T & H Pty Ltd v Nguyen

Judgment below

1. Judge Gibson heard the application for further security for costs on 24 March 2022. There was no dispute that both the applicant company and Mr Nguyen, its director and shareholder, were impecunious and thus would not be in a position to meet any adverse costs order: note judgment [22] and [37]. That being so a basis for ordering security under UCPR r 42.21 was made out and the question was whether or not the Court should order security in its discretion.
2. Her Honour noted at [28] that because an order for security for costs had already been made, it fell to the party seeking the order to point to a material change in circumstances which would justify a further order. Her Honour found: "[29] This is not a case of overlooked or underestimated costs … but a completely new set of circumstances arising from the effective resolution of the claims by the Referee. The prospect of a six-day-plus hearing on whether the Report in its entirety should be adopted is as unexpected as it is unwelcome to the defendants. [30] I am satisfied that the defendants have established that the plaintiff's rejection of the Report amounts to a material change in circumstances warranting an order for further security."
3. Her Honour then considered how to exercise the discretion: "[31] … [Counsel for the defendants] points to the following factors: (a) The plaintiff has brought four proceedings against the defendants and it has been found that the plaintiff in fact owes the defendants money. (b) The defendants have already incurred $323,000 in legal fees and only have $70,000 available in Court. (c) The plaintiff wishes to pursue a further 6 day hearing, which will cost the defendants at least another $86,000. (d) The plaintiff admits that it cannot [pay] this or any other costs order. (e) If security is not granted, the defendants will be forced to litigate in circumstances where they can never recover the further costs. (f) In all the circumstances, it is in the interests of justice that further security of $61,000 be granted and that these proceedings be stayed pending provision of security. [32] I have given a great deal of weight to Mr Nguyen's submission that the effect of making the order is to stultify the proceedings: Yandil Holdings Pty Ltd v Insurance Company of North America (1985) 3 ACLC 542 at 545. I note, however, that Strathdee DCJ did not consider there was any evidence to support the proposition that the plaintiff was insolvent because of this litigation (at [18]). I also note Strathdee DCJ's observations about the financial position of Mr Nguyen and the findings (at [23]) that Mr Nguyen's strained financial situation has not been caused by the defendants' actions. [33] I have also taken into account, as did Strathdee DCJ (at [23]), the very considerable delay in the commencement of these proceedings, which has been compounded by even more significant delays in the progress of the claims since that time. [34] I was not addressed as to the genuineness of the proceedings (UCPR r 24.21 (1A)(b): Interslice Pty Ltd v CCA Investments - Bass Hill Pty Ltd [2021] NSWSC 1578 at [49] - [51]; HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87 at [10]), and must be careful not to draw conclusions as to the merits of the case in those circumstances. However, in view of Mr Nguyen's admissions that the invoices he had claimed had been left out of the Report were in fact included, I consider some very small allowance should be made for this factor. [35] Taking into account all of the discretionary factors, this is a clear case where a further order for security for costs should be made by reason of the material change in circumstances following the Referee's Report."
4. Although not stated in terms, it is implicit that her Honour considered there was significant weight in the points made by the respondents which she had listed at [31]. Her Honour ordered the applicant to provide further security for costs in the sum of $61,000 within 28 days of the date of the order.

Determination

1. Leave to appeal is required because the appeal is from an interlocutory judgment or order: District Court Act 1973 (NSW), s 127(2)(a). Generally speaking, it is appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or a reasonably clear injustice going beyond something that is merely arguable: The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]. Because the present case is an application for leave to appeal from a decision granting security for costs, being a decision pertaining to practice and procedure, particular caution is called for in granting leave: PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [3]. Further, because the decision below was in part discretionary, and no complaint is made about the non-discretionary aspect of the decision, any challenge must seek to establish an error of the kind described in House v The King (1936) 55 CLR 499 at 505; [1936] HCA 40.
2. The applicant did not file written submissions, but attached to the applicant's Draft Notice of Appeal is a document titled "Grounds of Appeal", which reads as submissions. In this document the applicant identifies no issue of principle or question of general public importance. Nor did Mr Nguyen do so in argument.
3. In his Grounds of Appeal the applicant set out two principal complaints: first, that Judge Strathdee made errors in her consideration of the first application for security for costs; second, that Judge Gibson ought to have taken into consideration certain submissions which it says her Honour did not consider.
4. As to the first matter, Mr Nguyen complains that Judge Strathdee made a number of errors, but his main complaint is that her Honour relied on the existence of a second shareholder, other than Mr Nguyen, in considering whether or not the applicant was impecunious. Mr Nguyen says her Honour erred in thinking that there may have been a second shareholder, as the reference to such a shareholder in certain documents was just a hangover from when the company had originally been acquired as a shelf company from his accountant.
5. Any such error does not establish a reasonably clear injustice with respect to the decision of Judge Gibson: 1. The orders of Judge Strathdee were made over four years ago. If Mr Nguyen was seeking leave to appeal from that decision then that would be refused given the lengthy delay, during which time substantial further steps have been taken in the litigation. That is especially so given that it appears Mr Nguyen, who was then legally represented, was aware of the claimed error at the time of the decision but says he chose not to seek to appeal that decision because he lacked the funds to do so. 2. Mr Nguyen did not explain how these considerations were relevant to the decision of Judge Gibson. If they were suggested to be relevant to the issue of impecuniosity, there was no dispute about that before Judge Gibson. 3. It does not appear that Mr Nguyen asked Judge Gibson to have regard to what he says was the misapprehension upon which Judge Strathdee proceeded. It is incumbent on a party who contends on appeal that attention was not given to particular matters to demonstrate that the primary judge's attention was drawn to those matters, at least unless they were fundamental and obvious: Elzahed v State of New South Wales (2018) 97 NSWLR 898; [2018] NSWCA 103 at [2]. The claimed errors were not obvious.
6. As to the second complaint, Mr Nguyen contends that whilst her Honour had regard to his affidavits dated 15 April 2021, 18 June 2021, 23 June 2021 and 24 February 2022, her Honour did not consider submissions dated 13 May 2021. Those submissions substantially reproduce what was included in the affidavit of 15 April 2021, which her Honour did consider (see judgment [19]-[20]). Further, they were not directed to the security for costs application. As stated at [2] of the submissions, they were filed "in compliance with the Order 1 made by his Honour Judge Montgomery in Court on 23 April 2021 ordering, among other things, the Plaintiff/Cross Defendant serving the Defendants/Cross Claimants with a written submission of not more than 20 pages opposing adoption of the report".
7. Thus, for example, in those submissions (and in the affidavit of 15 April 2021) Mr Nguyen refers to four invoices which he issued to the respondents which he says were not considered in Mr Turner's report. The issue of those invoices arose in the course of the hearing below (Tcpt, 24 March 2022, p 33-35) and was dealt with squarely by her Honour in her reasons. In the course of the hearing, counsel for the respondents explained that each of those invoices was a duplicate of an invoice which the referee did take into account. Her Honour indicated that Mr Nguyen had acknowledged this, and her Honour considered that the referee appropriately considered the invoices: at [19(a)].
8. In any event, the merits of the underlying dispute were a factor of limited weight in her Honour's decision (referred to at [34]). Moreover, it is significant that a referee has already opined on the merits of the dispute. The applicant advanced no submission in this Court that would indicate it had substantial prospects of successfully resisting the adoption of the referee's report. The primary judge described the matter at [35] as being "a clear case" for ordering security. That conclusion was amply justified in all the circumstances.
9. In his oral submissions Mr Nguyen's main points were that he had no funds available to pay the security for costs; that the respondents owe him significant amounts of money; and that fairness required that he be permitted to pursue his claim against them. However, Judge Gibson gave "a great deal of weight to Mr Nguyen's submission that the effect of making the order is to stultify the proceedings": judgment [32]. It is well-established that although likely stultification is a powerful factor against ordering security it is not necessarily determinative, and ordering security may still be warranted in order to do justice between the parties: eg Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [92]-[96]. Her Honour made no error of principle in finding that this was such a case, nor was that conclusion unreasonable or plainly unjust.
10. Insofar as Mr Nguyen was submitting that his lack of funds was due to the actions of the respondents, Judge Gibson at [32] noted and implicitly accepted the finding of Judge Strathdee that that was not so. As the respondents submitted, there was no evidence before this Court indicating to the contrary.
11. Mr Nguyen has not established that there is any reasonably clear injustice going beyond something that is merely arguable.

Order

1. Accordingly, the orders of the Court should be as follows: application for leave to appeal dismissed with costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 September 2022