Federal Court of Australia Guoao Holding Group Co Ltd v Xue (No 3) [2023] FCA 689 File number: NSD 580 of 2022 Judgment of: STEWART J Date of judgment: 22 June 2023 Catchwords: PRACTICE AND PROCEDURE – release of security for costs – where applicant provided security for respondents' costs – where applicant successful with substantial judgment – where applicant brings contempt application for alleged breach of freezing orders by first respondent – where any future costs order made in the first respondent's favour in the contempt application could not possibly exceed judgment debt of $43 million – whether security should be released to the applicant Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: International Commercial Arbitration Number of paragraphs: 7 Date of hearing: 22 June 2023 Counsel for the Applicant: B Yin Solicitor for the Applicant: Minter Ellison Lawyers Counsel for the Respondents: M Zaki of Squire Patton Boggs Solicitor for the Respondents: Squire Patton Boggs ORDERS NSD 580 of 2022 BETWEEN: GUOAO HOLDING GROUP CO LTD Applicant AND: LIJUAN XUE First Respondent TREDMORE PTY LTD Second Respondent JUYING XUE Third Respondent order made by: STEWART J DATE OF ORDER: 22 JUNE 2023 THE COURT ORDERS THAT: 1. The sum of $100,000 paid into court as security for the first and second respondents' costs be released to the applicant. 2. By 4.00pm on 30 June 2023, the applicant serve any proposed further amended interlocutory application and statement of charge (Amendments). 3. By 4.00pm on 14 July 2023, the first respondent confirm whether she consents to or opposes the Amendments. 4. If the first respondent opposes the Amendments: (a) By 4.00pm on 21 July 2023, the applicant file an application for leave to amend the further amended interlocutory application and statement of charge together with any supporting evidence. (b) By 4.00pm on 28 July 2023, the first respondent file any evidence in response. (c) The matter be listed for the hearing of any application referred to in order 4(a) on 4 August 2023 on an estimate of 30 minutes. 5. If the first respondent consents to the Amendments: (a) By 4:00 pm on 21 July 2023, the applicant file and serve the further amended interlocutory application and statement of charge. (b) By 4:00 pm on 28 July 2023, the applicant file and serve any evidence in reply and written submissions on the contempt application and a list of authorities to be relied on or referred to. 6. The matter be listed for case management on 4 August 2023 to consider further programming orders in relation to the contempt application. 7. The contempt application be listed for hearing on 11 and 12 December 2023. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Delivered ex tempore) STEWART J: 1 This proceeding commenced as an application for freezing orders and to enforce a foreign arbitral award. Freezing orders and provisional enforcement orders were made ex parte. In the course of programming the question of enforcement for hearing, the respondents demanded security for costs in the sum of $200,000 from the foreign-registered and based applicant. The applicant offered $100,000, which the respondents accepted. That sum was then paid into court for that purpose. 2 In December 2022, I made orders enforcing the arbitral award, including entering judgment against the first respondent in a sum amounting to approximately $42 million, and that the first and second respondents pay the costs of the proceeding. See Guoao Holding Group Co Ltd v Xue (No 2) [2022] FCA 1584. 3 When the applicant sought payment out of court of the sum of the $100,000 that it had paid for security for costs, the respondents resisted that on the basis that they had filed a notice of appeal against the enforcement orders. Subsequently the appeal was discontinued, but in the meanwhile the applicant had filed an interlocutory application in the proceeding by which it charges the first respondent with contempt of court in relation to alleged breaches of the freezing orders. 4 The applicant has again sought payment out of court of the $100,000. The first respondent resists that on the basis that she may be successful on the contempt application and have a costs order made in her favour, and for that reason the $100,000 should remain in court as security for those potential costs. 5 The first respondent's position has a superficial attraction, but it does not withstand scrutiny. That is because the judgment debt on the enforcement of the arbitral award currently amounts to nearly $43 million, less the relatively paltry sum of $34,738.41 which has been successfully garnished from the first respondent's bank accounts. Despite demand, the first respondent has paid no further part of the judgment debt. The first respondent has also not made any commitment to paying the judgment debt, or indicated how or when she might do so. 6 In the circumstances, even if the first respondent were to be successful in the contempt application and have a substantial costs order made in her favour, even a punitive costs order, there is no prospect whatsoever that she would be paid the $100,000 – for that to occur, her recoverable costs would have to exceed $43 million, whereas her current actual costs are said to be $316,000 which includes substantial costs incurred in unsuccessfully resisting the enforcement of the award and which could not be the subject of any future costs order. Any quantified costs order in her favour would merely be set-off against the judgment debt, and any such costs order would likely be counted in tens or hundreds of thousands of dollars at the most, and certainly not in tens of millions of dollars. 7 The first respondent therefore has no justifiable case for security for costs in the contempt application. I will accordingly make an order that the $100,000 paid into court by the applicant as security for the respondents' costs in the proceeding be repaid to the applicant. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 22 June 2023