Federal Court of Australia

Lin v One Funds Management Limited (Security for Costs) [2025] FCA 973

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth), the Applicant provide security in the sum of $30,000 paid into Court for the Respondent’s costs incurred in relation to the application for an extension of time and leave to appeal up to the conclusion of the hearing of that application.

2.    The Applicant provide the security in accordance with order 1 by 9 September 2025.

3.    In the event of the Applicant’s default in providing security in accordance with order 1 by the time specified in order 2, the proceeding be dismissed.

4.    The Applicant pay the costs of this interlocutory application.

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

REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

1    These reasons concern an application for security for costs made by the respondent, One Funds Management Limited (OFML), in the context of an application for an extension of time and for leave to appeal a judgment given on 5 June 2025 (with reasons published on 6 June 2025) approving a Scheme of arrangement between OFML and certain of its creditors: One Funds Management Limited, in the matter of One Funds Management Limited (No 2) [2025] FCA 602 (OFML (No 2)).

2    The applicant is Enying Lin, a creditor of OFML, who appeared with leave as an interested person at the first and second court hearings in relation to the Scheme. The first court hearing culminated in, amongst other things, OFML being ordered to convene a Scheme Meeting to enable consideration of, and voting on, the resolution proposing the Scheme: One Funds Management Limited, in the matter of One Funds Management Limited [2025] FCA 475 (OFML (No 1)). The Scheme Meeting was held on 30 May 2025. The resolution proposing the Scheme was passed with the requisite majorities: OFML (No 2) at [3]-[4]. On 5 June 2025, the Scheme became effective upon a copy of the Court’s orders made on 5 June 2025 being lodged with ASIC. Further steps have since been taken as part of carrying the Scheme into effect, which have involved third parties relinquishing rights as part of the implementation of the Scheme.

3    On 7 July 2025, Ms Lin filed an application for an extension of time and leave to appeal from the judgment delivered on 5 June 2025 (the Extension and Leave Application) together with a supporting affidavit of Simran Kaur, law clerk, employed by Hall Partners sworn on 7 July 2025. Ms Lin proceeds on the express basis in her application that leave to appeal is required by s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

4    On 12 August 2025, shortly after the proceeding was allocated to me for case management, I convened a case management hearing. As a result of that hearing, I made orders in relation to the security for costs application (Security Application) allowing the parties to file submissions and evidence in support and for the Security Application to be determined on the papers. I also made timetabling orders to bring the Extension and Leave Application forward for hearing on 16 September 2025.

5    The Security Application is the subject of an interlocutory application filed 5 August 2025. OFML seeks security for costs calculated by reference to the period up to the conclusion of the hearing of the Extension and Leave Application in the amount it anticipates it would recover if a costs order is made against Ms Lin for this period, or such other amount as the Court considers appropriate. Ms Lin opposes the Security Application.

6    For the reasons which follow, I am satisfied it is appropriate to exercise the discretion to make an order for security for costs against Ms Lin in the limited amount and for the limited period sought by OFML.

EVIDENCE

7    In support of the relief it seeks, OFML relies upon the affidavits of Christopher Michael Prestwich, solicitor, sworn on 23 July 2025 and 5 August 2025 (respectively, the First Prestwich Affidavit and the Second Prestwich Affidavit) and Exhibit CP-1 to the First Prestwich Affidavit (Exhibit CP-1).

8    Ms Lin relies upon the affidavits of Simran Kaur sworn on 7 July 2025 and 12 August 2025 (respectively, the First Kaur Affidavit and the Second Kaur Affidavit).

APPLICABLE PRINCIPLES

9    The applicable principles are well established and were not in dispute on this application at the level of principle. They may be briefly stated.

10    The Court may order an applicant to give security for the payment of costs that may be awarded against that applicant: s 56(1) of the FCA Act. The Court’s jurisdiction in relation to security for costs is broad and unfettered and in each case will depend on its own circumstances: Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) [1984] FCA 34; 2 FCR 1 at 4 (Sheppard, Morling and Neaves JJ) and Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at [6] (Allsop CJ and Middleton J). On any application for security for costs the Court has a discretion that is to be exercised having regard to whether the interests of justice would be best served by making or refusing the order: Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd [1992] FCA 592; 8 ACSR 405 at 411 (Cooper J).

11    As Colvin J observed in Frigger, in the matter of Computer Accounting and Tax Pty Ltd (in liq) (No 2) [2018] FCA 612 (Frigger (No 2)) at [6]-[8]:

[6]     The jurisdiction to make an order for security is not limited by the terms in which the Rules of the Court as to security for costs may be expressed: Bell Wholesale at 3 applied in Commissioner of Taxation v Vasiliades [2016] FCAFC 170 at [71].

[7]     Further, as was stated by Kenny and Edelman JJ in Commissioner of Taxation v Vasiliades at [72]:

The purpose to be served by making an order for security for costs is to ensure that a successful respondent to a claim will have a fund available within the jurisdiction of the Court against which the respondent, if successful in defence, can enforce a judgment for costs in the respondent's favour. This purpose is, of course, relevant to an exercise of discretion.

[8]     An applicant may have access to funds from outside the jurisdiction or from a third party to enable the prosecution of a claim in Court. However, the problems that a successful respondent may face in enforcing a costs order obtained against the applicant due to difficulties or an inability to resort to that same source of funds has long been recognised as a significant factor that supports the making of an order for security for costs.

12    The power may be exercised to grant security in favour of a respondent to an application for leave to appeal, and to order that the proceedings be dismissed or stayed in the event of non-compliance: see, for example, Wikeley v Kea Investments Ltd [2024] FCA 631 (Dowling J); Horizons (Asia) Pty Ltd v Enagic Co Ltd [2022] FCA 365 (Stewart J); McCardle v Johnson [2023] FCA 1369 (Stewart J); Pleash (Liquidator) v Tucker [2018] FCA 168 (Greenwood J).

13    The factors informing the exercise of the discretion cannot be stated exhaustively — different considerations may bear upon the interests of justice in any particular case: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196-197 (Beazley J, quoting Gentry Brothers at 415); Hardingham v RP Data Pty Ltd [2020] FCA 1062 at [8] (Burley J); Frigger (No 2) at [5].

14    Relevantly on the present application, the following discretionary factors arise for consideration — I will not recite the cases in which these factors have been considered in the context of security applications:

(1)    Whether the applicant is ordinarily resident outside of the jurisdiction;

(2)    Whether the applicant has assets in the jurisdiction against which an adverse costs order can be enforced;

(3)    The risk that an order for costs will not be satisfied, including whether such a risk should be inferred where the applicant has a history of non-compliance with court orders or has unpaid legal debts;

(4)    Whether the party seeking security for costs brought its application promptly; and

(5)    The merits of the applicant’s case.

CONSIDERATION

Discretionary factors

15    I will address the discretionary factors that arise on this application in turn.

16    As to the first, the evidence in relation to whether Ms Lin is ordinarily resident outside of the jurisdiction is unsatisfactory. The evidence is given by Mr Kaur, a law clerk employed by Ms Lin’s firm of solicitors. Mr Kaur’s evidence is essentially at the level of assertion. It is not supported by identification of the sources of information upon which he has relied for information that is outside his personal knowledge and where he purports to give evidence that is “within [his] own knowledge or based on matters that [he has] become aware of as a result of [his] work completed on the file”, he does not substantiate with any particularity the basis upon which he has formed his understanding. Even if I was to overlook the quality of the evidence given by Mr Kaur, and that Ms Lin herself has not provided an affidavit, the gap in the evidence on the issue of Ms Lin’s ordinary place of residence is stark.

17    In the First Kaur Affidavit, which predates the filing of the Security Application, Mr Kaur deposed that Ms Lin “currently resides” in the People’s Republic of China but is however a “Permanent Resident of Australia”. In the Second Kaur Affidavit, filed in support of Ms Lin’s opposition to the making of a security for costs order, Mr Kaur deposes that Ms Lin is a “Permanent Resident of Australia” who “periodically resides” in China. Mr Kaur gives further generalised evidence, unsupported by primary records, in which he purports to give evidence of the context in which Ms Lin obtained a visa. I understand Mr Kaur’s references to Ms Lin being a “Permanent Resident of Australia” reflects Mr Kaur’s understanding of Ms Lin’s visa status. He does not give any evidence from which I would be prepared to infer that Ms Lin is ordinarily resident in the jurisdiction. Ms Lin was in a position to place evidence to that effect before the Court. She did not do so. On the basis of the evidence on this application, I infer that Ms Lin currently resides in China, that is outside the jurisdiction. I further infer from Mr Kaur’s description of Ms Lin residing in China both currently and periodically, that Ms Lin is ordinarily resident outside the jurisdiction. This discretionary factor weighs in favour of the grant of security. Ms Lin’s absence from the jurisdiction raises a genuine concern that OFML may well face difficulties enforcing any adverse costs order it obtains against her.

18    As to the second factor, Ms Lin contends that she has assets in the jurisdiction against which an adverse costs order can be enforced. Ms Lin submits that the return she stands to receive as a Scheme creditor is an asset in the jurisdiction against which an adverse costs order can be enforced. I do not accept that Ms Lin’s return as a Scheme creditor mitigates sufficiently against the likely difficulty that OFML would face in enforcing any costs order against her. The Scheme fund is administered by independent Scheme administrators (McGrathNicol) and the Scheme administrators are required to administer the fund in accordance with the terms of the Scheme. OFML has no ability to control to whom Scheme funds are paid and no entitlement to direct that funds due to be paid to Ms Lin as a Scheme creditor instead be paid to it. Ms Lin has not offered to provide an irrevocable undertaking or the like in relation to her return, or part of it, being placed in escrow or a solicitor’s trust account as a form of security.

19    In addition, OFML submits that it will not have priority vis-à-vis Ms Lin’s other creditors, including her former solicitors to whom debts are owed, and Ms Lin’s evidence does not address whether the return that she receives will be sufficient to discharge all her liabilities in the jurisdiction. In this regard, the evidence does not disclose the amount Ms Lin owed to her former solicitors, SMB Law. The evidence on this application suggests that that debt is significant. In evidence is a letter from her former solicitors to the Scheme administrators in which it is asserted that the firm acted for Ms Lin under a retainer for more than three years (from 29 June 2021 to 22 August 2024) and that Ms Lin owes the firm “a significant sum of money”.

20    In circumstances where Ms Lin’s evidence is silent as to whether she has any other assets in the jurisdiction against which a costs order could be enforced, I infer that she does not. This factor also weighs in favour of making a security for costs order.

21    As to the third factor, whether there is a risk that an order for costs will not be satisfied, the evidence supports that there is such a risk.

22    As mentioned, OFML’s unchallenged evidence is that Ms Lin owes debts to her former solicitors. Her former solicitors wrote to the Scheme administrator asserting an equitable fruit of the action lien over Ms Lin's distribution from the Scheme Fund. Ms Lin did not address in the evidence on which she relied any evidence as to the quantum of the debts incurred with her former solicitors. There is a bare assertion by Mr Kaur that there is a payment dispute between Ms Lin and her former solicitors but there is scant detail. From her unexplained failure to provide any evidence quantifying the amount of her debt and the nature of the payment dispute including the amount that is in dispute, I infer that such evidence would not assist her in resisting this security for costs application. I regard this factor as weighing in favour of making a security for costs application.

23    OFML submit that Ms Lin has a history of non-compliance with court orders giving rise to a risk that she would fail to meet an adverse costs order in the proceeding and that this is a factor in favour of ordering security. OFML rely on Wikeley v Kea at [37]-[44] (Dowling J) in aid of this submission. The evidence in relation to Ms Lin’s non-compliance with Court orders is of a different character to that considered in Wikeley v Kea. Ms Lin’s relevant non-compliance appears to have been in the form of obtaining repeated extensions of procedural orders after failing to meet procedural deadlines. I do not consider this to be other than a neutral consideration in the present application.

24    As to the fourth factor, the fact that OFML sought security for costs promptly after attempting to reach an agreement for the provision of security (which correspondence went unanswered) weighs in favour of the grant of security.

25    OFML wrote to Ms Lin’s solicitors within 14 days of being served with the Extension and Leave Application. When it received no response to its request for security, OFML brought this application as it had foreshadowed it would do within a further 14 days.

26    As to the fifth factor, for the purpose of this application and by reference to only the materials presently available, Ms Lin’s prospects on the Extension and Leave Application must be regarded as being relatively weak. Her prospects are necessarily informed in part by an assessment of the merits of the proposed appeal. The Extension and Leave Application will each require the Court to determine: (i) whether the appeal sought to be commenced has some merit; and (ii) any injustice occasioned in the result: Gallo v Dawson [1990] HCA 30; 93 ALR 479 at 480 (McHugh J); Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; 33 FCR 397 at 398–400 (Sheppard, Burchett and Heerey JJ).

27    I note that the parties will address the merits of the appeal at the hearing of the Extension and Leave Application and may rely on evidence that is not presently before me. My assessment of this factor is thus necessarily limited to the evidence presently before me on this application. In assessing the prospects of Ms Lin’s application, I take into account that appeals to orders approving a scheme of arrangement are rare for the reason that once a scheme of arrangement has become effective and third party rights are in play, the appellate court will generally be loath to make any order that would adversely affect the rights of innocent third parties: see Damian T and Rich A, Schemes, Takeovers and Himalayan Peaks (4th ed, Herbert Smith Freehills, 2021) at [4.4.3]. Ms Lin faces a significant obstacle where the Scheme became effective on 5 June 2025 and has reached a stage of implementation whereby other creditors and interested parties have changed their positions, including by giving up rights they were pursuing, or might otherwise have pursued, as a consequence of the Scheme being put into effect. This is a further factor that weighs in favour of the making of a security for costs order.

Other matters raised by Ms Lin

Complaint about lack of particularisation of costs

28    Ms Lin submits that OFML has not led sufficient evidence to establish its entitlement to an order for security in the amount sought, relying on DRE Capital Pty Ltd v Wixels Property Holdings Pty Ltd [2025] NSWSC 874 at [17]-[21] (Harrison AsJ) and the authorities cited therein. I do not agree.

29    Both aspects of the Extension and Leave Application brought by Ms Lin are to be heard together. The Extension and Leave Application raise issues of some complexity — particularly in the context of a scheme that has been approved by a majority of creditors and made effective through lodgement with ASIC. It is appropriate that the same counsel who appeared before Justice Jackman appear on the Extension and Leave Application.

30    The granular breakdown of proposed time and costs that Ms Lin contends ought to have been provided is inapt for an application of this type. The estimated hours of the legal team involved are limited and the calculation includes a discount from the actual time costs expected to be incurred.

31    OFML has acted reasonably in only seeking the proportion of costs that it anticipates it would be awarded on a party-party basis if successful.

32    Moreover, as at the date of her submissions, Ms Lin had been on notice of OFML’s intention to seek security for three weeks (since 23 July 2025) yet has waited until the filing of evidence (on 13 August 2025) to engage with OFML’s estimate. Any complaint about the particularisation of OFML’s costs ought to have been made much sooner.

33    I readily infer that in opposing the Extension and Leave Application, OFML will incur legal costs in respect of preparing affidavit evidence, drafting submissions, preparing observations to counsel, drafting advice and attendance at client and counsel conferences, attending to correspondence, and preparing for and attending the case management hearing and the hearing itself.

Complaint that security is sought against natural person

34    Ms Lin contends that it is not the Court’s usual practice to grant security against natural persons. That submission is an overreach in the present circumstances. It may be intended to direct the Court’s attention to the principle that mere impecuniosity is not a sufficient ground for obtaining security against a natural person: Barton v Minister for Foreign Affairs [1984] FCA 108; 2 FCR 463 at 469 (Morling J). If so, the submission is not on point. The factors that I have identified that weigh in favour of the grant of security are not informed by mere impecuniosity. Ms Lin has not led any evidence to the effect that she is impecunious: see, by way of analogy, Frigger v Banning [2016] FCA 359 at [78]-[79] (Barker J). In any event, OFML submits, and I accept, that courts are more willing to order security against impecunious individual plaintiffs on appeal than at first instance: Kemppi v Adani Mining Pty Ltd [2018] FCA 2012 at [42] (Robertson J). Ms Lin does not suggest that the making of a security for costs order would stifle the appeal.

Relief

35    OFML seeks orders that Ms Lin pay the sum of $30,000 (or such other amount as the Court considers appropriate) into Court as security for OFML’s costs of the Extension and Leave Application within 5 days of these orders, failing which the Extension and Leave Application be dismissed. OFML also seeks that its Security Application be granted with costs.

36    Having regard to the matters outlined above, in particular Ms Lin’s ordinary residence in China, the absence of any presently quantifiable assets in the jurisdiction against which an adverse judgment could be enforced and her unpaid and unquantified other debts in the jurisdiction, I am satisfied that OFML have established a real risk that OFML will not be able to recover its costs if Ms Lin’s Extension and Leave Application is unsuccessful. I am satisfied that I should exercise the discretion to make an order for security for costs, and that security be provided in advance of the hearing of the Extension and Leave Application. In the event of default in providing security in the amount and by the date required, the Extension and Leave Application will be dismissed.

CONCLUSION

37    For the reasons outlined above, I will make orders substantially in accordance with those sought by OFML.

Associate:

Dated:    15 August 2025