Vantage Holdings Pty Ltd v Huang
[2015] FCA 155
•4 March 2015
FEDERAL COURT OF AUSTRALIA
Vantage Holdings Pty Ltd v Huang [2015] FCA 155
Citation: Vantage Holdings Pty Ltd v Huang [2015] FCA 155 Parties: VANTAGE HOLDINGS PTY LTD (ACN 097 178 240) v YONG HUANG (AKA PETER HUANG) File number: QUD 127 of 2013 Judge: COLLIER J Date of judgment: 4 March 2015 Catchwords: PRACTICE AND PROCEDURE – security for costs – seeking future costs – whether impecuniosity due to applicant’s own actions – increase in estimated length of trial – whether order for security for costs will stifle litigation – delay in filing application for security for costs – whether voluntary assumption by respondent of applicant’s financial position – whether order would waste considerable judicial and litigant resources already spent – indemnity costs not appropriate – application dismissed Legislation: Corporations Act 2001 (Cth) s 588G(2), 588M, 1335(1)
Federal Court of Australia Act 1976 (Cth) s 56
Federal Court Rules 2011 (Cth) rr 19.01, 19.01(2), 19.01(3)Cases cited: Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176
Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 3) [2006] FCA 1498
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Delta Electricity v Blue Mountains Conservation Society Inc [2010] NSWCA 264
Fiduciary Ltd v Morningstar Research Pty Ltd [2004] 208 ALR 564
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744
James v Australia and New Zealand Banking Group Ltd (1985) 9 FCR 442
Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd [2009] HCA 43
Knight v FP Special Assets Ltd (1992) 174 CLR 178
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Madgwick v Kelly [2013] FCAFC 61
Mecrus Pty Ltd v Industrial Energy Pty Ltd [2015] FCA 103
O’Neill v Piscopo (No 4) [2012] FCA 1225
Opes Prime Group Ltd v Niako Investments Pty Ltd [2014] VSC 414
Ryan v Primesafe [2015] FCA 8
Topcide Pty Limited v Charter Financial Planning Ltd [2010] FCA 1151
Trility Pty Ltd v Ancon Drilling Pty Ltd [2013] VSC 577
Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245Date of hearing: 26 February 2015 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 36 Counsel for the Applicant: Mr MK Stunden Solicitor for the Applicant: Mills Oakley Lawyers Counsel for the Respondent: Mr G Beacham with Ms F Chen Solicitor for the Respondent: Yong Legal and Immigration Services Pty Ltd
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 127 of 2013
BETWEEN: VANTAGE HOLDINGS PTY LTD (ACN 097 178 240)
ApplicantAND: YONG HUANG (AKA PETER HUANG)
Respondent
JUDGE:
COLLIER J
DATE OF ORDER:
4 MARCH 2015
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
The interlocutory application filed on 19 December 2014 be dismissed with costs to be paid on a party-party basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 127 of 2013
BETWEEN: VANTAGE HOLDINGS PTY LTD (ACN 097 178 240)
ApplicantAND: YONG HUANG (AKA PETER HUANG)
Respondent
JUDGE:
COLLIER J
DATE:
4 MARCH 2015
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an interlocutory application for security for costs filed on 19 December 2014 by the respondent in the substantive proceedings, Mr Huang, against the applicant Vantage Holdings Pty Ltd (“Vantage”). In its amended originating application filed on 4 February 2015 Vantage, a creditor of JHC Development Group Pty Ltd ACN 082 315 393 (in liquidation) (“JHC”), sought a declaration against Mr Huang pursuant to s 588G(2) of the Corporations Act 2001 (Cth) (“Corporations Act”), an order against Mr Huang pursuant to s 588M of the Corporations Act and payment of interest in respect of debts owed by JHC to Vantage. In the interlocutory application currently before me, Mr Huang seeks the following orders:
1.That the Applicant provide security for the costs of the Respondent of these proceedings in the sum of four hundred and eighty five thousand five hundred and sixty four dollars and twelve cents ($485,564.12).
2.That the proceedings be stayed until such time as there has been compliance, by the Respondent, with the terms of Order 1.
3. Such further or other orders as the Court deems fit.
Vantage concedes that, as at 12 February 2015, Mr Huang met the threshold required by s 1335(1) of the Corporations Act and r 19.01(2) and (3) of the Federal Court Rules 2011 (Cth) (“Federal Court Rules”) in respect of an application for security for costs. The threshold issue conceded by Vantage is that there is reason to believe that Vantage will be unable to pay the costs of Mr Huang if he is successful in his defence (cf KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189).
Section 1335(1) provides:
Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
Materially, r 19.01 of the Federal Court Rules provides:
Application for an order for security for costs
(1) A respondent may apply to the Court for an order:
(a)that an applicant give security for costs and for the manner, time and terms for the giving of the security; and
(b) that the applicant's proceeding be stayed until security is given; and
(c)that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed.
(2)An application under subrule (1) must be accompanied by an affidavit stating the facts on which the order for security for costs is sought.
(3) The respondent's affidavit should state the following:
(a)whether there is reason to believe that the applicant will be unable to pay the respondent's costs if so ordered;
(b) whether the applicant is ordinarily resident outside Australia;
(c) whether the applicant is suing for someone else's benefit;
(d) whether the applicant is impecunious;
(e) any other relevant matter.Also of clear relevance is s 56 of the Federal Court of Australia Act 1976 (Cth) which provides:
Security
(1)The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.
(2)The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.
(3)The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.
(4)If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.
(5)This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.
Vantage opposes an order by the Court granting Mr Huang security for costs on discretionary grounds. It is useful to summarise the submissions of the parties before considering the current application.
Submissions of the parties
In summary Mr Huang submits that Vantage ought be required to pay security for costs in the amount sought because:
·The fact that Vantage is unable to meet Mr Huang’s costs should he prove successful in defending Vantage’s substantive application is an important if not decisive issue.
·The impecuniosity of Vantage is due to its own actions, including voluntarily cancelling its building licences. This event should be considered in light of the fact that related company, Vantage Holdings Australia Pty Ltd, applied for a medium rise licence on 15 July 2011 and an open building licence on 6 May 2012. These dates were contemporaneous with the dates on which Vantage’s building licences were cancelled.
·The estimated length of the trial has increased from four to eight days.
·Mr Huang seeks only security for “future costs”, namely costs from the time at which the application was foreshadowed on 9 October 2014.
·Even where there has been delay, security can be awarded for “future costs”.
·Vantage and the Court were informed at the directions hearing of 9 October 2014 that an application for security for costs would be brought.
·Whatever delay there has been is not sufficient to disentitle Mr Huang from security for future costs, especially if there is a strong indication that Vantage has no capacity to pay a costs order.
·Vantage bears the onus of proving that an order for security for costs will stifle the litigation.
In opposing the application for security for costs Vantage submits, in summary:
·there has been a gross unexplained delay by Mr Huang in filing the application for security for costs;
·Vantage’s claim is meritorious with strong prospects of success;
·public policy issues favour Vantage;
·it is likely that an order for security for costs will stifle Vantage’s claim;
·the calculation method and amount of security sought is inappropriate.
Consideration
In this case the parties do not dispute the principles guiding the exercise of the Court’s power to order an applicant to pay security for costs. The well-known purpose of ordering security for costs is to provide protection to a party brought into litigation by a party who is unable to meet the costs of that other party, should the litigation be unsuccessful (Beazley, Basten and Macfarlan JJA in Delta Electricity v Blue Mountains Conservation Society Inc [2010] NSWCA 264 at [4]). Where it is clear that the applicant is impecunious such that it is unlikely to be in a position to pay the costs of the respondent, it is incumbent on the Court to weigh various discretionary factors in considering whether an order for security for costs ought be made. Relevant principles were recently reiterated by the Full Court of this Court in Madgwick v Kelly [2013] FCAFC 61, albeit in the context of a class action. Once the threshold issue of impecuniosity is established by the party seeking security for costs, the evidentiary onus shifts to the party against whom the order is sought, to establish a reason why security should not be ordered: Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [62]; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] 208 ALR 564 at [35]-[36]; Topcide Pty Limited v Charter Financial Planning Ltd [2010] FCA 1151 at [12]; Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [30]; Mecrus Pty Ltd v Industrial Energy Pty Ltd [2015] FCA 103. Notwithstanding this principle, I note and respectfully adopt the following observation of Murphy J in Mecrus where his Honour said at [24]:
Even so, the burden rests on the defendant, from first to last, to persuade the court that the order for security should be made: Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 at [21] per Maxwell P and Buchanan JA. The plaintiff does not bear the ultimate burden of proof in the application for security but it must raise for consideration the matters that favour it if it wishes them to be taken into account in the determination of the case. The evidential burden to raise such matters is distinct from the legal onus of proving entitlement to an order for security for costs, which rests with the defendant: Cornelius and Others v Global Medical Solutions Australia Pty Ltd and Others (2014) 98 ACSR 301 at [18]-[20] per Macfarlan JA.
In this case Mr Huang has established that there is reason to believe that Vantage will be unable to pay any costs orders made against it in respect of the substantive claim. More specifically, there is a risk of prejudice to Mr Huang in that he may be out of pocket in respect of his costs of this litigation should the substantive application be dismissed. I accept that this is an important factor in considering whether an order for security for costs ought be made. On balance however I am not persuaded that I should make an order for security for costs against Vantage in this case. I have formed this view for the following reasons.
Delay
First, there is ample authority for the propositions that an application for security for costs should be made promptly, and that the closer the proximity of the application for security for costs to the substantive hearing, the greater the weight the Court may accord to the factor of delay (Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 3) [2006] FCA 1498 at [4]-[5]; James v Australia and New Zealand Banking Group Ltd (1985) 9 FCR 442 at 446; Trility Pty Ltd v Ancon Drilling Pty Ltd [2013] VSC 577 at [57]). Further, there is authority for the proposition that a party who wishes to obtain security for its costs must apply promptly for that relief once it is, or ought reasonably be, aware that the other party would be unable to meet an order for costs (Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 at [54]; Trility at [56]). As Newnes JA observed in Christou at [20]:
Security for costs is not a card that a defendant can keep up its sleeve and play at its convenience. Delay is an important consideration in the determination of an application for a security for costs because it is capable of causing prejudice or unfairness to the plaintiff. A plaintiff is entitled to know at the earliest opportunity, before it has committed substantial disruption or distraction in the conduct of the plaintiff’s case, and if the plaintiff is unable to provide security, the greater the costs that will have been wasted.
As also observed by Derham AsJ in Opes Prime Group Ltd v Niako Investments Pty Ltd [2014] VSC 414 at [30]:
The company, which can be assumed to be in financial difficulties, is entitled to know its position in relation to security at the outset and before it embarks to any real extent on its litigation, and certainly before it makes a substantial financial commitment toward litigating the claim. See Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301, 309; Smail v Burton; Re Insurance Assocs Pty Ltd (in liq) [1975] VR 776.
In this case I consider that there has been an extraordinary and unexplained delay on the part of Mr Huang in bringing this application for security for costs. An originating application was filed by Vantage in its substantive claim two years ago on 4 March 2013. Examination of the procedural history of the substantive proceeding reveals vacation of the trial dates (originally commencing on 4 February 2014) in circumstances where costs thrown away by that vacation were awarded against Mr Huang. A further costs order was made against Mr Huang on 27 August 2014. The matter was then listed for trial for four days commencing on 15 September 2014. Because of extensive disputes concerning the nature of the evidence and the strong case put by Mr Huang that the matter should return to mediation, the trial was adjourned part-heard to continue for eight days on 2 June 2015. The matter has been to mediation twice. On both occasions, mediation was unsuccessful.
Notwithstanding all of the events I have listed as comprising the procedural history of this matter, it was only subsequently on 9 October 2014 that Counsel for Mr Huang informed the Court that Mr Huang was contemplating filing an application for security for costs against Vantage. The interlocutory application itself was filed on 19 December 2014, which was 21 months after the substantive application was filed, and three months after the trial commenced.
On the evidence before the Court this is not a case where, between March 2013 and December 2014, the financial position of Vantage had deteriorated such that an application for security for costs later in the proceedings was warranted to protect the financial position of Mr Huang in defending the case against him. Rather, the uncontested evidence before the Court is that Vantage had cancelled its building licences in April 2011 and August 2012, which was before the substantive proceedings commenced.
The solicitor for Mr Huang, Mr William Sun, deposed in his affidavit of 12 February 2015 that a search of the Queensland Building and Construction Commission database was conducted on 12 September 2014 and that it was only then that the cancellation by Vantage of its building licences was discovered. In this respect Counsel for Mr Huang submitted that it would not be reasonable or normal to expect Mr Huang to ascertain (through searches or otherwise) whether or not Vantage had voluntarily cancelled those licences, which were at the core of its business. Mr Huang also complained about the failure of the solicitors for Vantage to provide information to his solicitors concerning the financial position of Vantage once the security for costs application had been filed. Further, Counsel for Mr Huang submitted that in the circumstances it was prepared to seek only its future costs of litigation.
However I do not accept that the lengthy delay of Mr Huang to bring the security for costs application can be either explained or justified by reference to a belated discovery of Vantage’s position concerning its building licences. Indeed, I consider:
·Contrary to the submission of Counsel for Mr Huang – it would have been reasonable or normal for a respondent faced by litigation by a corporate applicant, being a small building company, to undertake the type of search described by Mr Sun early in the course of the proceedings. This was particularly so when Mr Huang was, at all times, legally represented and has had the benefit of legal advice – including that of senior counsel – throughout the proceedings. No explanation has been provided by Mr Huang as to why such logical inquiries were not made prior to September 2014.
·I am not persuaded that Vantage was “forewarned” of Mr Huang’s application for security for costs, simply because on 9 October 2014 I made an order that Mr Huang file any application for security for costs on or before 19 December 2014. That order merely required that if Mr Huang decided to file an application for security for costs, it be filed by the date specified in the order. Even in the absence of such an order, Mr Huang could have filed an application for security for costs at any time.
·In the circumstances I do not accept that Vantage was at fault for declining to assist Mr Huang to prepare his case against it in respect of security for costs. In this respect I note the letter of Mr Huang’s solicitors dated 18 December 2014 to the solicitors for Vantage, in which Mr Huang’s solicitors sought, by the following day:
(a) annual returns for the last three (3) financial years;
(b) profit and loss accounts for the last three (3) financial years;
(c) balance sheet for the last three (3) years; and(d)any further information known of your client including, inter alia, whether it is engaged in any business at the present time or whether it holds any assets.
In this respect I note the letter by Mills Oakley Lawyers (the solicitors for Vantage) dated 19 December 2014 which included the following:
By your letter, your client asks that our client voluntarily give over a range of sensitive financial information regarding our client.
Even if our client was obliged to or minded to give over the information, we suspect it would not be able to do so in the unreasonably short time you have prescribed.
Having said that, there is simply no obligation at law on the part of our client to simply give over the information you requested in your letter.
The fourth category of documents you seek, being ‘any further information known of [our client]’ is also imprecise, of potentially very wide application and oppressive.
Perhaps you might first wish to carry out your own enquiries and searches before writing to us.
In my view this response of the solicitors for Vantage was reasonable in the circumstances.
Voluntary assumption of risk of Vantage’s financial position
Second, Counsel for Vantage helpfully took me to the recent decision of Murphy J in Mecrus where at [68] his Honour explained:
Where it may be said that a defendant voluntarily assumed the risk of a corporate plaintiff’s financial position it may be unfair to order security for costs: see Letore Pty Ltd v Associated International Finance Pty Ltd (Unreported, Supreme Court of Victoria, McDonald J, 28 May 1993, BC9303883); Denward Lane Pre-Cast Panels Pty Ltd v Cornerstone Constructions Australia Pty Ltd [2008] VSC 144 at [26] per Hansen J; Industrial Conveying (Aust) Pty Ltd v SKM Recycling Pty Ltd [2012] VSC 588 at [140]-[145] per Robson J; Coca-Cola Amatil Victoria Ltd v PAA Enterprises Pty Ltd [2003] VSCA 135 at [6]-[9] per Buchanan JA; Harrop Engineering at [11]-[16], [22] per Derham AsJ.
In this case such evidence as is currently before the Court indicates that Mr Huang and JHC had had business dealings with Vantage. Vantage is, and at all material times has been, a proprietary limited company operating in the building industry. It appears that no searches relating to the financial position of Vantage were undertaken by Mr Huang or his representatives until – apparently – September 2014. Certainly no security for costs application was brought in these proceedings until December 2014. In the circumstances I consider it reasonable to draw the inference that, until December 2014, Mr Huang was prepared to accept the risk that Vantage would be unable to satisfy any adverse costs order made against it. I consider this a factor relevant to take into account in considering whether to order security for costs against Vantage in respect of the current application.
Potential stifling of litigation
Third, in his affidavit dated 23 February 2015 Mr Glenn Carmichael, a director of Vantage, deposed in summary that:
·Vantage has incurred legal costs of approximately $510,000 in this matter.
·Both he and co-director Mr Shane O’Brien have assisted in funding the payment of Vantage’s legal costs.
·It would take at least six months for Vantage, together with the assistance of both Mr O’Brien and himself to raise funding to provide security for Mr Huang’s costs if an amount of $100,000 were ordered, and longer if a greater sum were ordered.
·The only real property in which he has an interest was on the Sunshine Coast and is valued at approximately $700,000. His partner also has an interest in that property as a joint tenant. The property is encumbered, it is his family home, and his partner has informed him that she would not agree to further mortgage the property to raise funds in respect of these proceedings.
·His only other significant personal financial assets are his shares in the holding company of Vantage, and entitlements he received by way of his discretionary family trust.
·Neither Vantage nor its holding company have sufficient funds or assets against which they could borrow to raise funds in respect of these proceedings.
Counsel for Mr Huang submitted that there was no evidence concerning the financial position of the discretionary trust of which Mr Carmichael is a beneficiary. While there is some merit in this submission, I do not consider it sufficiently persuasive that I will discount the evidence of Mr Carmichael concerning the financial pressure under which he has been placed by this litigation or the difficulty Vantage would experience in meeting an order for security for costs.
On balance, I am satisfied that an order for security for costs in the sum sought by Mr Huang would stifle Vantage’s claim, and that the persons standing behind Vantage would have considerable difficulty assisting Vantage to raise necessary funds to meet such an order.
Strength and bona fides of Vantage’s case
Fourth, although Mr Huang accepts that Vantage’s claim is bona fide with a prospect of success (transcript 26 February 2015 p 14 ll 11-14). Counsel for Vantage urged the Court to embark upon a preliminary assessment of the strength of Vantage’s case. In light of this concession by Mr Huang, I consider such preliminary assessment unnecessary. However, in respect of Mr Huang’s application for security for costs, I do take into consideration that it is not disputed that the claim of Vantage is bona fide, with a prospect of success.
Bona fides of Vantage’s actions
Fifth, as a discretionary factor to take into account, Mr Huang drew to my attention to the fact that not only had Vantage cancelled its building licences, but, contemporaneously, equivalent building licences were obtained by a related entity, Vantage Holdings Australia Pty Ltd (“VHA”). At the hearing before me, these events were described by Counsel for Mr Huang as a course of deliberate conduct by Vantage and its controllers (transcript 26 February 2015 p 11 ll 28-39).
While there was a suggestion that this conduct was tantamount to so-called “phoenix” activity, I note that in his affidavit Mr Carmichael explains in some detail that Vantage cancelled its building licences, and VHA instead acquired building licences, because:
·Vantage experienced a turnover of directors between 2010 and 2012.
·In or about June 2012 the Queensland Building Services Authority (“QBSA”) expressed a preference for a simpler corporate structure in Vantage and its related companies for licencing purposes.
·The directors of Vantage then resolved, following their meeting with the QBSA that all building work would be contracted through VHA.
This evidence was not contested before me, Mr Carmichael’s credit was not challenged, and for present purposes I am prepared to accept this evidence.
For the purposes of the current proceeding, and contrary to the submissions of Mr Huang, I draw no inferences unfavourable to Vantage in respect of its cancellation of building licences or the timing of the acquisition of building licences by VHA.
Future costs for remainder of trial
Sixth, Counsel for Mr Huang submitted that Mr Huang seeks only future costs, from the time at which the application was foreshadowed in October 2014. This application has been made particularly in light of the fact that the trial is now estimated to require eight days of hearing. In respect of these submissions I make the following points.
First, it is usual that an order for security contemplates future costs rather than costs previously incurred: Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd [2009] HCA 43 at [93]; Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 190-191. As Mason CJ and Deane J explained in Knight at 190-191:
The amount awarded as security is no more than an estimate of the future costs and it is not reasonable to expect a defendant to make further applications to the court at every stage when it appears that costs are escalating so as to render the amount of security previously awarded insufficient.
Second, that the estimated length of the trial has now expanded to eight days in my view is in no small measure due to the conduct of Mr Huang and his legal representatives. I note, for example, the vacation of the original trial dates in February 2013 (in respect of which costs were awarded against Mr Huang); the filing of further and very lengthy affidavits by Mr Huang (including large volumes of previously undiscovered documents) on the eve of the trial in September 2014; a lengthy list of previously undisclosed objections to the evidence of Vantage produced by the legal representatives of Mr Huang on the first day of the trial in September 2014; late compliance by Mr Huang’s legal representatives with directions of this Court on numerous occasions; and the proposed further expansion of Mr Huang’s defence as explained by Counsel for Mr Huang at the hearing last week. While I note that there has been a change in the legal team representing Mr Huang since the trial was adjourned part-heard in September 2014 and many of the events exacerbating the progress of this litigation cannot be laid solely at the feet of the new legal team, this fact neither relieves any prejudice suffered by Vantage as a result of two adjournments of the trial, nor mitigates the costs incurred by Vantage in meeting these events.
In my view the fact that the trial dates have potentially expanded from four days to eight days does not support the order for security for costs sought by Mr Huang.
Conclusion
In my view the application for security for costs has been made late in the proceedings and without proper explanation for the delay in respect of the application. In such circumstances it is likely that an order for security for costs would stifle the litigation. Such an order would also result in the wastage of the considerable judicial and litigant resources already spent on this matter (cf Newnes JA in Christou at [21]). While there is a risk to Mr Huang that any cost orders in his favour in respect of the substantive proceedings will not be met by Vantage, in light of the reasons I have given I consider it appropriate to dismiss the application for security for costs.
Counsel for Vantage sought an order for indemnity costs in the event that the application for security was dismissed. In my view the circumstances do not warrant an order for indemnity costs. As I explained in O’Neill v Piscopo (No 4) [2012] FCA 1225 at [3]:
The discretion of the Court to award costs is found in s 43 of the Federal Court of Australia Act 1976 (Cth). In the usual case where costs follow the event, it is customary for the Court to order costs against the unsuccessful party on a party and party basis although the Court has a wide and unfettered discretion to award costs on an indemnity basis in appropriate cases: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 231-234. As a general proposition however, before the Court orders indemnity costs against a party the case must exhibit special or unusual features to justify the Court exercising its discretion in this way: InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 at [11]. Situations where the Court may be inclined to order indemnity costs against an unsuccessful appellant include:
Ÿwhere a proceeding is commenced or continued in circumstances where the applicant properly advised should have known there was no chance of success;
Ÿwhere groundless allegations have been made;
Ÿwhere an application is brought and prosecuted not for the bona fide purpose of protecting and enforcing a legal right, but rather to achieve an ulterior or extraneous purpose; and
Ÿwhere there has been some relevant delinquency on the part of the unsuccessful party.
(De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77 at [6]; InterTAN Inc at [11].)
Other instances of circumstances where the Court may be prepared to order indemnity costs include:
·a false allegation of fraud;
·conduct which causes loss of time to the Court and to other parties; and
·conduct which amounts to a contempt of Court;
(see for example the recent discussion in Ryan v Primesafe [2015] FCA 8 at [110]-[112]).
While it is clear that the categories of cases in which indemnity costs can be awarded are not closed (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234), in this case I am not satisfied that there are particular facts and circumstances of this case which warrant the making of an order for payment of costs other than on a party-party basis. In particular:
·I am not satisfied that Mr Huang’s application for security for costs had no chance of success and ought never have been brought; and
·I am not satisfied that the application represents delinquency on the part of Mr Huang, an attempt to waste the time of the Court, or only as a delaying tactic in respect of this litigation.
It follows that the proper order is that Mr Huang’s application for security for costs filed 19 December 2014 be dismissed with costs against Mr Huang, to be assessed on a party-party basis.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate:
Dated: 4 March 2015
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