Security for costs in the context of the foreign judgment registration in Australia: KR & C Co Ltd v Soon Ok Hwang [2021] NSWSC 551

On 18 May 2021, the Supreme Court of New South Wales in KR & C Co Ltd v Soon Ok Hwang [2021] NSWSC 551 held that a security for costs application brought by a judgment debtor in its Notice of Motion to set aside a foreign judgment registered in Australia is to be dismissed with costs. This case provides a useful authority where there is limited case law dealing with security for costs applications in the context of the foreign judgment registrations in Australia. H & H Lawyers successfully opposed the security for costs application in these proceedings.

Background

In this case, the plaintiff, a foreign company, was a judgment creditor in a judgment held in the Republic of Korea against the defendant who was a judgment debtor. Based on that judgment, the plaintiff filed a Summons seeking an order for registration of the foreign judgment under the Foreign Judgments Act 1991 (Cth) (FJA). The foreign judgment from Korea was ordered to be registered, and the defendant applied to set it aside. A case concerning an application seeking to set  aside a registered foreign judgment will be discussed separately in a further case note. 

Following the setting aside application, the defendant, by another Notice of Motion, sought security for costs against the plaintiff, which is the subject of this case note. The defendant by seeking the security for costs relied upon the prospects of success on the application to set aside the registration of the Korean judgment.

The plaintiff opposed the security for costs on, amongst others, the following bases:

1. While security for costs under r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) is limited to applications made by a defendant in the proceeding, r 53.4 is intended to preclude a judgment debtor from making an application for security;

2. There is no reason to believe that the plaintiff would not pay any costs order if ordered; and

3. The defendant’s prospects of success are minimal.

The Court dismissed the defendant’s security for costs application by upholding the plaintiff’s 2nd and 3rd arguments above.

The Supreme Court’s Reasoning

The first question before the Court was the interpretation of UCPR r 53.4. That rule relevantly provides that:

“For the purposes of proceedings under the Foreign Judgments Act 1991 of the Commonwealth, the Supreme Court may make an order under rule 42.21 otherwise than on the application of the judgment debtor.”

In the previous hearing, on a motion for extension of time to apply to set aside the registration of foreign judgment before Campbell J in KR & C Co Ltd v Soon Ok Hwang [2021] NSWSC 164, one of the defendant’s contentions concerning r 53.4 was that it allows the Court to make a security for costs order of its own motion. However, Campbell J, referring to Richie’s commentary, stated to the effect that either the judgment debtor or creditor may make an application for security under r 53.4.

The Court in the present proceedings disagreed with Richie’s commentary, and accepted and cited obiter dicta of Adams J in Raffaele Viscardi SRL v Qualify Centre Food Services Pty Limited (No 2) [2013] NSWSC 2055 (“Viscardi”), which stated that:

“Though awkwardly drafted, this (being r 53.4) appears to prevent a judgment debtor, though a defendant, from making an application under r 42.21.”

Nevertheless, the Court did not determine this issue as it was not necessary for the Court to decide that in the circumstance where the judgment creditor was found to be not impecunious. 

During the proceedings, it was not contested that the plaintiff is a company registered in Korea, ordinarily resident outside Australia, and has no assets in Australia. Therefore, the threshold required in r 42.2(1)(a) of UCPR was enlivened without difficulty.

The plaintiff is a wholly-owned subsidiary of a statutory authority in Korea that has a similar function to that of the Australian Prudential Regulation Authority (APRA). There was no evidence establishing that the plaintiff, despite it being a foreign entity, is impecunious or will be unable to pay any adverse costs if ordered. Further, given the substantial reciprocity of treatment of judgments between Australia and Korea, the defendant can enforce the costs order in Korea, if ordered. 

As to the prospect of success on the application to set aside the registration of the Korean judgment, the defendant relied on public policy grounds under s 7(2)(a)(ix) of the FJA for reasons that:

1. There was a time interval between the foreign judgment and the registration in Australia;

2. The defendant did not receive notice of the proceedings in Korea; and

3. The quantum of the registered judgment is excessive. 

The Court found that the defendant’s public policy arguments were weak. The detailed arguments and analysis of the above contentions will be discussed in a further case note as that is the gist of the further proceedings, however, in summary, it was resolved that the prospect of success in the defendant’s contentions was modest at best.

Implications

This case is one of the limited authorities that have decided the security for costs application in the context of foreign judgment registrations in Australia. There are three key takeaways to be learned from this case.

Firstly, the mere fact that a party is not an ordinary resident and does not possess assets in Australia does not necessarily mean that that party would be unable to pay the costs. There must be something more than evidence simply showing that a party is a foreign entity, particularly in circumstances where that foreign entity is a government-owned company and where an original court and Australian courts mutually recognise judgments of each other. 

Secondly, when relying on the prospect of success ground in a security for costs application, a party applying for security is required to prove more than a moderate possibility of success in their arguments. In the present case, the Court found that the prospect in the defendant’s arguments was moderate but did not accept that that was sufficient.

Lastly and most importantly, it is a persuasive ground to argue that, while it is obiter dicta in this case and also in the Viscardi case, UCPR r 53.4 operates to preclude a judgment debtor from making an application for security. In New South Wales, the registration of a foreign judgment is determined ex parte (i.e. without the other party’s attendance and notice), and it is always the case that a judgment debtor applies for setting aside after the registration is completed. As such, a judgment creditor is relevantly in the position of a respondent/defendant who needs to respond to a motion brought by a judgment debtor. On that premise, it is unreasonable to view that UCPR r 53.4 is interpreted in a way that a moving party seeking a court order, i.e. a judgment debtor, is also allowed to seek security for costs that may stop a judgment creditor from responding to a judgment debtor’s motion