FEDERAL COURT OF AUSTRALIA Maxims Entertainment Pty Ltd v Chinatown Enterprises Pty Ltd [2000] FCA 1260 SECURITY FOR COSTS – application for order for security for costs on application for leave to file and serve out of time – no evidence to explain lengthy delay. Federal Court Rules, O 35 r 7, O 62 r 11 Maxims Entertainment Pty LTd v Chinatown Enterprises Pty LTd NG 918 of 1995 KATZ J 5 SEPTEMBER 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 918 of 1995 BETWEEN: MAXIMS ENTERTAINMENT PTY LTD First Applicant LONG SHONG PICTURES (HK) LTD Second Applicant PRO-VISION ENTERTAINMENT LTD Third Applicant POWER WORLD PRODUCTION LTD Fourth Applicant RISING SUN PICTURES LIMITED Fifth Applicant AND: CHINATOWN ENTERPRISES PTY LTD First Respondent MANDARIN FILMS (AUSTRALIA) PTY LTD Second Respondent WING CHEUNG Third Respondent THO VINH HUYNH Fourth Respondent JUDGE: KATZ J DATE OF ORDER: 5 SEPTEMBER 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Security for costs in the amount of $1850 be paid into Court by the third respondent within a period of seven days from today as a condition of his ability to proceed with his present application. In default of that payment being made, the third respondent's application of 29 June 2000 will automatically stand dismissed. 2. The third respondent pay the applicants' costs of the application for security for costs in the amount of $1850. In default of that payment being made, the third respondent's application of 29 June 2000 will automatically stand dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 918 of 1995 BETWEEN: MAXIMS ENTERTAINMENT PTY LTD First Applicant LONG SHONG PICTURES (HK) LTD Second Applicant PRO-VISION ENTERTAINMENT LTD Third Applicant POWER WORLD PRODUCTION LTD Fourth Applicant RISING SUN PICTURES LIMITED Fifth Applicant AND: CHINATOWN ENTERPRISES PTY LTD First Respondent MANDARIN FILMS (AUSTRALIA) PTY LTD Second Respondent WING CHEUNG Third Respondent THO VINH HUYNH Fourth Respondent JUDGE: KATZ J DATE: 5 SEPTEMBER 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me an application for security for costs. The circumstances out of which that application has arisen are as follows. 2 On 16 December 1998, Burchett J gave judgment in this Court on a claim of infringement of copyright. That judgment was in favour of a number of applicants and against two respondents. It will be convenient for me to describe those applicants together as Maxims and, of the respondents, I will refer only to Mr Cheung, who is the sole respondent who remains relevant presently. Burchett J's judgment for Maxims and against Mr Cheung was for damages in the sum of $15,680. Burchett J also ordered that Mr Cheung pay seven-eighths of Maxims' costs of the proceeding. 3 It appears from Burchett J's reasons for judgment that Mr Cheung had been aware of the scheduled hearing before Burchett J of Maxims' claim, but had not appeared at it. 4 On 22 June 1999, Mr Cheung applied to the Court for an order under O 35, par 7(2)(a) of the Federal Court Rules ("the FCRs"), which provision permits the Court to set aside a judgment where it was made in the absence of a party, even if it should be the case that the absent party had notice of the proceeding. 5 On 9 September 1999, Burchett J heard and determined that application by Mr Cheung. Burchett J dismissed it and ordered Mr Cheung to pay Maxims' costs of it. 6 On 15 December 1999, the costs of the second proceeding before Burchett J were taxed in the sum of $1300. 7 On 3 March 2000, the costs of the first proceeding before Burchett J were taxed in the sum of $79,252.25. 8 Mr Cheung sought to have the $79,252.25 figure reviewed. I assume that that application was made under O 62, r 11 of the FCRs, which provides that every taxation of costs and every decision of the taxing officer shall be subject to review by a Judge. 9 That application for review of the taxation came on for hearing before Burchett J and, on 9 May 2000, Burchett J dismissed it with costs. 10 The costs of that third proceeding before Burchett J were subsequently taxed in the sum of $2408. 11 Accordingly, the position then was that there were four money orders of this Court outstanding against Mr Cheung: one for $15,680 (the sum awarded as damages in December 1998); one for $79,252.25 (the costs of that first proceeding); one for $2408 (the costs of the second proceeding); and, finally, one for $1300 (the costs of the third proceeding). According to my calculations, the sum of those four orders was almost $100,000. 12 Before the taxation of costs in respect of the third proceeding had been completed, Mr Cheung filed, on 29 June 2000, a document headed "Application for leave to file and serve out of time". Paragraph one of that document stated that Mr Cheung applied for an extension of time in which to file and serve a notice of appeal from the judgments of Burchett J given on 16 December 1998, 9 September 1999 and 9 May 2000. Mr Cheung's application was supported by an affidavit affirmed by Mr William Chan on the same day as that on which the application was filed. 13 The matter came on for directions before me on 18 July 2000 and, on that occasion, Ms Pentelow, who appeared for Maxims, foreshadowed that Maxims would be applying for an order for security for costs of the application which Mr Cheung had filed on 29 June 2000. I therefore gave directions that Maxims put on its application for security for costs and evidence in support by a certain date, that Mr Cheung put on any evidence in reply by a certain date and that Maxims' application be heard this morning. 14 The application was subsequently put on, together with supporting evidence, and evidence was filed in reply on behalf of Mr Cheung. 15 This morning, when Maxims' application came on for hearing, Ms Pentelow read in support of the application an affidavit sworn by Ms Belinda Sou on 1 August 2000. Ms Winfield, who appeared for Mr Cheung, read an affidavit of Mr Cheung's, affirmed on 21 August 2000, and Mr Cheung was cross-examined and re-examined on his affidavit. 16 In support of her application for an order for security for costs on Mr Cheung's application for leave to file and serve out of time, Ms Pentelow relied on a number of matters in particular. 17 One was the very lengthy delay involved between the dates of the three judgments of Burchett J and the date of the filing of the application. As to that, it is true that, at least so far as Burchett J's first judgment is concerned, we are concerned with a period of about eighteen months. 18 Ms Pentelow further submitted that I should conclude that the application of 29 June 2000 had not been made bona fide. She drew attention to the fact that a bankruptcy notice had been served on Mr Cheung some time before 29 June 2000. That bankruptcy notice is in evidence before me and it claimed a total debt of almost $100,000, consisting of Burchett J's damages award together with the costs of the first and second proceedings before Burchett J and interest. Ms Pentelow's submission was that one could infer that the application of 29 June 2000 had really been brought only in an attempt to delay the inevitable so far as the bankruptcy notice served on Mr Cheung was concerned. 19 She also drew attention to the fact that, so far as Burchett J's decision of December 1998 was concerned, it could be said that that decision had already been the subject of review by reason of the fact that Mr Cheung had made his application under O 35, par 7(2)(a) of the FCRs, which would obviously lessen the chances of Mr Cheung's application succeeding, in so far as it sought leave in respect of the first decision of Burchett J. 20 She submitted also that there were poor prospects of success generally for Mr Cheung's application of 29 June 2000. 21 She submitted that Mr Cheung had demonstrated an unwillingness to comply with orders for the payment of money which had been made against him, not only by this Court, but also by the Supreme Court of New South Wales in related proceedings. 22 I may say immediately that I have taken the view that, so far as those other proceedings are concerned, I should have no regard to them whatever for present purposes. 23 Ms Pentelow finally referred to the fact that no offer of any sort had been made by Mr Cheung with respect to the sum of money (as I have said, about $100,000 in total) presently owing pursuant to the various orders of Burchett J. That omission by Mr Cheung to make any such offer is a matter which had obviously played a part in at least one of Burchett J's earlier decisions as well, because he had specifically referred to it. 24 In response to Ms Pentelow's submissions, Ms Winfield made a number of submissions. 25 Some were related to the proceedings in the Supreme Court, as to which, as I have already said, I have taken the view that I should have no regard for present purposes. For that reason, I will say nothing further about the submissions which she made in that respect. 26 Ms Winfield submitted that the obtaining of the leave which is sought in Mr Cheung's application of 29 June 2000 would not be an impossible task, although she did accept that she would have a difficult time in persuading the Court to grant it. 27 Finally, I should mention that Ms Winfield emphasised that there was no evidence before the Court of any inability on the part of Mr Cheung to pay any money orders which might be made against him and as to that I think it should be said immediately that there was no such evidence. 28 I have decided in the exercise of my discretion that this is a case in which it is appropriate to order security for costs. 29 One matter which, it was accepted by Ms Winfield, is a significant matter in determining whether or not to order security for costs is the prospects for success of the proceeding in respect of which security for costs is being sought. 30 During the course of her submissions, I drew Ms Winfield's attention to at least one problem which I saw with her proceeding as presently framed. That is that it proceeded on the basis that the three judgments of Burchett J in respect of which leave was being sought were all final judgments. 31 It is by no means clear to me that that basis is correct. It is even less clear, if I may say so, so far as the second and third judgments are concerned than it is with respect to the first of the three judgments. Of course, if it be the case in the result that all three of the judgments were interlocutory, then Mr Cheung's application of 29 June 2000 is fundamentally flawed and will fail. 32 Another aspect of the matter, so far as concerns the prospects for success of the application of 29 June 2000, is one to which Ms Pentelow directed attention in the course of her submissions. The fact is that the first decision of Burchett J was the subject of review by Burchett J himself on the application of Mr Cheung. I presently find considerable difficulty in seeing how leave would be granted with respect to Burchett J's first judgment in circumstances in which that judgment had, on Mr Cheung's own application, subsequently been reviewed pursuant to O 35, r 7 of the FCRs. 33 Two other aspects of the matter, so far as prospects of success are concerned, are as follows. 34 First, there was no material whatever put before me by Mr Cheung to explain the lengthy delay in the bringing of his application and, without finding it necessary to accept Ms Pentelow's submission that the motivating factor for Mr Cheung's application was solely and simply the service on him of a bankruptcy notice, the fact is that I have not been placed by Mr Cheung in possession of any material which would permit me to discover what the reason for the lengthy delay was. In the absence of such material, I may infer that there is no explanation, something which, although not necessarily fatal to Mr Cheung's application of 29 June 2000, would certainly create difficulties for its success. 35 In addition to that, Ms Winfield has not sought to demonstrate before me today any error in principle whatever in any of the three judgments of Burchett J, although, obviously, the prospects for success of Mr Cheung's application of 29 June 2000 would depend heavily on the ability to show at least some arguable error on Burchett J's part. 36 Taking the view that I do as to the prospects for success of Mr Cheung's leave application, at least on the material as it now stands before me, I am persuaded that this is an appropriate case for security for costs. 37 I should say now that Ms Winfield drew attention in her submissions to the fact that there was no specific evidence on the part of Maxims as to its likely costs of Mr Cheung's application for leave, but, as I said to Ms Winfield during argument, I am prepared to proceed in that respect on the following basis. 38 The proceedings before Burchett J which led to his second and third decisions resulted in taxation of costs in favour of Maxims of an average sum of about $1850. It seems to me appropriate in those circumstances to proceed on the basis that that would be likely to be the taxed costs of Maxims should Mr Cheung's present application fail. 39 I will therefore order that security for costs in that amount be paid into Court by Mr Cheung as a condition of his ability to proceed with his present application. Mr Cheung is to deposit $1850 with the Court Registry within a period of seven days from today and I will order that, in default of that payment being made, his application of 29 June 2000 automatically stand dismissed. 40 That leaves still the question of the costs of the security for costs application. I will fix the costs of that application at $1850, on exactly the same basis as I have derived that figure previously. I will order that that sum be paid by Mr Cheung to Maxims within seven days from today, in default of which Mr Cheung's application of 29 June 2000 will also automatically stand dismissed. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katz. Associate: Dated: 5 September 2000 Counsel for the Applicant: Ms J Pentelow Counsel for the Respondent: Ms R Winfield Solicitor for the Respondent: William Chan & Co Solicitors Date of Hearing: 5 September 2000 Date of Judgment: 5 September 2000