PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – POWER TO ORDER – where
a group of non-English
speaking Chinese nationals (the Chinese parties) were involved in
Source
Original judgment source is linked above.
Catchwords
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –SECURITY FOR COSTS – POWER TO ORDER – wherea group of non-Englishspeaking Chinese nationals (the Chinese parties) were involved inbusiness dealings in Australia with two Australian Chinese citizens, includingMr Junyan Lu – where the relevantdealings between the parties surroundthe purchase of two lots of real property at Carbrook (the CarbrookProperties) – where CN-AU Investment Group Pty Ltd (theCompany) as corporate trustee of the CN-AU Investment Trust acquiredmortgages held by other financiers over the Carbrook Properties –where MrLu was one of the directors of the Company – where the Chinese parties
allege that Mr Lu distributed the net proceeds
of the sale of Lot 2 of the
Carbrook Properties to himself without the consent of the directors of the
Company – where the
Chinese parties also allege that Mr Lu caused Lot 2 to
be transferred to an associate-controlled entity and secured a mortgage over
it
in his own favour – where the Chinese parties have commenced two
proceedings, one concerning a dispute about the proper
officers of the Company
(the directorship proceeding) and the other concerning whether Mr Lu
misappropriated the Company’s property (the derivative proceeding)
– where Mr Lu applied for security for costs in the directorship
proceeding and the derivative proceeding – whether
the Court’s
jurisdiction to order security for costs under r 671 of the Uniform Civil
Procedure Rules 1999 (Qld) is enlivened in the directorship and derivative
proceedings
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – PLAINTIFF OR APPLICANT SUBSTANTIALLY
IN POSITION OF
DEFENDANT – where Mr Lu’s applications for security for costs are
opposed on the discretionary grounds
– whether the Chinese parties’
claims in the directorship and derivative proceedings are defensive in nature
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – PLAINTIFF OR APPLICANT RESIDENT
OUTSIDE JURISDICTION
– WHERE ONE OR MORE CO-PLAINTIFF OUTSIDE JURISDICTION – where the
Chinese parties have no assets
in this jurisdiction – where there is no
evidence of any reciprocal agreement in terms of registering judgments in China
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE
OF DISCRETION –
DELAY – where Mr Lu delayed pursuing the application for security for
costs in the directorship proceeding
for over two years – where there is
no explanation for the delay in bringing the application – whether the
delay in pursuing
the application has caused prejudice to the Chinese parties
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE
OF DISCRETION –
PROSPECTS OF SUCCESS – whether the Chinese parties’ claims in the
directorship and derivative proceedings
have merit and prospects of success
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE
OF DISCRETION –
BONA FIDE CLAIM – whether the Chinese parties’ claims in the
directorship and derivative proceeding
are genuine
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE
OF DISCRETION –
PLAINTIFF’S OR APPLICANT’S IMPECUNIOSITY –where, in terms of
the derivative proceeding, the
Chinese parties allege that the Company is
impecunious and that this was caused by Mr Lu – whether the Company is
impecunious
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS
– SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE
OF DISCRETION
– JUSTICE OF CASE – whether the justice of this case warrants orders
for security for costs in the directorship
and/or derivative
proceedings
Corporations Act 2001 (Cth), s 181, s
182
Uniform Civil Procedure Rules 1999 (Qld), r 5, r 670, r 671,
Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA
114, cited
Commonwealth v Cable Water Skiing (Australia) Ltd (1994)
116 FLR 153, applied
Covecorp Constructions Pty Ltd v Indigo Projects Pty
Ltd [2007] QSC 262, considered
Denjim Pty Ltd v National Gold Pty
Ltd
Denjim Pty Ltd v AU Gold Pty Ltd (No 2) [2023] QSC 54,
considered
DGR Global v P.T. Limited [2025] QCA 122, followed
Global Access Ltd v Educationdynamics, LLC [2009] QSC 373
[2010] 1 Qd R 525,
considered
In Energy Drilling Inc v Petroz NL (1989) ATPR 40-954,
considered
Interwest Ltd v Tricontinental Corporation
Ltd (1991) 5 ACSR 621, cited
KP Cable Investments Pty Ltd v Meltglow
Pty Ltd [1995] FCA 76
(1995) 56 FCR 189, cited
Mecrus Pty Ltd v Industrial Energy
Pty Ltd [2015] FCA 103
(2015) 327 ALR 523, applied
Mio Art Pty Ltd v Mango Boulevard
Pty Ltd & Ors [2018] QSC 31, considered
Monto Coal 2 Pty Ltd v
Sanrus Pty Ltd [2018] QCA 309
[2019] 3 Qd R 143, applied
Olbers Co Ltd v
Commonwealth of Australia [2002] FCA 1269, applied
Pearson v
ING Bank (Australia) Ltd [2023] QSC 86
(2023) 14 QR 170, applied
PS Chellaram &
Co Ltd v China Ocean Shipping Co [1991] HCA 36
(1991) 102 ALR 321,
considered
Robson v Robson [2008] QCA 36, considered
Sir
Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609,
considered
Southern Cross Exploration NL v Fire & All Risks
Insurance Co Ltd (1985) 1 NSWLR 114, considered
Suncare Constructions
Australia Pty Ltd & Anor v Gainspace (Mackay) Pty Ltd [2016] QSC 67,
considered
Weily’s Quarries v Devine Shipping Pty Ltd [1994] TASSC 76
(1994) 14
ACSR 186, considered
Willey v Synan [1935] HCA 76
(1935) 54 CLR 175,
followed
Woolworths Ltd v About Life Pty Ltd (No 2) [2018] NSWSC 1340,
considered
Judgment (160 paragraphs)
[1]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - POWER TO ORDER - where a group of non-English speaking Chinese nationals (the Chinese parties) were involved in business dealings in Australia with two Australian Chinese citizens, including Mr Junyan Lu - where the relevant dealings between the parties surround the purchase of two lots of real property at Carbrook (the Carbrook Properties) - where CN-AU Investment Group Pty Ltd (the Company) as corporate trustee of the CN-AU Investment Trust acquired mortgages held by other financiers over the Carbrook Properties - where Mr Lu was one of the directors of the Company - where the Chinese parties allege that Mr Lu distributed the net proceeds of the sale of Lot 2 of the Carbrook Properties to himself without the consent of the directors of the Company - where the Chinese parties also allege that Mr Lu caused Lot 2 to be transferred to an associate-controlled entity and secured a mortgage over it in his own favour - where the Chinese parties have commenced two proceedings, one concerning a dispute about the proper officers of the Company (the directorship proceeding) and the other concerning whether Mr Lu misappropriated the Company's property (the derivative proceeding) - where Mr Lu applied for security for costs in the directorship proceeding and the derivative proceeding - whether the Court's jurisdiction to order security for costs under r 671 of the Uniform Civil Procedure Rules 1999 (Qld) is enlivened in the directorship and derivative proceedings
[2]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT SUBSTANTIALLY IN POSITION OF DEFENDANT - where Mr Lu's applications for security for costs are opposed on the discretionary grounds - whether the Chinese parties' claims in the directorship and derivative proceedings are defensive in nature
[3]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT RESIDENT OUTSIDE JURISDICTION - WHERE ONE OR MORE CO-PLAINTIFF OUTSIDE JURISDICTION - where the Chinese parties have no assets in this jurisdiction - where there is no evidence of any reciprocal agreement in terms of registering judgments in China
[4]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - DELAY - where Mr Lu delayed pursuing the application for security for costs in the directorship proceeding for over two years - where there is no explanation for the delay in bringing the application - whether the delay in pursuing the application has caused prejudice to the Chinese parties
[5]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - PROSPECTS OF SUCCESS - whether the Chinese parties' claims in the directorship and derivative proceedings have merit and prospects of success
[6]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - BONA FIDE CLAIM - whether the Chinese parties' claims in the directorship and derivative proceeding are genuine
[7]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - PLAINTIFF'S OR APPLICANT'S IMPECUNIOSITY -where, in terms of the derivative proceeding, the Chinese parties allege that the Company is impecunious and that this was caused by Mr Lu - whether the Company is impecunious
[8]
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - JUSTICE OF CASE - whether the justice of this case warrants orders for security for costs in the directorship and/or derivative proceedings
Woolworths Ltd v About Life Pty Ltd (No 2)[2018] NSWSC 1340, considered
[34]
G Handran KC with J Hughes for the plaintiffs/respondents
[35]
[1] This is an application for security for costs by Mr Junyan Lu as the defendant in two proceedings being heard together: proceeding numbers 11276/2022 (the directorship proceeding) and 14509/2024 (the derivative proceeding). The amount of security sought up to the first day of trial in the directorship proceeding is $290,735.04 (excluding GST) and the amount of security sought in the derivative proceeding is $248,912.40 (excluding GST).
[2] Both applications are opposed by the respondent plaintiffs on the discretionary grounds.
[36]
[3] A coherent overview of the relevant (contested) facts, and chronology of the two proceedings, is not readily discernible on the material before me. But, generally speaking, Mr Yongman Zhao, Mr Penghong Zhang and Ms Rui Jin (the Chinese parties) are a group of non-English speaking Chinese nationals, who, sometime in 2018, became involved in business dealings in Australia with two Australian Chinese citizens - Mr Lu and Ms Wenming Che.[1] The relevant dealings between the parties surround the purchase of two lots of real property at Carbrook (the Carbrook Properties).
[4] According to Mr Lu, the original plan was that the Chinese parties, Mr Lu and other investors in a company called CN-AU Investment Group Pty Ltd (the Company) were to purchase the Carbrook Properties. That plan did not come to fruition. Instead, the parties "pivoted" and the Company, as corporate trustee of the CN-AU Investment Trust (the Investment Trust), acquired mortgages held by other financiers over the Carbrook Properties.[2]
[5] Mr Zhao and Mr Lu were two of the original directors of the Company, while the Chinese parties were the majority shareholders. There are competing trust documents and claims as to the correct unit holders of the Investment Trust. One document lists the Chinese parties as unit holders and the other lists a non-party as the sole unit holder (from whom Mr Lu is said to have purchased all the units in the Investment Trust).
[6] The Chinese parties allege Mr Lu caused the Company to sell Lot 2 of the Carbrook Properties and wrongfully diverted the $2,490,000.00 sale proceeds to himself. Mr Lu is then said to have caused Lot 2 to be transferred to an associate-controlled entity and secured a mortgage over it in his own favour. The Company still holds the mortgage over Lot 1. Mr Lu claims that the Company owed him a personal debt of about $2,500,000.00 plus interest in relation to the acquisition of the mortgages held by the Company. The Chinese parties dispute this debt and say that the mortgages were acquired with funds totalling about $3,840,000.00 they invested in or loaned to the Company.
[7] Mr Lu, in turn, denies this. He does not appear to deny receiving significant amounts of money from the Chinese parties, but his case seems to be that these monies were not used to ultimately fund the purchase of the mortgages over the two lots. Rather, Mr Lu argues that he loaned money to the Company and then subsequently, as a director of the Company, he distributed the net proceeds of sale of Lot 2 (of around $2,500,000.00) to himself. It is not clear what in fact has happened to the funds provided by the Chinese parties.
[37]
[9] Rule 670(1) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) confers a broad discretion to order that a plaintiff give the security the court considers appropriate for a defendant's costs.
[10] Rule 670(2) provides that the discretion must be exercised subject to the provisions of the UCPR, particularly rr 671 and 672. The discretion must be exercised in the way which best suits the interests of justice in the circumstances of the case, keeping the obligations set out in r 5 firmly in mind.[3]
[11] An application for security for costs requires the court to engage in a two-stage process. At the first stage, the court must consider whether any of the prerequisites in r 671 of the UCPR are satisfied, and at the second, whether it should exercise its discretion to award security for costs and if so, in what amount.
[12] In this case, Mr Lu submits that the first stage is satisfied under r 671 of the UCPR, which provides (in part):
[38]
The court may order a plaintiff to give security for costs only if the court is satisfied -
[39]
(b) the plaintiff is suing for the benefit of another person, rather than for the plaintiff's own benefit, and there is reason to believe the plaintiff will not be able to pay the defendant's costs if ordered to pay them; or
[40]
(f) the plaintiff is, or is about to depart Australia to become, ordinarily resident outside Australia and there is reason to believe the plaintiff has insufficient property of a fixed and permanent nature available for enforcement to pay the defendant's costs if ordered to pay them..."
[41]
[13] For a "reason to believe" that the plaintiff will not be able to pay the defendant's costs, the objective circumstances must be sufficient to incline the mind towards accepting, rather than rejecting, that the plaintiff will not be able to pay the defendant's costs.[4] The onus rests on the applicant/defendant to establish that state of affairs.
[14] Once the threshold question has been answered, the court has an unfettered discretion to order security for costs.[5] Such a discretion must be exercised judicially considering the circumstances of the case.[6]
[15] The legal onus of proving entitlement to an order for security for costs rests on the applicant throughout the application, although there is an evidential burden of raising or identifying the relevant and shifting factors on the respondent.[7]
[16] In exercising the discretion to order security for costs, the court must carry out a balancing exercise.[8] In carrying out that exercise, r 672 of the UCPR provides:
[42]
"672 Discretionary factors for security for costs
[43]
In deciding whether to make an order, the court may have regard to any of the following matters -
[44]
(a) the means of those standing behind the proceeding;
(b) the prospects of success or merits of the proceeding;
[45]
(d) for rule 671(a) - the impecuniosity of a corporation;
(e) whether the plaintiff's impecuniosity is attributable to the defendant's conduct;
(f) whether the plaintiff is effectively in the position of a defendant;
(g) whether an order for security for costs would be oppressive;
(h) whether an order for security for costs would stifle the proceeding;
(i) whether the proceeding involves a matter of public importance;
(j) whether there has been an admission or payment into court;
(k) whether delay by the plaintiff in starting the proceeding has prejudiced the defendant;
(l) whether an order for costs made against the plaintiff would be enforceable within the jurisdiction;
[46]
[17] Whilst delay by a plaintiff in starting a proceeding is listed as one of the relevant factors, any delay by a defendant in making an application for security for costs is not. Such a factor is, however, raised by the Chinese parties in this case, and the authorities confirm that it is a relevant factor to be considered with the other discretionary criteria.[9]
[18] The relevant principles concerning delay by the defendant in bringing an application for security for costs were usefully summarised by Martin J (as his Honour then was) in Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd[2007] QSC 262 as follows:[10]
[47]
(a) Such applications must be made promptly;
(b) It would be unfair to allow a defendant security for costs if that defendant has stood by and allowed the plaintiff to work on its case and incur significant expense;
(c) Whilst delay is a significant factor, there is no rule requiring refusal on that basis alone;
(d) The issue of delay will weigh more significantly in some cases than others; and
(e) Cases where orders for security have been made despite delay usually involve the hearing not being immediately imminent, and where forewarning regarding the financial status of the plaintiff has been given prior to the application.[11]
[48]
[19] Before turning in more detail to the discretionary factors relevant to this case, it is instructive to understand the timing of the applications for security for costs in the chronology of both proceedings.
[49]
[20] On 19 September 2022, the Chinese parties as plaintiffs commenced the directorship proceeding by way of originating application against the Company, Mr Lu and Ms Che. That application seeks declaratory relief with the aim of "restoring proper corporate governance" to the Company.[12] Subsequently, orders were made that the proceeding continue as if started by claim.
[21] On 20 September 2022, the plaintiffs filed and subsequently served a statement of claim on the defendants.
[22] In September 2022, after the directorship proceeding had been filed and served, the plaintiffs discovered that Mr Lu was potentially trying to cause the Company to sell Lot 2 as mortgagee.
[23] On 24 November 2022, the plaintiffs urgently applied in aid of the directorship proceeding for an order restraining Mr Lu and Ms Che from dealing with the mortgages over the Carbrook Properties or, if they already had, from dealing with the proceeds of any such transaction. Subsequently, Mr Lu disclosed that Lot 2 was already sold and that the Company had entered into a contract of sale for Lot 1.
[24] On 25 November 2022, Burns J made orders to protect the proceeds from the sale of Lot 1, and for Mr Lu to disclose the use to which he had put the sale proceeds from Lot 2.
[25] On 1 December 2022, Mr Lu filed an affidavit which revealed that:
[50]
(a) on 18 October 2022, a contract for the sale of Lot 2 was entered into between the Company and A.C.N.661663047 Pty Ltd ACN 661 663 047 (ACN Co) as trustee for the Carbrook Unit Trust;
(b) the settlement date was 16 November 2022;
(c) the sum of the payments due to the Company from the sale of Lot 2 was $2,600,782.50, being the sale price after adjustments;
(d) a bank cheque from the sale proceeds was made payable to Mr Lu personally in the amount of $2,490,400.38; and
(e) no proceeds for the sale of Lot 2 were paid to the Company.
[51]
[26] On 3 April 2023, Mr Lu filed an application for security for costs in the directorship proceeding and on 27 June 2023, an amended application for security was filed.
[27] On 21 July 2023, orders were agreed upon for that application to be delisted and adjourned to a date to be fixed by the parties in consultation with the registry. Directions were also made for the filing of any material to be relied upon by both parties at the further hearing. Affidavits and submissions were subsequently filed in August 2023, but the amended application was not re-listed.
[28] On 5 June 2024 and 24 June 2024, the solicitors for the Chinese parties sent an email to Mr Lu's then solicitors, requesting that the parties confer and agree on a jointly convenient date for the re-listing and hearing of the amended application. No response to this correspondence was ever received and Mr Lu took no steps to relist the amended application for security.
[29] Other than what was stated in his affidavit on 1 December 2022, Mr Lu did not otherwise disclose what he did with the sale proceeds that were paid to him personally. Subsequently, the Chinese parties discovered more about the activities concerning the sale and proceeds of Lot 2 from publicly available sources (over the 2024 year), including that:
[52]
(a) ACN Co purchased Lot 2 in its capacity as trustee of the Carbrook Unit Trust. An associate of Mr Lu who once lived with him, Brendon Corrie, holds 80 per cent of the units in the Carbrook Unit Trust. After ACN Co purchased Lot 2, Mr Corrie began residing at Lot 2 and, as of October 2024, still lived there;
(b) Mr Peng, who controls ACN Co, holds the remaining units in the Carbrook Unit Trust;
(c) The Carbrook Unit Trust had no money to purchase Lot 2 from the Company, but Mr Lu apparently loaned $2,417,600.38 to ACN Co for that purpose from monies payable to him by the Company from the net proceeds of Lot 2;
(d) On 1 February 2024, Mr Corrie used his voting power in the Carbrook Unit Trust to remove ACN Co as trustee and to appoint Barkell Pty Ltd as the new trustee. The sole director of Barkell is Mr Rixing Chen;
(e) On 6 March 2024, Mr Lu and Mr Chen signed two documents on behalf of Barkell. The first was a document called "Deed Acknowledging Debt and Undertaking to Pay" pursuant to which Barkell acknowledged that it was indebted to Mr Lu in respect of a loan advanced by Mr Lu to ACN Co to allow the purchase of Lot 2 by ACN Co. The second was a mortgage over Lot 2 in favour of Mr Lu, securing the repayment to Mr Lu of the loan in the amount of $2,645,000.00;
(f) On 12 March 2024, Lot 2 was transferred from ACN Co to Barkell and on
22 March 2024, Mr Lu lodged the Lot 2 Mortgage with Titles Queensland; and
(g) On 3 June 2024, Barkell entered into a call option deed for the sale of Lot 2 for a price of $6,100,000.00, with a call option period of 12 months. The sale is subject to, among other things, the removal of a caveat lodged by ACN Co over Lot 2 on 25 March 2024.
[53]
[30] On 22 November 2024, the plaintiffs in the directorship proceeding obtained leave as majority shareholders of the Company to bring a derivative action on behalf of the Company against Mr Lu. As part of leave being granted, the plaintiffs produced a deposit certificate in Chinese currency (held in a bank account in China) and paid $50,000.00 into court as an indemnity for the Company to bring the derivative proceeding.
[31] A claim and statement of claim in the derivative proceeding were subsequently filed on 3 December 2024. A defence was filed by Mr Lu on 9 May 2025.
[32] On 30 July 2025, the Chinese Parties filed an application for the derivative proceeding and the directorship proceeding to be heard together. After a contested hearing on 6 August 2025, Sullivan J ordered that the proceedings be heard together, and that the evidence in one proceeding is to be used in the other.
[33] On 20 August 2025, the solicitors for Mr Lu foreshadowed bringing applications for security for costs in both proceedings; and on 9 September 2025, the present applications for security for costs were filed.
[54]
[34] It is not in issue that the Chinese parties as the plaintiffs in the directorship proceeding are not Australian residents and have no assets in this jurisdiction. It follows that I am satisfied under r 671(f) of the UCPR that this Court's jurisdiction to order security for costs is enlivened in that proceeding.
[35] The Company as the plaintiff in the derivative proceeding is registered in Australia and, on one view, holds assets in this jurisdiction. The latter fact is discussed further below as part of the discretionary considerations in the derivative proceeding. It is otherwise accepted by the Chinese parties that they are the individuals behind the Company seeking and obtaining leave in the derivative proceeding. It was therefore not seriously contended on behalf of the Company that the jurisdiction to order security for costs in the derivative proceeding has not been established by Mr Lu.
[36] It follows that I am satisfied that this court's jurisdiction to order security for costs is enlivened under r 671(b) of the UCPR in the derivative proceeding. This finding is consistent with the concession in the written outline of submissions filed on behalf of the Chinese parties that the applications should be refused on the discretionary grounds.[13]
[55]
Should security be ordered in the directorship proceeding?
[56]
[37] The Chinese parties raise the following factors as relevant to the discretion to award security for costs in the directorship proceeding:
[57]
(a) They are effectively in the position of a defendant;[14]
(d) There is a practical difficulty in granting security because of the overlap in issues with the derivative proceeding;[17] and
(e) There has been considerable delay by Mr Lu in bringing the application.
[58]
[38] Other factors that need to be woven into the consideration include:
[59]
(a) The means of those standing behind the proceeding;[18]
(b) Whether an order for security for costs would be oppressive;[19]
(c) Whether an order for security for costs would stifle the proceeding;[20] and
(d) Whether an order for costs made against the plaintiff would be enforceable within the jurisdiction.[21]
[60]
[39] Each of these factors are discussed below, although it is convenient to address some together where they overlap.
[61]
Prospects and genuineness of the directorship proceeding
[62]
[40] An application for security for costs is not a mini trial.[22] But the court may undertake a preliminary assessment of the strength of a plaintiff's claim as part of its consideration.[23]
[41] Where a prima facie case and cause of action are apparent on the face of the claim, in the absence of evidence to the contrary, ordinarily the court will proceed on the basis that the claim is bona fide with a reasonable prospect of success.[24] If that is the case, the court "should not go into the merits of the claim in detail unless it can be demonstrated that there is a high degree of probability of success or failure".[25] If this cannot be demonstrated, the merits of the claim are a neutral factor.[26]
[42] Mr Lu submits that "it cannot be said that the Chinese Parties' claim is 'strong and apparently meritorious'".[27] On the other hand, the Chinese parties submit that their case is "strong and apparently meritorious".[28]
[43] Given the parties' respective positions, it is relevant to make a preliminary assessment of the merits of the claim.
[44] The directorship proceeding concerns a dispute as to the current officeholders of the Company. Mr Lu and Ms Che are recorded on the ASIC register as the current directors. The Chinese parties as plaintiffs challenge the status of Mr Lu and Ms Che and allege that on 22 April 2021, without any reference to them, Mr Lu purported to appoint Ms Che as a director of the Company, made unlawful changes to the ASIC records and, by ignoring the voice of the shareholders, improperly excluded the first plaintiff (Mr Zhao) and Mr Xiangdong Gao as directors.
[45] On 3 August 2020, Mr Lu allegedly sent a letter to Mr Zhao stating that Mr Zhao was deemed to have vacated his position as director "effective immediately."[29]
[46] The Chinese parties also contend that on 3 June 2021, without reference to them, Mr Lu changed the Company's details on the ASIC register to record that Mr Zhao had ceased to be a director of the Company as of that date.
[47] On 11 June 2021, the majority shareholders of the Company met and resolved that:
[63]
(a) Mr Lu and Ms Che were removed as directors of the Company; and
(b) Mr Gao was appointed as a director of the Company.
[64]
[48] On 5 November 2021, the Chinese parties as shareholders met and resolved that:
[65]
(a) the members' meeting on 11 June 2021 was validly called and held;
(b) the resolutions passed on 11 June 2021 were valid and binding; and
(c) Mr Zhao was and always had been a director of the Company and, to the extent necessary, was re-elected as a director of the Company.
[66]
[49] The relief sought by the Chinese parties in the directorship proceeding includes:
[67]
(a) a declaration that Mr Lu ceased to be a director of the Company on 11 June 2021, or in the alternative, on 5 November 2021;
(b) a declaration that Ms Che was not validly appointed as a director, or ceased to be a director of the Company on 11 June 2021, or alternatively, on 5 November 2021;
(c) a declaration that Mr Zhao has been, since 30 October 2018, and continues to be, a director of the Company; and
(d) a declaration that Mr Gao was validly appointed as a director of the Company on 11 June 2021, or alternatively, on 5 November 2021.
[68]
[50] Mr Lu filed a lengthy and detailed affidavit in October 2022 to support the earlier application for security for costs which had been adjourned and not re-agitated. But he has still not filed a defence to the directorship proceeding. No explanation as to why no defence has been filed was proffered before me. Regardless, the material that has been filed by Mr Lu reveals his case to be two-fold.
[51] First, Mr Lu contends that Mr Zhao was not validly appointed as a director in 2018. The material facts are yet to be pleaded but this is a curious claim because:
[69]
(a) the historical company search lists Mr Zhao as having been a director from 30 October 2018 to 3 June 2021; and
(b) Mr Lu clearly considered Mr Zhao to be a validly appointed director. For example, he apparently corresponded with him about attending directors meetings, and also purported to remove Mr Zhao as a director for failing to attend meetings.
[70]
[52] Second, Mr Lu argues that Mr Zhao's position as a director was automatically vacated as he had failed to attend meetings or participate in the dealings of the Company between 25 February 2020 and 27 July 2020 in breach of clause 13.6 the Company Constitution. That clause relevantly states that a director vacates their position if they are "absent without the consent of the Directors from meetings of the Directors held during a period of six months."[30]
[53] Mr Lu's sworn evidence is that on 8 January 2020 he posted two letters giving notice of a meeting to Mr Zhao at an address in Australia and China. Mr Zhao denies receiving these letters or of otherwise having been given notice of any such meeting over this period. Mr Zhao's case is that he was back home in China at this time but no longer residing at the Chinese address the letter was sent to, and that he was in regular telephone contact with Mr Lu at the time. Consistent with this evidence, Mr Lu's evidence refers to telephone conversations and meetings with Mr Zhao over some months. Relevantly too, the address in Australia where the letter was sent was Mr Lu's residential address. Ultimately, the issue of whether Mr Zhao had notice of the meeting will be one for trial, but it is instructive to note that the relevant period was during the COVID-19 pandemic.
[54] I accept that there is a factual dispute about the constitution of the directorship of the Company. The issue in the directorship proceeding turns on the construction of the Company Constitution and on whether Mr Zhao was served with the relevant notice on 8 January 2020. Mr Zhao's evidence is that he was not served with the notice. That evidence, on its face, is credible, particularly considering the worldwide crisis at the time. But most relevantly, my preliminary assessment is that Mr Lu's evidence of service and/or notice is weak.
[55] It was submitted on Mr Lu's behalf that there is likely to be cross-examination on this issue. That may be true. But it is difficult to see how cross examination of Mr Zhao will be effective in challenging his evidence that he was not given notice of any meeting.
[71]
Characterisation of the directorship proceeding: aggressive or defensive?
[72]
[59] An order for security for costs is generally not made against a party who is forced to litigate to defend the actions of the defendant.[32] The task for the court is to characterise the proceedings - that is, to determine who, in substance, is the attacker, and who is defending the attack.[33]
[60] One approach is to consider whether the moving party was forced to take legal action in a "practical" or "commercial" sense, rather than out of legal necessity.[34]
[61] Mr Lu does not acknowledge the members' resolutions referred to in paragraphs [47] and [48] above and continues to purport to act on behalf of the Company as its director. He continues to control the Company's information recorded on the ASIC register, and he has refused to provide the Chinese parties the ASIC Corporate Key for the Company.
[62] The Chinese parties submit that they had no choice but to bring proceedings to redress the corporate governance issues raised by Mr Lu altering the corporate register. In this way, they characterise their action in bringing the claim as "responsive" to Mr Lu's conduct as opposed to being "attackers".[35] Mr Lu alleges that this argument overlooks that he was entitled to remove Mr Zhao as a director because of clause 13.6 of the Company Constitution.
[63] In the circumstances discussed at paragraphs [44] to [55] above, I am satisfied that the Chinese parties had no choice but to bring proceedings to defend themselves against what appears to be questionable conduct by Mr Lu in having Mr Zhao automatically removed as a director. I am therefore satisfied that the Chinese parties are effectively the defendant in the directorship proceeding.
[73]
Where the plaintiff is forced to litigate in this sense, it is a "powerful"[36] or "significant factor"[37] that "weighs heavily"[38] against ordering security for costs. It can also reduce the amount of any security ordered, which will be limited to claims which cannot be characterised as defensive.[39] Leaving aside whether Mr Zhao was validly appointed in the first place (a claim from Mr Lu that appears to be very weak), the issues surrounding subsequent meetings and valid appointments all turn on the overarching issue of the vacation of the appointment under the Company Constitution. I am therefore satisfied that all of the claims in the directorship proceeding are defensive in nature, so it is unnecessary to consider claims which are not.
[74]
[65] The fact that a claim is defensive rather than attacking can, in and of itself, provide a sufficient basis to refuse to order security for costs.[40] In the present case I consider that fact to be of considerable weight - but not sufficient in itself to refuse to order security.
[66] There remain other competing discretionary factors. One such factor is that an order made against the Chinese parties would not be enforceable within the jurisdiction.[41] Although, given the defensive nature of the claim and the good prospects of success, I am satisfied that such a factor ought to be afforded less weight.
[75]
[67] Delay is a relevant factor in determining whether to order security for costs.[42] If the application for security is not made promptly, it is almost inevitable that there will be some prejudice to the plaintiff.[43] The longer the delay, and the greater the costs the plaintiff has been allowed to incur, the less likely it is that an order will be made.[44]
[68] On any view, Mr Lu has delayed pursuing an application for security for costs in the directorship proceeding.
[69] In determining the weight to be given to the effect of delay, the following three matters need to be considered:[45]
[76]
(a) whether there is an explanation for the delay and, if so, what weight it should be afforded;
(b) the level of prejudice caused to the plaintiff if required to lodge security at a late stage; and
(c) the timing of the application for security for costs.
[77]
[70] It was submitted on behalf of Mr Lu that some responsibility for the delay in bringing this application ought to be apportioned to the Chinese parties because they requested to adjourn the initial application so that material could be prepared in response. Whilst it was reasonable for Mr Lu to have acceded to such a request, that does not adequately explain (nor was any reasonable explanation offered) why no steps were subsequently taken for over two years to re-list the amended application. This is particularly so given a request by the Chinese parties' solicitors in June 2024 to have the applications re-listed went unanswered.
[71] Mr Lu also submits that even accepting some delay is attributable to him, there is no real prejudice to the Chinese parties because the proceeding is at a relatively early stage. I accept that, technically speaking, the proceeding is at an early stage - the defendant for unknown reasons has not yet filed a defence and disclosure is yet to occur. But it cannot be overlooked that Mr Lu has allowed the Chinese parties to incur considerable costs in the meantime. These costs include:
[78]
(a) the Chinese parties' filing material in response to the abandoned security for costs application;
(b) both parties filing substantive evidence in the directorship proceeding (amounting to about 800 pages worth of affidavits and exhibits); and
(c) the Chinese parties agitating an application in the directorship proceeding (as discussed under the chronology of the proceeding above) which led more broadly to the derivative proceeding being pursued by the Chinese parties.
[79]
[72] I am also satisfied that there is prejudice to the Chinese parties in Mr Lu delaying the hearing until after leave to commence the derivative proceeding was granted. Senior Counsel for the plaintiffs "hypothesised" this point during oral argument as follows:[46]
[80]
"...had my clients been ordered to pay security in August 2023, they would not have been able to bring the derivative proceeding unless they would have been able to satisfy the security order. They would there never have been given leave, they wouldn't have been put to the cost and expense of then doing that, putting in a statement of claim and advancing some interlocutory steps in the derivative proceeding, before being confronted with what we're now confronted with today."
[81]
[73] I accept this submission. It is reasonable to infer that if the Chinese parties had been ordered to pay security for costs in the directorship proceeding, they may not have incurred the costs leading up to and including the commencement of the derivative proceeding.
[74] In the present circumstances, Mr Lu has failed to adequately explain the delay in bringing the current application. In doing so, has he has allowed the Chinese parties to incur considerable costs - not only in the directorship proceeding but also by bringing the derivative proceeding.
[75] The delay in bringing the present application is also relevant in one final way. The fact that the Chinese parties have no assets in this jurisdiction, and there is no evidence of any reciprocal agreements in terms of the registering of judgments in China, is another relevant discretionary factor to be considered in this case.[47] But given the unexplained delay in prosecuting the application, Mr Lu's apparent concern about recovery is of less weight than it might ordinarily be on a timely application for security.
[82]
[76] Counsel for Mr Lu submitted that all things being equal in terms of the discretionary factors, "security ought to be given because of the prerequisite matter".[48] This submission was maintained as follows:
[83]
(a) "The question then is, is there anything else which displaces it on the other side? And my submission is because everything is neutral, it doesn't. The scales still tip in the favour of security being granted";[49]
(b) A foreign plaintiff having no assets in the jurisdiction was "such a significant prerequisite factor" that "incredibly strong discretionary factors" were required to "outweigh that";[50] and
(c) The Chinese parties are unable to displace the significance of the fact that the threshold for under r 671(e) is satisfied and therefore, they ought to provide security.[51]
[84]
[77] Support for this submission was said to be founded on the observations of McHugh J in PS Chellaram & Co Ltd vChina Ocean Shipping Co[1991] HCA 36; (1991) 102 ALR 321. The relevant observations were made in the context of an application for security for costs on appeal to the High Court as follows:[52]
[85]
"...for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction" (emphasis added).
[86]
[78] The following observations of Gummow J in In Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 were also relied upon by counsel for Mr Lu:[53]
[87]
"The purpose of ordering security for costs against an applicant ordinarily resident outside the jurisdiction is to ensure that a successful respondent will have a fund available within the jurisdiction of this Court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement..."
[88]
[79] But these observations must be seen in the context of the remainder of the passage, where his Honour went on to say:[54]
[89]
"On the other hand, the mere circumstance that an applicant is resident outside the jurisdiction does not necessarily invite an exercise of discretion in favour of ordering security, the question being how justice will best be served in the particular case" (emphasis added).
[90]
[80] I do not accept the approach to the exercise of the discretion articulated in paragraph [76] above is correct for three reasons.
[81] First, it conflates the prerequisite requirement of r 671 and the discretionary factors in r 672 by suggesting that there is a presumption in favour of security once the prerequisite or condition precedent is established.
[82] Second, it suggests that the onus is somehow reversed and that once the prerequisite to the making of an order for security for costs has been established, it is incumbent on a plaintiff to show that the discretionary factors outweigh the established prerequisite such that security for costs should not be granted. Such an approach is exactly the type of error that was recently identified by the Queensland Court of Appeal in DGR Global v P.T. Limited[2025] QCA 122 as follows:[55]
[91]
"The reasons reveal that the judge effectively imposed a persuasive burden on the appellant by approaching the application on the basis that once the threshold condition had been satisfied, the power to order security for costs fell to be exercised in the respondents' favour unless the appellant persuaded the court by reference to discretionary matters, that the power should not be so exercised."
[92]
[83] Third, I accept that the fact that a plaintiff is resident outside of the jurisdiction and has no assets within the jurisdiction is, depending on the case, a factor of considerable weight in the exercise of the discretion. But there is nothing in either of the passages relied upon by counsel for Mr Lu to suggest that in such a case the onus of satisfying the court that security ought to be ordered shifts to a plaintiff. Rather, the observations in both decisions are entirely consistent with the well-established principles that the onus always remains with the applicant defendant, but there is an evidentiary onus on a plaintiff to identify the relevant discretionary factors that weigh in its favour. The weight to be given to a particular discretionary factor is dependent on the circumstances and justice of the case.
[84] The factor that weighs most in Mr Lu's favour is that an order for costs made against the Chinese parties would not be enforceable in this jurisdiction. But that is just one of the factors to be weighed. Upon a consideration of all the relevant factors as discussed above, I am not satisfied that Mr Lu has satisfied the onus on him. I do not consider the justice of this case warrants an order for security for costs.
[93]
Should security be ordered in the derivative proceeding?
[94]
[85] The Chinese parties raise the following discretionary factors:
[95]
(a) The Company is a company incorporated in Australia and there is nothing to prevent Mr Lu from enforcing a costs order against the Company;[56]
(b) The Company's impecuniosity was caused by Mr Lu;[57]
(c) The means of those standing behind the proceeding;[58]
(d) The Company is effectively in the position of a defendant;[59]
(e) The Chinese parties raise a good arguable case on behalf of the Company;[60]
(f) The enforceability of an order for costs made against the plaintiff within the jurisdiction;[61]
(h) Mr Lu delayed seven months after requesting security before filing his application in September 2025.
[96]
[86] Again, each of these factors are discussed below although some are more conveniently addressed together.
[97]
Position of the defendant, prospects and genuineness
[98]
[87] The derivative proceeding concerns a dispute as to whether Mr Lu was entitled to receive the net proceeds of the sale of Lot 2 over which the Company held mortgages. The Company contends (and Mr Lu disputes) that Mr Lu breached his duties under ss 181 and 182 of the Corporations Act 2001 (Cth) by distributing the net proceeds of the sale of Lot 2 to himself without the consent of the directors of the Company (being Mr Zhao and Mr Gao). The relief sought in the derivative proceeding includes a declaration that Mr Lu holds a mortgage over Lot 2 in his favour on trust for the Company.
[88] By his pleaded defence, Mr Lu alleges that:
[99]
(a) Mr Zhao and Mr Gao were, but no longer are, directors of the Company;
(b) he and Ms Che have been the duly appointed directors of the Company since 22 April 2021; and
(c) the duly appointed directors of the Company (Mr Lu and Ms Che) directed the Company to distribute the net proceeds of sale of Lot 2 to Mr Lu.
[100]
[89] Essentially, Mr Lu's case is that he was the "proper" director of the Company and at the time of the distribution of the net proceeds of the sale of Lot 2 to himself, "he was entitled to do or direct the company to do what it did."[63]
[90] Given what I have found to be a strong case on the overlapping issue of Mr Zhao's alleged "automatic vacation"[64] of the office of directorship, it follows that, at least to the extent that that issue infects other issues in the derivative proceeding, I am satisfied that there are strong prospects of success in relation to the derivative proceeding.
[91] In terms of the balance of the derivative case, Mr Lu submits that the Chinese parties "cannot assert" that the Company will be successful because:[65]
[101]
"...another issue in dispute is the origin of funds by [the Company] as trustee for the Trust to pay the outgoing mortgagees their debts in order to take assignment of the mortgage. The Plaintiff in the Derivative Proceeding alleges the funds used included $2,417,600.38 paid by the Chinese Parties, whereas Mr Lu says he leant [sic] all the funds used to [the Company]. To the extent that the Chinses [sic] Parties may have transferred funds in relation to the purchase of the Carbrook Property, the correspondence of 30 October 2018 indicates that those transfers were in relation to the Original Plan and not for the purposes of [the Company] purchasing the mortgages."
[102]
[92] In circumstances where no reasonable explanation has been given about what has happened to the money the Chinese parties transferred, even in terms of the "Original Plan", the defence by My Lu appears weak.
[93] It is also difficult to understand what Mr Lu's defence to his self-dealing regarding the mortgage on Lot 2 is, even if he is found to have been the sole director of the Company at the relevant time. But for his actions, the Company would have received proceeds from the sale of Lot 2 in the amount of $2,490,000.00. There is no suggestion that the majority shareholders approved such a dealing.
[94] It follows that I am satisfied that, at the very least, the claim is a bona fide one with reasonable prospects of success. Relevantly too, the individuals behind the derivative proceeding have:
[103]
(a) produced a deposit certificate of holding CNY1,202,380.84 (equivalent to about AUD 264,786.51); and
(b) paid $50,000.00 into Court in aid of the grant of leave to bring the derivative proceeding.
[104]
[95] In such circumstances, I am also satisfied that the proceeding is a genuine one.[66] In my view, the Company was left with no option but to challenge Mr Lu's alleged self-dealing. Considered another way - if Mr Lu had pursued the Company to recover funds, no security would be required from it. I am satisfied that in those circumstances the Chinese parties are effectively in the position of a defendant.
[105]
Attribution of impecuniosity and enforceability
[106]
[96] The Chinese parties allege that the Company's impecuniosity was caused by Mr Lu. This submission made on two bases:
[107]
(a) First, that Mr Lu caused the Company to sell Lot 2 and received the net proceeds of the sale in circumstances where he was not authorised or entitled to do so, and he then used those proceeds to advance a loan to ACN Co and acquire a mortgage over Lot 2;
(b) Second, there is evidence that the Chinese parties transferred significant sums of money to Mr Lu (about $3,850,000.00) and that the mortgages held by the Company were acquired with the money the Chinese parties advanced to the Company.
[108]
[97] Even accepting both premises are found to be true, I am not satisfied that the Company is impecunious. The evidence is that the Company holds a significant asset in this jurisdiction, namely the mortgage over Lot 1 (which was not ultimately sold in 2022). There is no evidence of the present value of Lot 1 because Mr Lu controls the books and records of the Company, but there is evidence that the Carbrook Properties were contracted to sell in 2017 for $9,600,000.00 and the Company acquired the mortgages over the Carbrook Properties in 2018 for approximately $2,500,000.00 million. It is reasonable to assume the mortgage over Lot 1 has some considerable value.
[98] If, however, the Chinese parties are unsuccessful in the derivate proceeding, I accept that it may not be in the interests of justice for the Company to have to pay Mr Lu's costs. But given the strength and nature of this case being defensive, I am not satisfied much weight ought to be given to this factor.
[99] The fact that the Chinese parties as the nominal plaintiffs were individual residents outside of Australia (without any assets within the jurisdiction) means that any judgment in favour of Mr Lu will not be enforceable in this jurisdiction.[67] For the reasons stated in the previous paragraph, I am not satisfied that much weight ought to be afforded to this factor either.
[109]
[100] The Chinese parties refer to the extensive procedural steps that have been completed, including pleadings, disclosure, and the issuing of non-party notices; and also to considerable evidence having been filed of over 1,000 pages of affidavits and exhibits, namely the Affidavit of Yongman Zhao filed on 25 October 2024 and the Affidavit of Junyan Lu filed on 14 April 2025.
[101] The Chinese parties point to this as a significant factor against awarding security for costs in this case. There is some tension between this submission and one made a few months ago in the consolidation application that the case is still not ready for trial. The delay of seven months in bringing this application has not been explained. But I am not satisfied that the delay is a significant factor either way in the derivative proceeding.
[110]
[102] The factor that weighs most in Mr Lu's favour in the derivative proceeding is that an order for costs made against the Chinese parties would not be enforceable in this jurisdiction. But that is just one of the factors to be weighed. In my view, other factors such as the strength and nature of the derivative case outweigh the factors in Mr Lu's favour.
[103] I am therefore not satisfied that Mr Lu has satisfied the onus upon him. I do not consider the interest of justice warrants an order for security for costs being made in the derivative proceeding.
[111]
[104] There is no suggestion that an order for security will stifle either proceeding,[68]
[112]
but the issue of whether an order for security for costs would be oppressive was raised by the Chinese parties.[69] That factor is underpinned by the submission that there is a practical difficulty in granting security due to the overlap in the proceedings.
[113]
[105] The issue of who are and were the duly appointed directors of the Company at the relevant times is the only real issue in the directorship proceeding. The resolution of the corporate governance of the Company is also a critical issue in the derivative proceeding. But that proceeding also involves broader issues, including allegations by the Chinese parties of conflicts of interest and self-dealing by Mr Lu, and potentially the resolution of the correct identity of the unit holders of the Investment Trust.
[106] The issue of oppressiveness is, in my view, a neutral one in terms of the discretionary factors. But it is relevant to the quantum of costs sought by Mr Lu in both proceedings, which total over half a million dollars. Those costs are excessive and do not take sufficient account of or reflect the considerable overlap in the proceedings. Taking a broadbrush approach, if I had been minded to grant security, I would have reduced the costs sought by at least half and I would have only allowed costs up until a mediation - not the first day of the trial.
[114]
[107] I order that:
The further amended application filed 9 September 2025 in BS 11276/22 is dismissed;
The application filed 9 September 2025 in BS 14509/24 is dismissed;
The defendant, Mr Lu, pay the costs of both applications.
[115]
[1] Ms Che is separately represented and had filed her own application for security for costs on 26 June 2023. That application has not been heard and was not returnable before me.
[4]Monto Coal 2 Pty Ltd v Sanrus Pty Ltd[2018] QCA 309; [2019] 3 Qd R 143 at 154 [43] (Gotterson JA, McMurdo JA and Boddice J, as his Honour then was, agreeing).
[118]
[5] See generally Sir Lindsay Parkinson & Co Ltd v Triplan Ltd[1973] QB 609.
[119]
[6]Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd[2007] QSC 262 at [25] (Martin J, as his Honour then was).
[24]KP Cable Investments Pty Ltd v Meltglow Pty Ltd[1995] FCA 76; (1995) 56 FCR 189 at 197-8 (Beazley J); Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd[2012] QCA 114 at [18] (Margaret Wilson AJA, Margaret McMurdo P and Applegarth J agreeing).
[130]
[25]Suncare Constructions Australia Pty Ltd & Anor v Gainspace (Mackay) Pty Ltd[2016] QSC 67 at [11] (Jackson J), quoting ACN 006 577 162 Pty Ltd (formerly Harrop Engineering Australia Pty Ltd) & Ors v Beauville Pty Ltd & Ors[2014] VSC 298 at [8] (Derham AsJ).
[54]In Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at [24] (Gummow J), citing Barton v Minister for Foreign Affairs (1984) 2 FCR 463; CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd(1987) 72 ALR 270 at 284-5.
CN-AU Capital Pty Ltd & Ors; In the matter of CN-AU Capital Pty Ltd [2025] QSC 290
Legislation Cited (1)
Civil Procedure Rules 1999
Cases Cited (10)
(1994) 116 FLR 153
(1995) 56 FCR 189
(2015) 327 ALR 523
(1991) 102 ALR 321
(1985) 1 NSWLR 114
(1935) 54 CLR 175
(1983) 70 FLR 261
(1988) 19 FCR 324
(1984) 2 FCR 463
(1987) 72 ALR 270
[8] The directorship proceeding concerns a dispute about who the proper officers of the Company are. The derivative proceeding concerns a dispute as to whether Mr Lu was entitled to receive the net proceeds of the sale of Lot 2.
[56] My preliminary assessment of the Chinese parties' case is that it is a strong and meritorious claim.
[57] Relatedly, I am satisfied of the genuineness of the proceeding, in that it seeks no more than declarations to restore the Company's corporate governance.
[58] Where the plaintiff has a strong and meritorious claim, the court will be reluctant to make an order which may have the effect of shutting the plaintiff out from running its case.[31] In this case, there is no suggestion that an order for security will stifle the proceeding under r 672(h); but regardless, the strength of the Chinese parties' case weighs heavily in the balance. This is particularly so when, for the reasons that follow, the Chinese parties had no choice but to commence the proceedings.