Sharetea Australia Pty Ltd v Lephan Trading Pty Ltd

[2025] NSWDC 405

District Court

New South Wales

Medium Neutral Citation:

Sharetea Australia Pty Ltd v Lephan Trading Pty Ltd [2025] NSWDC 405

Hearing dates:

25 September 2025

Date of orders:

25 September 2025

Decision date:

25 September 2025

Jurisdiction:

Civil

Before:

Newlinds SC DCJ

Decision:

(1)   The Notice of Motion filed by the Cross Defendants on 29 August 2025 is dismissed.

(2)   The first and second Cross Defendants are to pay the first and second Cross Claimants’ costs of and incidental to the Motion filed 29 August 2025.

Catchwords:

COSTS — Security for costs — Jurisdiction against natural person — Proper construction of UCPR rules 42.21 (e) and (f) — “Suing not for his or her own benefit but for the benefit of another person” — In context of solicitor agreeing to accept outstanding fees by instalment — Laith & Fadi Investments v Fogo Brazilia Holdings Pty Ltd [2024] NSWSC 1508; Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404; and Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690 explained and distinguished — No jurisdiction engaged — In any event application dismissed on discretionary grounds — Claim defensive in nature — Delay — Quantification — As to corporation — Application dismissed on discretionary grounds

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW) r 42.21

Cases Cited:

Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd [2008] NSWCA 148

Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123

Laith & Fadi Investments v Fogo Brazilia Holdings Pty Ltd [2024] NSWSC 1508

Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690

Madgwick v Kelly [2013] FCAFC 61

Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404

Category:

Procedural rulings

Parties:

Sharetea Australia Pty Ltd (Plaintiff/Applicant)
Lephan Trading Pty Ltd (First Defendant/Respondent)
Jonathan Nhan Le (Second Defendant/Respondent)

Representation:

Counsel:
N Lennings (Plaintiff/Applicant)
A Rizk (Defendants/Respondents)

Solicitors:
Somerset Ryckmans (Plaintiff/Applicant)
Levitt Robinson (Defendants/Respondents)

File Number(s):

2022/218841

Publication restriction:

Nil

JUDGMENT; ex tempore (revised)

1. This is an application for security for costs brought by Cross Defendants to a cross-claim which, in its amended form, was filed in February of this year.

2. The Cross Claimants are the Defendants to a claim brought by the Plaintiff/Cross Defendant which arises out of a franchise agreement entered into by one of the plaintiffs, and the first Defendant/Cross Claimant which his obligations were guaranteed by the second Defendant/Cross Claimant.

3. The claim by the Plaintiff is for moneys said to have become payable under that franchise agreement.

4. The matter has a long and tortured history which is not a credit to anyone who has been involved in it. There have been a multitude of directions hearings, notices of motions and the like, none of which seem to have produced the desired result which is that the case which is now set down for a hearing to commence on 1 December 2025 should be well and truly ready to go by now, but it is not.

5. I have decided to dismiss the applications for security for costs.

6. My reasons are as follows. Firstly, as against Mr Le, the second Cross Claimant, he is a natural person.

7. Mr Lennings, who appears on the application for the Cross Defendants seeks to engage jurisdiction for an order for security for costs against Mr Le by the route of r 42.21(1) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). He also, as a fallback position, relies on what is sometimes referred to as the inherent jurisdiction of superior courts which of course this Court does not have. More specifically, what I think he is relying on is the implied power of this Court attached to the express power this Court has to stay proceedings as an abuse of process.

8. In any event, the most direct route is under the rules. Mr Lennings relies on subr (e) and (f) of r 42.21. They are in the following terms:

“That a plaintiff is suing not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, or,

(f) that there is reason to believe that the plaintiff has divested assets with the intention of avoiding the consequences of the proceedings."

9. Even though subr (f) does not say so, both subr (e) and (f) must require a finding that there is reason to believe that the plaintiff will be unable to pay the costs for the defendant if ordered to do so. The reason I say that is that subs (f) would make no sense if all that was shown was that a person has divested assets with the intention of avoiding the consequences of the proceedings but failed to do so and still had sufficient assets within his or her control so as to be able to pay the costs of the defendant if ordered to do so.

10. I accept that the Cross Claimant falls within the definition of plaintiff for the purpose of the rules.

11. I am satisfied that there is reason to believe that Mr Le will be unable to pay the costs of the defendant if ordered to do so. This is because of the very transaction which is relied upon on this application as the divesting of assets which is a binding financial agreement entered into by Mr Le and his then wife, in 2022, where for all intents and purposes, on the then disclosed matrimonial assets of the parties, of the disclosed pool of matrimonial assets of Mr and Mrs Le, Mr Le effectively transferred what appears to have been almost all of those available assets to his wife in 2022.

12. The breakdown in the relationship between the Plaintiff and the Defendants happened at around that time and so Mr Lennings invites a finding by inference that the divesture of assets took place for the purpose of avoiding the consequence of the claim in these proceedings.

13. Putting that point to one side to which I will return, I am satisfied in light of the evidence of the binding financial agreement in 2022 that Mr Le is unlikely to be able to pay the costs of the Plaintiff if ordered to do so.

14. However, that is only one limb of subr (e) of r 42.21. The other is that Mr Lennings seeks a finding that Mr Le is suing not for his own benefit, but for the benefit of some other person.

15. The way this is put is that there is evidence, in fact I think it is an agreed fact, that Mr Le's solicitors, who have a costs agreement in place with him in the usual way that requires costs to be paid as and when they fall due upon invoice, have agreed to defer payment and to accept payments of outstanding fees by way of instalments.

16. So, it is said that in those circumstances Mr Le is not suing for his own benefit but is suing for the benefit of his solicitors.

17. In support of the proposition that an impecunious plaintiff is not suing for their own benefit but for the benefit of solicitors where those solicitors are owed lots of outstanding legal fees, the Cross Claimant relies on the decision of McGrath J in Laith & Fadi Investments v Fogo Brazilia Holdings Pty Ltd [2024] NSWSC 1508 and what his Honour said at [194] and also what Sackville J said in Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404 at [27] and what Parker J said at [42] of Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690.

18. The starting point seems to me is the words of the rule. Subrule (e) talks in terms of a plaintiff suing not for his own benefit but for the benefit of some other person.

19. The question is do the words of that rule leave room for a situation where the plaintiff might be suing in part for his own benefit but also for the benefit of some other person?

20. The various cases I have referred to do tend to suggest such a construction however each of them, it seems to me, was concerned with the particular facts that were before the Court on those occasions, and the statements are found in the context of the Courts considering whether there would be stultification of the claim if an order for security for costs were made and it was in that context that the courts were considering whether solicitors might be prepared to fund the proceedings in the sense of putting up security for costs. The argument being that the Court ought infer the solicitors would themselves put up security for costs because they had such a significant financial interest in the outcome.

21. There is authority that clearly points the other way, in particular Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd [2008] NSWCA 148 per Hodgson JA at 45(3) and Madgwick v Kelly [2013] FCAFC 61 where the Full Court of the Federal Court seems to have endorsed a statement by the primary judge in that case to the effect that such a construction was "remarkable."

22. Looking at the matter as a question of fact, it seems to me that all I know is that the solicitors are accepting payment over time for their invoices.

23. True it is if one adopts the broadest possible interpretation of the concept of suing for someone else's benefit, that the solicitors have an interest of a financial type in the outcome of the proceedings, but that financial interest really is no different than the financial interest they have in any event in running the case. Of course, the solicitors want their clients to win the case and of course it is more likely than not that the solicitors will recover their fees, at least faster, if clients win their case, but I just do not think that that circumstance is what was intended to be captured by subr (e).

24. In any event, I consider the better construction of subr (e) is that it is intended to capture circumstances where a plaintiff is not suing for their own benefit at all, but rather is suing for the benefit of others, an example being a plaintiff trustee who is suing in their own name to recover a judgment in their favour, but it is for the benefit of the beneficiaries to the trust that the trustee is administering. I do not consider the words of the rule capture a circumstance where a person is suing predominantly for their own benefit, but also in part for the benefit of another. I think cases dealing with litigation funding can be put to one side as dealing with the special circumstances that turn on facts far removed from a solicitor accepting payment of outstanding fees by instalment.

25. Accordingly, I am not satisfied that the jurisdiction conferred by r 42.21(1)(e) has been engaged. That takes me back to subs (f). That is, is there reason to believe that the Plaintiff has divested assets with the intention of avoiding the consequence of the proceedings.

26. There is no doubt that by the binding financial agreement Mr Le divested himself of almost all of his assets. That is not the point. The point is whether it can be inferred that when he did that in 2022, he did that with the intention of avoiding the consequences of the proceedings, the proceedings being not a foreshadowed claim by the Plaintiff against him as Defendant under the guarantor, but the cross claim that is now being propounded. I think that is very unlikely. On the face of the recitals in the Family Court documents, Mr Le and his wife were actually estranged, were either divorced or intending to become divorced, and were having disputes about custody and access of children. All of that seems to have been occurring in the years leading up to 2022 and it seems unlikely that all of those circumstances were contrived by Mr Le simply so as to avoid a potential adverse costs order on a cross claim that he might bring in answer to a claim by the Plaintiff for a debt for a failed franchise business.

27. Accordingly, I am not satisfied that jurisdiction is engaged by subs (f).

28. For those same reasons, I do not consider anything the Cross Claimants are doing to be an abuse of process.

29. If I am wrong and even if jurisdiction was engaged, I would not be minded to grant security as a matter of discretion against Mr Le. This is because, it seems to me that on a sensible reading of the cross claim, it is almost entirely defensive in nature to the Plaintiff's claim and that most of the matters raised in the cross claim could probably be raised by a defence. True it is that Mr Le is seeking to set aside the guarantee that he has sued upon but that is the very guarantee at the heart of the Plaintiff's case against him, and so that is a defensive move. He is seeking some damages in his favour which he says should in the first instance be set off against any amount that is owed to the Plaintiff. However, if there is a surplus he does seek a judgment in his own favour.

30. It is true that the cause of action that he relies upon for some of his damages is not defensive in nature. However, I think on a practical and sensible analysis, what he is doing is defensive in nature and in any event such parts of his cross claim that might be said to not be defensive would add so little to the overall costs of the litigation as to not justify the making of an order for security.

31. Moreover, there is delay here. It is true that Mr Rizk who has appeared for the Cross Defendants has conceded that there would not be stultification of the litigation in the event that an order for security is made, and I proceed upon that basis, and ordinarily I take the view that delay without prejudice in this sort of circumstance is a neutral factor. However, in this case, the matter is set down for hearing to commence on 1 December 2025, and in light of the procedural history of the matter it is not only in the interest of the parties that the matter proceed upon those dates, it is also in the interests of justice generally, in particular other litigants and the administrative time of the Court that this case has taken up to date.

32. The concession that there will not be stultification of the proceedings does not carry with it a concession that any amount ordered for security for costs could be got together and provided prior to 1 December. If that does not occur, it would have the inevitable consequence of the hearing date being vacated. The vacation of the hearing date would be prejudicial to the Cross Claimants which prejudice is a consequence of the delay in the bringing of this application.

33. Finally, there is the question of quantification of the amount.

34. Leeming JA in a case, in a very different case, of Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 123 at [26] referred to what he considered to be a "wildly exaggerated estimate" for the amount of security and found that in circumstances where such an estimate had been put forward which was grossly and disproportionately inflated, that no amount ought be awarded because the "broadbrush" approach that the courts adopt in security for costs applications, does not involve making a speculative guess by the Court in circumstances where the moving party has deliberately put forward inaccurate estimates.

35. In this case, I stress there is no suggestion that the quantification has been deliberately exaggerated whether wildly or not. However, it is grossly inflated because it proceeds upon the premise that what is being estimated is the whole costs of the cross claim rather than the much more nuanced approach that Mr Lennings took in the hearing, which is that there should be an amount for security ordered referable only to those portions of the cross claim that cannot be described as defensive in nature.

36. Even if I was satisfied that there was anything more than a de minimis amount of the cross claim that was not defensive in nature, I think in the circumstances especially in light of the impending hearing date, there being such inadequate evidence as to the amount, I would either have awarded no amount for security for costs at all, or if I had, the amount I would assess would have been so small as to not justify the potential disruption of the hearing so as the make the order. More to the point, any amount I chose to award would be the result of nothing more than guess work by me because of the way the evidence has been presented.

37. For all those reasons I dismiss the application against Mr Le.

38. There is then the application against the first Defendant which is a corporation.

39. The jurisdiction is engaged in relation to a claim against the corporation if I am satisfied that it is unlikely to be able to pay the costs of the proceedings, an adverse costs order of the proceedings.

40. I am so satisfied. It is the Cross Claimant corporation's case that it has effectively been destroyed by the misconduct of the Cross Defendant.

41. However, that finding does no more than engage the discretion to award security and as a matter of discretion I would not be prepared to make an order for security against the corporation for the simple reason that having not made the order against Mr Le, what is effectively exactly the same case as the one the corporation wishes to run is going to be run by Mr Le in any event, and in addition, the delay and the potential loss of the hearing date is sufficient to justify withholding relief but most importantly and essentially for all the reasons I have explained in relation to Mr Le's claim, I consider the company's claim to be almost entirely defensive in nature and it is impossible on the evidence to make any sensible assessment as to any portion of it that strictly is not defensive and therefore, for all those reasons, dismiss the claim against the first Cross Claimant.

42. For those reasons my orders are as follows:

1. The Notice of Motion filed by the Cross Defendants on 29 August 2025 is dismissed.

2. The first and second Cross Defendants are to pay the first and second Cross Claimants’ costs of and incidental to the Motion filed 29 August 2025.

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Decision last updated: 10 October 2025