Yu Xue (Martin) v Nalwa Holdings Pty Ltd trading as Royal Court Sydney Escorts

Supreme Court of NSW|2016-06-22|Before: Adams J

Notices of Motion

The Court has before it two Notices of Motion.
By Notice of Motion filed on 17 March 2016 the plaintiff seeks leave to amend its Statement of Claim. Although that amendment was initially opposed by the defendant, it was ultimately consented to.
By Notice of Motion filed the following day, 18 March 2016, the defendant seeks an order that the plaintiff provide security for costs in the sum of $50,000. The defendant initially also sought orders that the Statement of Claim be struck out pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), in the alternative that the plaintiff file an Amended Statement of Claim including certain particulars requested by the plaintiff, and that the plaintiff respond to the defendant's request for information as to the plaintiff's citizenship and residency dated 22 February 2016 within three days. Those three orders were not pressed at the hearing of the Motion before me today.
In support of its Motion, the defendant relied upon an affidavit of George Pashalis sworn 17 March 2016. In it Mr Pashalis deposed that he had not received any documents or information from the plaintiff concerning the plaintiff's citizenship.
At the conclusion of the hearing of the Motions before me today I made the orders set out at [32] below and indicated to the parties that I would publish my reasons later today. These are my reasons for making the relevant orders.

The parties' submissions

During the hearing it became clear that the plaintiff is a resident of the People's Republic of China (PRC) and has minimal assets in Australia.
Ms Tringali of counsel, who appeared for the defendant, sought security for the defendant's costs on the basis that the plaintiff resided outside the jurisdiction and, accordingly, the defendant would encounter difficulties in seeking to enforce any costs order in the event that the defendant was successful.
She noted that, although she had sought security for costs in the amount of $100,000 in her written submissions, it was the amount of $50,000 as sought in the Notice of Motion upon which she relied. In doing so she conceded that she had not filed any evidence as to how that figure was calculated.
Ms Tringali submitted that the reason she had not put on any evidence as to how the figure of $50,000 would be calculated was because the plaintiff's solicitor had not confirmed whether the plaintiff in fact was ordinarily resident outside Australia until today. She tendered a letter showing that the defendant was still seeking confirmation of this fact as recently as 30 May 2016.
Counsel for the plaintiff, Mr Morahan, did not dispute that his client resided overseas and that it would be difficult to enforce an Australian judgment in the PRC. Despite this, he submitted that I would not make the order sought in the exercise of my discretion. He noted that there was no evidence before this Court as to how the figure was to be arrived at. He acknowledged that such applications are to be made in a timely manner but pointed out that the Court could not assess the amount of any costs order without any evidence of matters such as what issues are in dispute and the likely length of the proceedings, the defendant having not as yet filed any defence.
On this issue, Mr Morahan tendered HSBC bank statements for the period 8 August 2014 to 10 September 2014 in the names of Mr Nan Wu and Miss Yun He. He informed the Court that these persons are the plaintiff's Australian agents. Those documents show the following amounts being transferred from this account to the defendant Nalwa Holdings Pty Ltd on the relevant dates: 1. $500,000 on 13 August; 2. $500,000 on 15 August; and 3. $2,000,000 on 19 August;
This transfer of $3 million from persons said to be agents of the plaintiff to the defendant in these amounts on these dates accords with three of the five payments pleaded in the Statement of Claim. Mr Morahan indicated that he was not aware as yet whether the fact of these payments to the defendant is disputed or not. If the fact of the payments is not disputed the issues would be narrowed to some extent.
As for the question of when the plaintiff notified the defendant that the plaintiff resided overseas, Mr Morahan pointed out that the plaintiff is deemed to have admitted this fact by not responding to the Notice to Admit Facts issued by the defendant on 19 May 2016. Accordingly, the defendant was on notice of that fact since 2 June 2016, 14 days after the issue of the Notice to Admit Facts: UCPR 17.3(2).
Mr Morahan opposed the Motion being stood over part-heard in order for the defendant to file evidence in support of its application for security for costs. Furthermore, he confirmed that the plaintiff's opposition to the order being made was not confined to the question of the amount to be paid. The plaintiff opposed the order being made at all at this stage.
In reply, Ms Tringali submitted that her solicitor had not briefed her with the material concerning the plaintiff's deemed admissions and that she was unaware of it. She conceded that the question of whether the plaintiff resided overseas was a separate and distinct issue from that concerning the calculation of the quantum of $50,000 as security for costs. She indicated that the reason no defence had as yet been put on was to minimise the incurring of costs.

Consideration

UCPR 42.21(1) relevantly provides that if "it appears that a plaintiff is ordinarily resident outside Australia …the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given."
UCPR 42.21(1A) sets out a number of matters to which the court may have regard in determining whether it is appropriate to make such an order. Relevantly for present purposes are: (b) the genuineness of the proceedings; (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute; (l) the timing of the application for security for costs; and (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff.
The relevant discretionary considerations are not confined to those set out in UCPR 42.21(1A). The court's discretion is wide and its objective is to minimise the potential for unmeritorious proceedings to cause hardship to the defendant.
There is no dispute as between the parties that the plaintiff resides in China and it would be difficult for the defendant to enforce a costs order in that jurisdiction. I am mindful of the fact that the defendant should not be expected to bear the uncertainty of enforcement in a foreign country: Cheng Xi Shipyard v the Ship "Falcon Trident" [2006] FCA 759 at [9] and Gujarat NRE Australia Pty Ltd v Williams [2006] NSWSC 992 at [29]. See also Li v State of New South Wales [2013] NSWCA 165 at [13].
The difficulty for the Court, however, is that no evidence was adduced on behalf of the defendant as to how the figure of $50,000 was arrived at. An applicant seeking security for costs bears the onus of adducing evidence to enable the court to order an appropriate security amount. It has been held that the court should carefully examine such costs estimates and make an informed assessment of the reasonableness of the projected costs: April Fine Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd [2009] NSWSC 867; (2009) 75 NSWLR 619.
No defence has as yet been filed so it is not known what issues are in dispute, including whether the defendant disputes that the money was in fact paid to it. As for the question of the genuineness of the claim, I note that the bank records tendered before me today showed that large amounts were paid to the defendant on the dates alleged by two persons said to be agents of the plaintiff. Ms Tringali did not dispute the genuineness of the claim.
I accept that orders can be made based on estimates in general terms in circumstances when it is difficult to form a reliable assessment of the likely costs. Despite this, there still remains a need in such cases for an applicant to bring to court some evidence as to the likely estimate so that a respondent to such an application can address that evidence.
I have given consideration as to whether it would be appropriate to make an order for a small amount to cover the defendant's costs up until now and the cost of filing a defence even in the absence of any evidence from the defendant. It seems to me that to do so would not be consistent with my duty to examine any costs estimates carefully and make an informed assessment of the reasonableness of any such estimates.
There is no issue that this application has been made in a timely manner. Timing is one of the relevant discretionary features listed in UCPR 42.21(1A). If such applications are delayed the court may be reluctant to order security for costs that have already been incurred. In refusing to grant the order sought, I have made no finding as to the merits of the question of whether this Court should grant security for the defendant's costs in the event that there was sufficient evidence to enable it to do so. There is simply insufficient evidence before me today to properly determine the issue. In these circumstances it is open to the defendant to make a further application once that evidence is available.
The parties were invited to make submissions concerning the appropriate costs orders. In relation to both Motions nothing was put to me to lead me to depart from the usual order that costs follow the event.
I make the following orders: 1. In relation to the plaintiff's Notice of Motion, leave is granted to amend the Statement of Claim in the form annexed to the Motion and the defendant is to pay the plaintiff's costs. 2. In relation to the defendant's Notice of Motion, Orders 1 to 3 are not pressed, Order 4 is dismissed, and the defendant is to pay the plaintiff's costs of the Motion.

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: 23 June 2016

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