[1991] HCA 36
Green Camel Pty Ltd v Urban Ecological Systems Ltd [2017] NSWSC 362
Sydmar v Statewise Developments (1987) 73 ALR 289
5 ACLC 480
Source
Original judgment source is linked above.
Catchwords
[1991] HCA 36
Green Camel Pty Ltd v Urban Ecological Systems Ltd [2017] NSWSC 362
Sydmar v Statewise Developments (1987) 73 ALR 2895 ACLC 480
Judgment (7 paragraphs)
[1]
Judgment
By a notice of motion filed on 14 March 2019, the defendants seek security for costs in respect of proceedings brought by the plaintiff to recover a debt of approximately $5.1 million (including interest of $1.51 million) said to be owing by the defendants to the plaintiff under a written agreement (in Chinese) made on or about 13 April 2016.
[2]
Background
The plaintiff is a Chinese national resident in China. He has no assets in Australia. The evidence is that he is wealthy; and it is not suggested that an order for security would have the effect of stultifying the proceedings.
The defendants are Australian citizens of Chinese origin. Their first language is Mandarin. The second defendant is the de facto spouse of the first defendant.
Wang v Liu [2019] NSWSC 420 | Case summary | Zoe
It appears from a Cross-Claim Statement filed by the defendants that in 2011, Yang Wang (Ms Wang), who is the daughter of the plaintiff, the second defendant and Xiuju Shi (Mrs Shi) established a company known as GR Capital Pty Limited. The paid up capital of the company was $20 million consisting of $7 million in respect of 35 shares held by Ms Wang, $7 million in respect of 35 shares held by Mrs Shi and $6 million in respect of 30 shares held by the second defendant.
On or about 8 May 2014, the company's members resolved to reduce the company's capital from $500,000 per share to $1 per share.
On or about 25 May 2015, Ms Wang, Mr Li, Mrs Shi's spouse, and the first defendant signed a document (in Mandarin) (the 2015 Document) which purported to be an agreement between Ms Wang and the plaintiff (Party A), Mr Li and Mrs Shi (Party B) and the defendants (Party C) by which Party B and Party C would return Party A's capital in the company.
Pursuant to that agreement, the first defendant is said to have made two payments in cash, one on 30 August 2015 and the other on 30 November 2015, totalling $560,000.
On 13 April 2016, the plaintiff, Mr Li and the first defendant, signed a second document (in Chinese) (the 2016 Document), which is the one on which the plaintiff sues. That document purports to be an agreement between the plaintiff and Ms Wang (Party A), the defendants (Party B) and Mr Li, Mrs Shi and Kia Li (the son of Mr Li and Mrs Shi) (Party C) which relevantly provides that Party B would pay $7 million of capital plus compensation due to delayed payments to Party A by 31 May 2016.
Following the signing of the 2016 Document, it is alleged that the first defendant made further cash payments totalling $5,668,000 to the plaintiff and transferred a property worth $950,000 to him.
The plaintiff also relies on an acknowledgement of debt signed on 12 November 2017, although the first defendant contends that the signature on that document purporting to be his is a forgery.
[3]
The defendants' claims in the proceedings
By the Cross-Claim, the defendants contend that the agreements embodied in both the 2015 Document and the 2016 Document are void or unenforceable for similar reasons, including that they were not signed by all parties, there was a failure of consideration, and the agreements were void for uncertainty. It is also alleged that even if enforceable, on their true construction the agreements only required Mrs Shi and the second defendant as shareholders of the company to put into execution the obligation of the company to repay the amount owing by the company to Ms Wang.
In relation to the 2016 Document, it is also pleaded that:
(a) Any obligations therein were dependent upon the existence of a valid agreement in the form of the 2015 Document and dependent upon the existence of binding obligations to make payments to the Plaintiff, arising from such agreement;
(b) By reason of the matters in paragraphs 12 to 20 above, the 2015 Document failed to take effect as an agreement and/or was void and/or failed to give rise to any such obligations.
The Cross-Claim seeks declarations in relation to the validity and enforceability of the 2016 Document. It also includes a claim for the amounts paid by the first defendant on the basis that those payments were made as a result of mistakes (concerning the validity and enforceability of the agreements).
[4]
The parties' contentions in relation to security
The defendants claim security in the amount of $250,000. That claim is made on the basis of evidence given by the defendants' solicitor, Mr Khoury, who estimates that the defendants' total costs will exceed $300,000, including costs of in excess of $47,000 which have already been incurred. That estimate is said to take account of the following matters:
(a) the proceedings involve complex factual and legal issues, as mentioned above and set out in the List Response;
(b) the likely need for 2 experts, one in relation to handwriting and one in relation to language and linguistics;
(c) the extensive use of translators and interpreters;
(d) one Senior Counsel being briefed without a junior Counsel; and
(e) the hearing taking approximately 3 days, although it is possible that the hearing may be considerably longer depending upon, amongst other things, the difficulties associated with interpreting and translating and the extent of the contest in relation to the lay and expert evidence.
Mr Khoury estimates that the defendants' recoverable costs on the ordinary basis to be in the order of $250,000.
The plaintiff accepts that in the normal course of events there are strong reasons for making an order for security in this case. The plaintiff is outside of the jurisdiction. He has no assets in the jurisdiction and there is no suggestion that an order for security would stultify the proceedings: see PS Chellaram & Co v China Ocean Shipping Company (1991) 102 ALR 321; [1991] HCA 36.
However, the plaintiff submits that it is not appropriate to make an order for security for costs in this case because in substance security is sought in respect of a Cross-Claim which is directed not at defeating the plaintiff's claim, but at securing a monetary judgment: see Sydmar v Statewise Developments (1987) 73 ALR 289; 5 ACLC 480; 11 ACLR 616; Green Camel Pty Ltd v Urban Ecological Systems Ltd [2017] NSWSC 362 at [53], [54] per Ward CJ in Eq.
The plaintiff also relies on evidence that the first defendant has an unsatisfied judgment against him for $10 million. The plaintiff accepts that the Court is unlikely to make an order for security in his favour in respect of the Cross-Claim because the likelihood is that that order would have the effect of stultifying that claim. In those circumstances, the plaintiff submits that the appropriate course is to make no order for security.
The plaintiff also makes two alternative submissions. First, he submits that the Court should accept an undertaking from Ms Wang who owns an unsecured property in Sydney as providing sufficient security. Second, he submits that the Court should not order security for past costs or for the claim under the 2015 Document and for that reason should limit any security to $100,000.
[5]
Consideration
In my opinion, it is appropriate to make an order for security. There is insufficient evidence before the Court to make any assessment of the plaintiff's prospects of success. It is true, as the plaintiff submits, that the defendants have advanced a familiar catalogue of reasons for why they are not liable to pay an amount said to be due on a written agreement. But that alone is not a reason to conclude that those defences are weak in this case.
I also accept that at least so far as the Cross-Claim based on the 2016 Document is concerned, it is largely defensive. The Cross-Claim to that extent is concerned with reasons for why the document is not enforceable as an agreement, with the result that the plaintiff's claim must fail. The first defendant also seeks to recover amounts he claims he paid pursuant to the alleged agreement. But that claim is said to be a logical consequence of the defendants' defence. It was only raised in response to the plaintiff's claim and as a result of the way that claim is defended.
The position is different in relation to the 2015 Document. The defendants seek to draw a connection between that document and the 2016 Document by pleading in their Cross-Claim that the obligations in the 2016 Document "were dependent upon the existence of a valid agreement in the form of the 2015 Document". However, it is very difficult to make any sense of that pleading. The existence of the 2015 Document may be relevant to the construction of the 2016 Document on the basis that it is part of the surrounding circumstances in which the 2016 Document was executed. But there is no apparent basis on which it could be said that the validity and enforceability of the 2016 Document depended on the validity and enforceability of the 2015 Document; and, in my opinion, the pleading to that extent is defective. On the basis of the facts alleged in the Cross-Claim, the pleading in relation to the 2015 Document is only relevant to the claim to recover the payments said to have been made in the mistaken belief that the agreement it embodies was valid and enforceable.
Mr Khoury does not attempt in his evidence to separate out the costs of the case based on the 2015 Document from the other costs of the proceedings. No doubt, there is some overlap in the two cases. As I have said, the existence of the 2015 Document may be relevant to the interpretation of the 2016 Document, and it appears that the amount claimed by the defendants is based on the invalidity of both agreements. On the other hand, it seems to me to be unnecessary for the purposes of the defence to investigate the validity and enforceability of the agreement based on that document.
The application for security was made promptly. Accordingly, I can see no reason why the security that is ordered should not cover past costs.
Taking those matters into account, and applying what is necessarily a broad-brush approach, in my opinion it is appropriate to order the plaintiff to pay security in the sum of $150,000.
As I have said, the plaintiff seeks an order permitting him to provide security in the form of an undertaking from Ms Wang to pay any costs order in circumstances where she has unencumbered property in Australia which is worth substantially more than the defendants' costs.
I am not prepared to accept that undertaking. Nor do I think it is an appropriate substitute for the provision of security in the form of a bank guarantee or a payment into Court. Although Ms Wang was expressed to be a party to the agreement on which the plaintiff sues, she is not a party to the proceedings and there is no evidence that she stands to benefit from them. There is no evidence that she has received independent legal advice on the effect of the undertaking it is proposed that she give. Moreover, if the defendants are successful, they should not be put in a position where, in order to recover their costs, they may have to engage in further proceedings with Ms Wang: see Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293 at [59].
On the other hand, I accept the plaintiff's submission that security should be provided in tranches.
[6]
Conclusion
The orders of the Court are:
1. Direct that the parties bring in short minutes of order by 30 April 2019 to give effect to these reasons and dealing with the question of costs, if costs can be agreed;
2. Direct that if the parties cannot reach agreement on the terms of the short minutes of order, the matter be listed before me on 3 May 2019, or such other date as is fixed with my Associate, to deal with any outstanding issues.
[7]
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Decision last updated: 16 April 2019