Cheng v Lam - [2025] WASC 263

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   CHENG -v- LAM [2025] WASC 263
CORAM:   PALMER J
HEARD:   3 JUNE 2025
DELIVERED          :   4 JULY 2025
FILE NO/S:   CIV 2438 of 2023
BETWEEN:   MARY YUEN SHAN CHENG
Plaintiff

AND

FRANCIS HUNG LAM
First Defendant

ANDREA MAN YEE CHENG
Second Defendant

CHAN THANH LAM
Third Defendant

MALCOLM FIELD as trustee in bankruptcy of the estate of CHAN THANH LAM
Fourth Defendant

Catchwords:

Practice and procedure - Application for security for costs - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application allowed
Security for costs ordered

Category: B

Representation:

Counsel:

Plaintiff	:	Mr P Hannan and Mr M A Tedeschi
First Defendant	:	Mr P G McGowan
Second Defendant	:	Mr P G McGowan
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance

Solicitors:

Plaintiff	:	GA Lacerenza & Associates
First Defendant	:	Johnstone Crouse Lawyers
Second Defendant	:	Johnstone Crouse Lawyers
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance

Case(s) referred to in decision(s):

Cheng v Lam [2023] WASCA 65
Cheng v Lam [No 2] [2018] WASC 199
Jebb as trustee for The Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2019] WASC 121
Moran v Schwartz Publishing Pty Ltd [No 2] [2015] WASC 35
Reynolds v Sharaz [2023] WASC 327

PALMER J:

Introduction

In these proceedings, the plaintiff (Mary) seeks orders winding up eight partnerships between her and, amongst others, the first defendant (Francis) and the second defendant (Andrea), and the appointment of a receiver and manager to the assets and businesses of the partnerships. Without intending any disrespect, as two of the parties have the same surname, I will refer to them by their first names.
In earlier proceedings in this Court with action number CIV 1706 of 2015 (the First Partnership Proceedings), Chaney J found that Mary, Francis and Andrea had been involved in the partnerships to develop various properties and he ordered an account.[1]
[1] Cheng v Lam [No 2] [2018] WASC 199.
In the joint Defence filed by Francis and Andrea in these proceedings, they plead that no receivers need to be appointed to four of the partnerships because of the account performed but they accept that a receiver should be appointed to the other four partnerships, albeit with limited powers. They also dispute that the balance remaining should be distributed as Mary claims.
Mary, Francis and Andrea are also defendants in separate proceedings in this Court brought by the Commonwealth Bank of Australia with action number CIV 2563 of 2013 (the Commonwealth Bank Proceedings).
There have been appeals in both the First Partnership Proceedings and the Commonwealth Bank Proceedings. Mary was ordered to provide security for costs in one of the appeals in the First Partnership Proceedings, CACV 50 of 2022.[2]
[2] Cheng v Lam [2023] WASCA 65.
Mary, Francis and Andrea have also been involved in other proceedings in the Family Court and bankruptcy proceedings in the Federal Court to which Mary is the respondent the (Bankruptcy Proceedings).
This judgment concerns an application that Francis and Andrea have made for an order that Mary pay security for costs in these proceedings in the sum of $27,238.20 pursuant to O 25 r 1 of the Rules of the Supreme Court 1971 (WA) (Rules of the Supreme Court).

The jurisdiction to order security for costs

Order 25 r 1 of the Rules of the Supreme Court provides that the Court may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him.
Order 25 r 2(g) of the Rules of the Supreme Court provides that, without limiting the generality of O 25 r 1, the Court may order security for costs where the plaintiff is in default in respect of any costs ordered to be paid by him in any proceedings previously brought by him against the same defendant or another defendant for substantially the same cause of action or in relation to substantially the same subject matter.
Order 25 r 3 of the Rules of the Supreme Court provides that in determining whether to exercise the discretion to order security for costs the court shall take into consideration:
(a)the prima facie merits of the claim;
(b)what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff;
(c)whether the normal processes of the court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff.
The nature of the Supreme Court's jurisdiction to order security for costs was recently summarised by Solomon J in Reynolds v Sharaz,[3] who referred to the summary of the law given by Kenneth Martin J in Moran v Schwartz Publishing Pty Ltd [No 2].[4] As Solomon J observed in Sharaz,[5] some factor, in addition to inability to pay, is generally required to attract the court's discretionary power to award security for costs against a natural person.
[3] Reynolds v Sharaz [2023] WASC 327 [15] - [30] (Sharaz).
[4] Moran v Schwartz Publishing Pty Ltd [No 2] [2015] WASC 35.
[5] Sharaz [20].

The evidence on the application

The evidence in support of the application

Francis and Andrea relied on an affidavit of Jack Dudding sworn 3 April 2025.
Mr Dudding is a lawyer acting for Francis and Andrea in these proceedings and in other proceedings to which Mary is also a party.
Mr Dudding deposes to various costs orders made in the First Partnership Proceedings, or appeals from those proceedings, requiring Mary to pay to Francis and Andrea a total of $394,175.53 that remain unpaid. In particular, he deposes to the following unpaid costs orders:
(a)a Certificate of Taxation in the Commonwealth Bank Proceedings dated 3 August 2022 in the amount of $73,748.67;
(b)a Certificate of Taxation in the First Partnership Proceedings dated 21 September 2022 in the amount of $256,006.65;
(c)a Certificate of Taxation in the First Partnership Proceedings dated 21 September 2022 in the amount of $13,317; and
(d)a Certificate of Taxation in the Supreme Court appeal action CACV 63 of 2020 dated 19 August 2022 in the amount of $51,103.21.
Mr Dudding also deposes to a costs order of $9,000 outstanding in proceedings in the Family Court since 24 November 2024.

The evidence opposing the application

Mary relied upon three affidavits, two affidavits that she swore herself on 22 May 2025 (First Cheng Affidavit) and 29 May 2025 (Second Cheng Affidavit) and an affidavit of Desmond Crawley sworn 26 May 2025 (Crawley Affidavit).
Mr Crawley is a chartered accountant who expresses a view that the winding up of the partnerships will result in a surplus.
In the First Cheng Affidavit, Mary makes various observations about the history of her proceedings with Francis and Andrea, as well as advancing various contentions about the winding up of the partnership. She also deposes to the fact that a sequestration application was made in the Bankruptcy Proceedings on 30 April 2024 and a decision on that application is still pending.
The first seven paragraphs of the Second Cheng Affidavit supplement what was said in the First Cheng Affidavit, but otherwise, the Second Cheng Affidavit appears to address whether an order should be made for substituted service. In those paragraphs, Mary deposes to the fact that she was ordered to pay $13,000 as security in appeal CACV 50 of 2022 and that she did so. She says that she subsequently abandoned the appeal and that Francis and Andrea are yet to tax their costs of the appeal. She says that she has been informed by her solicitors that Francis and Andrea's taxed costs would unlikely amount to $13,000.
Francis and Andrea objected to the receipt of the affidavit evidence filed by Mary on three grounds.
First, they argued that the evidence was filed late and no explanation was given for the lateness of the evidence.[6]
[6] Transcript of hearing held on 3 June 2025, ts 47.
On 4 April 2025, I ordered that Mary file and serve any affidavits in opposition to the security for costs by 28 April 2025.
Mary's affidavits were filed almost a month late, after Francis and Andrea had filed their written submissions in support of their application (which submissions were filed in accordance with the orders I had made on 4 April 2025).
Francis and Andrea characterised Mary's behaviour as a rejection of any obligation to comply with court orders.[7]
[7] ts 47 - 48.
Secondly, Francis and Andrea submitted that Mr Crawley's evidence was expert evidence. They queried the relevance of such evidence in the present context and contended that the court could not make findings about the matters addressed by Mr Crawley. They characterised Mr Crawley's evidence as involving assumptions and speculation and argued that he disregarded inconvenient matters. Further, they contended that his analysis involved an impermissible attempt to impugn a taking of account that Registrar Whitbread had performed in related proceedings.[8]
[8] ts 49 - 50.
Thirdly, Francis and Andrea submitted that the First Cheng Affidavit seeks to re-argue matters which have finally been dealt with in other proceedings and they referred to the decision of Smith J in Commonwealth Bank of Australia v Cheng [No 2] [2021] WASC 291.[9]
[9] ts 50 - 51.
Francis and Andrea's opposition to the Second Cheng Affidavit was more muted. They submitted that most of the Second Cheng Affidavit appeared to be related to substituted service (which it was) and seemed to have been filed to assist a submission that was made.[10]
[10] ts 51 - 52.
I am prepared to accept the evidence filed on this occasion. This is principally because at the hearing, Mary's counsel indicated that the evidence she filed was relied upon for the limited purpose of establishing that her claim that there will be a surplus was not 'completely fallacious' and I was not being asked to make a finding that there would be a surplus.[11] It seemed to me that the evidence was potentially relevant to the assessment of the prima facie merits of Mary's claim and the limited purpose for which the evidence was relied upon blunted the force of the objections made.
[11] ts 62 and ts 68.

Whether security for costs should be ordered

Mary argued that the following matters are relevant to the exercise of the discretion and add weight to the common law's natural reluctance to order security for costs against a natural person:[12]
(a)it was necessary for Mary to commence these proceedings despite the result in the First Partnership Proceedings;
(b)these proceedings do not raise the same, or substantially the same, cause of action as the First Partnership Proceedings;
(c)an examination of the Statement of Claim shows that the claim is properly pleaded;
(d)the partnership winding up process sought in this action is likely to produce a 'pay-out' to Mary, Francis and Andrea;
(e)in these circumstances, Mary's prospects are strong;
(f)Francis and Andrea are attempting to prevent Mary achieving the 'pay-out'; and
(g)Francis and Andrea are seeking security for costs up to and including the first day of the trial.
[12] Plaintiff's Submission in Opposition to 1^st and 2^nd Defendant's Application for Stay of Action/or Security for Costs dated 29 May 2025 (Plaintiff's Submissions), par 112.
Mary submitted that the application for security for costs should be dismissed. She also argued that it was too early for the Court to estimate the costs to be incurred for the future stages of the action and, if security for costs were to be ordered, it should be granted in tranches and limited to a modest amount.[13]
[13] Plaintiff's Submission, pars 112 - 114.
Francis and Andrea referred to the various outstanding costs orders against Mary.[14] They submitted that whether the winding up of the partnerships would result in a surplus was speculation. They contended that, in any event, Mary's obligation to pay costs was a personal obligation, rather than a liability of the partnership.[15]
[14] First and Second Defendants' Submissions in Support of the Application for Security for Costs Against the Plaintiff dated 19 May 2025 (First and Second Defendants' Submissions), par 3.
[15] First and Second Defendants' Submissions, pars 14 - 15.
Mary's submissions sought to attribute a malign motive to Francis and Andrea's opposition to the present proceedings. While it might well be expected that the protracted legal proceedings between Mary, Francis and Andrea would have created some bitterness, I am not satisfied that the material before me establishes that that there is no proper basis to defend the action, or that their decision to do so is based solely on spite.
Further, I am not prepared to conclude that the prima facie merits of the claim are 'strong' as Mary submitted. While, given the matters admitted by Francis and Andrea in their Defence, it may be anticipated that a receiver would be appointed to some of the partnerships, the terms and scope of any appointment remain controversial. I accept that there is a possibility that the winding up of the partnership might produce a surplus but on the material before me, I am not satisfied that that can be predicted with confidence.
It is unclear on the material available to me whether there would be any property within the jurisdiction to satisfy any costs order, or the normal processes of the court would be available. The affidavit material filed by Mary did not address her current personal financial situation (other than by reference to her potential entitlement to the proceeds of these proceedings). Significantly, the affidavit material also indicated that there is an application for a sequestration order currently pending in the Federal Court.
In my view, the following further considerations are also material to the exercise of my discretion in this case.
First, Mary has an established history of failing to satisfy costs orders made against her in favour of Francis and Andrea. This history suggests that she will not pay any costs ordered against her in these proceedings.
Secondly, neither the affidavit material before me, nor the submissions, sought to explain why the costs orders previously made were not paid. Significantly, neither indicated that Mary failed to pay those costs because of impecuniosity. Given this, it was not apparent to me that, even if Mary had the money to pay any costs orders (including because the winding up of the partnerships resulted in a surplus), she would do so.
Thirdly, Mary did not depose to being unable to pay the security if she was ordered to do so. The material before me reveals that she has been able to pay security when she was ordered to do so in the past.
Mr Hannan submitted that the evidence before the Court permitted inferences to be drawn both ways about whether Mary would be able to pay any security ordered.[16] He did not, however, invite me to infer that Mary would be unable to pay any security ordered. Nor did he submit that ordering security would prevent Mary from progressing the proceedings.
[16] ts 55.
As Vaughan J (as his Honour then was) observed in Jebb as trustee for The Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd,[17] it is incumbent on a plaintiff who wishes to resist an application for security for costs on the ground that the order will stultify the litigation to provide the court with a full and frank statement of his or her assets and liabilities. The affidavit material filed by Mary failed to do so.
[17] Jebb as trustee for The Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2019] WASC 121 [201].
I am not prepared to infer that Mary would be unable to pay any security ordered from the limited material provided to me, or that ordering security would prevent her from progressing the proceedings.
In my view, given all of these matters it is appropriate that I order that Mary provide security for costs.
Given the issues in these proceedings, the amount of $27,238.20 sought is in my view modest and appropriate. I do not consider it appropriate to order security in tranches as Mary argued.
I will hear from the parties on the question of costs but my preliminary view is that costs should follow the event.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CN
Associate to the Judge
4 JULY 2025