Ren v Jiang (No 4)

[2014] NSWCA 315

Court of Appeal

New South Wales

Case Title:

Ren v Jiang (No 4)

Medium Neutral Citation:

[2014] NSWCA 315

Hearing Date(s):

8 September 2014

Decision Date:

10 September 2014

Before:

Leeming JA

Decision:

1. The notice of motion filed 21 July 2014 be dismissed with costs.
2. The costs in order 1 to be calculated on an indemnity basis for the period on and after 13 August 2014.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

PRACTICE - security for costs - unexplained delay - unexplained standing by while other respondents seek and obtain security for costs - security already given by caveats on real property - no evidence of material change in circumstances

Legislation Cited:

Corporations Act 2001 (Cth), s 471B
Uniform Civil Procedure Rules 2005 (NSW), rr 42.21, 51.50

Cases Cited:

Brundza v Robbie & Co (No 2) (1952) 88 CLR 171
Charara v Integrex Pty Ltd [2010] NSWCA 342
Devenish v Jewel Food Stores Pty Ltd (1990) 64 ALJR 533
Fleming v Marshall [2010] NSWCA 152
Green v CGU Insurance Ltd [2008] NSWCA 148; 67 ACSR 105
In the matter of Wan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722; 90 ACSR 593
International Greetings (UK) Ltd (formerly Scandinavian Design Ltd) v Stansfield [2010] NSWSC 461
McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 143
Ren v Jiang [2014] NSWCA 1
Ren v Jiang (No 2) [2014] NSWCA 119
Ren v Jiang (No 3) [2014] NSWCA 204
Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245
Xu v Wan Ze Development (Aust) (in liq) [2014] FCA 461

Category:

Interlocutory applications

Parties:

Ke Qin Ren (First applicant)
Pei Xu (Second applicant)
Yi Cheng Jiang (Third applicant)
Gloconnect Pty Ltd (Fourth applicant)
Hong Jiang (First respondent)
Yongan Xie (Second respondent)
Wan Ze Property Development (Aust) Pty Ltd (In Liq) (Third respondent)

Representation

- Counsel:

Counsel:
J E Sexton SC and J Lee (First, second and fourth applicants, respondents on the motion for security)
D C Eardley (Third respondent; applicant on the motion for security)

- Solicitors:

Solicitors:
Ren Zhou Lawyers (First, second and fourth applicants)
Downeys Lawyers (Third respondent)

File Number(s):

2012/240805

Decision Under Appeal

- Before:

Black J

- Date of Decision: 

19 July 2012

- Citation:

[2012] NSWSC 821

- Court File Number(s):

2011/51745

JUDGMENT

1. By notice of motion filed 21 July 2014, the third respondent, who is the liquidator of Wan Ze Property Development (Aust) Pty Ltd, applies for security for costs. As refined during the hearing, the amount of security sought to be provided excludes the historical costs of proceedings in this Court, and is confined to costs for the two day hearing set down in November 2014. Even so, the application must be dismissed.

Procedural history

1. The procedural history is unusual, and important - in fact, it is dispositive of the application. For reasons not satisfactorily explained, the application has been delayed for more than a year after security was sought, and ordered, and provided, in respect of the costs of the other respondents. That background is as follows.

2. The decision the subject of this application for leave was given by Black J as long ago as 29 June 2012: In the matter ofWan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722; 90 ACSR 593. Orders were made on 19 July 2012. An application for leave to appeal was filed on 18 October 2012 (leave was required because the judgment was a summary judgment).

3. One complicating matter was that there was a further, interlocutory decision by the primary judge, from which leave to appeal was also sought, but that has now been discontinued. The other respondents applied for security for their costs by motion filed, relatively promptly, on 26 April 2013. That application came before Basten JA on 17 June 2013. The liquidator appeared on that occasion. Security for at least some of the other respondents' costs was ordered, and has been provided by way of the payment of $16,000 into court.

4. Subsequently, there has been a series of delays. One aspect of those delays has involved an application by the remaining respondents for the leave application to be stayed or dismissed as an abuse of process. That application was the subject of a hearing before me, and a judgment Ren v Jiang [2014] NSWCA 1.

5. A second contributing factor to the delay was a trial lasting some 11 days in the Federal Court, heard towards the end of 2013, seeking to set aside bankruptcy notices founded upon the judgment ordered by the primary judge. On two occasions, by consent, these proceedings were adjourned on the basis that the issues would be reduced having regard to the determination of the Federal Court. That history may be seen in Ren v Jiang (No 2) [2014] NSWCA 119. On 12 May 2014, the Federal Court dismissed Mr Ren's and Ms Xu's application: Xu v Wan Ze Development (Aust) (in liq) [2014] FCA 461. As had been anticipated, that determination did simplify the matters in his Court; in particular, it was the catalyst for the discontinuance of the second application for leave to appeal.

6. A third contributing factor has been changes of solicitors on the part of the applicants. The background for that is set out in Ren v Jiang (No 3) [2014] NSWCA 204.

7. In June 2014, over the opposition of the first and second respondents, I directed that the application for leave to appeal, the application for leave to proceed pursuant to s 471B of the Corporations Act 2001 (Cth), and the first and second respondents' application for summary dismissal, be set down and heard simultaneously. A date was allocated by the registrar on 21 July 2014. The hearing is listed for two days on 3 and 4 November 2014.

8. By reason of that unusual and unfortunate procedural history, the liquidators' motion for security for costs therefore comes before me almost two years after the application for leave to appeal was filed, and less than two months before it is to be heard.

Applicable principles

1. Applications for security for costs are to be made promptly. See McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 143 at 145; Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 at 175. In the present case, there is very lengthy delay. The position is on all fours with that described by Mason CJ in Devenish v Jewel Food Stores Pty Ltd (1990) 64 ALJR 533 at 534:

   "In these circumstances, it is obvious that the major steps preparatory to the hearing of the appeal have been taken, so that the appeal is ready for hearing and the bulk of the costs of the appeal would already have been incurred by the second appellant. In the result, the application for security comes at the heel of the hunt. ... As a general rule, applications for security for costs should be made promptly and before significant expense is incurred by the appellant."

2. That said, delay is not of itself a disentitling factor: Wollongong City Council v Legal Business Centre Pty Limited [2012] NSWCA 245 at [32]. However, here most of that very lengthy delay is wholly unexplained. There is no explanation at all in the evidence, or even in correspondence, from the liquidator for why no step was taken until March 2014 (some 18 months). During that time, security was sought and provided for in respect of the costs of all other respondents. Indeed, the liquidator, by his counsel, appeared at the hearing at which the other respondents were ordered to provide security. As Biscoe AJ said in International Greetings (UK) Ltd (formerly Scandinavian Design Ltd) v Stansfield [2010] NSWSC 461 at [30]:

   "a plaintiff who settles a security for costs application or against whom a security for costs order is made, is entitled to proceed with the litigation on the assumption that the quantum of the security to which the settlement or order relates will not be reopened without good reason."

3. The application being for leave to appeal, rather than an appeal, UCPR r 51.50 does not apply: Fleming v Marshall [2010] NSWCA 152; Charara v Integrex Pty Ltd [2010] NSWCA 342 at [10]. Those decisions were drawn to the liquidator's and the Court's attention only during the hearing, and caused him to apply for his application to be treated as made in the inherent jurisdiction of the Court (a course proposed by the liquidator during the hearing and not opposed by the first and second applicants). He also sought and obtained leave to file supplementary submissions on the Court's jurisdiction, in response to the respondents' submission that none of the paragraphs in r 42.21 apply either.

4. Following receipt of the liquidator's supplementary submissions after the hearing, it became common ground that the liquidator's application was sustained solely by the Court's inherent jurisdiction, in relation to the first and second respondents Mr Ren and Ms Xu.

5. Mr Eardley, for the liquidator, submitted that the inherent jurisdiction was broader than that circumscribed by the rules. Mr Sexton, for Mr Ren and Ms Xu, submitted to the contrary. There is force in the submission that the "special circumstances" required by r 51.50 and the particular bases identified as the preconditions to power in r 42.12 may not be side-stepped by recourse to an inherent jurisdiction. However, it is not necessary to express a concluded view on the point in order to resolve this application, and accordingly it is not appropriate to identify the metes and bounds of the Court's jurisdiction and its interaction with the rules.

Disposition of the application

1. This is an entirely inappropriate case for security to be ordered.

2. The liquidator, in oral submissions, said that he had been taking a conservative approach in not bringing an application for security for his costs, against the possibility, inter alia, that the application would not be heard because of a sequestration order. There are three difficulties standing in the way of accepting that submission. First, it is not substantiated by any evidence. Secondly, a conservative approach would have been to make an application at the same time as the other respondents; the course adopted by the liquidator has resulted in two, not one, hearings to address the provision of security for the respondents' costs. Thirdly, what does emerge from the evidence sits ill with a submission that the liquidator has been carefully husbanding the funds in his control. Indeed, it is a matter of concern to me that the liquidator claimed (by his solicitor's letter dated 4 July 2014) that he had incurred costs (including counsel's fees) of some $60,000 in this application until 25 June 2014. I should indicate immediately that the nature of those costs is not exposed on the evidence, and much work may have been done that is not obvious to me. My concern is that, by June 2014, the liquidator had not even served his written submissions responding to the application for leave to appeal, and although there have been numerous interlocutory applications, it is fair to say that the liquidator has substantially adopted a neutral stance in them.

3. As noted above, ultimately the liquidator abandoned a claim for security in respect of his historical costs, and confined it to his costs of the two day hearing set down in November. That concession was properly made. I can think of no sound basis for security for costs being ordered in circumstances where a respondent had incurred the lion's share of costs without demur, which, shortly before the hearing, were required to be paid into court as the price of the hearing not being stayed.

4. Turning to the more modest claim ultimately advanced, and accepting that the liquidator will appear by junior counsel (whose daily fee is modest), and that security for costs are security for the costs as assessed, and do not provide a complete security, the amount of security sought is in the vicinity of $10,000-$15,000. It will be seen that the amount is but a small fraction of the liquidator's costs already incurred.

5. The liquidator submitted, correctly, that there was no evidence of any prejudice to Mr Ren and Ms Xu in providing security. That is so. However, it is plain that the applicants have incurred substantial costs over the last two years. Indeed, new solicitors and new counsel have been retained. Further, the submission made by the liquidator that evidence of prejudice was necessary is inconsistent with what Hodgson JA said in Green v CGU Insurance Ltd [2008] NSWCA 148; 67 ACSR 105 at [57]:

   "Where substantial costs have been incurred since the time when an application for security should have been brought, it would be unreasonable to deny the existence of prejudice unless the plaintiff can prove exactly what the plaintiff would have done if the application had been brought earlier."

6. This is not merely a case of unexplained delay, although (a) the extent of the delay, (b) the liquidator's standing by while the other party sought and obtained security for costs, and (c) the relatively small amount of costs remaining to be incurred in the proceedings would, of itself, be sufficient to resolve the application. But the liquidator already has the benefit of security.

7. The first and second applicants consented to the liquidator lodging caveats over two properties at North Ryde and Macquarie Park in NSW. Those properties were completely unrelated to the proceedings. It may be that this is an explanation, or a partial explanation, for the liquidator's stance in 2013 when the other parties sought and obtained security for their costs. But that is speculation. The liquidator did not adduce evidence of why his stance changed some two years after the proceedings were commenced.

8. The liquidator made no oral submissions against the fact that he already enjoyed a measure of security. In his written submissions supplied after the hearing, he said:

   "The Third respondent submits that the various caveats that the First Appellant and the Second Appellant consented to act as statutory injunctions preventing the sale of the respective properties and that on bankruptcy, if that were to occur in respect of the First Appellant and the Second Appellant, then these caveats may be void as against the trustee of the respective bankrupt estates as antecedent transactions."

9. I cannot accept the submission (indeed, I do not fully understand it). The caveat prevents the sale of properties. If sequestration orders are made, the trustee will be obliged to realise the bankrupt estates in order to satisfy the claims of creditors, who may include the liquidator. There is no suggestion that the trustee in bankruptcy might dissipate the proceeds of sale to the detriment of creditors including the liquidator.

10. More generally, it was necessary for the liquidator to establish a material change of circumstance to put in place a different regime for security so close to the hearing. This he has signally failed to do.

11. None of the foregoing (save the question of the Court's jurisdiction) can come as any surprise to the liquidator. On 29 July 2014, promptly after the application had been made, the applicants summarised the position as follows:

    "Current Position

    The current position is therefore that your client already has security for the companies' costs as a result of our clients consenting to the lodgement of caveats over the two properties.

    As such please identify with precision:

    1. How your client maintains his position that he does not have security for costs of the appeal;

    2. The special circumstances which will justify the ordering of security when an inability to meet a costs order will not justify special circumstances in the Court of Appeal - see Pratt v Ashton [2012] NSWCA 313 at [6] per Hoeben JA (as his Honour then was);

    3. How your client maintains that it has spent around $65,000 to date on this appeal when the basis for his delay in bringing the motion is that the appeal was at standstill;

    4. Where the evidence is of the costs incurred to date - there is no estimate required for costs already incurred and you have failed to annex any itemised bills or invoices; and

    5. The basis upon the past costs being sought when an earlier application was brought 14 months ago by the first and second respondents and the threshold required to be overcome pursuant to UCPR 51.50 to have orders made for security."

12. The evidence does not disclose any response to that offer.

13. The applicants' solicitors made the position very plain by letter dated 29 July 2014. That letter contained an offer that the motion be discontinued with no order as to costs open for acceptance until 12 August 2014. On 11 August 2014, the (short) affidavit in response was filed. The offer made on 29 July 2014 involved a very modest compromise indeed, but the liquidator's application was hopeless or close to hopeless unless there was a factual answer to the matters identified in the Calderbank letter. None has been identified.

14. It was unreasonable for the liquidator, in those circumstances, to press his application for security. I order that the notice of motion filed 21 July 2014 be dismissed with costs, those costs to be calculated on an indemnity basis for the period on and after 13 August 2014.

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