Keynes Capital Global Limited v Guo (No 2)

THE COURT: On 18 August 2020, we dismissed with costs an application for leave to appeal from a decision of Ball J which required Keynes Capital Global Limited and General Energy International Holdings Limited (together, the applicants) to give discovery of certain documents in proceedings in the Commercial List of the Equity Division of the Supreme Court: see Keynes Capital Global Limited v Guo [2020] NSWCA 178. In the Commercial List, freezing orders had been made ex parte in relation to proceedings that the respondent, Ms Hui Guo (Ms Guo), intended commencing in Hong Kong against the two applicants. As at the date of this Court’s earlier judgment, funds in the sum of $22,671,178.47 (the Frozen Funds) were the subject of the freezing orders issued by the Court. As noted by Bell P at [6] of the Court’s earlier judgment, the Frozen Funds remain in a custodian account held by Gleneagle Securities Nominees Pty Ltd, an Australian Stockbroker.

The discovery orders which were the subject of challenge by the application for leave to appeal were made in the context of a notice of motion filed by the applicants seeking to vacate the freezing orders in the court below. As such, the “discovery issue” was an interlocutory aspect of a notice of motion, albeit one which would have had the effect of substantially defeating the Commercial List proceedings by the setting aside of the freezing orders that had been originally made on an ex parte basis.

Subsequent to the Court dismissing the application for leave to appeal with costs, the successful respondent filed a notice of motion on 6 October 2020 seeking an order, pursuant to r 42.7(2) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that the costs ordered to be paid by the applicants to the respondent of the application for leave to appeal be payable forthwith as agreed or assessed. This application was supported by two affidavits of Ms Samantha Jane Kinsey (Ms Kinsey) of 6 and 30 October 2020.

The first of these affidavits attached correspondence with the solicitors for the applicants. That correspondence sought the payment of the respondent’s costs in relation to the discovery appeal in the sum of $68,000 which amount built in a reduction of 25% of the solicitors’ fees to reflect the fact that the costs had been awarded on a party/party basis. Detailed narrations in respect of the costs claimed were supplied with the correspondence.

That correspondence and the offer which it effectively contained to resolve the question of quantification of costs in relation to the unsuccessful application for leave to appeal, was rejected by email of 30 September 2020 by the solicitor for the applicants. In rejecting the offer, it was put that it did “not reflect the outcome your client would achieve by way of assessment and certainly does not contain any element of compromise.” The letter continued that “[i]n the context of the proceedings as a whole, an order for payment of the costs of the appeal forthwith is not justified.”

The second affidavit of Ms Kinsey noted that the respondent was an individual litigant. She also noted, by reference to a directions hearing in the Commercial List and correspondence between the parties, that the hearing of the substantive matter was unlikely to take place until July 2021 in a “best-case” scenario as a consequence of which she expected that the respondent would be out of pocket for the costs of the discovery appeal until at least mid to late 2021.

Both parties filed written submissions in relation to the application for costs to be payable forthwith, with both parties consenting for it to be determined “on the papers”.

UCPR r 42.7 provides as follows:

Given that an appeal (and an application for leave to appeal) constitute new and separate proceedings from proceedings at first instance (see Distinctive FX 9 Pty Limited v Statewide Developments Pty Limited [2012] NSWCA 393 at [11]), there may be a question as to whether or not the expression “the conclusion of the proceedings” in UCPR r 42.7(2) is a reference to the appeal proceedings or a reference to the underlying proceedings from which an appeal or an application for leave to appeal is brought. There is certainly support for the latter view: see, for example, His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2007] NSWCA 142 at [47]-[49] per Beazley, Giles and Hodgson JJA (Macedonian Orthodox Church (No 2)); and Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd [2014] NSWSC 1141 at [9] and [11] per Stevenson J.

An alternative approach to the question of construction of UCPR r 42.7(2) was noted by Gleeson JA in Collier v Country Women’s Association of New South Wales [2017] NSWCA 303 at [15] (Collier) who, after referring to Macedonian Orthodox Church (No 2), said as follows:

The submissions of the respondent, as the moving party on the notice of motion, did not argue for the alternative construction articulated by Gleeson JA in Collier, but based the claim in terms that the Court should make an “order otherwise” within the meaning of UCPR r 42.7(2).

In Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 at [14]-[18], this Court reviewed the principles relevant to the making of an “order otherwise” as follows:

The respondent submitted that an “order otherwise” ought be made for the following five reasons:

The applicants countered these arguments by pointing out that there was nothing in the evidence which indicated the financial position of the respondent and that she was in need of immediate payment; that the primary reason why the balance of the Commercial List proceedings are unlikely to be determined until the second half of 2021 related to the availability of the respondent’s counsel; the fact that the respondent would be out of her money until the proceedings had concluded applied to most cases, and did not warrant a departure from the normal position; that there was nothing unreasonable about the applicants’ conduct in seeking leave to appeal, albeit that their application did not succeed; and that the dictates of justice permitted the Court to take into account the fact that the applicants have had over $20 million frozen for over two years in the underlying proceedings.

The applicants also submitted that the issue relating to the order for discovery was intertwined with the substantive relief which the respondent seeks in the Commercial List proceedings and that the application for leave to appeal the discovery question did not constitute a discrete matter. We do not accept this last submission. The question of the entitlement to discovery of documents will not be revisited at the final hearing. As an issue as between the parties, it has been fully and finally resolved. Further, reference should be made to what Bell P said at [12] of this Court’s earlier reasons for refusing leave to appeal:

In our opinion, this is a case where the Court should “order otherwise” and the order sought in the respondent’s notice of motion should be made. The utility of the application for leave to appeal was negligible and it related to a discrete issue.

We would reserve our position as to whether or not an “order otherwise” is necessary following the resolution of an appeal or an application for leave to appeal. We can see force in the observations of Gleeson JA in Collier but, the matter not having being argued before us, it is not appropriate to express a final view on that question.

The respondent should also be awarded her costs on the notice of motion for costs to be payable forthwith. Those costs should also be payable forthwith.