Liu v Lam (No 2)

1. [1]

   By a Statement of Claim filed on 20 April 2020 (“SOC”), Tuo Lio (the “plaintiff”) brought proceedings against Kin Lam (the “defendant”) for breach of an agreement which the plaintiff alleged had been entered into between the plaintiff and the defendant on 14 May 2018 (“the Agreement”).

2. [2]

   In substance, the plaintiff was a guarantor under a loan agreement which was entered into on or around 3 June 2014 between the defendant and Hong Kong Jiayi International Trade Co Ltd (“Jiayi”) (“Jiayi Loan Agreement”). Under the Jiayi Loan Agreement the defendant borrowed RMB 5 million. The defendant defaulted under the Jiayi Loan Agreement, and, as a result, Jiayi commenced proceedings against the plaintiff, as guarantor, in the People’s Republic of China. Ultimately, an appellate court found in favour of Jiayi and the plaintiff was ordered to pay Jiayi a total of RMB 9,469,485.52 (“Judgment Debt”). The plaintiff paid back the Judgment Debt by 23 January 2019.

3. [3]

   The plaintiff claimed that, under the Agreement, the defendant had agreed to indemnify the plaintiff for his loss occasioned by the Judgment Debt in consideration for the plaintiff proffering a period of forbearance. The plaintiff claimed that the defendant had wrongfully failed and refused to pay the plaintiff any amount in relation to the amount owing or interest thereon which remained due and owing to the plaintiff under the Agreement.

4. [4]

   This Court delivered judgment with respect to those claims on 18 October 2024 in Liu v Lam [1] (“the primary judgment”), in which the Court found that there should be judgment for the plaintiff.

5. [5]

   The following Directions were made on 18 October 2024:

6. [6]

   By Short Minutes of Order filed and served by the plaintiff and defendant in accordance with those Directions, the parties agreed on the judgment sum and interest payable to the plaintiff, namely, judgment for the plaintiff in the amount of $2,548,079.87. This sum was inclusive of interest up to 18 October 2024. My final orders shall, subject to what next follows, reflect that sum.

7. [7]

   I note the subsequent submission made by the defendant, that “[t]he defendant does consent to interest continuing at the same rate, 7.3% per annum, on [and] from 18 October 2024 to the date that the Court makes its Orders”.

8. [8]

   This submission was not addressed by the plaintiff. Nonetheless, as the defendant has agreed to the payment of interest on and from 18 October 2024 to the date of the Orders made in consequence of this judgment, that position should be reflected in the Short Minutes of Order that the Court will direct to be filed.

9. [9]

   Two issues emerged from the Short Minutes of Order filed and served by the plaintiff and the defendant in accordance with the Directions of 18 October 2024, namely:

   1. (1)

      the form of costs order to be made in favour of the plaintiff; and

   2. (2)

      whether the security sum of $310,000 paid by the plaintiff into Court as security for the defendant’s costs pursuant to Orders made on 2 February 2021, 21 November 2022 and 9 October 2023 be returned to the plaintiff prior to any appeal period having expired or any appeal having been dismissed or discontinued.

10. [10]

    In accordance with further Directions of the Court made on 27 November 2024, the plaintiff and the defendant filed and served submissions and affidavits in support of their position on the issues on 6 and 13 December 2024 respectively. The plaintiff also filed submissions in reply on 6 February 2025 on the question of whether the security sum should be returned.

11. [11]

    This judgment concerns the Court’s determination of the issues.

Costs

1. [12]

   The plaintiff submitted that the defendant should pay the plaintiff’s costs of and incidental to the proceedings on an indemnity basis, as agreed or assessed. The plaintiff’s submissions were, in summary, as follows:

   1. (1)

      A departure from the standard costs order is appropriate in circumstances where various adverse credit findings were made in relation to the defendant, including a finding that the defendant knowingly gave false evidence in the proceedings. The necessary corollary of these findings is that the defendant must have known at all times during the course of the proceedings that the Agreement created enforceable obligations on his part and that he was liable to the plaintiff.

   2. (2)

      Each of the facts disputed by the defendant in the ‘notice disputing facts’, served on the plaintiff on 15 October 2020, were subsequently proven by the plaintiff at trial. The defendant is liable to pay the plaintiff’s costs of proving those facts on an indemnity basis pursuant to r 42.8 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

   3. (3)

      The defendant failed to accept the plaintiff’s Offer of Compromise dated 1 August 2023, being judgment for the sum of $2,164,310 with no order as to costs (“the offer of compromise”). In circumstances where judgment obtained by the plaintiff is no less favourable than the terms of the offer of compromise, the defendant is liable to pay the plaintiff’s costs on an ordinary basis for the period up to and including 1 August 2023 and an indemnity basis thereafter, pursuant to r 42.14 of the UCPR. There are no exceptional circumstances which would justify a departure from the ordinary consequence of r 42.14 of the UCPR.

   4. (4)

      There should be no apportionment of costs for the two issues found in the defendant’s favour at trial, as the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Additionally, the amount of time spent on those two discrete issues was insignificant, and the argument advanced in relation to whether the statement of agreed facts constituted an “agreement” for the purposes of s 191 of the Evidence Act 1995 (NSW) was moot and ultimately of no assistance to the defendant.

2. [13]

   The defendant accepted that the plaintiff may have costs on other than an ordinary basis but submitted that the Court should exercise its discretion to award indemnity costs with respect to ‘a qualified order’. The defendant submitted that he should pay 75% of the plaintiff’s costs of and incidental to the proceedings on an indemnity basis, as agreed or assessed. The defendant’s submissions were, in summary, as follows:

   1. (1)

      The defendant accepted that indemnity costs may be warranted where a party has given false evidence. However, the object of an award of costs is compensatory rather than punitive and the focus of the Court’s consideration is the impact that the delinquency or falsehood has on the time required in the proceeding. The time and costs incurred by the parties was not wholly attributable to the Court’s determination of the defendant’s conduct. Given the adverse credit findings which were also made against the plaintiff, a proportion of 75% is reasonable and appropriate.

   2. (2)

      Rule 42.8 of the UCPR provides an entitlement for indemnity costs for the costs incurred in proving each disputed fact on which the applicant on the ‘notice to admit’ was ultimately successful. This does not support a claim for indemnity costs in respect of the entirety of the proceedings. There were only eight disputed facts and the defendant’s response to those facts was more complex and nuanced than a simple rejection of each of those facts.

   3. (3)

      The defendant accepted that the Offer of Compromise would justify the court exercising its discretion to order indemnity costs in favour of the plaintiff in respect of the costs incurred after 29 August 2023. However, the Offer of Compromise cannot fortify indemnity costs in respect of the whole of the proceedings.

   4. (4)

      There were two discrete issues in the proceedings on which the defendant succeeded at hearing. These issues were not insignificant and therefore, an indemnity costs order of 75% is more than reasonable.

3. [14]

   In that light, the issues between the parties can be distilled to the following:

   1. (1)

      subject to the question on indemnity costs, whether ordinary costs should be apportioned; and

   2. (2)

      whether there should be an order for indemnity costs for the whole of the proceedings or for a qualified period.

4. [15]

   Whilst the issues in substance revolved around the question of the appropriate order for indemnity costs, I propose to address the last mentioned summarised submission for the defendant as a precursor to considering that central issue.

5. [16]

   The Court has full power and a general discretion to determine how costs are awarded. [2] This discretion is, however, subject to the rules of the Court including the UCPR. The general rule is that ‘costs follow the event’, [3] meaning that an unsuccessful party will normally be required to pay a successful party’s costs, unless it appears that some other order should be made as to the whole or any part of the costs.

6. [17]

   As mentioned, the defendant submitted that the Court should take account of the two discrete matters on which the defendant was successful at hearing, being:

   1. (1)

      whether the Statement of Agreed Facts and Issues (“SOAF”) was an ‘agreement’ for the purposes of the Evidence Act; and

   2. (2)

      whether the plaintiff’s claim for interest at 18.25% per annum was penal and unenforceable.

7. [18]

   In Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2), [4] the New South Wales Court of Appeal described the general position on apportioning costs in cases of mixed success as follows:

8. [19]

   The principles applicable to determining when and how costs should be apportioned between issues in proceedings were stated by the Court of Appeal in Bostik Australia Pty Ltd v Liddiard (No 2): [5]

9. [20]

   Hence, the starting point when examining costs is the general rule that costs follow the event. Where there has been a mixed outcome in the proceedings, the Court will determine if it is appropriate to engage in the process of apportioning costs as between different issues. Importantly, the process of apportioning costs does not automatically follow where there is mixed success on multiple discrete issues as the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed.

10. [21]

    Where the Court determines that it is appropriate to apportion costs, the relevant question is then how to apportion costs. This question necessarily requires an impressionistic and discretionary evaluation. [6] The exercise should be carried out on a broad-brush basis, taking account of the degree of success and the likely extent of costs associated with different aspects of the case. The Court is entitled to take into account the importance of matters upon which the parties have been successful or unsuccessful, the time occupied, and the ambit of the submissions made, as well as any other relevant matter. [7]

11. [22]

    In my view, a proper evaluation of the primary judgment must result in the conclusion that costs should follow the event; being the determination of the plaintiff’s claim. Further, the plaintiff is correct to submit that the defendant’s success on two discrete issues at final hearing does not warrant the Court embarking upon an apportionment of costs.

12. [23]

    While it is unhelpful to undertake a detailed quantification of the issues which the defendant succeeded and failed, in the context of the significant number of factual and legal issues in dispute, in my view, the two discrete issues on which the defendant succeeded were relatively insignificant.

13. [24]

    Not only did the two issues occupy a minimal amount of time in a 8-day final hearing, but I also consider that the two issues on which the defendant succeeded were ancillary to the more dominant issues in dispute.

14. [25]

    The plaintiff was correct to submit that the argument which was had (and on which the defendant succeeded) in relation to whether the SOAF was an “agreement” for the purposes of the Evidence Act, was “moot and ultimately of no assistance to the defendant”. As correctly submitted by the plaintiff, that argument “did not alter any findings of fact made by the Court and did not result in any success for the defendant on any of the issues in dispute”.

15. [26]

    As to the question of interest, the defendant submitted that:

16. [27]

    However, this submission is misguided as the proper consideration is the actual impact on the cost of the proceedings, which are to be approached not upon punitive considerations but on a compensatory basis. In that regard, the plaintiff correctly submitted that:

17. [28]

    This proposition, that the ‘penalty interest issue’ was a minor issue in the scheme of the proceedings as a whole, is also reflected in the primary judgment and in the time spent deliberating that issue.

18. [29]

    Accordingly, notwithstanding the defendant’s success on the two discrete issues, it is not appropriate to seek to apportion costs. If the Court were assessing ordinary costs, then it would have made an order for costs in favour of the plaintiff for the whole of the proceedings. However, I now need to turn, at that juncture, to the indemnity issue.

19. [30]

    The Court also has the power and discretion to award costs on an indemnity basis pursuant to s 98 of the CPA.

20. [31]

    A summary of the relevant principles relating to the discretion to award costs on an indemnity basis based on the conduct of a party can be found in Cappello v HomeBuilding Pty Ltd: [8]

21. [32]

    Relevantly, the overarching principle in relation to the question of costs, is that an award of indemnity costs should be, as I have mentioned, compensatory and not punitive. [9] In Oshlack v Richmond River Council, [10] the Court noted:

22. [33]

    Therefore, the relevant issue is whether this matter exhibits some special feature that would warrant the Court awarding costs other than on an ordinary basis, and if so, whether costs on an indemnity basis should be awarded for the whole of the proceedings or a qualified period of time.

23. [34]

    There were three bases advanced by the plaintiff in this respect:

    1. (1)

       Pursuant to r 42.14 of the UCPR, costs should be awarded to the plaintiff on an indemnity basis from 2 August 2023 onwards, on the basis that the defendant failed to obtain a judgment no less favourable than the terms of the Offer of Compromise.

    2. (2)

       Pursuant to r 42.8 of the UCPR, costs should be awarded to the plaintiff on an indemnity basis from 2 October 2020 onwards, on the basis that each of the facts disputed by the defendant in the notice disputing facts were subsequently proven by the plaintiff at trial.

    3. (3)

       Costs should be awarded to the plaintiff on an indemnity basis for the whole of the proceedings, on the basis that the defendant was found to have given false evidence in the proceedings and was not an honest or and reliable witness.

24. [35]

    There was an Offer of Compromise made by the plaintiff on 1 August 2023, which was prior to the commencement of the trial on 14 February 2024. The relevant parts of the Offer of Compromise were as follows:

    1. (1)

       The plaintiff offered to compromise the whole of his claim against the defendant in the proceedings on the following terms:

    2. (2)

       The Offer of Compromise was expressed to be made in accordance with r 20.26 of the UCPR.

    3. (3)

       The Offer of Compromise required the defendant to accept its terms by 29 August 2023, being within 28 days from the date of the issuing of the offer.

25. [36]

    The defendant did not accept the Offer of Compromise within the time required, or at all.

26. [37]

    For a valid offer of compromise to be made, it must accord with the provisions of r 20.26 of the UCPR, which, relevantly, provides as follows:

27. [38]

    There was no dispute in these proceedings that the Offer of Compromise did comply with r 20.26 of the UCPR. Nor is there anything on the face of the Offer of Compromise which would suggest otherwise.

28. [39]

    The plaintiff’s application for indemnity costs based upon the Offer of Compromise, is also to be assessed in the light of r 42.14 of the UCPR, which provides as follows:

29. [40]

    The requirements of r 42.14(1) are satisfied in the present matter. A valid offer was made by the plaintiff and was not accepted by the defendant. The plaintiff obtained a judgment on his claim no less favourable to the plaintiff than the terms of the Offer of Compromise.

30. [41]

    Accordingly, unless the Court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs assessed on an indemnity basis from 2 August 2023. [11]

31. [42]

    The plaintiff submitted that “[e]xceptional circumstances are required to justify a departure from the strong presumption in favour of the ordinary consequence of rule 42.14 of the UCPR”. However, there are differing authorities on whether exceptional circumstances must be established. [12]

32. [43]

    Nonetheless, the defendant has not demonstrated any circumstances, exceptional or otherwise, that would, in my view, justify a departure from the ordinary consequence of r 42.14 of the UCPR. The defendant has, in fact, accepted that the Offer of Compromise does justify the exercise of the Court’s discretion to order indemnity costs in favour of the plaintiff in consequence of the Offer of Compromise.

33. [44]

    In all the circumstances, it is appropriate to award indemnity costs to the plaintiff against the defendant from at least 2 August 2023.

34. [45]

    On 2 October 2020, the plaintiff served on the defendant a notice to admit facts (“notice to admit”). The notice to admit required the defendant to admit the following facts:

    1. (1)

       The advance made by the lender pursuant to the Loan Agreement was made to Mr Lam personally.

    2. (2)

       The advance made by the lender pursuant to the Loan Agreement was not made to a partnership comprising of the plaintiff and the defendant.

    3. (3)

       The plaintiff was required to be included as a guarantor under the Loan Agreement because of the lender’s requirements.

    4. (4)

       The defendant requested that the plaintiff pay to the lender the sum of RMB 1,000,000 as repayment of the principal owing under the Loan Agreement.

    5. (5)

       The defendant's signature appears on the document which is annexed and marked "A".

    6. (6)

       The defendant signed the document which is annexed and marked "A" (or a version of it).

    7. (7)

       The defendant agreed to pay to the plaintiff the amount that the plaintiff was required to pay under the Judgment Debt.

    8. (8)

       The defendant agreed to pay to the plaintiff the amount owing.

35. [46]

    On 15 October 2020, the defendant served on the plaintiff a notice disputing facts in which the defendant disputed each of the above-mentioned matters referred to in the notice to admit.

36. [47]

    Ultimately, each of the facts contained within the notice to admit, and disputed by the defendant, were proven by the plaintiff at trial.

37. [48]

    Pursuant to r 17.3 of the UCPR, a requesting party (in this case, the plaintiff) may, by notice served on another (in this case, the defendant), require them to admit for the purpose of the proceedings the facts specified in the notice to admit. Rule 42.8(2) of the UCPR provides:

38. [49]

    In r 42.8(1) of the UCPR, ‘disputing party’ means the party who serves a notice disputing a fact, while the ‘requesting party’ means the party who is served with a notice disputing a fact. As mentioned, the disputing party was the defendant and the requesting party was the plaintiff.

39. [50]

    Therefore, as each of the facts disputed by the defendant were subsequently proved, the defendant must pay the costs of proof on an indemnity basis unless the court orders otherwise (r 42.8(2), UCPR).

40. [51]

    In the recent case of Pirrottina v Pirrottina (No 2), [13] Justice Rees set out the following observations in relation to the purpose and consequences of r 42.8 of the UCPR:

41. [52]

    The onus is therefore on the defendant to demonstrate why the Court should order otherwise than in accordance with r 42.8 of the UCPR. The focus will be on the reasonableness of the defendant in disputing each of the facts which were subsequently proved at trial.

42. [53]

    Justice White in Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (No 2) [14] described the approach to r 42.8 of the UCPR and the circumstances where the Court might be persuaded to “order otherwise”, as follows:

43. [54]

    The defendant submitted that the plaintiff erroneously treated certain “propositions” contained in the notice to admit, namely paragraphs 2, 7 and 8, as facts in dispute. The defendant submitted that:

44. [55]

    As to the remaining paragraphs in the notice to admit, namely paragraphs 1, 3, 4, 5 and 6, the defendant submitted that their response:

45. [56]

    In my view, the defendant correctly submitted that paragraphs 2, 7 and 8 contained in the notice to admit, which were purported to be ‘facts’ by the plaintiff, in fact contained mixed questions of fact and law, or were conclusions. In some cases, the conclusions for which agreement was sought went to the ultimate conclusion in the proceedings.

46. [57]

    I also agree with the thrust of the defendant’s submissions with respect to paragraphs 1, 3, 4, 5 and 6.

47. [58]

    I have determined to exercise my discretion to order otherwise than in accordance with r 42.8 of the UCPR and will not award indemnity costs to the plaintiff against the defendant on the basis of the disputed facts which were subsequently proved at trial.

48. [59]

    The parties correctly submitted that indemnity costs may be awarded where the unsuccessful party falsely and deliberately concocted evidence, or unnecessarily prolonged a hearing with deliberately false defences or allegations of fact. [15]

49. [60]

    In Degmam Pty Ltd (in liq) v Wright (No 2), [16] an unsuccessful party prolonged a trial by making deliberately false allegations of fact and Justice Holland ordered costs on an indemnity basis. His Honour found that the allegations, made as the basis of the defendant’s defences and causes of action, had been deliberately concocted in an attempt to deny the plaintiff its rights and to shift legal liability to the plaintiff. The defendant’s conduct, in multiplying allegation upon allegation and prevaricating in the witness box, grossly prolonged the litigation, which caused other parties to incur costs beyond what the plaintiff could have reasonably expected to incur in litigating genuine issues.

50. [61]

    However, not every allegation that proves unsustainable or without merit justifies indemnity costs. In Wentworth v Rogers (No 5), [17] the New South Wales Court of Appeal found that, while the appellant’s case lacked merit, the appellant had not made allegations which she believed or knew to be false, and as a result the Court ordered party party costs.

51. [62]

    The focus is therefore on the culpability of the unsuccessful party in knowingly and deliberately presenting false evidence which prolonged the proceedings through litigation of false claims (rather than merely unmeritorious claims).

52. [63]

    While findings of credit in relation to the defendant were made throughout the primary judgment, the overall conclusions reached by the Court were as follows: [18]

53. [64]

    On one view, this overall conclusion regarding the defendant could sustain the plaintiff’s contention that the defendant knowingly and deliberately presented false evidence. However, a wider review of the primary judgment makes that position abundantly clear.

54. [65]

    A pivotal consideration in the Court’s determination of the claim was the defendant’s assertion, made throughout the proceedings, that he had lied in his evidence in the Chinese court proceedings but told the truth in his evidence as to the same subject matter in these proceedings. The relevant passages of the primary judgment dealing with that argument are as follows: [19]

55. [66]

    Further, in discussing the defendant’s primary contention that the Agreement was not intended to create enforceable legal obligations and was executed solely for the purpose of delaying or preventing enforcement of the Judgment Debt by the Chinese courts, the primary judgment states: [20]

56. [67]

    It must follow, at least implicitly, from the above passages from the primary judgment that the Court concluded that the defendant knowingly and deliberately gave false evidence when advancing the argument that his evidence in the Chinese courts was, in all material respects, a lie and that his counterpart evidence in this Court should be believed.

57. [68]

    I acknowledge that the subject matter of the above findings does not necessarily encase the entirety of the findings of the Court leading to its final conclusion. However, it was a foundational component of the defendant’s case and significantly contributed to the length of the proceedings.

58. [69]

    While this is no doubt sufficient to resolve the issue of indemnity costs in favour of the plaintiff (whether taken with the findings as to the Offer of Compromise or separately), a further factor supporting an award of indemnity costs in favour of the plaintiff is that the Court’s adverse credit finding also materially contributed to the resolution of other key issues, including the issue as to whether ‘the 26 September 2015 email’ had been sent and whether the Agreement had been executed by the defendant.

59. [70]

    For example, in relation to the question of whether the defendant affixed his signature to the Agreement at a meeting with the plaintiff at the Grand Hyatt in Shenzhen on 14 May 2018, the Court noted: [21]

60. [71]

    Ultimately, the adverse credit findings materially impacted the Court’s final determination that the Agreement created enforceable legal obligations on the defendant’s part, and that there was no partnership between the plaintiff and defendant. Again, by way of example, in its determination of the issue as to whether the plaintiff and the defendant were in a partnership, the Court concluded: [22]

61. [72]

    This Court’s conclusion that the defendant knowingly and deliberately gave false evidence is further buttressed by two ancillary findings of the primary judgment.

62. [73]

    First, the Court found that the defendant had given a false declaration in a passport application and was willing to lie in documents such as a declaration if it would assist him. [23] The defendant ultimately conceded that he was willing to lie in affidavits it if would assist him. [24]

63. [74]

    Secondly, the evidence given by the defendant in relation to how his signature came to be applied to the transcript of the Chinese Court appeal proceedings, was to suggest that anyone in the court room that day could have applied his signature that day. The Court found that this evidence was ‘evasive’ and ‘manufactured’. [25]

64. [75]

    I have determined to award indemnity costs to the plaintiff against the defendant for the whole of the proceedings.

Release of security

1. [76]

   On 2 February 2021, Registrar Jones made the following Consent Orders relating to the security to be paid into the Court by the plaintiff:

2. [77]

   On 21 November 2022, Registrar Jones made the following further Orders sought by the defendant pursuant to a Notice of Motion filed on 26 September 2022, with reasons delivered orally by Registrar Jones in relation to the quantum of security:

3. [78]

   Registrar Jones gave the following reasons for increasing the quantum of security: [26]

4. [79]

   On 9 October 2023, Justice Chen made the following orders:

5. [80]

   Accordingly, the sum of $310,000 was paid by the plaintiff into the Court as security for the defendant’s costs (the “security sum”)pursuant to orders made on 2 February 2021, 21 November 2022 and 9 October 2023.

6. [81]

   As previously mentioned, the primary judgment was delivered on 18 October 2024, with judgment for the plaintiff.

7. [82]

   By a proposed Short Minutes of Order filed and served by the plaintiff on 13 November 2024, the plaintiff sought orders regarding the release of the security sum.

8. [83]

   The defendant did not consent to such orders, and by an alternative proposed Short Minutes of Order filed and served by the defendant on 22 November 2022, the defendant sought that the security sum be retained by the Court until:

   1. (1)

      the time for filing and service of a notice to appeal has expired and no appeal had been filed and served; or

   2. (2)

      any appeal which is made by the defendant is discontinued or dismissed.

9. [84]

   As at the date of this judgment, no notice of appeal has been lodged by the defendant and the defendant has not sought a stay of the primary judgment.

10. [85]

    The defendant provided a draft notice of appeal in the affidavit of Andrew Salgo filed on 13 December 2024 (“draft NOA”). The draft NOA sets out the following grounds of appeal:

11. [86]

    I acknowledge that there is a dispute between the parties as to what the “material date” is for the purpose of r 50.12(1)(a) of the UCPR. The plaintiff submitted that the material date is the date the primary judgment was delivered, being 18 October 2024, and as a result, the time for filing of any appeal has expired. The defendant submitted that the material date is the date on which an order is made, as it is not possible to appeal against reasons.

12. [87]

    It is for this reason that the defendant has likely not filed any notice of appeal or sought a stay of the primary judgment, as on their argument, there are no orders to appeal or stay at this time. Given the orders I propose to make and the reasons for the same, it is unnecessary to resolve that issue.

13. [88]

    The defendant did not expand on any of the above grounds of appeal in the draft NOA and advanced an entirely separate argument regarding ‘the 26 September 2015 email’ (that was not addressed within the draft NOA) in his submissions filed 13 December 2024. Hence, there is no correlation between the grounds of appeal and the arguments developed in the defendant’s written submissions.

14. [89]

    The plaintiff submitted that:

    1. (1)

       in circumstances where the plaintiff has been successful at trial, he is entitled to the release of security that has been paid into Court for the defendant’s costs of the proceedings;

    2. (2)

       it would be unjust to stay the release of security until such time as any appeal period has expired or appeal has been dismissed; and

    3. (3)

       in any event, the time period for any appeal has already expired as the “material date” for the purpose of r 50.12(1)(a) of the UCPR is 18 October 2024, being the date that judgment was delivered.

15. [90]

    The defendant submitted that:

    1. (1)

       if there were to be an order of costs in the defendant’s favour following an appeal, the prospect of enforcement of costs (in the absence of security) would be small. The facts the defendant points to in support of this submission are that as at 19 October 2020, the plaintiff had no assets in Australia and had not filed or lodged Australian tax returns or assessments for the years ending 30 June 2019 and 30 June 2020;

    2. (2)

       the Court fell into error in finding that ‘the 26 September 2015 email’ was a screenshot taken on the phone of the defendant, and absent this finding, the plaintiff would not have succeeded in the proceedings;

    3. (3)

       the following factors would be relied upon by the defendant on appeal, in relation to the ‘balance of likelihood’ as to the source of ‘the 26 September 2015 email’:

    4. (4)

       the material date in relation to the appeal period should be the date on which an order is made, rather than the date that reasons for judgment are delivered.

16. [91]

    The plaintiff was invited by the Court to file and serve submissions in reply on the question of whether the security sum should be returned. In reply, the plaintiff submitted that:

    1. (1)

       the Court cannot be satisfied that the averred grounds of appeal are arguable, as the draft NOA and submissions do not provide particulars or further elucidation as to the impugned findings; and

    2. (2)

       in regard to the defendant’s submission regarding ‘the 26 September 2015 email’, no other person could have taken the screenshot other than the defendant because:

17. [92]

    The plaintiff relied on the authority in Huon Shipping Logging Co Ltd v South British Insurance Co Ltd, [27] as well as a number of cases that have followed this decision. [28]

18. [93]

    As observed by Professor Dal Pont, the authority in Huon Shipping dictates that: [29]

19. [94]

    The defendant relied on the recent case of Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd (No 2), [30] where the Court refused the plaintiff’s application for release of security, as well as a number of further cases where the Court has refused to release security pending (i) an appeal, (ii) an application for leave to appeal, or (iii) further order, if an appeal is filed within a specified period. [31]

20. [95]

    It is necessary to first examine the authorities relied on by the parties.

21. [96]

    There is a long list of authorities which all follow the decision of Huon Shipping. As Justice Hamilton in Lym [32] explains, the principle enunciated in these cases is:

22. [97]

    The authorities relied on by the plaintiff favour the return of any sum paid into court as security for a defendant’s costs, regardless of whether an appeal has been filed or there were valid concerns that led to the granting of the security in the first place.

23. [98]

    Given the authorities relied on by the defendant, it is first useful to set out two recent Court of Appeal authorities in relation to the release of security for costs.

24. [99]

    In Carter v Mehmet (No 2), [33] the appellants provided security for the respondents’ costs of an appeal. The Court allowed the appeal brought by the appellants, set aside the orders of the primary judge, and ordered that the respondents pay the appellants’ costs of the appeal. The appellants sought the release of the security they had paid into court for the respondents’ costs of the appeal on the basis that, since the Court allowed the appeal and did not make any order for costs in the respondents’ favour, the entitlement to costs that the security for costs order was designed to protect, does not arise. The respondents did not make any submissions opposing the release of funds. The Court held:

25. [100]

    In Boris v Pages Property Investments Pty Ltd (No 2), [34] the appellant provided security for the respondent’s costs of an appeal. Following the upholding of the appellant’s appeal and an order that the respondent pay the appellant’s costs of the appeal and costs at trial, the parties were notified that the Court intended to pay out the monies held by the Court as security for the costs of the appeal. The respondent opposed the release of the monies, notwithstanding that it was not successful in its appeal, on the basis that there were two interlocutory costs orders made in the respondent’s favour over the course of the appeal. The Court held:

26. [101]

    The main authority relied on by the defendant is Gispac. In Gispac, the Court approached the question as to release of the security for costs as follows: [35]

27. [102]

    The Court in Gispac found that the appeal grounds advanced were arguable, and there were good discretionary reasons to refuse the plaintiff’s application for release of security. As a result, the plaintiff’s application for release of security was refused.

28. [103]

    A determinative feature in distinguishing the facts of Gispac from Carter and Boris was the fact that the Court had available to it evidence that the defendant had filed a notice of appeal: [36]

29. [104]

    While I note that no notice of appeal has been filed by the defendant, the draft NOA has been provided as evidence of the impending appeal and provides the grounds of appeal to be argued. I have mentioned the limitations of the draft NOA above and will further develop that consideration below.

30. [105]

    The Court in Gispac refers to three authorities where the court has refused to release a security pending the filing of an appeal or the determination of an appeal. [37] The courts in these matters have approached the question by reference to whether there is an arguable case on appeal. [38]

31. [106]

    Ultimately, given the discretion of the Court, each case will turn on its own facts.

32. [107]

    There are two different lines of authority regarding how to approach the return of a security sum which has been paid into the Court by a plaintiff as security for a defendant’s costs.

33. [108]

    On the authority in Huon Shipping and following, a plaintiff who has paid money into Court as security for the defendant’s costs and has secured a judgment and costs order in their favour, is entitled to have that money paid out as soon as judgment is entered, even if a defendant has secured a stay of execution with a view to an appeal. [39]

34. [109]

    In my view, I should follow this line of authority in this matter, although as I will later discuss, in the event that it was appropriate to consider the prospects of success of the appeal, no different result would follow.

35. [110]

    In circumstances where the plaintiff has succeeded at trial, and the significance of that success is demonstrated through an order for indemnity costs to be made in favour of the plaintiff, there is no sufficient reason for the Court to withhold the security sum. The apparent entitlement to costs in favour of the respondent which the security sum was designed to protect has not come to pass.

36. [111]

    I am not persuaded that the facts outlined by the defendant, being that as at 19 October 2020 the plaintiff had no assets in Australia and had not filed or lodged Australian tax returns or assessments for the years ending 30 June 2019 and 30 June 2020, is, without more (such as current financial information), enough to sustain the defendant’s submission that the prospect of enforcement of costs against the plaintiff (in the absence of security) would be low.

37. [112]

    Despite having approached the consideration of the issue in this way, and with a real reluctance to enter into a full discussion of the merits of any intended appeal, I intend to turn briefly to the question of whether the arguments advanced by the defendant demonstrate an arguable case on appeal.

38. [113]

    On the evidence that is before this Court, there are real doubts as to whether the appeal grounds advanced by the defendant are arguable for two reasons.

39. [114]

    First, the grounds of appeal in the draft NOA do not advance any substantive argument as to how the Court erred. The draft NOA merely lists three findings of the trial judge which, in the defendant’s opinion, were in error. As the plaintiff rightly submits, “no particulars of the impugned findings are given”. Nor is there any elaboration upon them in the written submissions for the defendant.

40. [115]

    Secondly, the only arguments advanced by the defendant in submissions were regarding the balance of likelihood as to the source of ‘the 26 September 2015 email’.

41. [116]

    Notwithstanding that the aspects of the primary judgment regarding ‘the 26 September 2015 email’ are not addressed as grounds in the draft NOA, and the defendant has not pointed to any nexus between the grounds of appeal averred in the draft NOA and ‘the 26 September 2015 email’, I propose, for completeness, to turn briefly to a number of difficulties with the defendant’s submissions as to the Court’s conclusions as to ‘the 26 September 2015 email’. Those issues, which are threefold, raise real doubts as to whether an appeal based on ‘the 26 September 2015 email’ would be arguable.

42. [117]

    First, the defendant’s submissions erroneously contended that ‘the 26 September 2015 email’ was determinative of the primary judgment in producing orders in favour of the plaintiff. The defendant submitted:

43. [118]

    I do not accept that proposition that, absent the Court’s finding in favour of the plaintiff regarding ‘the 26 September 2015 email’, the plaintiff would not have necessarily succeeded. The 26 September 2015 email was but one of several issues which were determined in favour of the plaintiff, giving rise to the ultimate determination in the primary judgment.

44. [119]

    The defendant correctly submitted that the primary judgment recognised the importance of ‘the 26 September 2015 email’ as follows: [40]

45. [120]

    However, if attention is directed to the core issues dividing the parties in the proceedings, it is evident that ‘the 26 September 2015 email’ is but one factor in the determination or has no significance at all.

46. [121]

    A useful starting point, in that respect, is to examine the issue as to whether there was a partnership between the plaintiff and defendant.

47. [122]

    In relation to the question as to whether the Jiayi Loan Agreement and the ‘CAN deal’ were entered into by a partnership, the Court concluded: [41]

48. [123]

    The section of the primary judgment dealing with the question of whether the Jiayi Loan Agreement was entered into by any partnership (see pars [656] – [703] of the primary judgment) does not include any discussion of ‘the 26 September 2015 email’. Rather, the Court relies on a number of other reasons as to why the notion of a partnership between the plaintiff and defendant was not upheld by the evidence.

49. [124]

    A further illustration is the determination of the Court with respect to the issue as to whether there was an intention to create legal relations with respect to the Agreement.

50. [125]

    The Court found that there was an intention to create legal relations with respect to the Agreement which was signed by the parties on 14 May 2018 in the defendant’s hotel room in Shenzhen, which as described in the primary judgment is:

51. [126]

    In relation to whether the Agreement was intended to create enforceable legal relations, the Court found: [42]

52. [127]

    These further findings are not addressed by the argument sought to be advanced by the defendant, that absent any error in relation to ‘the 26 September 2015 email’, the plaintiff would not have succeeded. As is evident from the Court’s reasoning in the primary judgment as a whole, the finding in relation to ‘the 26 September 2015 email’ was but one factor bearing upon the conclusions in this matter.

53. [128]

    Secondly, the defendant failed to address in the primary proceedings that his contention that ‘the 26 September 2015 email’ was fabricated, required him to meet the rigorous standard of proof required to demonstrate the equivalent of fraud. That omission remains evident in the supplementary submissions.

54. [129]

    As noted in the primary judgment, to prove that the plaintiff effectively engaged in fraud is a significant hurdle given the Briginshaw principle: [43]

55. [130]

    Lastly, the defendant submitted that there was nothing in the screenshot of ‘the 26 September 2015 email’ that on its face suggested (let alone made apparent) that the screenshot was taken on the phone of the defendant, as there was no identifying feature which suggested that the recipient “me” was any known or identifiable individual, let alone the defendant.

56. [131]

    The Court’s findings on this issue were as follows: [44]

57. [132]

    There is real strength to the submission of the plaintiff that, on the evidence reflected in the findings made in the primary judgment, no other person could have taken the screenshot other than the defendant because, as mentioned earlier:

    1. (1)

       there is a reference to "sjt_liutuo" (being a reference to the plaintiff) and "me", which makes it apparent that "me" is the other party to the email communication, being the defendant (there being only two parties to the communication); and

    2. (2)

       the defendant admitted that the references to "SJT" and "sent to me" indicated that he took the screenshot on his phone.

58. [133]

    In cross-examination, the defendant made the following admission: [45]

59. [134]

    In relation to this admission, the defendant submitted that:

60. [135]

    This appears to be a new argument advanced for any appeal, but in any event, it faces significant difficulties. In answer to a question, which was not the subject of an objection, the defendant gave a straightforward answer to the question as to whether he took the screenshot on his phone. Whatever other forensic processes that might be applied to the expression “sent to me” or “SJT”, they are matters about which the defendant may be expected to be able to ascribe meaning in order to answer the question as to whether he took the screenshot. His answer represents an admission of fact.

61. [136]

    For the reasons I have given above, in my view, there must be real doubts as to whether the appeal grounds advanced by the defendant are arguable.

62. [137]

    It follows that it is appropriate to return the security sum to the plaintiff.

Conclusion

1. [138]

   For the above reasons, the Court has concluded:

   1. (1)

      there shall be judgment for the plaintiff;

   2. (2)

      the defendant shall pay the plaintiff’s costs on an indemnity basis for the whole of the proceedings; and

   3. (3)

      there shall be a return of the security sum to the plaintiff.

Orders

1. [139]

   The Court orders and directs that:

   1. (1)

      the plaintiff shall file and serve Short Minutes of Order reflecting the primary judgment and this judgment within 7 days of the publishing of this judgment.