Junying Yan v Xiangting Kong (in Her Capacity as Administrator of the Estate of the Deceased) - [2020] SASC 143

SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction)
In the Estate of HONGTAO LIU; JUNYING YAN V XIANGTING KONG (IN HER CAPACITY AS ADMINISTRATOR OF THE ESTATE OF THE DECEASED) & ORS
[2020] SASC 143
Judgment of The Honourable Justice Stanley
11 August 2020
PROCEDURE - STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY - INHERENT AND GENERAL STATUTORY POWERS - TO STAY OR DISMISS ORDERS OR PROCEEDINGS GENERALLY
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT - RESIDENT OUTSIDE JURISDICTION - GENERALLY
SUCCESSION - FAMILY PROVISION - PROCEDURE - ORDERS AND OTHER PROCEDURAL MATTERS - COSTS - OTHER MATTERS
The deceased, Hongtao Liu, died intestate on 9 November 2018. The second defendant, Xiangting Kong, is the wife of the deceased. She was granted letters of administration for the deceased’s estate on 8 February 2019. The third and fourth defendants, Daniel Liu and Shirley Liu, are the children of Xiangting Kong and the deceased. Junying Yan, the plaintiff in the proceedings, is the mother of the deceased. She is a Chinese citizen and resides in China.
The majority of the estate’s assets are in Australia, however, a substantial proportion of the estate is in China. The beneficiaries of the estate under intestacy law in this State are the second, third and fourth defendants. On 1 August 2019 she commenced proceedings in the Court claiming a promissory constructive trust in relation to property of the deceased and applying for provision pursuant to s 7 of the Inheritance (Family Provision) Act 1972 (SA) (the Family Provision Act). The plaintiff has also commenced four actions in the Chinese courts. The subject matter of those actions concern both moveable and immovable property of the deceased in China. The plaintiff claims an entitlement to part of that property under Chinese intestacy law.
The plaintiff applies for a stay of the proceedings. The second defendant has applied for an order for security for costs, supported by the third and fourth defendants.
Held per Stanley J (dismissing the stay application and granting the security for costs application):
1. The plaintiff has not established that the justice of the case requires the granting of the stay. She has not established that to allow the action to proceed would impose hardship which can be avoided without the risk of injustice to the second, third and fourth defendants.
2. The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund within the jurisdiction which will guarantee that any order for costs in favour of the defendant will be met. The order protects the efficacy of the exercise of the power to award costs.
3. There are multiple considerations which favour the grant of an order for security for costs in this case, including but not limited to the plaintiff’s residence in China and lack of property or capital within the jurisdiction of this Court.
Inheritance (Family Provision) Act 1972 (SA) s 7; Supreme Court Civil Rules 2006 (SA) r 192, r 194, referred to.
Viscariello v Tamasauskas [2018] SASC 111; Merribee Pastoral Industries Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd (1998) 193 CLR 502; P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321; Mothership Music Pty Ltd v Flo Rida [2012] NSWCA 344; Singer v Berghouse (1993) 114 ALR 521; Li v State of New South Wales [2013] NSWCA 165; Green v Ellul & Ors (No. 2) [2018] SASCFC 105; Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC & Ors [2008] SASC 337, discussed.
Ferris v Lambton (1905) 22 WN (NSW) 56; Batistatos v Roads and Traffic Authority of NSW (2006) 226 CLR 256; CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345; Rogers v The Queen (1994) 181 CLR 251; Rozenblit v Vainer & Anor (2018) 262 CLR 478; Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467; Energy Drilling Inc v Petroz NL [1989] ATPR 40-954; Indoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744, considered.

In the Estate of HONGTAO LIU; JUNYING YAN V XIANGTING KONG (IN HER CAPACITY AS ADMINISTRATOR OF THE ESTATE OF THE DECEASED) & ORS
[2020] SASC 143
Testamentary Causes Jurisdiction: Applications for Stay and Security for Costs
STANLEY J:
Introduction

The deceased, Hongtao Liu, died intestate on 9 November 2018. The second defendant, Xiangting Kong, is the wife of the deceased. She was granted letters of administration for the deceased’s estate on 8 February 2019. The third and fourth defendants, Daniel Liu and Shirley Liu, are the children of Xiangting Kong and the deceased and were born in 2006 and 2008 respectively. The defendants all reside in Adelaide. The children attend school here.
Junying Yan, the plaintiff in the proceedings, is the mother of the deceased. She is a Chinese citizen and resides in the People’s Republic of China (China). On 1 August 2019 she commenced proceedings in the Court claiming a promissory constructive trust in relation to property of the deceased and applying for provision pursuant to s 7 of the Inheritance (Family Provision) Act 1972 (SA) (the Family Provision Act).
The statement of assets and liabilities of the deceased discloses a net value of the estate, both within and outside South Australia, in excess of $30,000,000. The majority of the estate’s assets are in Australia, however, a substantial proportion of the estate is in China. The beneficiaries of the estate under intestacy law in this State are the second, third and fourth defendants.
The plaintiff has commenced four actions in the Chinese courts. The subject matter of those actions concern both moveable and immovable property of the deceased in China. The plaintiff claims an entitlement to part of that property under Chinese intestacy law. The evidence suggests that the moveable property concerns a power supply equipment shareholder dispute and a dispute over lending between the city power supplier and related entities. There appears to be common ground that in relation to the immovable property the plaintiff has an entitlement to about $1.25 million.
The Court has before it two interlocutory applications. The plaintiff applies for a stay of the proceedings. The second defendant has applied for an order for security for costs. This is supported by the third and fourth defendants. An application for a mandatory injunction restraining the plaintiff from taking any steps to further prosecute proceedings in China related to the deceased’s estate (the anti-suit injunction) has also been brought. That application has not yet been heard. On the hearing of these applications I indicated I would not decide them until I had heard the application for the anti-suit injunction. The hearing of the anti-suit injunction has been delayed for reasons outside the control of the parties. In the circumstances I now consider it inappropriate to delay delivering this judgment. The parties are entitled to know the outcome of these applications before I make any decision in relation to the application for the anti-suit injunction.
The evidence
Both applications proceeded on the basis of affidavit evidence. The deponents were not required for cross-examination. The plaintiff relied upon affidavits of Fiona Ruth Fagan affirmed 12 November 2019, 20 December 2019[1], 17 January 2020 and 31 January 2020 as well as the affidavit of Victoria Jennifer Gilliland sworn 26 August 2019.
[1] Noting I allowed objections to paragraphs 7, 11 and 13 of this affidavit.
The second defendant relied on affidavits of Victoria Jennifer Gilliland of 26 August 2019, 9 September 2019 and 3 February 2020 and the affidavits of the second defendant of 23 January 2020 and 31 January 2020.
The plaintiff’s application for a stay
The plaintiff applies to stay her own action. The plaintiff submits that the purpose of the application is to save the costs of the action in circumstances where the outcome of proceedings she is currently pursuing in China might obviate the need for the proceedings in this Court. It is purely pragmatic.
The plaintiff accepts there are good prospects she will receive real property worth $1.25 million from the Chinese estate of the deceased, being real property acquired after the deceased’s marriage to the second defendant. The plaintiff submits that if she is successful in the Chinese proceedings then she will not be able to satisfy the threshold test in the Family Provision Act claim and, notwithstanding the good prospects of success on her constructive trust claim, she would not proceed with that claim for pragmatic reasons. Accordingly, if the action in this Court is not stayed, there is the potential that the costs incurred by both sides will be wasted. She submits that, on the basis of the evidence of Ms Fagan’s first affidavit, the Chinese proceedings should be concluded by early 2021. In those circumstances the balance of convenience favours a grant of the stay until the need to pursue the action in this Court becomes clear.
The plaintiff’s application is opposed by the second, third and fourth defendants.
The second defendant, supported by the third and fourth defendants, submits that the plaintiff’s action delays significantly the administration of the deceased’s estate and operates as a freeze on those assets in circumstances where they have always lived by recourse to those assets. The longer the action takes to resolve, the greater the financial and emotional toll on them. By contrast, they submit there is no evidence that proceeding to the resolution of the action in this Court prejudices the plaintiff’s ability to live. The plaintiff offers no concession to them for the indulgence she seeks by way of a stay. In effect she seeks to stay the proceedings sine die in circumstances where there is no admissible evidence which permits findings to be made about the degree of overlap between the Chinese proceedings and the action in this Court; when the Chinese actions will be finalised; or the likely outcome of those proceedings. Having commenced the proceedings, it is not open to the plaintiff to contend that this Court is not an appropriate forum. The evidence does not establish that the resolution of the Chinese actions will have any legal effect in deciding the matters sought to be agitated in the action in this Court or that the prejudice to the plaintiff in prosecuting this action outweighs the prejudice caused to the second, third and fourth defendants as the result of an indeterminate delay. Further, the position of the plaintiff is not that the outcome of the Chinese proceedings will resolve the issues in the action in this Court. If dissatisfied with the outcome of the Chinese proceedings the plaintiff wishes to maintain her right to litigate here. The plaintiff’s position amounts to having her cake and eating it.
Principles applicable to an application for a stay of proceedings
Supreme Court Civil Rules 2006 (SA)[2] r 192 confers power on the Court to stay proceedings if the justice of the case so requires. The Court also has an inherent jurisdiction to stay proceedings to prevent an injustice being done.[3] The power to stay proceedings is based on the duty of the Court to protect its own functions.[4] In Viscariello v Tamasauskas[5] Doyle J considered the basis of the Court’s power to grant a stay of proceedings in the following terms:[6]
The power to order a stay of proceedings is not conditioned upon any threshold finding of prejudice or abuse of process. While not lightly exercised, the Court has a wide discretion, conditioned only upon what the justice of the case requires. The discretion requires a balancing exercise having regard to all factors relevant to doing justice between the parties.
Without intending in any way to be comprehensive or exhaustive, the circumstances in which a stay of proceedings might be warranted include where such an order is necessary to prevent an abuse of process, or to ensure the fair conduct of proceedings. A stay might also be appropriate where it is necessary to ensure the efficient or expedient use of the parties’ and court’s time and resources.
The existence of other legal proceedings, particularly where they are related or overlap in terms of the parties or issues involved, will often be a relevant consideration. The nature of those other proceedings, and their relationship with the subject proceedings, may justify a conclusion that the conduct of the subject proceedings would involve an abuse of process, would jeopardise the fair conduct of one or other set of proceedings, or would result in an inefficient use of the parties’ or the court’s time and resources. Of course, consideration must also be given to any competing considerations arising from the parties’ general entitlement to pursue their legal rights through litigation. And even if the circumstances justify a stay of the subject proceedings, the justice of the case might only require a temporary rather than permanent stay.
[Citations omitted]
[2]    These applications were heard and determined under the previous Rules of this Court.
[3]    Ferris v Lambton (1905) 22 WN (NSW) 56.
[4]    Batistatos v Roads and Traffic Authority of NSW [2006] HCA 27 at [9]-[15], (2006) 226 CLR 256 at 265-267; CSR Ltd v Cigna Insurance Australia Ltd [1997] HCA 33, (1997) 189 CLR 345 at 390-398; Rogers v The Queen [1994] HCA 42, (1994) 181 CLR 251 at 286.
[5] [2018] SASC 111.
[6] [2018] SASC 111 at [23]-[25].
The stay application should be refused
The application is unusual because the applicant for the stay is the party who has invoked the Court’s jurisdiction. Nonetheless, the plaintiff has been candid in asserting that the basis of the application for the stay is purely pragmatic. The plaintiff seeks an interim but indefinite stay of her action. Whether she has established an entitlement to a stay does not turn on whether this jurisdiction is not an appropriate forum.
At issue is whether a stay is required in the interests of justice. It is not granted lightly. The onus is on the plaintiff to establish that conclusion. In my view she has not done so.
The Court cannot have much confidence in the predicted timetable for the finalisation of the Chinese proceedings. By the time this matter came on for hearing on 3 February of this year, the Court had evidence of a prediction by the plaintiff’s Chinese lawyer that the trial of the proceedings was expected to commence at the end of January 2020. However, there was no evidence before the Court whether the trial had commenced as predicted. The plaintiff must have been in a position to provide such evidence. In the meantime the administration of the deceased’s estate is being delayed while the plaintiff’s action in this Court remains undecided. That delay necessarily would be extended if the plaintiff’s application for a stay was granted. Because the Court cannot know when the Chinese proceedings will be finalised the stay sought is indefinite. Where the Court cannot predict with any confidence the timing of the resolution of the Chinese proceedings the administration of the estate could be subject to a lengthy delay. That will occasion obvious prejudice to the second, third and fourth defendants who have been financially dependent upon the deceased. There is little evidence of prejudice to the plaintiff by the refusal of her application. At present she remains free to pursue the Chinese proceedings. As I have observed, it appears common ground that the plaintiff is entitled to at least $1.25 million in those proceedings. There is no evidence that the dismissal of the application for a stay prejudices her ability to live.
While a relevant consideration is whether a stay might be appropriate where it is necessary to ensure the efficient or expedient use of the parties’ and the Court’s time and resources, particularly in circumstances where there are other overlapping or related legal proceedings, it is not clear that the issues arising in the Chinese proceedings overlap or replicate the issues in this action. Meanwhile, the plaintiff insists on her right to pursue her action in this Court if unsuccessful or dissatisfied with the outcome of the Chinese proceedings. Accordingly, the Court cannot know whether time and costs will be saved by a stay.
The plaintiff having invoked the Court’s jurisdiction seeks the indulgence of a stay in circumstances where, insofar as it is possible at this juncture to make any assessment of the prospects of success, those prospects seem equivocal at best given the plaintiff’s apparent entitlement to at least $1.25 million in the Chinese proceedings.
The constructive trust claim is pleaded on the basis of verbal promises made by the deceased after the death of the plaintiff’s husband in 2007 that he would support the plaintiff financially for the rest of her life. In accordance with that promise it is pleaded that payments were made by the deceased to the plaintiff from 2007 until his death. There is a plea that in reliance upon this representation the plaintiff did not build up her assets. Obviously the Court will have to assess that claim against the background that the plaintiff was a factory worker with limited education and skills who was 63 years old in 2007. Further, the net present value of that representation must be assessed against the quantum of those payments which were pleaded as commencing at $30,000 per annum and later increasing to $40,000 per annum. These payments were supplemented by expenditure for travel, food and accommodation. In these circumstances the plaintiff may have some difficulty in satisfying the Court that, even if the evidence supports the finding of a constructive trust by reason of her reliance upon the deceased’s representations, the value of the trust would exceed the $1.25 million to which she is entitled from the deceased’s estate under Chinese intestacy law.
In the same way receipt by the plaintiff of $1.25 million from the deceased’s estate might make it difficult for her to satisfy the threshold test of need in the Family Provision Act claim. So much is conceded by her counsel.
The application is made on pragmatic grounds. The plaintiff wishes to avoid the costs of the very action she has instituted. She has not established that allowing the action to proceed would impose hardship which can be avoided without the risk of injustice to the second, third and fourth defendants.[7] The potential for the saving of costs and time by the parties and the time and resources of this Court is not enough.
[7] Rozenblit v Vainer & Anor [2018] HCA 23 at [10] and [12], (2018) 262 CLR 478 at 484.
In these circumstances I am not satisfied that the justice of the case requires the grant of the stay sought by the plaintiff.
For these reasons I would refuse the application for a stay.
The application for security for costs
The defendants seek an order that the plaintiff provide security for costs up to but not including trial and that the action be stayed until the security is given.[8] They seek an order for security in the amount of $350,000.
[8] They also seek permission to apply for further security for costs and the requirement that they file a defence be waived until security is provided.
The defendants seek an order for security for costs on two bases. First, the difficulties of enforcing in Australia any order for costs against the plaintiff, due to her residence in China, and second, the evidence that the plaintiff does not own real estate or have any capital in Australia. Further, the defendants submit that the Court cannot be satisfied that they would have any ready means of enforcing in China an order for costs made in this action against the plaintiff. In all these circumstances the defendants submit that the interests of justice require an order that the plaintiff provide security for costs.

The application is opposed by the plaintiff. She submits that, while China is not a member of the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, there are processes for the recognition and enforcement in Chinese courts of a judgment obtained in Australia. The plaintiff proffers an undertaking to this Court to not oppose or obstruct the enforcement in China of an adverse costs order which may be obtained by the defendants from this Court.
The plaintiff submits that her action involves an equitable claim for a constructive trust and a claim under the Family Provision Act. She contends that an order for security for costs when she is impecunious would be contrary to the public policy objective in Family Provision Act claims that the Court should not make costs orders that would discourage bringing meritorious claims. The evidence in the Family Provision Act claim and the evidence in the trust claim will mostly overlap. While the plaintiff has an expectation that she will, as a result of the Chinese proceedings, come into an amount of at least $1.25 million, she is not presently in a position to satisfy any order for security. As a consequence an order for security would stifle her claims in the action in this Court. Further, the plaintiff submits that the amount sought by way of security is extravagant. Finally, she submits that the recent trend has been to limit the amount of the security to the additional costs of a defendant enforcing an order for costs in the country where the plaintiff resides.
Principles applicable to an application for security for costs
SCR 194 provides for security for costs in the following relevant particulars:
(1)     The Court may order a plaintiff to provide security for costs if—
…
(b)     the plaintiff is ordinarily resident outside Australia; or
…
(e)     the order is necessary in the interests of justice.
…
(3)If the Court orders security for costs, the action may be stayed until the security is given.
(4)The Court may, at any time, vary or revoke an order for security for costs and make consequential directions.
…
(6)If the action has been stayed for 6 months, the action is automatically dismissed for want of prosecution.
(7)A dismissal effected by subrule (6) takes effect at 4.30 pm on the last day of the period.
(8)Despite the dismissal of an action under this rule, the Court may, for special reasons, reinstate the action.
In addition to the power to order security for costs conferred by SCR 194, the Court has an inherent power in the exercise of its jurisdiction to grant security for costs. In Merribee Pastoral Industries Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd,[9] Kirby J, referred to the power of the High Court to grant security in its original jurisdiction and said:[10]
[9] [1998] HCA 41, (1998) 193 CLR 502.
[10] [1998] HCA 41 at [26], (1998) 193 CLR 502 at 513-515.
Without any pretence to having conducted an exhaustive analysis of the decisions in this Court where orders for security for costs have been sought, in appeals, a number of propositions can be stated which it may be useful to collect:
1.There is no absolute rule to control the exercise of the discretion to order security for costs where that jurisdiction derives from the inherent power of the Court. The jurisdiction, as one reposed in a court, is to be exercised judicially and for the purpose for which it exists. An analogous discretion has been described as "absolute". It would be wrong to attempt to hedge the jurisdiction about by rules or practices, even where derived from a number of instances. This is because what should be done in each case depends entirely on the circumstances of the case. The governing consideration is what is required by the justice of the matter.
2.There is therefore no absolute rule (applicable statute apart) that the impecuniosity of a party will entitle its opponent to an order for security for its costs. Where the power to so provide exists in uncontrolled terms, it would be to fetter the jurisdiction impermissibly to adopt such a rule or even a prima facie entitlement. By the same token, the inability of a party to meet the costs of an unsuccessful proceeding is not irrelevant to the exercise of the jurisdiction. Litigation is inevitably expensive and burdensome. To add to the burdens of a party successful in the outcome, those of paying its costs with little or no prospect of recovery under an order for costs may, in particular circumstances, be a reason for offering a measure of protection to that party by way of security for costs.
3.Another consideration that has sometimes been judged to be relevant is the strength of the case of the party resisting an order that it provide security for costs and an evaluation (necessarily tentative) of its prospects of success. Thus, the fact that a party has secured special leave to argue its case on appeal has been thought a relevant consideration in some circumstances. Similarly, if a proceeding appeared hopeless and such as was bound to fail, the lack of apparent merit in a party's case might be a reason for ordering it to provide security for the costs to which, it appears, it is needlessly putting its opponent. Such a consideration would need to be exercised with care, given that the real merits of a case might not emerge until the final hearing or might not sufficiently emerge in the necessarily brief proceedings typically involved in an application for security for costs. Furthermore, if a party asserts that its opponent's proceedings are manifestly lacking in legal merit, other remedies are available to it to protect it from needless vexation. In appeals there is the barrier of leave or special leave.
4.Further considerations which, in the particular circumstances of the case, have been held relevant to the grant or refusal of an order for security for costs in relation to a proceeding in the Court have been:
(a)   That the hearing of the proceeding is close at hand or that the moving party has delayed its application for such an order.
(b)   That the parties or some of them are legally aided.
(c)   That the proceeding raises matters of general public importance quite apart from the interests of the parties.
(d)   That the nature of the proceeding is such that, even if unsuccessful, an order for costs in favour of the winning party might not be made or might be limited.
(e)   That the costs orders made earlier in the proceedings have followed an unusual course or have involved countervailing orders which must be weighed against those liable to be made in the proceedings in question.
(f)   That a party to the proceedings is, or will at judgment be, or be likely to be, absent from the jurisdiction and has no or few assets within the jurisdiction.
(g)   That if an order were made it would effectively shut a part out of relief according to law in circumstances where that party's impecuniosity is itself a matter which the litigation may help to cure.
Doubtless there are as many further considerations as there are cases. The foregoing help to illustrate some of the matters which courts, including this Court, have felt to be relevant to the exercise of the discretion to order security for costs, where that discretion is invoked.
[Citations omitted]
These principles are equally applicable to the exercise of this Court’s power to order security for costs before trial.
In exercising the discretion the Court seeks to strike a balance between ensuring that adequate and fair protection is provided to a defendant and avoiding injustice to an impecunious plaintiff by stifling his or her legitimate claim.[11]
[11] Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 at 470.
The relevant factor that a party to proceedings is absent from the jurisdiction and has no or few assets within the jurisdiction has been held to be a powerful consideration in the exercise of the discretion to grant security for costs.
In P S Chellaram & Co Ltd v China Ocean Shipping Co[12] McHugh J observed:[13]
To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, 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.
[12] [1991] HCA 36, (1991) 102 ALR 321.
[13] [1991] HCA 36, (1991) 102 ALR 321 at 323.
In Mothership Music Pty Ltd v Flo Rida[14] Meagher JA said:[15]
Ordinarily, and in the absence of countervailing considerations, the fact that the moving party is resident out of and has no assets in Australia is to be given significant weight when considering whether to order security under this rule: P S Chellaram & Co Ltd v China Ocean Shipping Co. Those countervailing considerations include whether the party has assets in a foreign jurisdiction in which the costs order could be enforced, the complexity associated with those enforcement proceedings and the additional costs involved in pressing them, whether the assets in that jurisdiction might easily be moved in order to avoid enforcement and whether the making of an order for security would stifle the prosecution of an arguable appeal or other proceeding.
[Citations omitted]
[14] [2012] NSWCA 344.
[15] [2012] NSWCA 344 at [12].
The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund within the jurisdiction which will guarantee that any order for costs in favour of the defendant will be met.[16] The order protects the efficacy of the exercise of the power to award costs.[17]
[16] Energy Drilling Inc v Petroz NL [1989] FCA 146 at [24], [1989] ATPR 40-954 at 50-422.
[17] Li v State of New South Wales [2013] NSWCA 165 at [20]; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744.
While, in the absence of special circumstances, the need to bring action in a foreign court to enforce an order for costs will weigh very heavily in favour of a grant of security for costs, nonetheless, as was pointed out in Singer v Berghouse[18] by Gaudron J, an order for security for costs involves a discretionary judgment of a very broad kind made by reference to the circumstances of the particular case and not by reference to a rule or rules which direct a decision one way or the other.[19]
[18] [1993] HCA 35, (1993) 114 ALR 521.
[19] [1993] HCA 35, (1993) 114 ALR 521 at 522.
Order for security for costs
The plaintiff contends that there exists in Chinese courts provision for the recognition and enforcement of judgments of Australian courts. This is said to occur pursuant to the Civil Procedure Law of the People’s Republic of China. It is unclear when provision for the enforcement and recognition of foreign judgments by Chinese courts was enacted. But in Li v State of New South Wales[20] the New South Wales Court of Appeal held that the defendant in those proceedings would be likely to have difficulty, and would inevitably incur additional costs, in attempting to enforce in China any costs judgment it might obtain against the plaintiff.[21]
[20] [2013] NSWCA 165.
[21] [2013] NSWCA 165 at [43].
The plaintiff undertakes not to oppose or obstruct the enforcement in China of an adverse costs order made by this Court. But that does not establish that the enforcement of such an order in China would not be difficult and result in the incurring of additional costs. On the contrary, the authorities support the proposition that it would.[22]
[22] Li v State of New South Wales [2013] NSWCA 165 at [43].
The evidence does not establish that there are reciprocal arrangements in place between Australia and China which enable an Australian judgment for costs to be registered and enforced in a Chinese court. On the contrary, it is common ground that China is not a signatory to the relevant Hague Convention. For that matter, neither is Australia.
In Li v State of New South Wales Ward JA, with whom Macfarlan and Gleeson JJA agreed, said:[23]
While there remains a discretion to be exercised having regard to all the circumstances of the particular case, Dal Pont comments (at [29.69]) that the trend of the cases (referring there to Jalfox Pty Ltd v Motel Association of New Zealand Inc; Nasser v United Bank of Kuwait) is that the ease and convenience of enforcement procedures in the plaintiff's country of residence will ordinarily be a primary consideration and that, conversely, the fact that a judgment would be simple to enforce is a powerful factor against the making of such an order (there referring to Knott v Signature Security Group Pty Ltd).
[Citations omitted]
[23] [2013] NSWCA 165 at [24].
Both factors favour the grant of an order for security for costs.
On the other hand, there are factors which militate against the grant of an order. While there is little dispute that the plaintiff is not in a position presently to satisfy any order for security for costs, the time when the test of impecuniosity is to be applied is the date of judgment. If by that time the plaintiff has obtained judgment for at least $1.25 million in the Chinese proceedings there is reason to consider that she would be in a position to satisfy an order for costs.
Further, the plaintiff submits that even if she was unsuccessful in her Family Provision Act claim she may not be liable to a costs order.
In Green v Ellul & Ors (No. 2)[24] the Full Court applied the principle that the costs discretion should not be exercised so as to discourage the bringing of meritorious claims under the Family Provision Act. However, for the reasons set out above addressing the plaintiff’s application for a stay, there is reason to consider that the plaintiff’s prospects of success in the action are equivocal at best. Accordingly, there is reason to doubt the plaintiff’s claim pursuant to the Family Provision Act is meritorious.
[24] [2018] SASCFC 105.
Finally, the stultification of proceedings is recognised to be a cogent consideration to be taken into account in deciding whether an order for security is appropriate.[25] The courts are reluctant to prevent a plaintiff’s impecuniosity from keeping him or her from litigating a legitimate claim. This is an important principle protecting access to justice. Nevertheless, impecuniosity of a natural person has been recognised as not operating as an absolute bar to an order for security for costs. In Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd[26] Heydon J recognised that the fact that there is a non-resident plaintiff is a situation in which security for costs orders might be made against impecunious natural persons.[27]
[25] Li v State of New South Wales [2013] NSWCA 165 at [46].
[26] [2009] HCA 43, (2009) 239 CLR 75.
[27] [2009] HCA 43 at [91], (2009) 239 CLR 75 at 117-118.
Ultimately, in my view there are four considerations which favour the grant of an order for security for costs. First, the fact that the plaintiff is a resident of China with neither property nor capital within the jurisdiction of this Court. Second, that there is reason to doubt the plaintiff’s prospects of success of her action in this Court. Third, even if the making of the order for security will stultify the action, it is an action with doubtful prospects of success, which the plaintiff has indicated she may not wish to pursue depending upon the outcome of the Chinese proceedings, in circumstances where it appears to be common ground that she is entitled to at least $1.25 million in those proceedings; and it is an action which the plaintiff has asked the Court to stay. Fourth, the plaintiff’s impecuniosity has not been caused by the conduct of the defendants.
In my view these considerations justify an order for security for costs.
As to the submission that if the Court is disposed to make an order for security for costs, it should be limited to the costs likely to be incurred in enforcing any costs order in China, the authorities which support this proposition appear to be confined to cases where there exist reciprocal arrangements between Australia and the overseas country in question which enable an Australian judgment for costs to be registered and enforced in a superior court of that country.
In Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC & Ors[28] Judge Lunn said:[29]
The rationale behind the power to order security for costs against a party overseas is that the other party, if successful in obtaining an order for costs, should not be put to the substantial expense and delay in recovering those costs by having to enforce the order overseas. Such difficulties are one fact to be weighed by the Court in the exercise of the discretion: Limberis (above) at [33]. There is a line of cases where security has been ordered against overseas parties, but it has been limited to the costs likely to be incurred in enforcing the costs order overseas: Connop v Varena Pty Ltd; Barton v Minister for Foreign Affairs; Southern Cross Commodities Pty Ltd v Martin; Bethune v London Properties Ltd; Shackles v The Broken Hill Proprietary Company Ltd; Soh v The Commonwealth. As far as I am aware all of the cases in which such a limited security has been ordered are cases where there have been reciprocal arrangements in place between Australia and the overseas country in question which enabled an Australian judgment for costs to be registered and enforced in a superior Court of the overseas country.
[Citations omitted]
[28] [2008] SASC 337.
[29] [2008] SASC 337 at [21].
In these circumstances, in the absence of conclusive evidence of the existence of reciprocal arrangements between Australia and China for the recognition and enforcement of judgments, I do not consider that the order should be confined to the costs of the enforcement of any order for costs in China.
Further, in this regard, I do not accept the plaintiff’s submission that the costs estimate of the second defendant’s expert is extravagant. While high there is no evidentiary basis to doubt the reasonable costs of the action are $350,000.
I would order that the plaintiff is to pay into Court the sum of $350,000 by way of security for costs. I would direct that if the plaintiff fails to pay the sum of $350,000 by way of security for costs into Court the action is to be stayed until the security is given. I would hear the parties as to costs and the time within which security for costs is to be paid.
Conclusion
I would dismiss the application by the plaintiff for a stay of the action. I would grant the second defendant’s application that the plaintiff pay into Court the sum of $350,000 by way of security for costs. I would order this action be stayed until such time as the plaintiff provides said security. I would hear the parties as to the timing by which such payment is to be made and the costs of these applications. I would defer the requirement for the defendants to file a defence to the plaintiff’s claim until further order. I would grant permission for the defendants to apply for further security prior to and for the costs of trial.