FEDERAL COURT OF AUSTRALIA Yang v American International Assurance Company (Australia) Limited [2008] FCA 982 JUN YANG and AULIAN ENTERPRISE PTY LTD (ACN 084 120 230) v AMERICAN INTERNATIONAL ASSURANCE COMPANY (AUSTRALIA) LIMITED (ACN 004 837 861) NSD 444 of 2008 LINDGREN J 24 JUNE 2008 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 444 of 2008 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JUN YANG First Appellant AULIAN ENTERPRISE PTY LTD (ACN 084 120 230) Second Appellant AND: AMERICAN INTERNATIONAL ASSURANCE COMPANY (AUSTRALIA) LIMITED (ACN 004 837 861) Respondent JUDGE: LINDGREN J DATE OF ORDER: 24 JUNE 2008 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. It be a condition of the appellants' prosecuting the appeal that they provide security for the respondent's costs in a sum of $18,146. 2. The appeal be stayed until the security is provided. 3. If the appellants fail to provide the security by 30 January 2009, the appeal stand dismissed. 4. Either party have liberty to apply on three days' notice. 5. The appellants pay the respondent's costs of the application for security. 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 NSD 444 of 2008 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JUN YANG First Appellant AULIAN ENTERPRISE PTY LTD (ACN 084 120 230) Second Appellant AND: AMERICAN INTERNATIONAL ASSURANCE COMPANY (AUSTRALIA) LIMITED (ACN 004 837 861) Respondent JUDGE: LINDGREN J DATE: 24 JUNE 2008 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By a notice of motion filed on 3 June 2008 the respondent, American International Assurance Company (Australia) Limited (AIA), applies for an order that the appellants provide security for AIA's costs of the appeal in a sum of $18,146, an associated stay until the security is provided and an order that the appellants pay AIA's costs of the motion. 2 The Court's jurisdiction to order the security is found in s 56 of the Federal Court of Australia Act 1976 (Cth). Order 28 of the Federal Court Rules also applies: see RD Werner & Co Inc v Bailey Aluminium Products Pty Ltd (1988) 18 FCR 389. 3 The second appellant (Aulian Enterprise Pty Ltd) (Aulian) is a proprietary company of which the first appellant (Mr Jun Yang) and his wife (Ms Jie Wu) are the directors. The paid up capital of Aulian is $2, one share being held by each of the directors. 4 The primary proceeding in which the appellants were the applicants and AIA the respondent was heard over a period of some 20 days and judgment was given by Cowdroy J on 12 March 2008 dismissing the application: see Yang v American International Insurance Company (Australia) Ltd [2008] FCA 39. Subsequently, on 16 April 2008, his Honour ordered that the costs which the appellants were ordered on 12 March 2008 to pay to AIA be paid on a party-party basis up to 11 September 2007 and from that date on an indemnity basis: see Yang v American International Assurance Company (Australia) Ltd (No 2) [2008] FCA 493. 5 The primary proceeding arose out of an agency arrangement between AIA and, in the first place, Mr Yang, then pursuant to a new agreement, Aulian, and following an assignment of the agreement between Aulian and AIA to "Jun Yang" (a business name registered by Mr Yang), again Mr Yang. Mr Yang, Aulian, and then Mr Yang again sold life insurance on behalf of AIA. 6 The claim made by the appellants at first instance followed termination in the sense of the ending of the agency relationship. Actually, Mr Yang resigned on 30 January 2002 but his case was that the only alternative allowed to him was that of "dismissal". 7 The appellants' case at first instance turned on alleged representations that had been made to Mr Yang on behalf of AIA, and what was alleged to be unconscionable conduct of AIA in "terminating" the agency. I need not summarise the alleged representations. In various forms they were generally to the effect that Mr Yang would have a career and guaranteed income for life with AIA, and that therefore no matter what his conduct AIA could not terminate the agency. 8 There was conflicting evidence before the primary Judge as to the making of the alleged representations. 9 In October 2000 Mr Yang issued two receipts to a Mr Xu, the holder of two life policies issued by AIA, acknowledging receipt of the payment of premiums totalling $11,415.01. The money was not received by AIA. Mr Xu complained to AIA about the consequential lapsing of his policies. His Honour found (at [125]) that: · Mr Yang received cash of $11,415.01 from Mr Xu in respect of premiums on 28 October 2000; · Mr Yang issued receipts for the cash; · contrary to Mr Yang's allegation, Ms Lin of AIA did not give authorisation for the issue of the receipts; · Mr Yang failed to account to AIA for the monies until 5 December 2001 in circumstances mentioned below; and · on 5 December 2001 Mr Yang gave an accounts clerk at AIA an untruthful explanation for Mr Yang's tender of payment and attempted reinstatement of Mr Xu's policies on that date. 10 Following the complaints by Mr Xu to AIA over the lapsing, Mr Yang, as noted above, tendered payment in order to have the policies reinstated. In fact they were reinstated. The explanation that Mr Yang gave was that Mr Xu had just returned from overseas. 11 The appellants' unconscionable conduct case had two limbs: the making of the representations on behalf of AIA and the actual "termination". 12 Before his Honour the case was very much concerned with issues of credit. His Honour preferred the evidence of the witnesses called by AIA. Mr Xu gave evidence in support of Mr Yang and said, notwithstanding his earlier complaints including complaints in writing to AIA, that he had not paid Mr Yang the cash at all. His Honour disbelieved him and disbelieved Mr Yang who also said that he had never received the cash. 13 The primary Judge made a number of findings that were damning in relation to the credit of Mr Yang and other witnesses who supported him. His Honour found that Mr Yang had been dishonest and that false evidence had been given. He dismissed an allegation by Mr Yang that AIA's computer records had been "doctored" to support its case. 14 I have referred to the facts above because of their relevance to the question whether security for costs should be ordered as mentioned below. 15 There is evidence in the form of an affidavit of Matthew Glenn Foglia, solicitor of Wotton & Kearney Insurance Lawyers, the solicitor for AIA, estimating AIA's costs of the appeal at $18,146. That estimate is made on the basis of a two day hearing. As noted in the affidavit, however, the hearing could be longer having regard to the fact that at present Mr Yang lacks legal representation and he cannot communicate effectively in the English language. I have no hesitation in accepting Mr Foglia's estimate. 16 The evidence of the appellants' impecuniosity is largely found in an affidavit of Mr Yang sworn 4 September 2007 that was filed in the primary proceedings in relation to difficulties that Mr Yang was having in obtaining a transcript. He attached to that affidavit a copy of the August 2007 bank statement of his wife and himself which showed a credit balance of $555.44, and a loan agreement by which they had borrowed from Perpetual Trustees Victoria Ltd. In his affidavit he said that he had credit card debts of approximately $15,000 and owed approximately $100,000 to members of his family. 17 The loan agreement related to the home of Mr Yang and Ms Wu at 5 Lutanda Close, Pennant Hills which, according to the affidavit, was worth approximately $760,000 and in respect of which they owed approximately $736,000. The equity of $24,000 was obviously insufficient to cover the credit card debts and amounts owed to family members. 18 In that affidavit Mr Yang said that his current income was about $100 per week as a part time cleaner and that Ms Wu did not work remuneratively but received a Centrelink benefit. He said that he and his wife lived on her Centrelink benefit and his earnings as a part time cleaner and that his family and friends paid the mortgage commitments of Mr Yang and Ms Wu. 19 On the evidence summarised above I find that, if the appellants were to lose the appeal and were ordered to pay AIA's costs of the appeal, they would not be able to pay those costs. 20 It follows that an order for security coupled with a stay would have the effect, unless circumstances changed, of precluding the appellants from prosecuting the appeal. 21 Ordinarily the Court is reluctant to make an order having the effect of denying access to the Court of a would-be litigant. However, the appellants have already had access to the Court in the form of the proceeding at first instance and it is accepted that in such circumstances, the requirements of justice may permit the making of an order for security which will have the effect of preventing an appeal: see, for example, Cowell v Taylor (1886) 31 Ch D 34 at 38. 22 I explained to Mr Yang that an order for security and an accompanying stay will not prevent him from seeking legal advice as to the appeal. In an affidavit made on 18 June 2008 opposing AIA's motion he stated that after he obtains a copy of the transcript of the proceeding at first instance he would obtain legal advice and, depending on the advice, may discontinue the appeal. He makes the point that in that case AIA will not have suffered any additional costs. The making of the orders that I have in mind ensure that that is so. 23 There was discussion on the hearing as to a date beyond which, if security is not provided, the appeal should stand dismissed. Mr Jones of counsel for AIA suggested November 2008. Mr Yang requested until after Christmas. I will make the date 30 January 2009. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 3 July 2008 The first appellant appeared in person. Counsel for the respondent: Mr M A Jones Solicitor for the respondent: Wotton & Kearney Insurance Lawyers Date of Hearing: 24 June 2008 Date of Judgment: 24 June 2008