURE – COSTS – Costs following ex parte grant of freezing order – where freezing order allowed to lapse due to further evidence – where a reasonable settlement offer made at a very late stage prior to return date of freezing order – where capacity of plaintiffs’ solicitors to act for them interfered with by an application by defendants for personal costs orders in related proceedings – limited costs order made in favour of defendants Legislation Cited: Court Procedures Act 2004 (ACT), s 5A Court Procedures Rules 2006 (ACT), rr 1701, 1753 Cases Cited: Kuo v Barrow-Yu [2025] ACTSC 259 Orpen v Tarantello [2009] VSC 143 Parties: Yi-Ling Kuo (First Plaintiff) Gavin Chen (Second Plaintiff) Lawrence Barrow-Yu (First Defendant) Stephen Barrow-Yu (Second Defendant) The Barrow-Yu Trading Pty Ltd (Third Defendant) Representation: Counsel D Gang; A Teo (Amicus curiae) A Herskope (Defendants) Solicitors Avia Lawyers (Plaintiffs) Vasilaras + Co Lawyers (Defendants) File Number: SC 222 of 2025 MOSSOP ACJ: Introduction

1. These reasons need to be read along with the earlier reasons that I gave for making a freezing order in these proceedings: see Kuo v Barrow-Yu [2025] ACTSC 259.

2. Subsequent to the making of those orders, there have been some developments in the proceedings in the County Court of Victoria. The plaintiffs’ statement of claim has been struck out with leave to replead. An indemnity costs order was made against the plaintiffs and leave reserved for the defendants to make an application for costs directed to the plaintiffs’ solicitors or plaintiffs’ counsel. That application is listed for hearing on 12 September 2025. The reasons for the making of those orders were not available.

3. The unfortunate consequence of the making of the application for personal costs orders directed to the plaintiffs’ solicitors or counsel has been to create a conflict of interest between the plaintiffs and the lawyers who have acted for them up to that point in the County Court proceedings, and also in this court on the application for the original freezing order.

4. For the purposes of the return date of the freezing order, the plaintiffs’ solicitors and counsel took the view that they were unable to appear for the plaintiffs, notwithstanding that the solicitors remained on the record and it was not clear how the solicitors had a conflict of interest in relation to the present proceedings in the ACT, as distinct from the proceedings in Victoria. Nevertheless, counsel and then the solicitor appeared only as amicus for the purposes of the hearing, but made only very limited submissions. The plaintiffs themselves, who I was told have limited English, did not appear for the purposes of the hearing.

5. Having regard to the additional evidence that was put before the court, I considered that it was appropriate to allow the freezing order to lapse. It lapsed at the end of 8 July 2025. The fundamental reason for that was that there was put before the court evidence as to the use of funds from the sale of the two units which does not support the contention that the transfer was done to put assets beyond the reach of creditors. The reason that I allowed the order to lapse was not because of the pleading difficulties that the plaintiffs have obviously had in the County Court or the defendants’ success in striking out the pleadings.

Use of the funds

6. An affidavit was sworn the day prior to the hearing (7 July 2025) and filed electronically on the morning of the hearing (8 July 2025) by Stephen Barrow-Yu.

7. The affidavit of Mr Barrow-Yu indicates that, as a result of the transfer of the two properties referred to as units 29 and 33, he obtained surplus funds totalling $384,602.41. That money was used to pay existing creditors: (a) La Trobe Mortgage was paid $268,252.60. These were liabilities of Reunion Place Pty Ltd pursuant to various accounts where the outstanding liabilities were in excess of $5 million. They involved making repayments on accounts which were incurring very substantial late payment fees. (b) Payment of $22,717.34, being liabilities in relation to an account identified as MA Money Mortgage, which I was informed by counsel for the defendants related to the Reunion Place development, although it was annotated as “Apartment 104-1A”. (c) Three other payments, made in part with these funds (along with other funds), and made through the bank account of the Barrow-Yu family trust, which are described as payments of “personal loans”. These payments appear to be of $70,000 to an individual, $50,000 to a couple and $50,000 to another individual, and are labelled: “Repayment of personal loans to friends”. The terms of those loans, their purpose, whether Mr Barrow-Yu was in default, and whether or not there had been demands for repayment was not in evidence.

8. The manner in which the funds are shown to have been disbursed does not, on the limited evidence before the court, appear able to be characterised as involving putting assets beyond the potential reach of the plaintiffs or other creditors. Rather, the evidence is more consistent with Mr Barrow-Yu and the entities with which he is involved being under obligations to a variety of creditors and extracting the equity available from the two units so as to be able to discharge liabilities to other creditors of him or entities associated with him.

9. It is axiomatic that a freezing order is not to be made simply in order to provide security for a judgment creditor or potential judgment creditor.

10. The change in the overall complexion of the evidence meant that there was no longer a strong enough case to indicate that the transfer of the two units was in order to avoid paying potential creditors to warrant the continuation of a freezing order.

Further contentions of the defendants

11. Counsel for the defendants also made submissions alleging a failure on the part of the plaintiffs to comply with their obligations when making an ex parte application. Counsel referred to the summary of those principles in Orpen v Tarantello [2009] VSC 143 at [27]. Counsel alleged that facts in paragraphs 10, 16, 17, 25, 33, 38, 39, 42 and 43 of the affidavit relied upon in support of that application (the affidavit of Mr Teo dated 6 June 2025) involved misrepresentations or nondisclosures. Having considered the submissions in relation to each of these paragraphs, I am not satisfied that there were material misrepresentations in that affidavit or that material which the plaintiffs were obliged to put before me was not put before me on the previous occasion. It is certainly not the case that any of the criticisms made by counsel for the defendants of the terms of those paragraphs indicated that I was misled or any matter of significance for my ultimate decision was withheld.

12. I did not, and do not, consider that any failure of duty provided a basis for allowing the freezing order to lapse.

Costs

13. If the defendants were successful in having the order discharged or not continued, counsel sought costs on an indemnity basis and also sought that leave be reserved to make an application for those costs to be paid by the lawyers who acted for the plaintiffs on the application.

14. Reliance was placed upon an open offer sent on 4 July 2025, the Friday before the Tuesday of the return date of the freezing order. That letter asserted that, by reason of the striking out of the plaintiffs’ statement of claim, there was “no foundation” for any alleged debt. The defendants offered to have the freezing order discharged with no order as to costs, but give an undertaking either privately or to the court that the two units would not be disposed of without giving 21 days’ written notice. It was open for acceptance until noon on Monday, 7 July 2025.

15. It is not clear when on 4 July 2025 that offer was communicated to the solicitors for the plaintiffs or when it was communicated to the plaintiffs themselves. It was a reasonable offer to resolve the application. The offer was reasonable even in circumstances where the disclosure of the factual matters subsequently disclosed to the court had not been made at that time.

16. It is not clear what advice, if any, the plaintiffs received in relation to this offer as, at some stage following the decision of the County Court on 4 July 2025, their solicitors and counsel determined that, in light of the application for personal costs orders against them, they had a conflict of interest and would be ceasing to act for the plaintiffs.

17. In the circumstances of this case, I consider that it is appropriate to make a limited costs order in favour of the defendants. The order that I will make is an order that the plaintiffs pay the defendants’ costs from midday on 7 July 2025 and the cost of the preparation of the affidavit of Mr Barrow-Yu, whether before or after that time. Otherwise, I will order that there be no order as to the costs of the application for a freezing order made on 18 June 2025.

18. I decline to make an indemnity costs order in the circumstances. That is for the following reasons: (a) the reasonable offer was only made at a very late stage and might, consistently with s 5A of the Court Procedures Act 2004 (ACT), have been made much earlier; (b) the ultimate success of the defendants in discharging the order was not on the basis that the plaintiffs did not have an arguable case but instead upon the basis of the additional evidence filed on the morning of the hearing; and (c) it was the application made by the defendants for personal costs orders in the County Court proceedings that meant that, at the critical moment for the purposes of the offer in the present proceedings, the capacity of the plaintiffs’ solicitors to act for them had been interfered with.

19. I also decline to reserve an opportunity for the defendants to make an application for personal costs orders against the lawyers who acted in the application.

Orders

22. The freezing order has lapsed. I have indicated the position in relation to costs. It is, in my view, not appropriate to accept the submission that the proceedings as a whole should be dismissed. There is a claim for final relief still on foot. Whether that claim is pursued in light of the evidence that has now become available is a matter for the plaintiffs when they are able to get proper advice. Having regard to the fact that the Victorian proceedings now involve the side issue of whether or not a costs order should be made against the plaintiffs’ solicitors, it is appropriate to adjourn these proceedings until after the date on which that application has been listed for hearing. That will allow either the lawyers presently on the record but seeking to go off the record to resume acting for the plaintiffs, or the plaintiffs to attempt to obtain other representation and obtain advice in relation to the continuation of these proceedings.

23. The orders of the Court are: (1) The plaintiffs are to pay the defendants’ costs of the interlocutory freezing order application from 12 noon on 7 July 2025 and the costs of the affidavit of Stephen Barrow-Yu dated 7 July 2025 whether incurred before or after that time and there is otherwise no order as to the costs of application. (2) The proceedings are listed for directions before the Registrar on 22 September 2025 at 2:30 pm and the parties are directed to provide agreed or competing directions to the Registrar no later than 18 September 2025. I certify that the preceding twenty-three [23] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Chief Justice Mossop. Associate: Date: