District Court New South Wales Medium Neutral Citation: Shao v Zhang & Anor; Zhang & Anor v Shao (No 2) [2022] NSWDC 179 Hearing dates: Written submissions Date of orders: 26 May 2022 Decision date: 26 May 2022 Jurisdiction: Civil Before: Gibson DCJ Decision: Orders: (1) The Plaintiff pay the Defendants' costs on the ordinary basis up to 30 October 2020, and on the indemnity basis thereafter. (2) Pursuant to Civil Procedure Act 2005 (NSW) section 98(4)(c), the Plaintiff pay the Defendants' costs as a gross sum costs order in the amount of $243,833.37, representing costs of $18,950.95 on the ordinary basis up to 30 October 2020, and $ 224,882.42 on the indemnity basis thereafter. (3) Pursuant to Civil Procedure Act 2005 (NSW) section 100(1), the Plaintiff pay the Defendants the sum of $4,268.53 as pre-judgment interest. (4) Pursuant to Civil Procedure Act 2005 (NSW) section 101(1), the Plaintiff pay the Defendants the sum of $45 per day for each day since the delivery of the Judgment until the sum of $269,237.46 is paid by the Plaintiff in relation to the cross-claim. (5) The Plaintiff pay the Defendants' costs of the motion, as a gross sum costs order, in the sum of $8,492.24. Catchwords: COSTS - indemnity costs - offer of compromise - whether offer complies with UCPR r 20.26 - whether offer open for 28 days - Calderbank offers - whether offers a genuine compromise and capable of acceptance - whether costs should be assessed or the subject of gross sum costs orders Legislation Cited: Civil Procedure Act 2005 (NSW) ss 98, 100 and 101 Uniform Civil Procedure Rules 2005 rr 20.26, 42.1, 42.2, 42.14 and 42.16 Cases Cited: Calderbank v Calderbank (1975) 3 All ER 333 Chaina v Presbyterian Church (NSW) Property Trust (No 26) [2014] NSWSC 1009 Davis v Swift (No 2) [2015] NSWCA 137 Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 Fabre v Lui (No 2) [2015] NSWCA 312 Fairfax Pty Ltd v Printlane Pty Ltd (No 2) [2009] NSWDC 121 Guest v Karl Romandi & Helen De Luis Pty Ltd (No. 2) [2012] NSWCA 105 Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 Jones v Bradley (No 2) [2003] NSWCA 258 Jones v Bradley (No 2) [2003] NSWCA 258 Leichhardt Municipal Council v Green [2004] NSWCA 341 Leichhardt Municipal Council v Green [2004] NSWCA 341 Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 Mohamed v Farah [2004] NSWSC 482 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 Port Stephens Shire Council & Anor v Tellamist Pty Ltd (No 2) [2004] NSWCA 415 Shao v Zhang & Anor; Zhang & Anor v Shao [2022] NSWDC 38 Snowy Mountains Grammar School Ltd v Adventurer AWD Pty Ltd [2022] NSWSC 53 Taheri v Vitek (No 2) [2014] NSWCA 344 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11 Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 Wagner & Ors v Nine Network Australia & Ors (No 2) [2019] QSC 309 Category: Costs Parties: Plaintiff/cross-defendant: Mr Woquan Shao (self-represented) Defendants/cross-claimant: First defendant/ First cross-claimant: Ms Liying Zhang Second defendant/ Second cross-claimant: Oceania Investments Group Pty Ltd Representation: Counsel: Defendants/cross-claimants: Mr B Cameron Solicitors: Defendants/cross-claimants: Concisus Legal Pty Ltd File Number(s): 2020/00135051 Judgment The application before the court 1. In June 2019, the plaintiff (hereafter "Mr Shao") entered into the first of a series of three agreements with the second defendant (hereafter "Oceania") for the operation and subsequent purchase of a beauty business which had been, up until that time, conducted by the first defendant, a beautician (hereafter "Ms Zhang"). Mr Shao commenced running the business shortly afterwards on a "try before you buy" basis and then decided to go ahead with the purchase. The final purchase agreement between Mr Shao and Oceania, signed on 4 November 2019, required the payment of three instalments, with the second and third of these being due on 29 February and 10 May 2020. 2. Mr Shao paid the first instalment but, instead of completing the purchase, he sent an email to the defendants on 3 March 2020 stating, without explanation, that he would no longer participate in the business and would not pay the remaining instalments. On that same date, his solicitors notified the defendants that the plaintiff's last day of work at the business would be on 8 March 2020. This was very short notice. Mr Shao was offered an extension of time to 25 May 2020 for completion of the purchase for the two outstanding sums, but did not take it up. 3. Mr Shao commenced these proceedings on 6 May 2020. The defendants brought a cross-claim on 24 June 2020, initially seeking specific performance (as well as claims arising from Mr Shao's poor management and failure to comply with obligations under the contract to make required payments, which offsets were later admitted) but, after being able to sell the business to a third party, amended the cross-claim in 2021 to plead damages for the loss of the contract in lieu of the specific performance claim. 4. On 28 February 2022 I handed down judgment (Shao v Zhang & Anor; Zhang & Anor v Shao [2022] NSWDC 38) and made orders as follows: (1) Judgment for the defendants on the statement of claim. (2) Judgment for the defendants/cross-claimants on the cross-claim in the amount of $269,237.46. (3) Costs and interest reserved, with liberty to apply. (4) Exhibits retained until further order. 1. The defendants now seek orders for the payment of interest and for costs, including costs on an indemnity basis, and for a gross sum costs order pursuant to s 98 of the Civil Procedure Act 2005 (NSW). 2. The defendants rely upon the affidavit of Mr Colin Oi affirmed on 8 April 2022, which attaches the relevant correspondence as well as information about the quantum of the costs. Mr Shao, who appears for himself, had provided no evidence on these applications but has provided written submissions opposing the orders sought. The offer of compromise 1. On 30 October 2020, the solicitors for the defendants forwarded an offer of compromise which was also, in the covering letter, expressed to be a Calderbank offer (Calderbank v Calderbank (1975) 3 All ER 333). 2. The text of that letter is as follows: "30 October 2020 Brightstone Legal Level 35, 31 Market Street, Sydney NSW 2000 By email only: [redacted] WITHOUT PREJUDICE SAVE AS TO COSTS Dear Colleagues, Re: Zhang & Anor ats Shao District Court of NSW proceedings no. 2020/135051 1. We refer to the enclosed offer of compromise in respect of the parties' claims in the proceedings. 2. By the Amended Statement of Claim (ASOC), your client seeks: a. judgment against our clients in respect of its claim for liquidated damages amounting to no less than $68,852.00; and b. judgment against the first defendant in respect of its claim for liquidated damages comprising amounts of $100,000 and RMB 250,000 (the Refundable Deposit). The Plaintiff's claim is unlikely to succeed 3. Our clients consider that your client's claim is unlikely to succeed. 4. The payments set out in paragraph 6 of the ASOC will not be held to be overpayments under the First Agreement. 5. Rather, our clients consider that the Court will very likely find that the payments to the second defendant's bank account, referred to in paragraph 6 of the ASOC were in keeping with your client's obligation to pay the costs and expenses of operating the Coco Beauty Business during the term of the First Agreement. 6. Further, in respect of the alleged Refundable Deposit, it is our clients' position that the payments comprising the alleged Refundable Deposit strongly support the proposition that your client has substantially performed his payment obligations under the July and Second Agreements. 7. Nothing in the July or Second Agreements support the proposition that these payments were "refundable". 8. It is also our clients' position that it will be evident that there was no rescission of the Second Agreement as alleged in your client's pleadings. The Cross-claim will succeed 9. Our clients consider that they have very good prospects in relation to the Cross-claim. 10 It is evident from the contemporaneous documentation, and the admissions made by your client in correspondence, that your client made material representations upon which our clients relied to their detriment. It is also clear that your client has breached the agreements reached between our clients. 11. Pursuant to Clause VI of the Second Agreement, our client is entitled to be paid the sum of $125,088, in addition to the other heads of damages set out in the Statement of Cross-claim. 12. Upon success in the Cross-claim, our clients will be seeking their costs from your clients. Offer of Compromise 13. Notwithstanding that our clients contest the genuineness of your client's claims, we are instructed that they are prepared to settle these proceedings on the basis of the enclosed offer of compromise. 14. In the event that the offer is not found to have been validly made under rule 20.26 of the Uniform Civil Procedure Rules 2005, it is intended alternatively as an offer in accordance with the principles enunciated in Calderbank v Calderbank. 15. If the offer is accepted, our clients would be content for the plaintiff to resume control of the Coco Beauty Business, and assist with the transfer of the lease or, failing that, maintain the lease provided that your client pays the rent, effectively "completing" the Second Agreement for $35,088 less than the $125,088 payable by your client. 16. Our client would also forbear from pursuing claims in respect of additional loss and damages which our clients have incurred as a result of your client's misrepresentations and breaches of contract, including further costs of maintaining the Coco Beauty Business since March 2020. Should the proceedings not resolve, our clients reserve the right to pursue those further losses in the proceedings. 17. For the above reasons, our clients consider that the terms of the enclosed offer represent a genuine compromise for the purposes of entitling them to an order for indemnity costs as and from the date of the offer, in the event that the ultimate outcome of the proceedings is as or more favourable to our clients than the terms of the enclosed offer. 18. If you have any queries, please do not hesitate to contact us. Yours sincerely, Concisus Legal Colin Oi Solicitor" 1. The terms of the enclosed offer of compromise were as follows: "1. The defendants offer to compromise these proceedings with the plaintiff on the basis that the plaintiff consents to the following orders: a. The plaintiff/cross-defendant pay the second defendant / second cross-claimant the amount of $90,000; b. the whole of proceedings 2020/135051 is dismissed; c No Order as to costs. 2. The offer is open for acceptance by the plaintiff for a period ending at 5pm on the 28th day following the date of this offer. 3. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005" 1. In the offer of compromise, the defendants proposed to resolve the whole of the proceedings on the basis that the plaintiff pay the second defendant in the amount of $90,000. At this stage, the defendant's costs in the proceedings were just under $30,000, according to paragraph 38 of Mr Oi's affidavit. However, the covering letter made an additional offer. if the offer of compromise were accepted, as to how it could be implemented, namely that the terms of the offer could, if Mr Shao wished, be replaced by another agreement for payment of a lesser sum ($35,088 less than the $125,088 payable by Mr Shao under the agreement). Nevertheless, the offer of $90,000 inclusive of costs could be accepted without these alternatives being considered. 2. No response was received to this offer. The parties exchanged their evidence between 1 December 2020 and 23 February 2021. The plaintiff then failed to comply with an order to serve evidence in reply by 5 April 2021 and, on 12 May 2021, the defendants, by notice of motion, sought orders for the filing of this evidence, failing which the claim should be struck out. On 14 May 2021, the court ordered the plaintiff to find his evidence by 4 June 2021 and to pay the defendants' costs of the notice of motion. That order was complied with. 3. Two weeks later, on 18 June 2021, a second offer was made. This offer was expressed to be a Calderbank offer only. As is generally the case with offers of this kind, statements were made in the offer as to the reasons why it was considered the offer ought to be accepted. The explanation for the shortness of the period of time was related to the approaching time in which the defendants were to serve the evidence in reply on the cross-claim. 4. Once again, no response was received to this second offer. After the defendants served their evidence in reply on 13 July 2021, the parties undertook a mediation, where the proceedings failed to settle. Both parties substantially revised their pleadings immediately prior to the commencement of the hearing on 27 July 2021. That hearing resulted in the defendants substantially bettering their offers. Mr Shao's submissions 1. Mr Shao's submissions of 16 May 2022 are expressed to have been written by him personally. His submissions may be summarised as follows: 1. The offer of compromise fails to comply with Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 20.26(2)(a)(i), for two reasons. First, the offer to settle "these proceedings" makes it "unclear as to what precisely the offers relate to" (submissions, paragraph 5). Second, clause 2 of the offer of compromise does not comply with r 20.26(5)(a) because this rule requires "no less than" (i.e. more than) 28 days after the offer date for the offer to be valid, whereas here the first offer expired on the 28th day at 5 pm. 2. The offer of compromise was not a valid Calderbank offer because it was not a genuine compromise, it was incapable of acceptance and it was not unreasonable for Mr Shao to reject it. 3. The second offer, which was a Calderbank offer only, was similarly not a valid offer. The validity of the offer of compromise 1. The offer of compromise was clearly put forward on the basis that the "whole of proceedings 2020/135051 [be] dismissed". Use of the phrase "the whole of the proceedings" (in terms of what must be disposed of) is commonly found in curial descriptions of what the offer must state: see, for example, Guest v Karl Romandi & Helen De Luis Pty Ltd (No. 2) [2012] NSWCA 105 at [6]. 2. In Port Stephens Shire Council & Anor v Tellamist Pty Ltd (No 2) [2004] NSWCA 415 at [14], the Court specifically rejected submission similar to that made by Mr Shao, namely that a cross-claim was not included by such language: "Tellamist also submitted that the offer of compromise was ineffective under the Rules because at the time of the offer there was on foot the Council's cross-claim. Tellamist said that the words "entire action" in the offer of compromise could not include the cross-claim, and that because the policy of the rules was to bring the whole of the proceedings to an end the offer could not be accepted by Tellamist because acceptance would not do so. I do not agree. By Pt 22 r 2 an offer may be made to compromise "any claim in the proceedings". Although it was regrettably less than explicit, the preferable view is that the words "the entire action" in the circumstances extended the offer to the Council's cross-claim as well as Tellamist's claims. The emphatic words were meant to take the offer beyond Tellamist's claims, and by late 2002 enforcement of dedication of the land was ancient history which would readily be taken to be abandoned. (In fact, although not to be taken into account in construing the offer of compromise, the Council abandoned it in February 2003.) I see no reason why the Council as defendant should not have offered to compromise its claim as cross-claimant by abandonment of the cross-claim as part of an overall offer. Tellamist could accept that offer, and the whole of the proceedings would come to an end." 1. That ruling related to the use of the phrase "entire action", but the Court's reference in the final sentence to "the whole of the proceedings" must mean that the use of the term "whole of the proceedings" in the offer of compromise under consideration here must be even clearer in terms of what it connoted. 2. Conformably with the statements of the Court of Appeal as set out above, the offer of compromise applied to the entire proceedings, namely the claim and the cross-claim, both of which were to be dismissed. 3. In arriving at this finding, I have not accepted a submission made by Mr Cameron that I can have regard to the language of the covering letter to the offer of compromise as being in similar terms. The validity (or otherwise) of the offer of compromise should be construed from its own terms, rather than from the covering correspondence: Davis v Swift (No 2) [2015] NSWCA 137 at [12] per Meagher JA. 4. Mr Shao also submitted that, at the time, the cross-claim included a claim for specific performance and that there had already been one payment made by Mr Shao. I reject these arguments, as the terms of the offer clearly took into account both the quantification of the claims as well as the nature of the relief sought. 5. The remaining difficulty is what to make of the offer in the covering letter to let Mr Shao back into the shop on the basis of payment of a lesser sum, with provisos about what would happen if the lease was not able to be transferred. 6. In simple contractual terms, the offer of compromise, if accepted, represented the end of the litigation, regardless of the covering letter's contents. Mr Shao would have been entitled to hold the defendants to their bargain of accepting $90,000 inclusive of costs. For the reasons set out in Davis v Swift, the contents of the accompanying letter would not have assisted the defendants if they had sought to resile from what was offered. 7. I am satisfied that the offer of compromise was couched in clear terms capable of acceptance in circumstances where the settlement would have been the end of the litigation. It would have been a substantially better result for Mr Shao than the result set out in my judgment. 8. The second basis for alleged non-compliance with Uniform Civil Procedure Rules 2005 r 20.26(5)(a) is that leaving the offer "open for acceptance by the plaintiff for a period ending at 5 pm of the 28th day following the date of this offer" is a period of time less than the 28 days required. 9. I agree that the nomination of a time of 5 pm on the 28th day falls short of the "no less than 28 days" requirement for the purposes of UCPR r 20.26(5)(a). I adopt the interpretation of this requirement by Barrett J in Mohamed v Farah [2004] NSWSC 482: "52 …By reference to that provision and a more general (but unexplained) proposition that documents of importance should only be served during normal business hours, the plaintiff says that acceptance by fax received by the plaintiff's solicitors at their office shortly after 6 pm on 22 April 2004 should not be regarded as an acceptance within the time for acceptance allowed by the offer. 53 I do not accept that submission. There is no basis in the rules themselves for regarding the 9 am to 5 pm limitation as relevant to anything but the specific (and, for present purposes, quite irrelevant) situation under Part 9 rule 4(1)(a) with which it is expressed to be concerned. Nor is any cogent reason advanced for regarding the conclusion of ordinary business hours as the point at which a day ends for purposes such as the present. Every day continues up to the point which divides it from the next. It cannot be suggested that, if one party to proceedings chances upon the other in the street at 10 pm or 11 pm on a particular day and gives him or her a document, the document should be regarded as either not given at all or given otherwise than on that day. In Lewes Nominees Pty Ltd v Strang (1983) 57 ALJR 823, the High Court accepted that a notice exercising an option given to the grantor personally at his home at 6pm on the last day for exercise was "sufficient notice", although the attempted exercise of the option was, for other reasons, incomplete." 1. The offer of compromise was thus not validly made. 2. In the alternative, however, the defendants rely upon the offer of compromise as a Calderbank offer. The offer of compromise viewed as a Calderbank offer 1. In his helpful written submissions, Mr Cameron summarises the threshold issues to be considered by the court where there is a Calderbank offer, having regard to the principles set out by Ward CJ in Eq in In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161. The difference between the operation of an offer of compromise under UCPR 42.15 and a Calderbank offer were explained by Rees J in Snowy Mountains Grammar School Ltd v Adventurer AWD Pty Ltd [2022] NSWSC 53 at 8: "Whilst it is relevant to consider whether rejection of a Calderbank offer was unreasonable when deciding whether to make an order for indemnity costs, the same is not the case where an Offer of Compromise has been served in accordance with the rules: IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1 at [12]; [2010] FCAFC 31, citing Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40. In that event, an order for indemnity costs follows, unless the Court otherwise orders: New South Wales Insurance Ministerial Corp v Reeve (1993) 42 NSWLR 100 at 102; Morgan v Johnson (1998) 44 NSWLR 478 at 581-82. This rule will only be departed from in "exceptional cases": Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281 at [17]-[18]; [2004] FCA 1437." 1. In practical terms, the principal difference between the two methods of making settlement offers is that a court may exercise its discretion not to order costs to be paid on an indemnity basis unless the offer contains a genuine element of compromise: Fabre v Lui (No 2) [2015] NSWCA 312. 2. The rejection of a Calderbank offer, in circumstances where the final outcome is less favourable to the offeree, enlivens the discretion to award indemnity costs, but does not create any prima facie right to such an order: Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [8], [12] – [19] 3. A Calderbank offer must embody a genuine compromise and, additionally, it must be demonstrated that it was unreasonable for the unsuccessful party not to accept: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [21], [40], [46] and [57]; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26]. 4. The relevant factors include the stage of the proceedings at which the offer was made, the period of time allowed for acceptance, the extent of the compromise, the offeree's prospects of success assessed at the date of the offer and whether the offer foreshadowed an application for indemnity costs in the event of its rejection: Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 at [25]; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25]. 5. First, there is the question of the circumstances in which an offer of compromise may be viewed as a Calderbank offer at all. In Davis v Swift (No 2) at [14], Meagher JA stated: "The respondent submits that even if the Offer of Compromise was not in accordance with r 20.26 it can nevertheless be taken into account in the exercise of the costs discretion because the non-compliance was technical and there was no request for clarification or evidence that the absence of the statement as to the inclusion of the advance payments affected the appellant's consideration of the offer. This submission is rejected. The respondent does not and could not rely upon the Offer of Compromise as a Calderbank offer. There was nothing in the terms of that offer or the accompanying letter which indicated that it was to be relied on in relation to costs otherwise than under the rules. In those circumstances it was not available to be taken into account as an offer of settlement in an argument as to costs. See Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311 at [41] - [44] (Bathurst CJ) and [59] - [60] (Barrett JA)." 1. In the present case, the covering letter clearly and unambiguously states that the offer was to be "relied on in relation to costs otherwise than under the rules", namely as a Calderbank offer. There is no requirement that any offer must specify in the offer of compromise itself that it is also relied upon as a Calderbank offer, and an offer is not inadmissible or ineffective because it does not accord with these requirements: Jones v Bradley (No 2) [2003] NSWCA 258 at [14] – [15]; Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 at [8]. 2. This brings me to the attack on the clarity of the offer. I make the same findings on this issue as I did in relation to the clarity of the offer of compromise, but with substantial additions. I consider that, unlike the strictness with which the contents of an offer of compromise must be determined, the court is entitled to take into account the observations made in the covering letter sent with the offer, which include the reference to a Calderbank offer as well as a great deal of information about why the offer should be accepted, the accuracy of which is not challenged. The fact that other alternatives are included as part of the offer does not mean that the offer is invalid. It is not uncommon for Calderbank offers to contain proposals capable of revision or alteration; a common example is the terms of an apology in defamation proceedings. If the text of the apology offered required some clarification or change, that would not make it reasonable to reject the offer; to the contrary, it is a matter that should be the subject of further negotiation: Wagner & Ors v Nine Network Australia & Ors (No 2) [2019] QSC 309 at [37] - [39]. 3. For these reasons, I am satisfied that the Calderbank offer was sufficiently clear in its terms. 4. I also consider that it was genuine, in the sense that it involved a real and genuine element of compromise: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [22] – [24]; Taheri v Vitek (No 2) [2014] NSWCA 344 at [10] – [12]). It was not an offer from which the defendants would have profited, in that it was below the sum claimed under the contract (bearing in mind the acknowledged adjustments the subject of the cross-claim), as well as inclusive of costs. 5. Taking all of the above into account, it was unreasonable of Mr Shao not to have accepted the Calderbank offer of 30 October 2020. 6. Finally, Mr Shao appears to infer that failure to comply with UCPR r 20.26 and/or to make a valid Calderbank offer is sufficient to oppose the making of a costs order. However, the existence of an offer of either kind is not the source of power or jurisdiction for an indemnity costs order. The existence of an offer of compromise under UCPR r 20.26 gives rise to a presumption in favour of an indemnity costs order but the power to make such an order (and, for that matter, an indemnity costs order following a Calderbank offer) derives from s 98 of the Civil Procedure Act. The discretionary exercise of the power to award indemnity costs is informed by other provisions of the UCPR, such as UCPR r 42.1, 42.2 and 42.14 as well as by determinations by appellate courts as to the circumstances in which the ordering of indemnity costs, including whether the result is less favourable than an offer made by the successful party: Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425. An offer of compromise (valid or not) or a Calderbank offer is relevant, but not a precondition, to the awarding of indemnity costs. The second offer 1. The terms of this offer were as follows: "18 June 2021 Brightstone Legal Level 35, 31 Market Street, Sydney NSW 2000 By email only: [redacted] WITHOUT PREJUDICE SAVE AS TO CSOTS Dear Colleagues, Re: Zhang & Anor ats Shao District Court of NSW proceedings no. 2020/135051 1. We refer to our offer of compromise dated 30 October 2020. 2. We maintain that the Court is unlikely to accept your client's claims that: a. The Payments to the second defendant's bank account were overpayments; or that b. The July and Second Agreement required our client to refund your client's payments under those agreement; or that c. The parties rescinded the Second Agreement on or around 16 January 2020. 3. We are reinforced in our view having considered your clients' evidence served in the proceedings to date, which contains substantial self-serving assertions that are, more often than not, inconsistent with contemporaneous communications between parties. 4. For the same reason, we are confident that our clients will be successful in their Cross-claim. Offer to Compromise 5. Our clients have incurred approximately $74,930 in these proceedings, including recoverable pre-commencement costs. We anticipate that our clients will incur in excessive of $63,200 to take the matter to final hearing, including the costs of preparing our clients' evidence in reply, which is required to be served by 13 July 2021. 6. In the interest of avoiding further time and expense spent on the matter, our client is prepared to settle the dispute on the following terms: a. Without admission as to liability, our client will pay your client $1,500 within five business days of acceptance of this offer. b. Your client's Amended Statement of Claim and our clients' statement of cross-claim are dismissed. c. Our clients undertake not to press for their costs of the motion pursuant to the order of his Honour Judge Wilson SC on 14 May 2021. d. The parties are to bear their own costs. 7. Being mindful that we are approaching time to serve our clients' evidence in reply, this offer is only open for acceptance in writing until 5pm, Thursday 24 June 2021. 8. This is an offer made in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333. 9. Our clients consider that the terms of the enclosed offer represent a genuine compromise for the purposes of entitling them to an order for indemnity costs as and from the date of this offer, in the event that the ultimate outcome of the proceedings is as or more favourable to our clients than the terms of this offer. 10. If you have any queries, please do not hesitate to contact us. Yours sincerely, Concisus Legal Colin Oi Solicitor" 1. I first note that this was not framed as an offer of compromise. However, a party making offers is not required to give some kind of explanation for making a Calderbank offer rather than using the offer of compromise system: Jones v Bradley (No 2) [2003] NSWCA 258 at [12]. 2. This offer was made shortly before the hearing and was left open for only 6 days, a period of time I consider to be sufficiently long in those circumstances. 3. This offer was a very significant compromise. It involved a small payment by the defendants, abandonment of a favourable costs order and a total end to the litigation. It was made at an ideal time in terms of saving the parties from substantial preparation and hearing costs. It was not a "walk away" offer, but a genuine compromise. 4. Unlike the first offer, there were no other alternatives put, such as Mr Shao going back into the business. The terms are clear. It was an excellent offer, and Mr Shao was unreasonable to reject it. 5. If I have erred in holding that the first Calderbank offer was valid, I would alternatively have found that the second Calderbank offer was valid and that it was unreasonable of Mr Shao not to have accepted it. The application for a gross sum costs order 1. The defendants have served evidence setting out the costs they incurred in defending the claim and bringing a cross-claim, which totalled $310,250.34 inclusive of GST (affidavit of Mr Oi, paragraph 31). The defendants provide a costing estimate that if a gross sum costs order is not made, the costs of assessment are likely to add an additional $23,000-$33,000 and that the costs procedure may take approximately six months from the filing of the application of costs assessment to the finding of the costs assessor. 2. The defendants submit that this is an appropriate matter for a gross sum costs order to be made. Not only has the plaintiff not taken any steps to pay the judgment debt, but the only assets he has in the jurisdiction are shares into proprietary companies, the value of which is uncertain. He does not own any real property. As the evidence in the hearing demonstrated, he has spent much of his career and work activity in New Zealand and in China. 3. Mr Shao submits that the appropriate avenue to determine the issue of costs is through the engagement of a costs assessor "so as not to cause any undue prejudice, unfairness or inequity to myself in relation to the issue of costs" (submissions, paragraph 21). This is because gross costs orders are asserted to be suitable only for "small sums" (submissions, paragraph 17) and because the amount claimed "in excess of $300,000 is excessive" (submissions, paragraph 20). 4. It is incorrect to say that gross sum costs orders are limited to "small sums". To the contrary, the practice of making gross sum costs began in relation to very large costs assessments (Harrison v Schipp at [21] - [22]; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11) and it has only been over the last two decades that a practice of making gross sum costs orders for small claims has sprung up, as is noted in Fairfax Pty Ltd v Printlane Pty Ltd (No 2) [2009] NSWDC 121 at [14]. Gross sum costs orders have been made for costs as high as $8.3 million (Chaina v Presbyterian Church (NSW) Property Trust (No 26) [2014] NSWSC 1009). 5. The question of whether the costs are "excessive" requires analysis of the costs material conformably with the procedure for gross sum costs order applications. Gross sum costs orders - the relevant legislation 1. Section 98(1) of the Civil Procedure Act 2005 is as follows: "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." 1. Although initially only made in proceedings where the costs are substantial, gross sum costs orders are increasingly commonly made in a wide range of cases. In Mahaffy v Mahaffy 97 NSWLR 119, Payne JA noted at 275 that a wide discretion with respect to costs is conferred by the provisions of s 98. 2. Essentially, the court must be satisfied as to two matters: 1. The proceedings are of the kind for which a gross sum costs order is appropriate. 2. The court can be satisfied that there is sufficient information for the court to come to a fair and informed assessment of what the costs would be likely to be. 1. Mr Shao's challenge to a gross sum costs order on the basis that this is not a small matter is misconceived and I am satisfied that the circumstances set out in paragraphs 74 - 79 of Mr Cameron's submissions mean that these are proceedings of the kind for which a gross sum costs order is appropriate. I am also satisfied that there is sufficient information, in the material attached by Mr Oi to his affidavit, to enable me to come to a fair and informed assessment of what those costs are likely to be. 2. One factor not mentioned by Mr Cameron, but about which there is reference in my judgment, is that the manner of conduct of these proceedings by the defendants was exemplary. They complied with timetables, provided helpful submissions and wasted no trial time. The same has been the case in relation to this application. The defendants' submissions were prompt and comprehensive; Mr Shao provided submissions only after being the subject of relisting and the threat of a self-executing order. 3. In the absence of submissions as to the specific costings from Mr Shao, I do not propose to go into the detail of analysis of the sums sought. While I note that he is a litigant in person, the authorship of his submissions is clearly shared with a native English speaker with extensive legal training. Mr Shao has taken a number of points of some nicety, so if he chooses not to express opinions on quantum beyond the one-word claim that they are "excessive", he must accept the consequences. 4. I have found that the first offer is a valid Calderbank offer and accordingly would assess costs conformably with the formula set out in paragraph 1 of the costs orders sought, namely $243,833.37. Pre-judgment and post-judgment interest 1. The defendants also claim $4,268.53 as pre-judgment interest as well as $45 per day for each day since judgment until the sum of $45 per day since the delivery of the judgment until the sum of $269,237.46 is paid by Mr Shao. 2. The award of interest under ss 100(1) and 101(1) is discretionary. However, the factor relied upon by Mr Shao to rebut the entitlement to interest - namely that specific performance was initially sought - is without merit. Costs of this motion 1. The costs of this motion are also sought as a gross sum costs order, for the sum of $8,492.24. 2. For the same reasons as those set out above, I accept that this amount should be awarded as a gross sum costs order. Orders: 1. The Plaintiff pay the Defendants' costs on the ordinary basis up to 30 October 2020, and on the indemnity basis thereafter. 2. Pursuant to Civil Procedure Act 2005 (NSW) section 98(4)(c), the Plaintiff pay the Defendants' costs as a gross sum costs order in the amount of $243,833.37, representing costs of $18,950.95 on the ordinary basis up to 30 October 2020, and $ 224,882.42 on the indemnity basis thereafter. 3. Pursuant to Civil Procedure Act 2005 (NSW) section 100(1), the Plaintiff pay the Defendants the sum of $4,268.53 as pre-judgment interest. 4. Pursuant to Civil Procedure Act 2005 (NSW) section 101(1), the Plaintiff pay the Defendants the sum of $45 per day for each day since the delivery of the Judgment until the sum of $269,237.46 is paid by the Plaintiff in relation to the cross-claim. 5. The Plaintiff pay the Defendants' costs of the motion, as a gross sum costs order, in the sum of $8,492.24. ********** 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: 30 May 2022