FEDERAL COURT OF AUSTRALIA

Huang v Vantage Holdings Pty Ltd [2015] FCA 693

THE COURT ORDERS THAT:

1.    the application for leave to appeal be refused; and

2.    the appellant pay the respondent’s costs of and incidental to the application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This is an application for leave to appeal against the decision of Collier J delivered on 4 March 2015 in Vantage Holdings Pty Ltd v Huang [2015] FCA 155. Her Honour declined to order security for costs. The history of the principal proceedings is unclear, but the history of the application for security appears from her Honour’s reasons. At [13] – [16], her Honour gives the following outline:

13    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.

14    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.

15    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.

16    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.

2    Her Honour went on to say at [17] that she did not accept that the lengthy delay by Mr Huang in bringing the security for costs application could “be either explained or justified by reference to [the] belated discovery of Vantage’s position concerning its building licences”. Her Honour gave further details in that regard. At [20] – [22], under the heading “Potential stifling of litigation”, her Honour summarized evidence by various witnesses. In order to understand this evidence, it must be understood that at that stage, Vantage had spent something over $500,000 in connection with preparation and conduct of the case, and was expecting to expend a further sum of up to about $200,000 in preparing for the balance of the trial. It is to resume on 2 June 2015, now for eight days.

3    The principals of Vantage, Mr Carmichael and Mr O’Brien, gave evidence that they would have extreme financial difficulty in raising that amount of money and effectively could not do so within the time available. Mr Carmichael said that it would take six months for them to raise that amount. He said that although he owned real property which had an equity of something in excess of about $300,000, of which he had a half share interest, his partner would not allow him to mortgage it for the purpose of providing security prior to 2 June this year. Mr O’Brien, I am told, was in a similar position. In those circumstances, her Honour concluded at [22] that:

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.

4    This, it is submitted by counsel for Vantage, really meant that they would have considerable difficulty in raising the sum in less than six months in order to satisfy any order for the provision of such security prior to the recommencement of the trial. In the course of argument, I commented that the delay and the very late stage at which the application for security was made would, in my view, provide a sufficient basis for the refusal of the application for security. Indeed, in the absence of some evidence of significant change in circumstances, I would have thought that such consequence would be inevitable.

5    In conclusion, her Honour said at [32]:

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.

6    Mr Huang submits that the error inherent in this conclusion is that the proceedings would be stifled if an order for security for costs were made, rather than simply that Vantage and those standing behind it would experience considerable difficulty in complying with such an order. In my view, that is not the correct view of her Honour’s conclusions. The possibility that a trial, which had already consumed so much in the way of resources in an action which had been going for some time, might be adjourned, and then lose its trial dates because of a late application for security for costs which could not be readily met, might well raise the real probability that the proceedings would be aborted.

7    In any event, I understand her Honour to have used the word “stifle” to mean that the trial would, in all probability, have to go off on 2 June, with whatever consequences might flow from that. Indeed, if the usual order were made that the proceedings be stayed in the event that the security was not provided, one might expect that the consequences would, in fact, be their stifling. However it is not necessary to speculate about that possibility.

8    A second point is raised before me by Mr Huang. It asserts that it has found fresh evidence concerning its earlier application for security for costs, and that such evidence suggests that either the information as to financial circumstances provided by Mr Carmichael and Mr O’Brien was misleading, or that such circumstances have changed. In very recent times, Vantage Holdings has applied for a Mareva injunction, freezing Mr Huang’s assets. I am told that the application arose in circumstances in which he appeared to be disposing of assets. I do not think that there is any specific evidence to that effect before me. Mr Sun, the solicitor for Mr Huang, has sworn an affidavit in which he sets out evidence given by Vantage Holdings in support of the application for the Mareva injunction. In those proceedings Mr Carmichael said, concerning the capacity of Vantage Holdings to support any undertaking as to damages, that he consented to give a personal undertaking in the form annexed, which was in accordance with the usual practice of the Court. In effect, he would undertake to submit to such order as the Court may consider to be just for the payment of compensation to any person affected by the operation of the order. He also said:

The only real property that I have an interest in, is as joint tenant with Trina Louise Cash … situated at 15 Buruwang Street, Birtinya, Qld. That property is mortgaged to the ANZ Bank. I estimate the current market value of that property is about $700,000 to $750,000, and the balance of the debt mortgage over same is about $377,244. In that regard I estimate the current equity in the property is about $320,000 to $370,000, in which I have a half share interest.

9    Mr O’Brien also offered an undertaking and said that he would provide to the Court a bank guarantee in the amount of $70,000 to support his undertaking. Counsel for Mr Huang submits that these statements are inconsistent with the position taken before Collier J on the hearing of the application for security for costs, in that they suggest that there is property available to both Mr Carmichael and Mr O’Brien, which property might have been made available by way of security for Mr Huang’s costs in the principal proceedings. However, as Counsel for Vantage has pointed out, that proposition does not necessary follow. First, there is the overwhelming lateness of the application for security for costs, and the enormous amount of money that has already been spent on these proceedings. Secondly, the statements that were made as to Messrs Carmichael and O’Brien’s incapacity to raise money appear to have related, at least in part, to the attitude taken by their respective partners. Further, that amount was required to be paid prior to 2 June this year. Any amount payable by way of compensation pursuant to the undertakings will be made at some time in the future, presumably after the resolution of these proceedings.

10    In those circumstances, the estimate given by Mr Carmichael as to the length of time necessary in order to give security for costs was not inconsistent with the evidence concerning the capacity to support the proposed undertaking as to damages. Any discrepancy is a matter for cross-examination. Although it might be inferred that there was a certain degree of opportunism in it all, there is no direct contradiction.

11    It seems most unlikely that the fresh evidence would be of much assistance in the appeal. It is more likely that it can be effectively dealt with by way of a fresh application on new material. In any event, I am not satisfied that any error is demonstrated in her Honour’s reasons. I do not accept that her Honour misunderstood the meaning of “stifling” or “stultification” of the proceedings. Her Honour simply used that term to describe the circumstances to which she had referred: the serious risk of disruption of the trial and its possible permanent derailment as a result of losing the eight days set down for the trial in June.

12    In those circumstances the decision is one peculiarly within the Court’s discretion. As has been said, the availability of an appeal from such a decision depends upon the considerations identified by the High Court in House v The King (1936) 55 CLR 499. I see no error of principle in her Honour’s decision, nor any arguable case as to such error. In those circumstances, I refuse the application for leave to appeal.

Associate:

Dated:    8 July 2015