Vantage Holdings Pty Ltd v Huang

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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 245
Date 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)
Applicant
AND:

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…

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Details
Case
[2015] FCA 155
Decision Date

CaseChat Overview and Summary

The case of Vantage Holdings Pty Ltd v Huang was before the Federal Court, where the respondent, Mr Huang, sought an order for security for costs against the applicant, Vantage Holdings Pty Ltd. The core issue was whether the court should grant Mr Huang's request for security for future costs in light of various factors, including an increase in the estimated length of the trial, potential impecuniosity of the applicant due to its own actions, and the impact of such an order on the litigation process. The court was also required to consider whether Mr Huang's delay in filing the application and the voluntary assumption of Vantage's financial position warranted a different outcome.

The court considered the principles guiding the exercise of its power to order security for costs, which is primarily to protect a party from the financial burden of litigation if they are unsuccessful. The court acknowledged that Mr Huang had established a risk of prejudice due to potential impecuniosity of Vantage. However, the court found that the application was made late in the proceedings without proper explanation for the delay. Additionally, the court noted that the increase in the estimated length of the trial did not justify an order for security for costs, and there was a risk that such an order would stifle the litigation and result in the wastage of significant judicial and litigant resources already spent. The court also rejected the notion that the application represented delinquency or a delaying tactic on Mr Huang's part.

The court concluded that while there was a risk that Mr Huang might not be compensated for his costs if the substantive proceedings were unsuccessful, the circumstances did not warrant an order for indemnity costs. The court held that the case did not exhibit the special or unusual features necessary to justify such an order, as there was no evidence that the application had no chance of success or represented an attempt to waste the court's time.

The court dismissed the application for security for costs and ordered that costs be paid on a party-party basis. The decision highlights the importance of timely applications for security for costs and the need for applicants to provide adequate explanations for any delays in filing such applications. The court also emphasised the potential consequences of granting security for costs orders, including the risk of stifling litigation and wasting judicial resources.

Orders

Orders of the court

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.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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; andŸwhere 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.

Ratio Decidendi

Legal Principle Established

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