Supreme Court New South Wales Medium Neutral Citation: Ou v Wan (No 2) [2021] NSWSC 28 Hearing dates: On the papers Date of orders: 29 January 2021 Decision date: 29 January 2021 Jurisdiction: Equity - Corporations List Before: Williams J Decision: No variation to the costs order contained in order 7 of the orders made on 22 December 2020 Catchwords: COSTS – no issue of principle Legislation Cited: Corporations Act 2001 (Cth), s 461(1)(k) Cases Cited: Ou v Wan [2020] NSWSC 1899 Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 Category: Costs Parties: Guozhong Ou (Plaintiff/First Cross-Defendant) Xianguo Wan (First Defendant/Cross-Claimant) Ou's International Pty Ltd (Second Defendant/Second Cross-Defendant) Australian Health International Pty Ltd (Third Defendant) Representation: Counsel: Mr W R Chan (Plaintiff/First Cross-Defendant) Solicitors: ABP Lawyers (Plaintiff/First Cross-Defendant) Self-represented: First Defendant/Cross-Claimant File Number(s): 2018/97178 Publication restriction: N/A Judgment 1. I published reasons for judgment in this matter on 22 December 2020 dismissing all claims and cross-claims in the proceeding save that I made orders for the winding up of the second defendant/second cross-defendant (Ou's International Pty Limited) and the third defendant (Australian Health Pty Limited) pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth): Ou v Wan [2020] NSWSC 1899 (the principal judgment). 2. The winding up orders were made on the application of the plaintiff/first cross-defendant (Mr Ou), and were not opposed by the first defendant/cross-claimant (Mr Wan) by the time of the hearing conducted before me on 3 to 6 November 2020. 3. The dismissal of all other claims and cross-claims extended to Mr Ou's claim against Mr Wan for damages for alleged breach or repudiation of contract and Mr Wan's cross-claim against Mr Ou for damages for alleged breach of contract. 4. In relation to the orders for the winding up of the two companies, I formed the opinion expressed at [136] of the principal judgment that: " … each of Mr Ou and Mr Wan bears equal responsibility for their failure to bring the companies' affairs to an end in an orderly manner without needing to approach the Court for a winding up order." 1. I continued (at [136]): "In those circumstances, and given that both parties' damages claims have failed, my preliminary view is that each of Mr Ou and Mr Wan should pay his own costs of the proceedings. In Mr Wan's case, that includes his costs of the interpreter. I will make directions permitting either party to file and serve short written submissions in the event that they contend for a different costs order, in which case I will review those submissions and determine the question of costs on the papers." 1. I made the following orders: "7. Subject to order 8 below, order that: (a) the Plaintiff/First Cross-Defendant pay his own costs of the proceedings; and (b) the First Defendant/Cross-Claimant pay his own costs of the proceedings. 8. In the event that either party contends for a costs order other than order 7 above: (a) grant liberty to that party to file and serve by 28 January 2021 written submissions of no more than 2 pages directed to the costs order for which that party contends; and (b) grant liberty to the other party to file and serve by 3 February 2021 written submissions in reply of no more than 2 pages." 1. On 28 January 2021, Mr Ou served submissions contending for: 1. an order that Mr Wan pay Mr Ou's costs of the proceedings on the ordinary basis from 20 February 2019 or, alternatively, from 30 April 2020; or 2. alternatively, an order that Mr Wan pay Mr Ou's costs of the hearing that was listed for 5 to 7 May 2020 but was vacated in circumstances that I will refer to below. 1. On 29 January 2021, Mr Wan served submissions dated 27 January 2021 contending for an order that Mr Ou pay "all or part of" Mr Wan's "costs, attorney's fees and other expenses incurred by Mr Wan in connection with the case" on the basis that "the incident was entirely caused by Mr Ou" and "based on the principle of fairness". 2. Mr Ou's first submission relies on Mr Wan's failure to accept two offers made by Mr Ou, which he characterises as Calderbank offers. 3. In the first offer, made by letter dated 11 February 2019, Mr Ou offered to settle the matter on the basis that Mr Ou would transfer all of his shares in the two companies to Mr Wan, Mr Ou would resign as a director of Ou's International Pty Ltd, the proceedings would be dismissed and each party would pay its own costs. The offer was conditional upon Mr Ou being released as a guarantee of the lease of premises at Kingsford under which Ou's International Pty Ltd was the lessee. 4. In the second offer, Mr Ou offered to settle the matter on terms that the parties sign consent orders to the effect that the proceedings be dismissed with no order as to costs, the parties release one another from any future claims or actions with respect to the issues raised in the proceedings, and Mr Wan pay Mr Ou the sum of $20,000. 5. As the Court of Appeal said in Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 (Gleeson JA, Meagher and McCallum JJA agreeing): "68. There is no presumption that an offeree who does not accept an offer, and does not obtain a more favourable judgment, will necessarily pay indemnity costs from the date of the offer: Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [9]; Miwa Pty Ltd v Siatan Properties Pty Ltd (No 2) [2011] NSWCA 344 (Miwa) at [8]; Jones v Bradley (No 2) [2003] NSWCA 258 at [6]-[9]. 69. The principles on which indemnity costs will be ordered as a consequence of non-acceptance of a Calderbank offer are well-known: see, for example, the remarks of Basten JA in Miwa at [6]-[16]. Basten JA identified at [8] two questions, namely, whether: (1) there was a genuine offer of compromise; (2) it was unreasonable for the offeree not to accept it." 1. In all the circumstances of this case, I do not regard Mr Wan's failure to accept either of the two offers as unreasonable. 2. The first offer was conditional upon Mr Ou being released as a guarantor of Ou's International Pty Limited's obligations under the lease of the Kingsford premises. As recorded in the principal judgment at [17], [30] and [56], Ou's International Pty Limited had traded from those premises since early 2014, but Mr Wan had worked predominantly from other premises since mid-2015. From late December 2015, Mr Wan had no involvement in the business of Ou's International Pty Limited. However, according to an affidavit of Wen Tao Lu affirmed on 20 January 2021 and relied on in support of Mr Ou's costs application, the lease of the Kingsford premises remained on foot until it was terminated by the lessor on one month's notice on 20 February 2019. 3. In those circumstances, I infer that as at February 2019, it would have been very difficult, if not impossible, for Mr Wan to know what liabilities Ou's International Pty Limited might have incurred under its lease of the Kingsford premises since the end of 2015 for which Mr Wan would be liable as the sole remaining director of Ou's International Pty Limited and guarantor if he accepted the first offer and procured the lessor's release of Mr Ou's guarantee. 4. For completeness, I note that Mr Lu's affidavit asserts that, on the termination of the Kingsford lease, "Mr Ou ceased to be a guarantor of Ou's International to the Kingsford shop lease". As I understand it, this assertion was put forward as suggesting that the condition precedent to the first offer had been satisfied on 20 February 2019 and that the question is therefore whether it was unreasonable for Mr Wan to fail to accept the offer thereafter. 5. There was no evidence to support Mr Lu's assertion. In my opinion, it would be unusual for the terms of a guarantee given to a lessor under a retail or commercial lease to bring to an end the obligations of a guarantor accrued prior to termination of the lease solely by reason of the termination of the lease. For those reasons, I consider that acceptance of the first offer after 20 February 2019 would have required Mr Wan to procure a release from the lessor in favour of Mr Ou, potentially leaving Mr Wan with liabilities the nature or extent of which he was not reasonably able to assess at the time he was considering the first offer. 6. The second offer makes no provision for the winding up or ongoing management of the two parties, and the stalemate between the parties that had persisted since late 2015 (as described in the principal judgment) would not have been resolved by Mr Wan's acceptance of the offer. I therefore do not regard his failure to accept the second offer as unreasonable. I also note that the offer was open for acceptance only for a few hours, as Mr Ou's submissions acknowledged. 7. I reject Mr Ou's alternative application for an order that Mr Wan pay his costs of the hearing that was vacated in May 2020. The circumstances in which that hearing was vacated were explained in an ex tempore judgment delivered by Black J on 4 May 2020. The Court Book prepared by Mr Ou (as the plaintiff) contained statements and documents in Mandarin that had not been translated. Mr Wan's solicitor had recently been granted leave to cease acting in circumstances where Mr Wan could no longer afford to pay him. Mr Wan required an interpreter for the hearing, but it was not clear how he could fund the cost of doing so. Mr Ou declined to provide an interpreter for the hearing. 8. Black J vacated the hearing dates 5 to 7 May 2020 and stayed the proceedings because the hearing could not proceed until the Court Book was regularised (including by providing translations of Mandarin documents) and either Mr Wan or Mr Ou arranged an interpreter for the whole of the hearing. The stay was subsequently lifted and the hearing proceeded before me on 3 to 6 November 2020 with Mr Wan providing the interpreter. 9. Mr Ou submitted that he has incurred the costs of having his solicitor and counsel "reserved" for the May 2020 hearing and that this could have been avoided if Mr Wan had indicated prior to 4 May 2020 that he was not ready to proceed. 10. Correspondence annexed to Mr Lu's affidavit reveals that Mr Ou's solicitors were informed on 15 April 2020 that Mr Wan's former solicitors were no longer acting for him. 11. Given the friendship between Mr Ou and Mr Wan over many years prior to the commencement of their business relationship in 2013 and their business relationship between 2013 and 2015 (as referred to in the principal judgment) and the fact that it was clear from the face of Mr Wan's affidavits served prior to May 2020 that those affidavits had been interpreted for him before being sworn, I infer that Mr Ou and his legal representatives were well aware that Mr Wan would require an interpreter to participate in the hearing and that his lack of legal representation made the need for an interpreter all the more critical. 12. Mr Ou complains that Mr Wan did not inform him that he could not proceed with the May 2020 hearing, but there is no evidence that Mr Ou or his legal representatives made any inquiries to ascertain whether Mr Wan would have the services of an interpreter. 13. Moreover, as Black J's judgment records, Mr Ou (as the plaintiff responsible for preparation of the Court Book) took no steps to arrange translations of material in the Court Book in the Mandarin language. It must have been clear to him and his legal representatives that the Court would be unable to deal with that material without such translations. 14. In all of those circumstances, I consider that Mr Ou and Mr Wan bear equal responsibility for the vacation of the hearing in May 2020 and I reject Mr Ou's application for an order that Mr Wan pay that component of his costs. 15. Mr Wan's submissions relying on "the incident" having been "entirely caused by Mr Ou" effectively ask the Court to revisit factual matters, all of which were canvassed in my reasons for judgment. Neither those matters, nor Mr Ou's submissions and evidence in relation to costs, cause me to reach a different view to that which I expressed on a preliminary basis at [136] of the principal judgment. 16. For those reasons, I make the following orders and notation: 1. Order that the plaintiff/first cross-defendant pay his own costs of his application for costs orders made by written submissions dated 28 January 2021. 2. Order that the first defendant/cross-claimant pay his own costs of his application for costs orders made by written submissions dated 27 January 2021 and received on 29 January 2021. 3. Note that order 7 made on 22 December 2020 otherwise operates unconditionally from 29 January 2021. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 January 2021