Yao v Fang[2025] QCA 65

[2025] QCA 65

COURT OF APPEAL

BOND JA

Appeal No 1400 of 2025

SC No 13370 of 2022

WENLIANG YAOFirst Appellant/First Respondent

(ALSO KNOWN AS

WILLIAM YAO)

LIANRU ZHAOSecond Appellant/Second Respondent

NEW AUS GROUP PTY LTDThird Appellant/Third Respondent

ACN 165 555 733

W HOLDING GROUP PTY LTDFourth Appellant/Fourth Respondent

ACN 619 024 341

BRISBANE VALLEY INVESTMENTS PTY LTDFifth Appellant/Fifth Respondent

ACN 623 094 306 (BOTH IN ITS OWN

RIGHT AND IN ITS CAPACITY AS

TRUSTEE FOR THE BRISBANE

VALLEY INVESTMENTS TRUST)

v

LINA FANGFirst Respondent/First Applicant

NAXI AGRICULTURESecond Respondent/Second Applicant

INVESTMENT PTY LTD

ACN 634 072 209 (AS TRUSTEE

FOR THE NAXI AGRICULTURE

INVESTMENT TRUST)

NAXI @ TROUGHTON PTY LTDThird Respondent/Third Applicant

ACN 634 070 698 (AS TRUSTEE

FOR THE NAXI PROPERTY

INVESTMENT TRUST)

NAXI (CHINA) PTY LTDFourth Respondent/Fourth Applicant

ACN 616 666 749

BRISBANE

WEDNESDAY, 7 MAY 2025

JUDGMENT

BOND JA:  A proceeding which is pending in the trial division is being managed on the commercial list by the primary judge.  The proceeding commenced on 31 October 2022 and was placed on the commercial list on 19 May 2023.  On 22 December 2023 the matter was listed for a trial to commence on 28 October 2024.

On 24 September 2024, the first, third, fourth, fifth and sixth defendants applied to have the trial adjourned.  On 30 September 2024 their application succeeded.  The proceeding is currently listed for a six-week trial before the primary judge, commencing on 21 July 2025.

Her Honour described the nature of the proceeding in these terms.

“The statement of claim reveals a complicated set of arrangements and money transfers.  In essence the plaintiffs allege that monies belonging to Ms Fang were transferred to Australia and used to purchase properties in Australia and that the plaintiffs have claims against the defendants as a consequence.  Such claims include claims for monies had and received, damages for deceit, equitable compensation, for an account, for monies held on trust, for damages pursuant to the Australian Consumer Law, for damages for breach of fiduciary duty and so on.  The amounts involved exceed about $80m.”^[1]

In Fang v Yao [2025] QSC 46, published on 21 March 2025, the primary judge disposed of an application by the first, third, fourth, fifth and sixth defendants for leave to amend their defence in the proceeding.  Leave was given for some amendments but refused in relation to other amendments which required leave being given to withdraw admissions.

The most important issue in contest before the primary Judge seemed to be proposed amendments which would –

1.  withdraw admissions previously made that the first plaintiff, Ms Fang, was in fact the owner of the funds that the plaintiffs sought to recover in the proceeding; and

2.  in lieu thereof plead a denial with an associated positive case to the contrary.

The positive case proposed by the first, third, fourth, fifth and sixth defendants had these elements:

1.  The funds allegedly owned by Ms Fang were not transferred or caused to be transferred to Australia by her as the plaintiffs allege, but instead by Mr Zhenjie Wang.  Mr Wang is not a party to the proceeding;

2.  Although Ms Fang alleges that Mr Wang was her former husband and gave her the monies, Ms Fang and Mr Wang were never married or divorced.

3.  The alleged custodian arrangements by which the funds were said to be held before transfer did not reflect any arrangement which in fact existed, and the funds for which Ms Fang sues do not and did not ever belong to her.

4.  Documents central to the plaintiffs’ case are either forgeries or of doubtful authenticity.

5.  The purpose of the transfer of the funds the subject of the proceeding from the People’s Republic of China to Australia, was to expatriate monies otherwise than in accordance with the laws of the People’s Republic of China so that the plaintiffs are not entitled to the relief claimed by reason of illegality and a doctrine of unclean hands.

By notice of appeal filed on 4 April 2025, the first, third, fourth, fifth and sixth defendants appealed her Honour’s decision.  Save for proposed amended paragraphs 18D(b) to (g), which were abandoned before her Honour, they seek to reverse her Honour’s decision and to be permitted to advance the positive case against Ms Fang’s ability to pursue recovery of the funds.  Sorry, to advance the positive case concerning Ms Fang’s ownership of the funds and accordingly against her ability to pursue recovery of the funds.  The plaintiffs in the proceeding are the respondents to the appeal and seek to uphold her Honour’s decision and to resist the additional issues being made part of the upcoming trial.

There are other defendants in the proceeding in the trial division but they’re not involved in the appeal.  No further reference needs to be made to them.  Accordingly, the appeal is to be contested between, on the one hand the first, third, fourth, fifth and sixth defendants as appellants, and on the other hand the first to fourth plaintiffs as respondents.  It is convenient to refer to the two groups of litigants respectively as the appellants and the respondents.

For obvious reasons the hearing of the appeal has been expedited.  It appears to be common ground that if the appeal is allowed the trial dates will be lost.

I have before me an application for security for costs in relation to the expedited appeal.  The application was foreshadowed by the respondents on 11 April 2025 and the application filed on 28 April 2025.  It has been brought on urgently and, for obvious reasons, must be decided on an urgent basis.

The present reasons assume the reader is familiar with the reasons of the primary judge, the issues raised by the notice of appeal, and the arguments proposed to be advanced on appeal as articulated in the written submissions which have been filed for that purpose by the appellants and the respondents respectively.  Time does not permit the extensive recitation of the contents of those documents.

The principles relevant to the disposition of an application for security for costs on appeal are not in dispute, as set out in Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241, Murchie v Big Kart Track Pty Ltd [2003] 1 Qd R 528, Woolworths Group Ltd v Day [2018] QCA 79 and Green v Scottney-Turbill [2023] QCA 141.

In the present case I am persuaded that it is appropriate to make the order sought.  The considerations which have informed that judgment are as follows.

First, the amount sought is $49,000 which was an amount more than amply justified by the affidavit evidence.  The appellants did not dispute the quantum if an order was to be made.

Second, there has been no delay by the respondents in their application for security.

Third, the material supports the conclusion that the appellants, who comprise two natural persons and three corporations, are all impecunious.  Because that conclusion applies to all of the appellants, and because they all share a coincidence of interest in the issues arising on appeal, issues which sometimes arise in these applications as to the need to differentiate between appellants do not arise.  The inability of the appellants to meet a costs order made against them in the event they fail on appeal provides a persuasive reason for ordering security for costs.

Fourth, I’m not persuaded that ordering security will necessarily stifle the appeal.  As to this:

1.  Relevant orders freezing assets of the appellants were made on 19 May 2023.

2.  The orders are subject to an exception which permits the appellants to pay up to $300,000 for their reasonable legal expenses.

3.  Notwithstanding the significant passage of time since the freezing orders were made and the steps in the proceeding that have occurred since then by solicitors and counsel engaged by the appellants, no request has been made to vary the initial amount to enable additional funds to be released to pay for lawyers.

4.  The respondents suggest that it is open to draw the inference that reasonable legal expenses must have exceeded $300,000 and that the appellants have other sources of funds available to them.

5.  There is no evidence put before me by the appellants that they are unable to source the security sought, whether at all or within a particular timeframe.  Their apparent impecuniosity does not establish that proposition because the parties may be able to borrow monies from some other party.

6.  The highest that counsel for the appellant was prepared to put the countervailing proposition was that “In light of the freezing order it can be inferred that there is at least a real prospect that ordering security will stifle the appeal.”

7.  That there is an alternative source of funds is certainly something which might be suspected given the level of the appellants’ representation and the extensive work they’ve apparently done.  But I do not think I could make that positive finding.  Indeed, I conclude that evidence does not permit me to be sufficiently satisfied to draw either of the positive inferences which the parties have suggested.

8.  However, I do conclude that I am not persuaded that ordering security will necessarily stifle the appeal.

Fifth, the authorities support the proposition that a judge considering an application for security for costs of an appeal should have regard, to the extent that it is possible so to do, to the appellants’ prospects of success of the appeal.  Indeed, the question of the view I should form as to the prospects of success and how that should influence the exercise of my discretion was the consideration which took up most of the oral argument before me.  As to this consideration I make the following observations:

1.  The whole purpose of the jurisdiction to order security for costs of an appeal is to make an order in appropriate cases to protect a respondent against the risk that an appellant would be unable to satisfy an order for costs against it in the event that the appellant failed on appeal and such an order was made.

2.  If the appellants had an apparently weak case a judge might be more likely to assess the risk of an adverse costs order to be high and, when taken with evidence sounding as to the extent of the appellants’ impecuniosity and the risk that an order might stifle the appeal, more likely to conclude that the interests of justice were served by making an order for security.

3.  The converse is also true.  If the appellants had an apparently strong case a judge might be more likely to assess the risk of an adverse costs order to be low and, when taken with the evidence as to the extent of the appellants’ impecuniosity and the risk that an order might stifle the appeal more likely to conclude that the interests of justice were not best served by making an order to protect the respondents against the risk that the appellants would be unable to satisfy such a costs order.

4.  In the present case the appeal is for an interlocutory decision of a Judge in the trial division on a matter of practice and procedure.  Having regard to rule 765 of the Uniform Civil Procedure Rules 1999 (Qld) that means that the appeal is an appeal in the strict sense with the result that the Court of Appeal must determine the correctness of the judgment under appeal at the time that the judgment was given.  That is, on the evidence adduced before the primary judge and on the material as it then stood.  The standard of appellate review is the deferential standard set out in House v The King (1936) 55 CLR 499.  Moreover, the appellate court is not likely to interfere unless, in addition to error of principle by the primary judge, the appellants demonstrate that the order will work a substantial injustice to one of the parties.

5.  The appellants did not dispute the application of these principles but asserted their ability to demonstrate House v The King error and that it would constitute a substantial injustice to prevent them from running the case concerning funds ownership which their proposed pleading flagged.

6.  My present preliminary view is that at least the latter issue is likely to be a significant obstacle to the appellants’ success on appeal.  Denying a litigant the opportunity to advance a case which is merely arguable and where there is no adequate explanation for the change of position, does not without more presently seem to me necessarily to result in substantial injustice.

6.  At least one of the reasons why the ordinary position is to require an explanation for a proposal that an admission made by lawyers on client’s instructions be withdrawn, is the expectation of both courts and parties that parties should be bound by their lawyers’ conduct of their cases.  And if parties seek relief from that expectation they should be prepared to condescend to detail as to why.

7.  However, my ability to reach even a preliminary view on whether the appellants could surmount that obstacle was stymied by the fact that I did not have before me the evidence which the primary Judge had and which would sound as to the adequacy or inadequacy of the appellants’ explanation of how the admission came to be made in the first place and which might now be relied on to justify its withdrawal, or as to the evaluation of the extent of injustice, if any, which would be involved in denying the appellants the ability to withdraw the admission and plead the denial and associated positive case which they seek to plead.

8.  Whilst it was common ground that there was no explanation from the appellants themselves, their counsel suggested that an explanation was to be found in the implications to be drawn from material which I do not have, namely affidavit material from the appellants’ solicitor which explain how enquiries which he had made led to his forming the view that there was a positive case to be run.

1.  The result is, that I cannot form either a positive or a negative view on the prospects of success on appeal.  I do not find an assessment of prospects to be helpful in determining this application.

Nevertheless, having regard to the first to fourth of the considerations which I have discussed above, it seems to me that the interests of justice are best served by making an order for security for costs of the appeal in the amount which the respondents seek.  The appellants invited me to conclude that their appeal was at least arguable.  But even if I was prepared to express that view I would not regard it to be a consideration which outweighed the other considerations to which I have averted.  If the impecunious appellants want to be able to run their appeal they must be prepared to protect the respondents from any costs risk.

I will hear the parties as to the form of the order.

…

BOND JA:  …  I make an order in accordance with the draft signed by me and placed with the papers.