FEDERAL COURT OF AUSTRALIA Darmali v Chu [2024] FCA 1521 File number(s): NSD 1323 of 2024 NSD 1324 of 2024 Judgment of: THAWLEY J Date of judgment: 19 December 2024 Catchwords: PRACTICE AND PROCEDURE – applications for stay pending appeals – stays granted on conditions PRACTICE AND PROCEDURE – security for costs –where appellants assert impecuniosity –whether order for security for costs would stultify appeal – security ordered in one appeal and refused in other Bankruptcy Act 1966 (Cth) s 52(5) Corporations Act 2001 (Cth) ss 913BA, 913BB(2) Legislation: Federal Court of Australia Act 1976 (Cth) s 56 National Consumer Credit Protection Act 2009 (Cth) ss 80(1)(b), 64(4), (5)(b) Federal Court Rules rr 19.01, 36.08 Property and Stock Agents Act 2002 (NSW) A1 for Maintenance Pty Ltd v Lehal Pty Ltd [2018] FCA 1476 All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Limited [2020] FCA 840 Fouche v The Superannuation Fund Board [1952] HCA 1; 88 CLR 609 Australian Competition and Consumer Commission v BMW (Australia) Ltd (No 2) [2003] FCA 864 Dye v Commonwealth Securities Limited [2012] FCA 992 Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; 55 NSWLR 737 Cases cited: Kiefel v State of Victoria [2014] FCA 604 Lawson Solutions Pty Limited v B & J Lloyd Pty Limited, in the matter of Trinity Quality Interiors Pty Ltd [2024] FCA 843 Lehrmann v Network Ten Limited [2024] FCA 1226 Madsen v Darmali [2024] NSWSC 76 Nyoni v Pharmacy Board of Australia [2018] FCA 1313 Nyoni v Shire of Kellerberrin (No 9) [2016] FCA 472 Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; 88 IPR 633 Wu v Li [2014] FCA 297 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-Area: General and Personal Insolvency Number of paragraphs: 122 Date of hearing: 17 and 19 December 2024 Counsel for Mr Darmali: Mr M Friedgut and Ms N Bailey Solicitor for Mr Darmali: Connor & Co Lawyers Counsel for Mr Cai: Mr M Condon SC and Mr D Southwood Solicitor for Mr Cai: Juris Cor Legal Counsel for the Respondents: Mr R Scruby SC and Mr D Meyerowitz-Katz Solicitor for the Respondents: McCabes Lawyers ORDERS NSD 1323 of 2024 BETWEEN: DAVID DARMALI Applicant HONG CHU AND: First Respondent XUEPING XU Second Respondent NSD 1324 of 2024 BETWEEN: HAI ZHONG CAI Applicant HONG CHU AND: First Respondent XUEPING XU Second Respondent order made by: thawley j DATE OF ORDER: 20 december 2024 THE COURT ORDERS THAT: IN NSD 1323/2024: 1. Orders 1, 2 and 8 entered on 23 August 2024 by Jackman J in Federal Court of Australia proceeding number NSD32/2022, insofar as they affect the applicant (Darmali), be stayed pending determination of Darmali's appeal in this proceeding (Darmali's Appeal), subject to the conditions set out in paragraphs 7 and 8 below. 2. The parties have liberty to approach this Court on three days' notice in the event that it is not possible for them to obtain orders giving effect to the intention expressed in the undertaking noted in paragraph 8(a) below. 3. Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth), by 21 January 2025, Darmali is to give security for the Respondents' costs of this Appeal in the amount of $275,875 by way of payment into court or the provision of an unconditional bank guarantee on terms acceptable to the first and second respondents. 4. In default of compliance with order 3: (a) the appeal is stayed until further order; and (b) the first and second respondents have liberty to apply for the appeal to be dismissed. 5. The first and second respondents have liberty to apply for additional security for their costs of the appeal. 6. The costs of Darmali's interlocutory application filed on 14 November 2024 and the first and second respondents' interlocutory application filed on 19 November 2024 are to be each party's costs in the cause of the appeal. CONDITIONS OF STAY 7. By 21 January 2025, Darmali is to pay the sum of $1,900,000 into an interest-bearing controlled monies account to be established by the solicitors for the first and second respondents, which funds will remain in the account until: (a) agreement between Darmali and the first and second respondents; or (b) further order of the Court. 8. The parties give the following undertakings: (a) The first and second respondents and Darmali undertake to their reasonable endeavours to obtain such orders/directions that will have the effect, pending the determination of Darmali's Appeal, of retaining the status quo in relation to the first respondent's Creditor's Petition based on bankruptcy notice BN273604 in Federal Court of Australia proceeding NSD 1474/2024 (the Creditor's Petition), the respondents' existing application for review in Federal Circuit and Family Court of Australia proceeding SYG 2561/2024 (First Review Application), and Darmali's application for extension of time to comply with the bankruptcy notices BN 273635 and BN 273604 (Bankruptcy Notices), with the intention that: (i) If Darmali's appeal is successful, no act of Bankruptcy will have been committed by Darmali by reason of non-compliance with the Bankruptcy Notices; or (ii) If Darmali's Appeal is dismissed and the orders made against him by the primary judge are upheld, then: A. Darmali will have committed an act of bankruptcy on 18 October 2024 by reason of his non-compliance with bankruptcy notice BN 273604; and B. it will be open to the first respondent to move on the Creditor's Petition; (b) In order to give effect to the undertakings in (a) above, the parties further undertake as follows: (i) On 24 January 2025, the parties will jointly apply for the respondents' review application to be adjourned until 14 days after the determination of the appeal; (ii) on 4 February 2025: A. Darmali will: (I) seek a further extension of the time to comply with the Bankruptcy Notices before the Registrar of the Federal Circuit and Family Court of Australia; and (II) draw the Registrar's attention to these orders and undertakings; B. the first and second respondents will: (I) inform the Registrar they oppose the further extension; but (II) otherwise make no submission in opposition to the further extension; (iii) in the event a further extension is granted by the Registrar on 4 February 2025, the first and second respondents will prepare and file an application to review the Registrar's decision to grant that extension (Second Review Application); (iv) the parties will jointly apply for the First Review Application and the Second Review Application to be adjourned until 14 days after the determination of the appeal; (v) if Darmali's appeal is successful, the first and second respondents will consent to the dismissal of the First Review Application and the Second Review Application; (vi) if Darmali's Appeal is dismissed and the orders made against him by the primary judge are upheld, then Darmali will consent to the relief sought in the First Review Application and the Second Review Application. (c) The above undertakings are without prejudice to the rights of Darmali or the first and second respondents to approach the Court for leave to vary the undertakings following the determination of the appeal in the event that any party applies or proposes to apply for special leave to appeal to the High Court. inform the Registrar that they oppose the further extensio otherwise make no submissions in opposition to the further extension IN NSD 1324/2024: 1. Pursuant to r 36.08(2) and/or r 41.03 of the Federal Court Rules 2011 (Cth), the operation and enforcement of orders 1, 2, 5, 6, 8, 11, 12, 13 and 14 made by Jackman J on 23 August 2024 in proceeding NSD 32 of 2022 be stayed, to the extent they affect the appellant Hai Zhong Cai, until the determination of the appeal in proceeding NSD 1324 of 2024. 2. As a condition of ordering a stay pursuant to Order 1, the Court makes the following orders in proceeding NSD 1475 of 2024: a. Pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth), the period at the expiration of which the Creditor's Petition will lapse will be the period of 24 months commencing on 18 October 2024. b. The Creditor's Petition is adjourned until 14 days after the determination of the appeal in proceeding NSD 1324 of 2024. c. The parties have liberty to notify the Registry that the appeal has been determined and the proceeding NSD 1475 of 2024 should be relisted. 3. Order that the costs of the stay application filed by the appellant be costs in the appeal. 4. Order that the costs of the security for costs application filed by the respondents be costs in the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from transcript) THAWLEY J 1 These reasons concern four interlocutory applications in two appeals which are listed for hearing before the Full Court from 24 to 26 March 2025. Mr Hai Zhong Cai (the appellant in NSD1324/2024) and Mr David Darmali (the appellant in NSD1323/2023), both seek a stay of orders made by the trial judge on 23 August 2024 in NSD32/2022, pending the outcome of their respective appeals. The respondents in both appeals (Ms Hong Chu and Mr Xueping Xu), oppose the granting of a stay and seek orders for security for costs against Mr Cai and Mr Darmali. There is a third appeal listed for hearing from 24 to 26 March 2025, being Ms Lin's appeal. She has obtained a stay of execution subject to various conditions which require her to pay a substantial portion of the judgment debt, some of which the plaintiffs will hold in a controlled monies account. There is also an application for leave to appeal brought by Mr Wu which has been listed for hearing at the same time. BACKGROUND 2 The primary proceedings concerned investments by Ms Chu and Mr Xu of $3.5 million each in the Gold Stone Secured Income Mortgage Fund: Chu v Lin, in the matter of Gold Stone Capital Pty Ltd (Trial Judgment) [2024] FCA 766 (hereafter 'J'). The Fund was an unregistered managed investment scheme of which Gold Stone Capital Pty Ltd was the trustee. Mr Cai (who was the second defendant) and Mr Darmali (who was the third defendant) were both involved in the management of the Fund. Mr Cai was a registered director of Gold Stone. Mr Darmali was the Fund manager: J[78]. The first defendant was Ms Lin, Mr Cai's then wife. 3 Mr Darmali was (and remains) the director of Fiducia Asset Management Pty Ltd, which had an Australian Financial Services Licence ("AFSL") permitting it to carry on a financial services business involving issuing units in managed investment schemes. This is how Gold Stone was permitted to conduct its funds management business. Mr Darmali was the "responsible manager" and "key person" under Fiducia Asset's AFSL. Mr Darmali was also a director of Fiducia Resources Pte Ltd, which owned 5% of the shares in Gold Stone. 4 Together with his then-wife (Ms Lin), Mr Cai was a director and shareholder of DCK Asset Holding Pty Ltd, which held 50% of the shares in Golden Destiny Investments Pty Ltd, which held a 95% share in Gold Stone. 5 The trial judge found that Gold Stone breached its duty as trustee of the Fund:  by entering into three loan agreements outside the powers of investment conferred by the Fund Constitution: J[203];  by recklessly investing funds on a hazardous security in the sense described in Fouche v The Superannuation Fund Board [1952] HCA 1; 88 CLR 609 at 637: J[204] and [205]; and  in procuring the loans for an improper purpose: J[207]. 6 The trial judge concluded that Mr Cai and Mr Darmali knowingly procured or induced the breaches of trust by Gold Stone: J[223], [226]. 7 Mr Cai and Mr Darmali each ran a similar defence to the claims against them. In substance, they each disclaimed any knowledge of, or responsibility for, anything Gold Stone did and attributed all of the blame to Ms Lin. According to the respondents, their "evidence in that respect was manifestly inconsistent with the contemporaneous documents, and it was obvious at the trial that they had both misrepresented the extent of their involvement in Gold Stone's decisions and affairs": RS at [23]. The trial judge found that each of Mr Cai and Mr Darmali would say whatever each of them perceived to be in his respective forensic interests, regardless of the truth – see: J[25] to [54]. 8 In addition to the involvement in breach of trust claims, the respondents also succeeded against Mr Cai and Mr Darmali in respect of other causes of action: (a) As against Mr Darmali, the respondents established that he had received $520,000 in secret commissions, which he was obliged to disgorge to the respondents. However, this made no monetary difference to the judgment against him, because the commissions were paid from the loan proceeds and Mr Darmali was in any event found to be liable to compensate the plaintiffs with respect to the entire loan amounts: J[235] and [236]. (b) As against Mr Cai, the respondents established that he had misappropriated trust monies, which misappropriations were ultimately reflected in orders 5 and 6 – see: J[239] to [249]. 9 The trial concluded on 21 June 2024. 10 On 27 June 2024, the solicitor for the respondents discovered that Mr Cai's property at 16 Orange Street, Eastwood NSW 2122 (Eastwood Property) had been listed for auction on 7 July 2024. Mr Cai entered into a contract for sale of the Eastwood Property on 7 July 2024. The sale was due to complete on 2 September 2024. 11 On 15 July 2024, the trial judge delivered judgment in the primary proceedings. On the application of the respondents, the trial judge made freezing orders against Mr Cai. 12 On 8 August 2024, before final orders had been made, Mr Darmali sold his property at 33A Kings Road, Vaucluse NSW 2030 (Vaucluse Property) for $3,750,000 to his wife Ms Chu Li and Silver Altum Pty Ltd, of which Ms Li is the sole shareholder and director: Lacey 1 at [14]. 13 Mr Darmali deposited the net proceeds of $1,931,532.36 from the sale of the Vaucluse Property into an HSBC account #090 in the name of his mother, Mrs Darmawati Darmawati. Mr Darmali says that this was done in partial repayment of a loan from her: Lacey 1 at [26]. Mrs Darmawati currently resides in Indonesia. 14 On 23 August 2024, the trial judge made final orders to give effect to the reasons for judgment delivered on 15 July 2024. 15 On 27 August 2024, the respondents filed an interlocutory application seeking a range of orders. This interlocutory application was set down for hearing on 30 August 2024. It seems that Mr Cai attempted to accelerate the completion of the sale of the Eastwood Property from 2 September 2024 to the morning of 30 August 2024, but this did not eventuate by reason of the hearing of the interlocutory application and orders made by the trial judge on 30 August 2024: Lacey 2 at [7(a)], [22]; AJL 12 at 164. The interests of two third party caveators were also addressed. 16 Freezing orders were also made on 30 August 2024 restraining Mr Darmali from disposing or otherwise dealing with his assets, subject to certain conditions and exceptions. Mr Darmali's wife and Silver Altum undertook not to deal with their title to the Vaucluse Property until completion of a hearing listed for 27 September 2024: ALJ 12 at 165. Orders were made for the filing by Mr Darmali of an affidavit disclosing his assets: Lacey 1 at [18]; AJL 12 at 167. The freezing orders were varied on 12 and 27 September 2024: MRC 1 at 258. 17 Ms Lin filed an appeal on 19 September 2024. Mr Darmali and Mr Cai filed separate appeals on 20 September 2024. These are all appeals as of right. 18 On 26 September 2024, six days after Mr Darmali had filed and served his Notice of Appeal, Ms Chu and Mr Xu served Bankruptcy Notices on Mr Darmali: Connor 1 at [14]. 19 On 14 October 2024, Mr Darmali filed in the Federal Circuit and Family Court of Australia ("FCC") an application for an extension of time to comply with the Bankruptcy Notices that had been served on behalf of Ms Chu and Mr Xu: MRC 1 at 322. The application sought in the alternative, orders setting aside the Bankruptcy Notices. 20 On 15 October 2024, the FCC made orders extending the time for compliance with the Bankruptcy Notice issued by the second respondent (Mr Xu) to 26 November 2024, being the first return date of the application for an extension of time. That order was served on 16 October 2024. The FCC's order contained an inadvertent error in not also extending the time for compliance with the Bankruptcy Notice issued by the first respondent (Ms Chu). This was not noticed by Mr Darmali's solicitors. 21 On 24 October 2024, Ms Chu filed and served a Creditor's Petition on Mr Darmali in Federal Court of Australia proceedings NSD 1474/2024: Connor 1 at [20]. 22 On 25 October 2024, the FCC issued amended orders, extending the time for compliance with both Bankruptcy Notices to 26 November 2024: MRC 1 at 343. That order was served on the respondents on 25 October 2024 and Ms Chu was asked to discontinue the Creditor's Petition, but declined to do so: MRC 1 at 346, 348. 23 On 6 November 2024, the respondents filed an Interim Application in the FCC seeking: (a) the setting aside of the orders extending the time for compliance with the Bankruptcy Notices (made on 15 October 2024 as amended on 25 October 2024); or (b) a review of those orders; and (c) to the extent necessary, an extension of time in which to bring the review application in (b): MRC-1 at 351 (Interim Application). 24 On 7 November 2024 further orders for disclosure by Mr Darmali were made and, on 12 November 2024, Mr Darmali served a second disclosure affidavit. Amongst other things, this stated that Mr Darmali had not received any income nor worked in the last 12 months. 25 On 19 November 2024, orders were made by this Court, adjourning the further hearing of Ms Chu's Creditor's Petition concerning Mr Darmali until 17 December 2024: MRC 2 at 455; Connor 2 at [33]. 26 On 26 November 2024, orders were made by the FCC: (a) dismissing the Interim Application; (b) extending the time for compliance with the Bankruptcy Notices issued by Mr Xu and Ms Chu to 4 February 2025; (c) adjourning the further hearing of the application to 4 February 2025: MRC 2 at 457; Connor 2 at [33(b)]; ASD at [17]. 27 On 29 November 2024, the respondents filed an Application for Review seeking to review the orders made on 26 November 2024 by which the Interim Application was dismissed: MRC 2 at 460; Connor 2 at [33(c)] (Review Application). By the Review Application, the respondents seek: (a) orders setting aside the orders extending the time for compliance with the Bankruptcy Notices (made on 15 October 2024 as amended on 25 October 2025); or (b) a review of those orders; and (c) to the extent necessary, an extension of time in which to bring the review application in (b). PRINCIPLES Stay pending appeal 28 Rule 36.08 of the FCR provides power to grant a stay. It provides: 36.08 Stay of execution or proceedings under judgment appealed from (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. (3) An application may be made under subrule (2) even though the Court from which the appeal is brought has previously refused an application of a similar kind. 29 The question whether or not to grant a stay requires a consideration of at least: (a) whether the appeal raises serious issues for determination of the appellate court in the sense of raising arguable grounds; and, if so (b) where the balance of convenience lies: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; 55 NSWLR 737; at [18]; Lehrmann v Network Ten Limited [2024] FCA 1226 at [30] (Abraham J). Generally speaking, it is not appropriate to embark on a close consideration of the prospects of success in determining whether the appeal raises serious issues for determination: Lehrmann at [31], citing Australian Competition and Consumer Commission v BMW (Australia) Ltd (No 2) [2003] FCA 864 at [5] (Finkelstein J). 30 A number of the relevant principles were summarised by Jagot J in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; 88 IPR 633 at [15]: (1) "A successful party is presumed to be entitled to the benefits of the judgment obtained": Advanced Building Systems v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121 at 122; 38 IPR 289 at 290 (Advanced Building Systems). (2) An "applicant for a stay has the burden of persuading the court that it should be granted" (Advanced Building Systems at ALR 122; IPR 290) but it is not necessary to show special or exceptional circumstances: Henderson v Amadio Pty Ltd (1996) 65 FCR 66 at 69; 136 ALR 593 at 595 (Henderson) applying Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685; 10 ACLR 42. (3) "The court, in the exercise of its discretion, will not hesitate to stay proceedings when it is necessary to preserve the subject matter or integrity of the litigation. Nor will the court hesitate to grant a stay where the refusal of a stay could create practical difficulties in terms of the relief which [the] court could grant": Advanced Building Systems at ALR 122; IPR 290. (4) It is relevant to consider whether "there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed": Federal Cmr of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220 at 223; 64 ALR 325 at 327. (5) Another relevant consideration is whether the proposed appeal is genuine and based on reasonable grounds: Henderson at FCR 69; ALR 595. (6) Relevant also is the willingness or not of a party to give an undertaking as to damages. Hence, in Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd [2001] FCA 1750 at [10] (Red Bull) Red Bull's refusal to give such an undertaking, thereby exposing Sydneywide to irrecoverable loss if Sydneywide succeeded in its appeal, was described as "a factor which is clearly relevant to the exercise of the discretion to grant a stay", however it proved insufficient to displace the presumption that Red Bull was entitled to the benefit of its judgment: at [20]. Security for costs principles 31 Sections 56(1) and (2) of the FCA Act provides: (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. 32 Rule 19.01 of the Rules relevantly provides: (1) A respondent may apply to the Court for an order: (a) that an applicant give security for costs and for the manner, time and terms for the giving of the security; and (b) that the applicant's proceeding be stayed until security is given; and (c) that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed. 33 In All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Limited [2020] FCA 840 at [42], Allsop CJ observed: The Court's discretion to require the provision of security for costs is broad and the factors informing the exercise of that discretion cannot be stated exhaustively. The only limitation is that the discretion be exercised judicially: Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCAFC 29; 2 FCR 1 at 3. The matter which lies at the heart of the discretion is one of fairness, both in terms of whether security should be granted, and if so, in what amount: Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at 21 [92]. The Court aims to achieve a "balance between ensuring that adequate and fair protection is provided to the defendants, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings": Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 at 470 (Giles J). 34 The relevant considerations or factors which are often mentioned in this context are not exhaustive and nor are they "a checklist of matters to be brought to account as part of the balancing exercise in every case": A1 for Maintenance Pty Ltd v Lehal Pty Ltd [2018] FCA 1476 at [26] (Colvin J). As Colvin J observed at [26]: Whether a consideration has significance and, if so, the weight that it should be afforded will depend upon the particular circumstances of each case: PS Chellaram & Co Ltd v China Ocean Shipping Company [1991] HCA 36. 35 The factors were summarised in the following way by Markovic J in Lawson Solutions Pty Limited v B & J Lloyd Pty Limited, in the matter of Trinity Quality Interiors Pty Ltd [2024] FCA 843 at [43]: [43] The factors include: whether the application for security for costs has been brought promptly; the strength and bona fides of the plaintiff's case. As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success; whether the applicant's impecuniosity was caused by the respondent's conduct the subject of the claim; whether the applicant's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate; and whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197–198. 36 The fact that security is sought in respect of an appeal brought by an unsuccessful applicant at first instance is a matter relevant to the exercise of the Court's discretion, albeit that fact does not supply a presumption in favour of an order for security for costs – see: Dye v Commonwealth Securities Limited [2012] FCA 992 at [27] (Emmett J); Kiefel v State of Victoria [2014] FCA 604 at [44] to [46] (Mortimer J); Nyoni v Shire of Kellerberrin (No 9) [2016] FCA 472 at [8] (Mortimer J); Nyoni v Pharmacy Board of Australia [2018] FCA 1313 at [25] (White J). 37 It is for the party resisting an order for security for costs to show that impecuniosity would stultify the proceedings: Lehrmann at [25]. MR DARMALI The interlocutory applications 38 Mr Darmali seeks a stay of orders 1, 2 and 8 made on 23 August 2024 in proceedings NSD32/2022 pending determination of his appeal. Those orders were: 1. Each of the first, second, third, and seventh defendants is to pay the first plaintiff equitable compensation in the amount of $3,100,386.79, together with compound interest in the sum of $1,844,581.31, pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). 2. Each of the first, second, third, and seventh defendants is to pay the second plaintiff equitable compensation in the amount of $3,100,386.79, together with compound interest in the sum of $1,816,550.42, pursuant to s 23 of the FCA Act. 8. The first, second, and third defendants pay the plaintiffs' costs of the proceedings. 39 The respondents seek an order for security for costs in the amount of $275,875. Summary of the parties' positions 40 Mr Darmali submits that he does not have funds available to pay security for the respondent's costs and, accordingly, if he is ordered to provide the security sought, he will not be able to continue his appeal. It was common ground that Mr Darmali bore the onus of establishing that an order for security would stultify his appeal. He submits further that he cannot pay any amount due under the judgment. 41 Mr Darmali submits that, if a stay is not granted, there is a real risk he will become bankrupt and that, if that happens (Connor 1 at [40]), then: (a) he may be unable to hold an AFSL in the future, referring to s 913BA and s 913BB(2)(c) of the Corporations Act; (b) he may be unable to act as a credit representative, referring to s 80(1)(b) and s 64(4) and (5)(b) of the National Consumer Credit Protection Act 2009 (Cth); (c) he may be unable to act as a Responsible Manager or Key Person for any AFSL or ACL, referring to ASIC Regulatory Guide RG105 and RG206; and (d) he will suffer irreparable prejudice, including reputational damage in relation to his competence as a financial advisor, which might not be cured by an appeal. 42 The respondents submit that Mr Darmali's previous actions demonstrate that he would seek to avoid paying the judgment amount and the costs of an unsuccessful appeal, should the respondents be successful on appeal. The respondents contend that Mr Darmali has not fully disclosed his financial resources or his ability to pay the judgment debt, despite orders to do so, and that the Court would not be satisfied on the evidence adduced on these applications that Mr Darmali is unable to pay at least a substantial part of the judgment and meet an order for security for costs. Mr Darmali's financial position Mr Darmali's evidence about his financial position 43 In his disclosure affidavit of 23 September 2024, Mr Darmali's total assets are said to have a value of $94,108.62. In addition, Mr Darmali has $46,487.82 in superannuation. Mr Darmali's liabilities were stated to be $2,009,120.69. 44 The freezing orders of 30 August 2024 contain an exception for $1,500 per week for living expenses and $100,000 for legal expenses. 45 Since final orders were made on 23 August 2024, Mr Darmali's lawyers have received a number of payments from third parties for Mr Darmali's legal costs: Connor 2 at [28]. These are said to be repayable to the relevant third parties by Mr Darmali. The third parties are not litigation funders and they are not willing to fund an adverse costs order or provide security: Connor 2 at [29]. Disclosure of financial affairs 46 As mentioned, the respondents submit that the appellant has access to financial resources he has not disclosed to the court and that there has not been a full disclosure in relation to what occurred with the net proceeds of sale of the Vaucluse Property: Lacey 1 at [43] to [54]; RS at [48] to [62]. Company structure 47 The respondents tendered a "Business Profile of Fiducia Resources Pte Ltd" from the Accounting and Corporate Regulatory Authority of Singapore, dated 20 November 2024. Fiducia Resources is a company registered in Singapore of which the appellant was a director as at 23 May 2024: Lacey 1 at [45]. It appears from the Business Profile that Mr Darmali was no longer a director of Fiducia Resources as at 20 November 2024: Connor 2 at [31]. 48 The sole shareholder of Fiducia Resources is FAM Global Holdings Limited. FAM Global is a company registered in the British Virgin Islands. It appears that Mr Darmali's mother – Mrs Darmawati – is the sole shareholder and director of FAM Global, although it seems that it is a company that Mr Darmali has used in his business: Madsen v Darmali [2024] NSWSC 76 at [18]. Mrs Darmawati is 81 years old and lives in Indonesia. 49 The respondents tendered ASIC searches of the following companies of which Mr Darmali is a director: (1) Fiducia Asset Management Pty Ltd, of which Fiducia Resources is the sole shareholder; (2) Fiducia Wealth Management Pty Ltd, of which Fiducia Resources is the sole shareholder; (3) Fiducia Private Wealth Pty Ltd, of which Fiducia Resources is a shareholder; (4) Fiducia Capital Management Pty Ltd, of which Fiducia Resources is a shareholder; (5) Darmali Investments Pty Ltd, of which the sole shareholder is Mr Darmali; and (6) Trinity Zone Pty Ltd, of which the sole shareholder is Mr Darmali. The Vaucluse Property 50 As at 15 July 2024, when the trial judge delivered his reasons for judgment, Mr Darmali owned the Vaucluse Property. It was mortgaged to the National Australia Bank but otherwise unencumbered. 51 On 15 July 2024, Silver Altum Pty Ltd was registered, the sole director and shareholder of which was Mr Darmali's wife, Ms Li. The next day, Mr Darmali instructed a conveyancer to act for him on the sale of the Vaucluse property: Connor 2 at [22(f)]. 52 On 8 August 2024, a contract was exchanged for Mr Darmali to sell the property to Ms Li and Silver Altum for $3.75 million, which – according to a valuation obtained by the respondents – was below market value. The respondents contend that the value of $3.75 million did not take account of the fact that a development approval had been obtained: Lacey 3 at [7]. The respondents contend the market value was $4.5 million: AJL 11 at 280. It is not necessary to reach a concluded view about these contentions for present purposes. The sale settled 8 days later, on 16 August 2024. As mentioned, the net proceeds were $1,931,532.36. 53 Under the disclosure orders made on 30 August 2024 (AJL 11 at 172-81), Mr Darmali served a disclosure affidavit dated 23 September 2024, in which he deposed at [4] that he owed his mother a sum of about $3.7 million, less part payment of the loan "from sale proceed" of about $1.9 million: AJL 11 at 189-90. 54 The amount was said to be paid by reason of a "Mortgage Linked Loan Agreement" between Mr Darmali and his mother dated 26 November 2015: MRC-2 at 4. That agreement provided for Mr Darmali to pay interest compounding monthly at 15% per annum. At the time of the agreement, that was approximately the interest rate applicable to unsecured personal loans: Lacey 3 at [34]. The loan was said to be secured by mortgage over the Vaucluse Property, but no mortgage or caveat was ever registered. 55 The further disclosure orders of 7 November 2024 required Mr Darmali, amongst other things, to identify the account into which he transferred the proceeds of sale and how the proceeds were then dealt with; and to give details of the alleged loan from his mother, including the bank accounts from which and into which the advances were made: AJL 11 at 191-201 (order 3(d)). 56 In response, Mr Darmali served a second disclosure affidavit on 12 November 2024, in which he stated at [6] that he had transferred the proceeds into an HSBC account #090 in the name of Mrs Darmawati Darmawati: AJL 11 at 203. He stated in that affidavit at [7] that he did "not know now whether those proceeds have since been transferred from that account or otherwise dealt with". He gave his mother's address in Indonesia and a telephone number and stated for email address: "N/A" – see: AJL 11 at 203 at [4]. 57 The respondents caused a subpoena to be issued to HSBC on 3 December 2024: Lacey 3 at [22]-[26]. HSBC's account opening application form in respect of the account into which the net proceeds of sale of the Vaucluse Property were paid (#090) indicate that the account, in Mrs Darmawati's name, was opened by Power of Attorney and record the "personal details" by reference to Mr Darmali's email address, Mr Darmali's residential address at 8 Candlebush Crescent in Castle Hill, and a mobile phone number which I infer to be Mr Darmali's mobile phone number at the relevant time: AJL 13 at 262. The HSBC documents record that Mrs Darmawati is a housewife, that she does not work and that her gross yearly income when she opened account #090 was $1: AJL 13 at 263. 58 I note that an application to open an account with HSBC made by Mrs Darmawati in 2006, which was not apparently made by Power of Attorney, provided an email address which I infer is Mrs Darmawati's email address: AJL 13 at 351. It provided a residential address for Mrs Darmawati in Singapore and a Singaporean telephone number. 59 The HSBC documents also show that, on the same day as the net proceeds of sale ($1,931,532.36) of the Vaucluse Property were paid into HSBC account #090, namely 19 August 2024, $1.9 million was remitted to FAM Global: AJL 13 at 339. On the same day, there was also a transfer of $70,000 from HSBC account #090 to HSBC account #412: AJL 13 at 338, 339. HSBC account #412, also in Mrs Darmawati's name, was linked to a visa debit card issued to Mr Darmali (AJL 13 at 269), which was used to purchase goods and services, in and around Castle Hill where Mr Darmali lives, of a personal or domestic nature, such as restaurant bills and purchases from Bunnings, chemists and pet stores (AJL13 329). I infer these purchases were made by Mr Darmali: Lacey 1 at [47], [53]; Lacey 3 at [27(c)]; AJL 13 at 270-344. There was no evidence from Mr Darmali denying that these EFTPOS transactions were made by him with the debit card linked to the account in Mrs Darmawati's name. The account #412 is used by Mr Darmali. 60 The HSBC account statements also show large sums of money moving from FAM Global to the HSBC accounts, then to Mr Darmali or his wife, Ms Li, or their corporate vehicles. An amount of $2.1 million came into these accounts from FAM Global in the period 20 May 2023 to 20 May 2024: Lacey 3 at [27]; AJL-13 at 284-5, 300, 314, 325. 61 Mr Darmali's solicitor, Mr Connor, swore an affidavit which sought to address some of these matters: Connor 3. Mr Connor stated that Mr Darmali had told him (amongst other things) that:  he, Mr Darmali, was asked to sign and lodge the HSBC form for Mrs Darmawati, which he did: Connor 3 at [11(c)]; and  Mrs Darmawati was an existing customer and that is why the bank did not require identification for Mrs Darmawati and he was required to provide identification because he was not an existing customer: Connor 3 at [11(d)]. 62 Mr Connor stated that he was informed by Mr Darmali that Mr Darmali does not have permission from Mrs Darmawati to use those funds: Connor 3 at [12]. This evidence does not go anywhere near explaining the HSBC records or the beneficial ownership of the funds in those accounts or who directed the payment of the net proceeds out of the HSBC account to FAM Global. 63 In the absence of any evidence from Mr Darmali fully explaining these matters (either directly or through his solicitor), or any evidence from Mrs Darmawati at all, I infer that the HSBC account into which the net proceeds of sale of the Vaucluse Property were paid (#090) is controlled and operated by Mr Darmali. 64 The course of events just described causes serious doubt about whether Mr Darmali gave a full and frank disclosure in his disclosure affidavits. 65 In particular, it is difficult to accept as truthful that Mr Darmali did not know whether the $1.9 million paid into the HSBC account had been transferred out of that account or otherwise dealt with as he deposed in his second disclosure affidavit: AJL-11 at 203 [7]. The HSBC account statements are likely to have been sent to one or other of Mr Darmali's home or email addresses or have been electronically accessed by him. I infer that each of the HSBC accounts in Mrs Darmawati's name are controlled by Mr Darmali. There is no evidence which reliably explains how anyone apart from Mr Darmali could have caused the $1.9 million payment to FAM Global to have been made given that Mrs Darmawati's contact details were not shown in the HSBC records for account #090 and that, according to Mr Darmali, she has no current email address. There was no evidence to suggest that Mrs Darmawati had electronic banking access to the accounts. 66 I conclude that what Mr Darmali stated at [7] of his second disclosure affidavit – that he did not know where the net proceeds had been transferred after they had been deposited into the HSBC account – is likely to be false. It is likely that the amount of $1.9 million was transferred out of the HSBC account to FAM Global by Mr Darmali or at his direction. It is also likely that Mr Darmali could secure repayment of those funds should he wish to do so. The Candlebush Property and the Darmali Investment Trust 67 Fiducia Wealth, as trustee for the Darmali Investment Trust ("DIT"), owns the Candlebush Property. It was not in dispute that Mr Darmali lives at the Candlebush Property. It is apparently worth about $2.9 million. 68 In his disclosure affidavit of 12 November 2024, Mr Darmali deposed that he had not been a beneficiary of any trusts in the last 12 months: AJL-11 at 204 [13]. Pursuant to the orders for production made on 7 November 2024, Mr Darmali produced various documents in relation to the DIT on 10 December 2024. That production included a series of documents which indicated that Mr Darmali was removed as a beneficiary of the DIT in 2017: Lacey 3 at [37]; see also Connor 3 at [18]. 69 It appears from a response to a subpoena issued to Bell Partners, the accountants who have prepared tax returns for Mr Darmali and Fiducia Wealth, that Bell Partners and perhaps the Australian Tax Office have, at least in some respects, acted on the basis that Mr Darmali remained a beneficiary and in fact received a trust distribution in 2022. The Financial Statements for the DIT for the year ended 30 June 2023 indicate an historical trust distribution for the 2022 year of $464,098: AJL 13 at 114. The DIT tax return for the 2022 year record that Mr Darmali's share of income of the trust estate was $464,098: AJL 13 at 391. Mr Darmali asserts that the 2022 trust return is erroneous and there is some support for this proposition in that it does not appear in Mr Darmali's 2022 tax return: Connor 3 at [18]. On 19 June 2023, after his accountants proposed that income go to him, Mr Darmali wrote in an email: "[t]he income … is not going to David Darmali. We will do a tax planning. We have an entity such a Fiducia Wealth which carry significant loss…": Lacey 3 at [38] to [40]. In that email, Mr Darmali did not state that he was not a beneficiary or that the income could not be distributed to him. Bell Partners did not produce any document which suggested that Mr Darmali had been removed as a beneficiary of the DIT and its conduct was inconsistent with such a proposition. The only documents indicating that Mr Darmali had been removed as a beneficiary of the DIT in 2017 were those produced by Mr Darmali. 70 Whilst all of this causes some doubt about Mr Darmali's response at [13] of his second disclosure affidavit (AJL11 at 204) it is unnecessary to reach a concluded view about whether Mr Darmali has been a discretionary beneficiary of any trust in the last 12 months, as he claims. Earnings 71 Fiducia Asset holds an AFSL and an Australian Credit Licence and appears to be the entity through which Mr Darmali carries on his business as a financial planner: Connor 1 at [30]. Fiducia Wealth is an authorised representative of Fiducia Asset: Connor 1 at [35]. Mr Darmali's email signature block identifies him as the Managing Director of Fiducia Wealth: Lacey 1 at [51]. 72 On 2 May or 10 July 2023, Mr Darmali told the New South Wales Civil and Administrative Tribunal that he "currently manages $200 million in funds": AJL-11 at 509, [21]. Part of the prejudice Mr Darmali claims he will suffer if a stay is not granted and he becomes bankrupt is that he may "be unable to continue servicing the clients of Fiducia [Asset], meaning those clients would have to find a new manager / representative": Connor 1 at [41]. According to his tax returns, Mr Darmali received a total of $95 in income in the 2022 and 2023 financial years: Lacey 3 at [40(d)-(e)]. 73 On 12 November 2024, in his second disclosure affidavit, Mr Darmali swore that he had not worked or received any income in the last 12 months: AJL-11 at 204, [9]. The respondents submit that this evidence contradicts some of the evidence referred to, in particular the evidence of his solicitor: Connor 1 at [41]. 74 The evidence referred to by the respondents is capable of being understood consistently as meaning that Mr Darmali has not worked since November 2013. Without deciding whether or not that is the case, for the purposes of the present application, I will proceed on the basis that Mr Darmali is not currently in receipt of meaningful income from "servicing the clients of Fiducia [Asset]". Conclusions 75 Mr Darmali's amended notice of appeal extends for some 28 pages and, on the respondents' calculation, contains 155 grounds and sub-grounds of appeal: RS at [27]. I am satisfied that Mr Darmali's appeal contains grounds which are reasonably arguable, notwithstanding what the respondents have identified in submissions as weaknesses in those grounds. 76 There should be a stay of orders 1, 2 and 8 made by the trial judge on 23 August 2024 on conditions, including that Mr Darmali pay, or procure to be paid, to a controlled monies account of the respondents' solicitor the amount of $1.9 million. 77 Mr Darmali should be ordered to pay security for costs of the appeal in the amount of $275,875 I accept the quantification evidence of Mr Lacey in this regard. I note that he accounts for the fact that some work would need to be performed in any event given other appeals. Leaving Mr Lacey's evidence aside, the amount appears reasonable for an appeal of this size and complexity, involving as it does a challenge to numerous findings of fact. 78 I am not satisfied that these orders would stultify the proceedings. 79 The evidence adduced on these applications indicates that, if the amounts are not paid, that is likely to be because of forensic decisions made by Mr Darmali and not by reason of any inability to pay the amounts or to procure the amounts to be paid. 80 Counsel for Mr Darmali referred to a series of cases in which it was held that a stay should be granted where an appeal would be stultified without it because the appellant would be likely to be placed into liquidation of declared bankrupt, including: Kalifair at [21], [23] and [24]; Lehrmann at [69] to [71]; Wu v Li [2014] FCA 297 at [50] to [52]. These decisions depend on a conclusion that the appellant will not be able to prosecute the appeal if a stay were not granted because the relevant appellant, not having capacity to pay the judgment debt, would be placed into liquidation or declared bankrupt. Those cases do not countenance a stay being granted where the appellant has not demonstrated financial incapacity, but merely asserts such incapacity. 81 I propose to address the appropriate condition in relation to the bankruptcy proceedings following delivery of these reasons. One matter which was agreed between the parties was that there should be an order pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth), extending the time at which Ms Chu's creditor's petition lapses. 82 The respondents sought, as a condition of the stay, that modifications be made to the freezing orders as twice amended. In my view, any modification to the freezing orders – if truly not capable of agreement between the parties – is more appropriately dealt with by the trial judge, rather than as a condition of granting the stay. MR CAI The interlocutory applications 83 Mr Cai seeks a stay of orders 1, 2, 5, 6, 8, 11, 12, 13 and 14 of the orders made by the trial judge on 23 August 2024. Those orders include: 1. Each of the first, second, third, and seventh defendants is to pay the first plaintiff equitable compensation in the amount of $3,100,386.79, together with compound interest in the sum of $1,844,581.31, pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). 2. Each of the first, second, third, and seventh defendants is to pay the second plaintiff equitable compensation in the amount of $3,100,386.79, together with compound interest in the sum of $1,816,550.42, pursuant to s 23 of the FCA Act. 5. The second and seventh defendants pay equitable compensation to the first plaintiff in the amount of $196,659.70, together with compound interest in the sum of $62,093.90, pursuant to s 23 of the FCA Act. 6. The second and seventh defendants pay equitable compensation to the second plaintiff in the amount of $196,659.70, together with compound interest in the sum of $62,093.90, pursuant to s 23 of the FCA Act. 84 Orders 8 and 11 to 14 concern costs. I consider the orders for costs should be stayed irrespective of whether a broader stay is ordered. 85 The respondents seek orders for security for costs in the amount of $230,000. Summary of the parties' positions 86 In summary, Mr Cai submits that, if a stay is not granted, there is a real risk he will be made bankrupt and he will be unable to prosecute the appeal. He also submits that he does not have the resources to pay any part of the judgment debt or security for costs. If Mr Cai is declared bankrupt, he may not be able to continue working as a licensed real estate agent as he risks disqualification under the Property and Stock Agents Act 2002 (NSW). 87 On 31 October 2024, a Registrar of the FCC extended time for compliance with a Bankruptcy Notice issued by Ms Chu until 7 days after the determination of this interlocutory application: Cai 2 at [34]. It would appear that Mr Cai overlooked commencing proceedings to seek an extension of time to comply with a Bankruptcy Notice issued by Mr Xu. On 18 October 2024, Mr Xu filed a Creditor's Petition in this Court. The further hearing of that petition has been adjourned until 11 February 2024. 88 Mr Cai accepts that there is an act of bankruptcy and the parties agreed that, if there is a stay to be granted on conditions, the conditions should include an order under s 52(5) of the Bankruptcy Act extending the time at which Mr Xu's Creditor's Petition lapses. 89 In summary, the respondents submit that (Lacey 1 at [7]): (1) after the hearing, but before delivery of judgment, Mr Cai attempted to (and then did) sell the Eastwood Property; (2) Mr Cai has not fully disclosed his financial resources or his ability to pay the judgment debt, despite orders that he does so; and (3) Mr Cai applied to deregister the company through which he carried out his primary income-generating business, shares in which were the subject of freezing orders made against him on 30 August 2024, and "phoenixed" his business into a company with a near identical name, the shares in which were held by an associate, Ms Chen. Mr Cai's financial position Mr Cai's evidence about his financial position 90 Pursuant to orders made by the trial judge on 12 September 2024, $323,700 of the proceeds of sale of the Eastwood Property was transferred to Mr Cai's solicitors' trust account to fund the appeal and various other legal expenses: Cai 1 at [14] to [16]. Other amounts have been quarantined to take into account the interests of two third party caveators. 91 Mr Cai submits that he has no other source of income or money available. He submits that an order for security for costs would prevent him from prosecuting his appeal. Mr Cai has a total of approximately $800 in his current bank accounts. He does not receive any income and has attempted to apply for Centrelink benefits. Mr Cai has $47,055.97 in superannuation. Apart from his Honda scooter and personal items he does not have any interest in any personal (or real) property. He pays $600 per week in rent. Since the freezing orders were made on 15 July 2024 Mr Cai has received $1,500 per week for 11 weeks for living expenses: Cai 2 at [30]. He has also borrowed amounts from friends to assist with expenses. 92 The respondents submit that the financial position disclosed by Mr Cai is incomplete and unreliable because: (1) On 8 March 2024, the appellant withdrew the amount of $694,816.08 from his Westpac Bank account ending in 9640: Lacey 1 at [32(a)]. Mr Cai says that this formed part of the money that was loaned to him by Ms Liu in April 2023 and which was secured against the Eastwood Property: Cai 2 at [17]. (2) On 12 March 2024, the appellant paid the amount of $140,000 to Tery Shields Pty Ltd trading as Lexus of Paramatta, in circumstances where the only motor vehicle the appellant deposes to owning is a 2019 Honda Forza 300 scooter, which is typically valued between $3,490 and $8,500: Lacey 2 at [32(b)]. Mr Cai gives evidence that this transaction relates to a loan from a friend: Cai 2 at [18]. (3) On 8 June 2024, the appellant withdrew $555,192.70 as a bank cheque from his St George account ending in 1142 payable to 'Haiping Cai', his brother. Mr Cai gives evidence that this was the repayment of a loan: Cai 2 at [19]. The real estate business 93 As mentioned, the respondents submit that Mr Cai diverted his business to frustrate any enforcement of the judgment in the proceedings. 94 Mr Cai was the sole director and shareholder of Australian Sydney Realty Pty Ltd (ASR). On 24 June 2024, three days after the hearing of the primary proceedings commenced, a company named Australia Sydney Realty Pty Ltd was incorporated by Ms Chunmei Chen. 95 On 13 November 2024 Mr Cai applied to deregister ASR. Mr Cai explains that he did that because the business failed as a consequence of the freezing orders which had been made and the consequent difficulties in passing on rent to landlords: Cai 2 at [22] to [26]. Mr Cai stated that he was not aware that he could not deregister the company due to the freezing orders and apologised to the Court for doing so: Cai 2 at [22]. 96 The respondents believe Mr Cai was diverting business through his longtime associate and former employee Ms Chen. Mr Cai agreed that Ms Chen used to work at ASR, but stated he had nothing to do with the company she incorporated or the business she is operating: Cai 2 at [27]. Ms Chen resides on the same street as Mr Cai's current residential address – see: AJL-12 at 297-8; Cai 2. Mr Cai stated (Cai 2 at [23] to [27]): 23. Prior to the freezing order, the business conducted through ASR was struggling to be profitable. Then the freezing orders ultimately caused the business to fail. As a result of the freezing orders made on 15 July 2024, withdrawal restrictions were placed on various accounts associated with ASR, including a statutory trust account that was used to hold my clients' money. Annexed hereto and marked "F" is a letter from Westpac that identifies the accounts that were restricted. 24. On 30 August 2024, Jackman J made a notation on the freezing orders to facilitate these restrictions being lifted. However, it still took a few weeks for Westpac to lift these restrictions and I had to attend the bank approximately five or six times for the restrictions to be lifted. 25. Due to my inability to use these accounts, particularly the statutory trust account, I lost my clients. For example, most of my clients were landlords. I could not pay those landlords rent that was paid into the trust account by their tenants. I told these clients that I was having difficulties due to legal proceedings. Subsequently, these clients stopped using ASR and moved to different agents to manage their properties. The business conducted through ASR mainly involved managing properties, which I was unable to do during the time of the restrictions on the Westpac account. 26. As a result of the above, I decided to stop conducting a business through ASR and I considered that the shares have no value. In addition, I have recently applied to receive Centrelink benefits. The fact that I am listed as a director of ASR has prevented me from obtaining Centrelink benefits, so I took steps to deregister ASR to address this problem. 27. I refer to paragraphs 50 to 54 of the Lacey Affidavit. I agree that Ms Chen used to work in ASR. However, I have nothing to do with the company she has incorporated and the business she is operating. I presume she has incorporated a company of a similar name as it may have some name recognition based upon the business I used to conduct through ASR. 97 The respondents tendered bank statements for the relevant statutory account of ASR held with Westpac Banking Corporation Ltd. These showed that rent received into ASR's statutory account were transferred to Australia Sydney Realty. The respondents submitted that it should be inferred that Mr Cai knew the clients had moved to Australia Sydney Realty, given the specific entries each of which referred to transfers of rent to that company and given that Mr Cai's address was on the statements and Westpac's correspondence was addressed to him. I accept that submission. There does not appear to be any suggestion of there being transfers to any other agent – compare Cai 2 at [25]. There is also some evidence which suggests that Ms Chen and Mr Cai have been working together to some extent in renting property – see: Lacey 2 at [52]. There was also an entry in ASR's bank statements for wages payable to Ms Chen of $1,420 on 8 July 2024: Cai 2 at 36. Mr Cai's evidence about this topic is unsatisfactory and less than full and frank. Indeed, aspects of [25] and [27] of Cai 2 are misleading. Eastwood Property and alleged loans 98 Mr Cai appears to have two brothers, one named Haiming and one named Haiping. Mr Cai is a signatory to Westpac accounts in Haiping's name: AJL-12 at 225; Lacey 4 at [30]. 99 At the time of trial, Mr Cai owned a property at Eastwood which appeared to be unencumbered. Shortly after the hearing, Mr Cai listed the property for sale. Within four weeks after that, there were four caveats on the title of the property, apparently securing debts of about $4.5 million: Lacey 2 at [17] to [21]; AJL-12 at 241, [7]. 100 The first caveat was lodged by Haiming, apparently pursuant to a loan agreement dated 25 January 2014, in respect of which Mr Cai says he has made no interest payments or repayments, such that the loan has been in default for almost 11 years. The loan agreement records that it was witnessed by Ms Chunmei Chen: AJL-12 at 297-8. The loan agreement was not disclosed as a liability of Mr Cai's in his 2019 divorce settlement, contrary to a certification Mr Cai gave that he had disclosed all his liabilities: Lacey 2 at [26] to [30]; Lacey 4 at [12] to [15]. Either the loan agreement did not exist or Mr Cai's certification is incorrect. 101 The respondents made no submissions about the second caveat (to Secured Lending). 102 The third caveat was lodged by Sunshine Cladding Pty Ltd, purportedly pursuant to a contract dated 5 February 2024 to conduct renovations on Mr Cai's property, in respect of which Sunshine Cladding claimed a debt of $512,710. Sunshine Cladding has since abandoned its claim against Mr Cai and it seems it may not have been qualified to conduct the supposed renovations: Lacey 2 at [37] to [45]; Lacey 4 at [11]. 103 It also appears that, on 30 January 2024, the director of Sunshine Cladding, Mr Shai Guo, deposited $10,000 into one of the Haiping Westpac accounts of which Mr Cai is a signatory, and on 28 February 2024 he deposited a further $40,000. Then on 14 June 2024, a sum of $50,000 was paid back from Haiping's account to Mr Guo: AJL-14 at 103, 106, 111. 104 Mr Cai says that he was referred to Sunshine Cladding by a friend, and he had no dealings with Sunshine Cladding before engaging it in around February 2024 to renovate the Eastwood Property: Cai 2 at [8], [10]. Mr Cai did not mention the $50,000 paid into Haiping's account and then repaid to Mr Guo, which the respondents only discovered when Haiping's account statements were produced by Westpac on subpoena. 105 The fourth caveat was lodged by Ms Jia Liu, purportedly pursuant to a loan agreement dated 21 April 2023, securing an advance of $800,096.20. The purported loan agreement required interest of 5% per annum to be paid monthly in arrears on the first day of each month, with a default interest rate of 8% per annum. 106 Mr Cai says there have been no interest payments or repayments since the loan was made. Mr Cai says that the loan advance comprised the net proceeds from the sale of a property owned by Ms Liu in Dundas Valley (which, incidentally, she purchased in 2014 from Ms Chunmei Chen). 107 The respondents accept that Ms Liu sold the Dundas Valley property and that the proceeds were paid to Mr Cai on or about 21 April 2023. The respondents submit, however, that this occurred in circumstances where, in January 2023, Ms Liu's mortgagee, the Commonwealth Bank of Australia, had taken possession of the property and, in order to regain possession, Mr Cai had caused a sum of $555,192.77 to be paid from one of the Haiping Westpac accounts to the CBA in discharge of its debt: Lacey 4 at [28]. After the proceeds of sale from the Dundas Valley property were paid to Mr Cai, they remained in his personal Westpac account until 8 March 2024: Lacey 4 at [22]. On 8 March 2024, the account was emptied by drawing two bank cheques (AJL-14 at 78): (1) The first was a cheque for $140,000, which was paid to Terry Shields Pty Ltd, a Toyota dealership, for the purchase of a Toyota Landcruiser in the name of Chunmei Chen: AJL-12 at 264, 297; AJL-14 at 46-62. Mr Cai says this was a repayment of a loan from his friend Mr Qunsheng Chen, and he does not know why Qunsheng Chen wanted the money paid in that manner: Cai 2 at [18]. (2) The second bank cheque, drawn on 8 March 2024, was for $694,816.08 and was deposited by Mr Cai into an account at St George Bank, and then split into three different accounts: Cai 2 at [17]. Of those funds: (a) $100,000 was withdrawn on 3 June 2024 (Cai 2 at 13); and the majority of the remaining funds (totalling $583,781.27) were transferred on 8 June 2024 into a different St George Bank account in Mr Cai's name. On the same day, a bank cheque for $555,192.77 was drawn from that account, and the account was then emptied on 10 June 2024 by a payment of $33,000 to Haiping's Westpac account ending 112: AJL-14 at 304, 111. 108 On 11 June 2024, the $555,192.77 bank cheque was deposited into a different Westpac account relating to Haiping. 109 On 14 June 2024, the funds were transferred to Haiping's #112 account: AJL-14 at 288, 111. From that account:  $50,000 was paid to Mr Guo on 14 June 2024 (as mentioned earlier);  two payments of just over $50,000 each were made to "Babawin" on 17 June 2024; and  a total of $450,000 was paid into Mr Cai's Westpac account on 19, 26, and 27 June 2024: AJL-14 at 111. 110 Of the amount of $450,000 last referred to, just under $200,000 was paid on 26 and 27 June 2024 to each of Me Global Union Pty Ltd and ACN 675 818 4898: AJL-14 at 298. The ACN company has the registered business name "123BABAWIN321": AJL-14 at 312. The respondents submit that it should be inferred that the ACN company is, or is related to "Babawin", which received the two payments of just over $50,000 from Haiping's account on 17 June 2024. 111 Me Global has a registered business name "SUPAY" and appears to carry on a money exchange and currency remittance business: AJL-14 at 310-1. The respondents submit that it should be inferred that the money paid to Me Global was remitted overseas. An amount of $30,000 was transferred back to Haiping's account on 1 July 2024 and that amount was withdrawn in cash the following day: AJL-14 at 298, 111-2. 112 The respondents submitted that: (a) It was implausible that the proceeds of sale of the Dundas Valley property of a little over $800,000 were received by Mr Cai as a loan, because it would make no sense that he would have left those funds in an account earning interest at rates of about 4% per annum, while not making any interest payments on the loan, which was accruing interest at a default rate of 8% per annum. (b) It was likely that "the accounts in Haiping's name are for all intents and purposes Mr Cai's accounts" and that they were not disclosed as such in his disclosure affidavit. (c) The "events involving Sunshine Cladding and Mr Guo are bizarre and make Mr Cai's evidence regarding Sunshine Cladding implausible in the extreme". The respondents submitted that it was implausible that there was in truth a loan from Haiming Cai secured over the Eastwood Property. (d) Mr Cai appears to have remitted (at least) about $500,000 of the proceeds of sale of the Dundas Valley Property to "Babawin" and "Me Global", and the deposit of $105,000 was paid into an account in Haiping Cai's name. (e) Ms Chen, Mr Cai's neighbour and an employee of his company, for whom he recently purchased a $145,000 Landcruiser ($5,000 was paid to Terry Shields from Haiping's account on 5 March 2024 which appears to have been the deposit for the Landcruiser: AJL-14 at 106), "appears to be operating a 'phoenix' of Mr Cai's real estate business" which Mr Cai had operated for over 10 years. Consideration 113 I am satisfied that Mr Cai's appeal includes grounds which are reasonably arguable, notwithstanding what the respondents have identified as weaknesses in their written submissions at [72] to [88]. 114 The respondents submit that Mr Cai's financial affairs are "opaque". It should be noted in this regard that a substantial amount of the material relied upon by the respondents was served on Friday, 13 December 2024 in advance of the hearing on Tuesday, 17 December 2024: Lacey 4. Much of the evidence was not strictly in reply, but that fact is in turn explained at least in substantial part by the fact that much of the material had only been obtained from documents produced under subpoena after Mr Lacey's evidence in chief had been filed. 115 This evidence was allowed over Mr Cai's objection and there was no application to adduce further evidence. Nevertheless, the evidence should be assessed in light of this course of events. 116 Even if Mr Cai is involved in some way with Australia Sydney Realty with Ms Chen, either by being employed or having some other beneficial or even controlling interest, the evidence does not establish that he is in receipt of any substantial income from that source and I do not infer that he is. In this regard, I accept that the business of ASR was not doing particularly well at the time of hearing, as Mr Cai stated. The bank statements which were in evidence suggest that the management fees earned were low and certainly not at the level which could fund litigation of this nature in any meaningful way. 117 As to the payments which the respondents contend were made overseas, I do not consider that the evidence establishes a source of funds which could be relied upon if an order for security for costs were made. 118 The evidence establishes an incapacity on the part of Mr Cai to source funds to meet an order for security for costs and an incapacity to pay any part of the judgment sum into a controlled moneys account as a condition of a stay. If the judgment is not stayed, Mr Cai's appeal is likely to be stultified because he is unlikely to be able to fund an order for security for costs and he is likely to be made bankrupt. 119 I also note that:  The stay is sought for a comparatively short period of time, the appeal having been listed for hearing on 24-26 March 2025. The stay should be granted until the determination of the appeal or further order.  Ms Chu and Mr Xu have a measure of protection in that they have the benefit of freezing orders made on 15 July 2024 as varied on 30 August 2024.  Ms Chu and Mr Xu are Chinese nationals who sometimes reside in China. It seems that they own properties in Australia, but the value of them is not known, and neither is their net equity in those properties. If the appeal were upheld there is a possibility of difficulty with recovering monies paid pursuant to the judgment. Australia does not have a mutual recognition treaty with the People's Republic of China. 120 A stay of orders 1, 2, 5, 6, 8, 11, 12, 13 and 14 of the orders made by the trial judge on 23 August 2024 should be granted on appropriate conditions which address the bankruptcy proceedings. The parties have agreed appropriate orders in that respect. CONCLUSION 121 Mr Darmali's interlocutory application seeking a stay should be granted on the conditions mentioned earlier. The respondents' interlocutory application seeking security for costs against Mr Darmali should be allowed. 122 Mr Cai's interlocutory application seeking a stay should be granted on conditions. The respondents' interlocutory application seeking security for costs against Mr Cai should be dismissed. I certify that the preceding one-hundred and twenty-two (122) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley. Associate: Dated: 23 December 2024