Supreme Court New South Wales Medium Neutral Citation: Ye v Chen (No 2) [2021] NSWSC 1265 Hearing dates: 1 July 2021 Date of orders: 6 October 2021 Decision date: 06 October 2021 Jurisdiction: Common Law Before: Harrison AsJ Decision: The Court Orders: (1) I decline to vacate my prior order that the defendant pay the plaintiff's costs on an ordinary basis. (2) Both parties are to pay their own costs of their written submissions Catchwords: COSTS – No point of principle Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.14, 42.5 Local Court Act 2007 (NSW), ss 39, 40 Cases Cited: Leichhardt Municipal Council v Green [2004] NSWCA 341 Oshlack v Richmond River Council (1998) 193 CLR 22 72 Ye v Chen [2021] NSWSC 1098 Ye v Chen [2021] NSWSC 272 Category: Costs Parties: Rebecca Ye (First Plaintiff) Ucer Investment and Resources Management Pty Ltd (Second Plaintiff) Yu Chen (Defendant) Representation: Counsel: A M Cheema (First and Second Plaintiff) J L Harrison (Defendant) Solicitors: Musabbir Abdul Hassan (First and Second Plaintiff) Fei Wang (First Defendant) File Number(s): 2021/6370 Publication restriction: Nil Judgment 1. HER HONOUR: On 31 August 2021, I delivered judgment in Ye v Chen [2021] NSWSC 1098. I made an order that Ms Chen's amended notice of motion filed 18 June 2021 be dismissed. I also made an order that the defendant pay the plaintiffs' costs on an ordinary basis. 2. The plaintiffs indicated that they wished to seek that their costs be paid on an indemnity basis. On 2 September 2021, I made orders that the plaintiff is to file further written submissions with regards to indemnity costs before 9 September 2021, and that the defendant is to do the same before 16 September 2021. I have now received those submissions. The letter of offer (dated 2 April 2021) 1. On 21 April 2021, the plaintiffs' solicitor sent the defendant's solicitor a letter (the "letter of offer") which invited the defendant to withdraw its motion with no order as to costs, and to 'progress the appeal to hearing'. The letter of offer was followed by an email on 27 April 2021 confirming that the offer remained open and would expire on 30 April 2021 (the "Email"). 2. The letter of offer dated 21 April 2021 is made without prejudice save as to costs. It relevantly reads: "As pointed out by the Duty judge (in obiter), a final decision can be infected by error as a result of an earlier interlocutory decision. Your insistence that it was incumbent on our client to appeal the interlocutory decision at the time it was made is erroneous. The further relief for security for costs is also likely to fail given the terms of the stay granted in the Local Court by which your client's position is protected by the payment of $150,000 into a trust account by 31 May 2021 (as amended by the Duty Judge). Notably, these costs are yet to be assessed and do not account for previous costs orders made against your client. In the circumstances we invite your client to withdraw the notice of motion with no order as to costs with further orders made to progress the appeal to hearing - principally the service of the appeal affidavit by our client. In the event, your client does not accept the above offer, we shall rely on this letter in support of an application for indemnity costs. We estimate that our costs of the motion will be greater than $30,000." 1. The starting point in awarding costs is s 98 of the Civil Procedure Act 2005 (NSW). It relevantly reads: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. ..." 1. Rule 42.14 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") relevantly reads: "42.14 Where offer not accepted and judgment no less favourable to plaintiff (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) ..." 1. UCPR 20.26 relevantly reads: "20.26 Making of offer (cf SCR Part 22, rules 1A, 2, 3 and 4; DCR Part 19A, rules 1, 2, 2A, 3 and 4; LCR Part 17A, rules 2 and 5) (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule: (a) must identify: (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and … (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and … (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose: (a) a judgment in favour of the defendant: (i) with no order as to costs, or (ii) despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer. … (5) The closing date for acceptance of an offer: (a) in the case of an offer made two months or more before the date set down for commencement of the trial-is to be no less than 28 days after the date on which the offer is made, and (b) in any other case-is to be such date as is reasonable in the circumstances." 1. I will refer to two cases as to how the discretion to award indemnity costs must be exercised. They are Leichhardt Municipal Council v Green [2004] NSWCA 341 ("Leichhardt Council") and Oshlack v Richmond River Council (1998) 193 CLR 22 72 ("Oshlack"). 2. In Leichhardt Council the Court of Appeal (per Santow, Bryson JAA and Stein AJA) stated at [47]: "[47] The conclusion that indemnity costs should not be viewed as a necessary or automatic consequence of not accepting a defendants offer does not in any way deny the general discretionary power of the Court regarding costs in such circumstances. It merely recognizes that, influenced but not bound by the rules, a Court will be reticent to award such indemnity costs following defendant offers of settlement. It cannot be forgotten that the power to award indemnity costs is within the Court's general discretion in any event (see s148AB District Court Act 1973, s76(1)(c) Supreme Court Act 1970). It is preferable to consider applications for indemnity costs following unaccepted offers of compromise by defendants as being applications for a favourable exercise of the Court's general discretion to award indemnity costs. As far as Calderbank offers go there is very little difference, the costs consequences of these lying entirely within the Court's general inherent discretion on costs. Nothing said in GIO General Ltd v ABB Installation & Service Pty Ltd (supra) derogates from this conclusion. The Court there merely held that the trial judge's discretion not to award indemnity costs was not appellably erroneous. The decisions of Dunford J in Bishop (supra) and McKerlie (supra) can be regarded likewise. The authorities (especially Jones v Bradley) emphasise the width of the discretion and the unusual nature of an award of indemnity costs in relation to Calderbank letters." 1. In Oshlack, the High Court summarily stated at [44]: "[44] It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a "solicitor and client" basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part." The plaintiff's submissions 1. These submissions, where necessary, should be read in conjunction with the plaintiffs' submissions dated 25 June 2021. The defendant has been unsuccessful in each of the categories of relief she sought in her motion filed on 16 March 2021 (amended 26 May 2021) ("the Motion"). As a result the plaintiffs make an application for indemnity costs pursuant to UCPR r 42.5. 2. On 22 March 2021, this and another of the defendant's motions were before his honour Beech-Jones J. His honour stated that "summary judgement applications for appeals on questions of law will very rarely be entertained in advance of the hearing of the final appeal." However the defendant and her legal representatives persisted with the Motion. 3. On 1 April 2021, the Registrar halted the progress of the appeal, until the hearing of the defendant's motion. Given the finality of relief sought in the Motion, the Registrar rightly deemed that it ought to progress first. 4. The defendant's solicitors did not respond to either the letter of offer or the Email. Neither was there any correspondence requesting an extension of time (or clarification, if any were needed) to the offer. 5. On 27 May 2021, the defendant served its evidence on the Motion which attached the whole of the transcript from the court below and was some 600 pages in length. The defendant relied on 4 affidavits affirmed by her solicitor, Mr Fei Wang. Closer to the hearing the overwhelming majority of the 850 page court book was comprised of the defendant's evidence. 6. Mercifully, the plaintiffs' evidence was short and to the point. It comprised of her solicitor's two affidavits which annexed relevant parts of the transcript from the Local Court and the summons, and totalled forty pages. 7. On 1 July 2021 the matter was heard, over the course of half a day with judgment being handed down on 31 August 2021. 8. The final result is more favourable to the defendant than what it offered in the letter of offer. Its rejection is made more unreasonable in circumstances where the defendant and her legal representatives were on notice about the prospects of the Motion by his honour's remarks and the contents of the letter of offer. 9. The Motion was unusual, a waste of court time and resources, and was bound to fail from the outset. 10. A more orthodox approach would have been to make the defendant's application at the same time as the hearing of the appeal where the same overlapping issues would have been heard and determined. The approach adopted by the defendant has resulted in additional unnecessary legal costs and the appeal is no closer to being determined. 11. A formal warning to claim indemnity costs (as occurred in the present case) will enhance the prospects of success on an application for costs to be paid on an indemnity basis. 12. As such it was 'unreasonable' for the defendant to reject the plaintiffs' offer to forego its costs in exchange for the withdrawal of the motion. 13. In the circumstances of this case the plaintiffs ought to be given a fuller measure of protection, by way of an order for indemnity costs from after 30 April 2021, for the significant, yet avoidable, additional costs that they incurred in successfully defending the Motion. The defendant's submissions 1. The issue appears to be whether, in the circumstances of this case, the existing order which provides "the defendant is to pay the plaintiff's costs on an ordinary basis" should now be altered by the court in order to provide that "the defendant is to pay the plaintiff's costs on an indemnity basis". 2. The letter of the plaintiffs' current solicitor (Auburn Lawyers) dated 21 April 2021 did not provide for the plaintiffs amending the original summons (which was filed on 8 January 2021 by Citi Lawyers, a former firm of solicitors for the plaintiffs). 3. The terms of the offer are not clear because the offer proposes as part of its terms "further orders made to progress the appeal". 4. Accordingly, noting the following sequence of events, it was reasonable for the defendant not to 'accept' the offer (assuming that the offer was capable of being accepted). 5. Relevantly, on 9 February 2021, the defendant provided the plaintiffs with submissions which identified the need for the original summons to be amended. 6. Those submissions included as follows: "The Appeal incorrectly purports to be brought pursuant to s 39 of the Local Court Act 2007 when it ought to have been made under s 40, and leave is required as the decision was an interlocutory order, see Addendum below. Further, the Appeal incorrectly states that the material date is 11 December 2020, when the Judgement was issued following the trial, rather than 12 February 2020, when the interlocutory decision was "pronounced or given". Leave is also required due to the Company's breach of UCPR 50.3(1)(a). There are at least five reasons why there is no real prospect of the Supreme Court granting the Company the leave it requires to proceed with the Appeal…" 1. After the defendant provided those submissions on 9 February 2021, the plaintiff (via Citi Lawyers or Auburn Lawyers) never committed to amending the original summons. 2. However, soon after Harrison AsJ decided the motion on 31 August 2021, the plaintiffs promptly served a proposed amended summons on 9 September 2021, which was filed the following day without opposition from the defendant. 3. The amended summons attempts to address the content of the submissions provided by the defendant on 9 February 2021, outlined above. 4. The amended summons is brought pursuant to both ss 39 & 40 of the Local Court Act 2007 (NSW) ("LCA"). 5. The amended summons expressly relies on [23] of Stapleton LCM's final decision, presumably to attempt to contend that her Honour's final decision on 11 December 2020 reflects the material date rather than her earlier interlocutory decision on 12 February 2020. Thus, it will now apparently be contended that, the issues regarding leave to appeal out of time, outlined within the defendant's submissions dated 9 February 2021, will fall away. 6. Furthermore, the Motion sought an order for security for costs with respect to the defendant's future costs related to the appeal proceedings in the Supreme Court. The letter of offer suggested that no such security regarding future costs was required in light of the payment required by the condition of the stay. 7. However, the condition of the stay only protects part of the defendant's costs incurred previously in the Local Court proceedings. The condition of the stay does not protect the future costs which the defendant will incur in the appeal proceeding in the Supreme Court. Accordingly, it was reasonable for the defendant not to accept the offer. 8. This is particularly so in circumstances where no evidence was advanced in opposition to the order for security for costs on behalf of the plaintiffs. 9. The Court's power to order costs is discretionary. The offer is not clear as to what other 'further orders' were proposed. The offer is certainly not an offer of compromise made in accordance with UCPR r 20.26. 10. In this case: 1. Stapleton LCM found that Ms Ye persisted with a defence which Ms Ye knew to be untrue. There is a real issue concerning Ms Ye's reliability, noting the abundant evidence which was tendered against her in the Local Court and the testimony of four lay witnesses (one lay witness was a friend of Ms Ye herself). The plaintiffs are impecunious. 2. None of the appeal grounds were argued in the court below, without explanation (despite lengthy preparations and 5 days of trial). 3. The plaintiffs did not answer the content of the defendant's submissions dated 9 February 2021 in relation to s 40 LCA and the lack of prospects of the Supreme Court granting leave to appeal out of time. 4. On 8 March 2021, Ms Ye placed her real property on the market for auction. 5. On 10 March 2021, the plaintiffs breached Stapleton LCM's condition of stay, without notice, after failing to respond to enquiries in that regard. 1. In these circumstances, there was plainly a proper basis for the motion to have been filed on 16 March 2021 in order to attempt to protect the defendant's rights, particularly with respect to mounting legal costs. 2. Following the decision on the Motion, rather than the plaintiffs actually pursuing the original summons which they defended during the hearing of the motion, an amended summons was filed. 3. It can now be seen that the motion was required to provoke the plaintiffs to address the submissions which the defendant provided on 9 February 2021, seven months before the amended summons was filed. 4. Had the offer enclosed the draft amended motion, perhaps aspects of the motion would have resolved in April 2021. 5. Finally, the plaintiffs' costs of the motion appear modest, for example, the affidavit of the plaintiffs' solicitor was the only evidence advanced in opposition to the motion, and the content of that affidavit did not appear necessary. 6. In all the circumstances, the Court should maintain the standard order, namely, that 'the defendant is to pay the plaintiff's costs on an ordinary basis' rather than alter that order to 'the defendant is to pay the plaintiff's costs on an indemnity basis'. 7. In reply to the plaintiffs' submissions dated 9 September 2021 (the same date upon which the proposed amended summons was served), the many pages of Local Court transcript which the defendant made available in the Court Book (for completeness, in view of the nature of the orders sought) merely constituted evidence which the plaintiffs presumably will consider during the substantive appeal. Particularly in view of the content of the defendant's submissions on the motion, the inclusion of the transcript probably will not increase the plaintiffs' total costs. 8. Otherwise, the defendant has always laboured to advance this dispute to finalisation and the plaintiffs' submissions dated 9 September 2021 do not address the defendant's submissions dated 9 February 2021. Resolution 1. While the defendant still maintains that there was a proper basis for the Motion to discuss the appeal on a summary basis, the reason she says is that it was an attempt to protect the defendants' rights particularly with respect to mounting legal costs. This is a surprising submission given that in Ye v Chen [2021] NSWSC 272 Beech-Jones J drew to the attention of the plaintiffs' counsel that questions of law will rarely be entertained in advance of the hearing. Of the final appeal. I also expressed the same view. See: Ye v Chen [2021] NSWSC 1098 (my earlier decision) at [31] and [32]. 2. The defendants had already lodged $263,000 as security for costs. The only reason that I decline to award the defendant's indemnity costs is because I gave them some latitude in considering matters that had not been articulated in the notice of appeal. The plaintiff has now filed an amended notice of appeal. I decline to vacate my earlier order that the defendants are to pay the plaintiffs costs on an ordinary basis or to award indemnity costs to the plaintiff in relation to the defendant's amended notice of motion filed 18 June 2021. 3. The parties are to pay their own costs of these written submissions. The Court orders 1. I decline to vacate my prior order that the defendant pay the plaintiff's costs on an ordinary basis. 2. Both parties are to pay their own costs of their written submissions. ********** 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: 06 October 2021