Mo v Zhang
[2025] QSC 172
•29 May 2025 (delivered ex tempore)
SUPREME COURT OF QUEENSLAND
CITATION:
Mo v Zhang [2025] QSC 172
PARTIES:
YINGZHI MO
Plaintiff
v
BIN ZHANG
Defendant
FILE NO:
BS 4118 of 2024
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
29 May 2025 (delivered ex tempore)
DELIVERED AT:
Brisbane
HEARING DATES:
27 May 2025, 29 May 2025
JUDGE:
Hindman J
ORDER:
1. The Plaintiff provide security for the Defendant’s costs of the proceeding up to and including the first day of trial, to the satisfaction of the Registrar, in the amount of $175,000, by 4.00 pm on 29 August 2025.
2. The costs of and incidental to the application are the Defendant’s costs in the proceeding:
(a) on the indemnity basis, for the hearing on 29 May 2025; and
(b) otherwise (including for the hearing on 27 May 2025), on the standard basis.
CATCHWORDS:
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – where the defendant applies for security for costs against the plaintiff – whether the Court’s power to award security for costs is enlivened – whether the Court should exercise its discretion to order security for costs – whether the proposed quantum and mechanisms for the payment of security are appropriate
Uniform Civil Procedure Rules 1999 (Qld), r. 671(e).
COUNSEL:
A J H Morris KC on behalf of the applicant/defendant
B Guo on behalf of the respondent/plaintiff
SOLICITORS:
Kingsford Lawyers on behalf of the applicant/defendant
Auslaw Future on behalf of the respondent/plaintiff
Introduction
This is an application made in proceedings where Mr Mo sues Mr Zhang in the form of a claim. The plaintiff claims declarations that he has an equitable interest in a particular property, and that the defendant holds over 93 per cent of that property on trust for him. Then there are orders sought for the sale of the property, the distribution of the profits, and an account about the ownership of an earlier property. There is then a claim for the sum of over $2,000,000 in the alternative to those orders about the distribution of sale proceeds, and then a claim for a sum of money, $105,000, for conversion and detinue, alternatively, as moneys had and received, or alternatively, as loss and damage for breach of an agreement.
The proceeding was commenced on the 3rd of April 2024. It has been defended by way of a notice of intention to defend and defence, filed 3 May 2024, and there was a reply filed on 17 May 2024. That appears to be about as far as the proceeding has progressed to date in terms of the substantive proceeding. So it does not appear, for example, that disclosure is presently completed.
Whether security for costs should be awarded
The defendant/applicant, who is an individual, has applied for security for costs against the plaintiff/respondent, who is also an individual. The basis of the application is one that the court sees less regularly. It is that the plaintiff/respondent is ordinarily resident outside of the jurisdiction. The evidence establishes that he is, in fact, resident in China, so a prerequisite for an order for security for costs is met – rule 671(e) UCPR.
The second part of the relevant principles about security for costs concerns the fact that the court does have an unfettered discretion to order security, and the discretion should only be exercised after taking into account all of the circumstances of the case. It is for the defendant/applicant to put on cogent evidence to support the quantum of security sought, and the onus does always remain on the defendant/applicant to establish that the court should exercise its discretion to order security. But there is, once those matters are taken into account, an evidentiary onus that falls upon the plaintiff/respondent to satisfy the court if there should be a refusal for security for other reasons. For example, a reason that security might not be ordered is if the proceeding would be stifled if security was ordered.
In this case, when it comes to looking at those other factors that can be relevant to security for costs, one of the factors that can loom large, and has been mentioned in this proceeding, is the prospects of success. I have considered the pleadings in the matter which effectively disclose, the plaintiff/respondent says, an arrangement whereby the defendant/applicant agreed to act as the plaintiff/respondent’s agent to buy and maintain a property in Broadbeach Waters, and that the property was not to be sold unless the plaintiff/respondent consented; and then a second agreement for the purchase and subsequent maintenance of a vehicle, which was to be delivered to the plaintiff/respondent for his use.
Then it is alleged that, under that property agreement, the defendant/applicant sold that property without the plaintiff/respondent’s knowledge or consent and received the sale proceeds, and applied those sale proceeds to the purchase of the real property, which is the subject of the declarations sought. It is said that that was a breach of the agreement, and that the new property is held on trust. There is a similar sort of argument made about the vehicle: that it was purchased, but despite demand, it was not delivered to the plaintiff/respondent for his use.
The defendant/applicant denies both of those agreements and also pleads a positive defence based on the Latin maxim that no action can be founded on an illegal act, and that has to do with what the defendant/applicant says is the circumstance that all of these transfers of funds occurred with the purpose of moving funds out of China, evading or seeking to evade restrictions that exist under Chinese law. It is, I think, plain, even on the pleadings, that I cannot readily make an assessment of the strength of that case.
There is an added complexity, in that whilst this proceeding involves the plaintiff/respondent and defendant/applicant, there is a loosely related proceeding whereby a person by the name of Ms Chen has sued the defendant in this court in proceeding 6557/22 in respect of similar sort of arrangements, where there is an alleged transfer of funds for particular purposes. It is claimed that the defendant did not do what he was directed to do in relation to the funds, and therefore there are monetary claims made against the defendant in that proceeding.
Those three people are actually all known to each other. The defendant in both proceedings is the cousin of the plaintiff/respondent in this proceeding and is the nephew of the plaintiff in the other proceeding that I have mentioned. There was, in the other proceeding, an application for summary judgment by Ms Chen, which was initially successful, but overturned in the Court of Appeal. Whilst the two proceedings involve separate alleged payments coming from China, what is plain from the other proceeding is that the Court of Appeal, looking at the evidence, considered that there was some real uncertainty about the true source of the funds and, in fact, in the judgment, contemplated the possibility that, in fact, the funds might have come from another person entirely. That might not be revealed per se on the pleadings in that other proceeding because the allegations are simply that Ms Chen says she transferred certain monies to Mr Zhang, and Mr Zhang simply denies that Ms Chen sent him any funds.
The key to that complexity of this other proceeding is that in the summary judgment application, and in an affidavit filed in that proceeding, it seems to have been suggested by Mr Zhang that the source of funds that he appears to concede were transferred to him – whilst he denies that it was Ms Chen – was Mr Mo, the plaintiff/respondent in this proceeding. There is some suggestion that there is a sum of money in the order of $637,305 that, effectively, it is suggested defendant/applicant must have, and it must belong to either Ms Chen or Mr Mo, and that any security ordered in this proceeding could be satisfied in circumstances where Ms Chen and Mr Mo agree that that money or part of that money could be used as security for costs. I am not prepared to proceed on that basis in this application because I do not think that the position is clear enough about the true owner of those funds such that I should not treat it as money of either Ms Chen or Mr Mo that they, by agreement, put up as security in this proceeding. So I do not give that significant weight.
The other type of security that is proposed by the plaintiff/respondent is security given by way of undertakings in respect of property that is said to be valuable that he owns in China. The evidence about that property comes just from Mr Mo and is not supported by any independent evidence like company searches or mortgage details that show the property is unencumbered. Insofar as there is a valuation provided of the property, it is very old, from December of 2009, and cannot be afforded too much weight.
The difficulty with assets in China, of course, is that enforcing an adverse costs order against the plaintiff/respondent outside of the jurisdiction will have complexities associated with it. There is evidence that it is not beyond the scope of Chinese law for Australian judgments to be enforced within that jurisdiction, but the evidence shows that there are some serious hurdles that might be faced in any such application, and there is no real certainty that an Australian judgment would be enforced in China. In that respect, it is different to jurisdictions that have close reciprocal ties with Australia, like other countries in the Commonwealth, including New Zealand. So that, in my view, is not an adequate form of security for the defendant’s costs.
There was otherwise a suggestion by the plaintiff/respondent that a sum of money could be secured, but a small sum of money which would, effectively, just cover the costs of getting an Australian judgment enforced in China, a modest sum in the tens of thousands of dollars. But that to me does not seem to deal with the real purpose of security, which is to give security for costs, not simply for the extra costs that might be incurred trying to enforce a judgment in a jurisdiction where there is some real doubt about enforcement. So that, to my mind, is not an appropriate way to secure the defendant/applicant’s position.
Insofar, then, as the plaintiff/respondent’s material is concerned, there is not otherwise evidence that the plaintiff/respondent is unable to pay security or unable to pay a particular amount of security within any particular time, nor is there any evidence that a requirement to pay security in any particular amount or at any particular time would stifle the proceeding. Those would have been matters that would have been important to tell against the discretion for an award of security for costs.
Balancing all of those factors, it does seem to me to be a case in which security should be ordered.
Quantum and form of security
The issue then turns to what the proper quantum of the security is and the mechanisms for the payment of security. The amount sought on behalf of the applicant/defendant up to including the first day of trial is estimated at $200,000, based on a very broad brush affidavit of a solicitor, which does not descend into too much detail about how that estimate is arrived at, except to say that it is for certain bulk sums of items of money for certain items of work without disclosing either solicitors’ rates, or counsels’ rates, or time expected to be spent on items or work.
There is also an issue raised by the plaintiff/respondent that the estimate in its terms seems to contemplate a town agent, and, in fact, there is a town agent instructing today, in circumstances where the firm actually briefed is based in Ashmore. But it is not obvious to me that that estimate of costs, apart from that one set of town agents’ fees to file documents and attend conferences when required, which is claimed at $5,000, has otherwise been inflated because of the use of a town agent in any way.
There has also been an issue raised about whether the costs should appropriately cover for a mediation, in circumstances where the plaintiff/respondent is apparently intent that he will not participate in a mediation. It does, on the face of it, from what I have seen, seem to be a case where mediation would likely occur, and the mediation fees that are otherwise estimated seem to me, in the context of the dispute, to be a reasonable sort of estimate.
There has been an issue taken with the fact that the solicitor says that, as a general rule of thumb, the assessment of costs on a standard basis are approximately 75 per cent of a litigant’s actual costs, and that the estimate is adjusted on that basis. The plaintiff/respondent says that it could be as low as 50 per cent, and, undoubtedly, that is true, but my role in setting security is not to carry out some sort of mini form of costs assessment, but to take a broad brush approach and, in fact, apply some of my own knowledge of costs and how the matter is likely to proceed to arrive at what is an appropriate order in the circumstances of the case.
The plaintiff/respondent has also suggested that the security ought be split over two tranches. The first tranche would be now, and the second, it is proposed, would be after disclosure. Disclosure, of course, is the next step. It is well overdue already, and if the parties are getting on with the matter, as of now, one would think disclosure should be completed immediately. So there does not seem to me to be a great advantage in ordering payment by way of tranches, and there does not seem to me to be circumstances where the plaintiff/respondent has been progressing at a pace which would mean that the court would be concerned if it takes the plaintiff/respondent a more extended period of time to make the payment of security.
In all of those circumstances, I am satisfied that the jurisdictional preconditions to the award of security for costs are satisfied. I am satisfied that the defendant has met its onus, and that the court ought make an order for security for costs. I am going to make an order for security for costs. I think that the appropriate amount of security is $175,000 up to and including the first day of trial. I am prepared to give the plaintiff/respondent whatever time he requires to make payment.
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