Supreme Court New South Wales Medium Neutral Citation: Chen v Gu; Chen v Nguyen (No 2) [2012] NSWSC 199 Hearing dates: 28 February 2012 Decision date: 28 February 2012 Jurisdiction: Equity Division Before: Rein J Decision: 1. Order for indemnity costs against the first defendant in the 2007 proceedings. 2. Order for costs against the defendant in the 2009 proceedings on the usual basis up to 11 August 2011 and thereafter on an indemnity basis. Catchwords: PROCEDURE - costs - application for costs on an indemnity basis - conduct of first defendant considered - failure to accept a Calderbank offer PROCEDURE - costs - consolidated proceedings - whether costs of plaintiff in pursuing Registrar General and defending cross claim of ex-wife should be ordered to be paid by solicitor found liable to plaintiff - whether plaintiff could recover his costs from Registrar General notwithstanding Registrar General's success on defence under s 129(2)(b) Real Property Act 1900 Legislation Cited: Real Property Act 1900 Cases Cited: Chen v Gu; Chen v Nguyen [2011] NSWSC 1622 Category: Consequential orders Parties: Hao Chen (plaintiff) Hui Qin Gu (first defendant in the 2007 proceedings) Registrar General of New South Wales (second defendant in the 2007 proceedings) Van Uu (Warren) Nguyen (defendant in the 2009 proceedings) Representation: Counsel: D A Smallbone (plaintiff) G Sirtes SC (second defendant in the 2007 proceedings) Solicitors: Austin Haworth & Lexon Legal (Sydney) (plaintiff) Legal Services (second defendant in the 2007 proceedings) HWL Ebsworth Lawyers (defendant in the 2009 proceedings) File Number(s): SC 2007/254839; 2009/290968 ex tempore Judgment 1In a judgment on liability delivered on 15 December 2011, I indicated my preliminary views on costs issues between the plaintiff and Mr Nguyen but provided the parties with an opportunity to furnish further written submissions on the topic. 2I have received further written submissions on behalf of Mr Chen and on behalf of Mr Nguyen, and some further submissions in response to those, to which I have had regard. I have also received the affidavit of Ms Annette Leung, sworn on 13 February 2012, which is relied on by Mr Chen in support of his applications for special costs orders. 3On 15 December 2011, Mr Smallbone of counsel indicated that Mr Chen would seek an order for indemnity costs against Ms Gu. I have received written submissions on behalf of Mr Chen on that topic as well. 4No submissions were made on behalf of Ms Gu. Indeed there has been no appearance today on her behalf. Mr Smallbone informs me that his solicitor received yesterday a notice of ceasing to act by Ms Gu's solicitors. Indemnity Costs Against Ms Gu 5I will deal firstly with the question of indemnity costs against Ms Gu. I have already made an order that Ms Gu pay Mr Chen's costs of the proceedings; that order was not opposed. The plaintiff submits that, having regard to the conclusions reached by the Court as to Ms Gu's conduct of the case, the case is one in which an order for indemnity costs is appropriate. 6It was submitted by Mr Chen that Ms Gu must have known throughout the proceedings that her allegations in the proceedings, by which she sought to justify her dishonest conduct, were false and they were allegations which caused the trial to be prolonged. The second aspect is her refusal to settle, even when offered a settlement on a walk-away basis (said to have been made to her on the understanding that she did not have substantial assets in New South Wales), and her refusal to take part in a proposal for mediation. 7On 1 May 2008, the plaintiff through his solicitor made an offer to Ms Gu to resolve the case on the basis that each party pay their own costs: see page 1 of Exhibit AL-1 to Ms Annette Leung's affidavit. That offer, in the form of a Calderbank letter, was rejected. Mr Chen has obtained a judgment against Ms Gu for the full amount of the claim. 8I think that the offer made on 1 May 2008 was very favourable to the plaintiff and ought to have been accepted. Having regard to the nature of Ms Gu's defence and the manner in which she conducted her case, which included her seeking to justify her forging of Mr Chen's signature on four documents and denying that she had presented her cousin as Mr Chen to Mr Nguyen, her solicitor, and the absence of any opposition on her part to the orders now sought, I think it is appropriate that an order for indemnity costs be made against her for the entire proceedings. Costs Orders Against Mr Nguyen 9Dealing with the costs orders against Mr Nguyen, I have noted Mr Nguyen accepts that he is liable to pay Mr Chen's costs of the case against him. Further, he now accepts that Mr Chen is entitled to an order for indemnity costs as and from 11 August 2011, when an offer of compromise was made but not accepted, and Mr Chen having obtained a judgment as favourable to him as the offer of compromise. 10Mr Nguyen argues that: (1) he should not be required to pay any costs of Mr Chen in pursuing the Registrar General of New South Wales; (2) he should not be ordered to pay any of the costs in matter 2009/290968 to the "extent they were incurred in prosecuting the plaintiff's claim for fraud against Ms Gu": see paragraph 3(c) of the Submissions on Behalf of Mr Nguyen in Relation to Costs of February 2012 ("Supplementary Submissions on Costs"); as it has been found by the Court that Mr Nguyen was not aware of the fraudulent conduct of Ms Gu at [35] of Chen v Gu; Chen v Nguyen [2011] NSWSC 1622, this aspect of the plaintiff's case has nothing legally to do with Mr Nguyen; (2) he should not be ordered to pay the Registrar General's costs because the claim against the Registrar General was a different right of recovery; (3) no Bullock or Sanderson order should be made in respect of the Registrar General's costs. I should note that for the period prior to 11 August 2011, Mr Chen seeks costs only on the usual basis. 11Dealing with the first issue, I set out the view which I expressed on a preliminary basis at [160] of Chen v Gu; Chen v Nguyen based on the Outline of Submissions on Behalf of Mr Nguyen in Relation to Costs received at the hearing on 15 November 2011: "Given that: (1) Mr Nguyen's solicitors denied liability by letter of 6 April 2004 and suggested that Mr Chen bring a claim against the Torrens Assurance Fund (see pages 760-761 and 783 of Exhibit A3); (2) the Registrar General had a defence to the claim on the Torrens Assurance Fund if Mr Nguyen was negligent thereby causing loss to Mr Chen and was to be indemnified by LawCover; (3) Mr Nguyen has maintained, prior to the commencement of proceedings against the Registrar General and since then, that he was not negligent and did not cause the plaintiff's loss: see pages 760-761 and 783 of Exhibit A3; (4) two of the issues in the case against the Registrar General are identical to that in the case of the claim against Mr Nguyen (i.e. was Mr Nguyen negligent, and if so, did his negligence cause loss to Mr Chen); (5) the loss of title which led to a claim on the Torrens Assurance Fund and against Mr Nguyen arose entirely without any fault or error or omission on the part of the Registrar General and did arise by reason of a breach of duty to Mr Chen by Mr Nguyen (in addition to the fraudulent conduct of Ms Gu); and (6) the active adoption (and even expansion) by Mr Nguyen of Ms Gu's defence against Mr Chen's claim; my preliminary view is that Mr Chen is entitled to an order for all of his costs of the proceedings, including his case against the Registrar General." 12The two proceedings were, well before the hearing and over the opposition of Mr Nguyen, ordered to be consolidated, and rightly so in my view. So far as Ms Gu's cross claim and the claim in fraud is concerned, it is artificial in the extreme, in my view, to put forward these issues as separate from the essential position of Ms Gu, which was embraced and promoted by Mr Nguyen (or to be fair to him, by those acting on his behalf). The claim for $500 per week was linked by Ms Gu with the principal Chen/Gu issues and the malicious prosecution claim was something which could only arise if Ms Gu's defence was upheld. I do not regard it as appropriate to excise those matters from the order for costs in favour of Mr Nguyen. I accept that Mr Nguyen was not found (or alleged) to have known of Ms Gu's fraud at the time he purported to act for Mr Chen, but in his defence of the case against him he chose to align his case with Ms Gu, aware of the allegations of Mr Chen and aware of the fact that Mr Xu had been presented to him as Mr Chen, that Ms Gu had not told him that she was separated or divorced from Mr Chen and that she had forged Mr Chen's signature on four documents. 13Mr Chen does not at this stage seek any order in respect of costs that he might be required to pay the Registrar General, whether he is liable or not for such costs has not yet been determined. It is clear now that if Mr Chen does succeed against the Registrar General, it cannot be for more than $5,000 and that the Registrar General's success in respect of the entire balance of the claim arises because, at least, Mr Nguyen had been found to have been negligent and is entitled to indemnity from LawCover. If Mr Chen does not pursue the Registrar General in respect of the $5,000 it will be an entirely reasonable decision, in my view, because there is an overwhelmingly strong likelihood that Mr Nguyen will personally be able to meet the judgment against him to the extent of the excess. If the Registrar General does establish an entitlement to costs against Mr Chen, I would need little persuasion that those costs should be paid directly by LawCover to the Registrar General in the form of a Sanderson order. I think it follows from the view expressed in [160] of my earlier reasons in Chen v Gu; Chen v Nguyen and set out at paragraph 10 above that Mr Chen acted reasonably in joining the Registrar General and that it is appropriate that Mr Nguyen bear the costs of joining the Registrar General should they otherwise be ordered against Mr Chen. 14The Registrar General asserted (like the plaintiff) that Mr Nguyen was negligent and liable to be indemnified by LawCover, and those two facts have been established. I see no point in ordering Mr Chen to pay the Registrar General and Mr Nguyen to pay Mr Chen for the costs incurred, should Mr Chen otherwise be liable to an order for costs in favour of the Registrar General. 15I turn now to a further argument based upon s 129 of the Real Property Act 1900 (NSW). Section 129 provides: " Circumstances in which compensation payable (1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from: ... (e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud, ... is entitled to payment of compensation from the Torrens Assurance Fund. (2) Compensation is not payable in relation to any loss or damage suffered by any person: ... (b) to the extent to which the loss or damage: (i) is a consequence of any fraudulent, wilful or negligent act or omission by any solicitor, licensed conveyancer, real estate agent or information broker, and (ii) is compensable under an indemnity given by a professional indemnity insurer". 16The Supplementary Submissions on Costs seem to assert that Mr Chen is entitled to a costs order against the Registrar General because those costs are not loss and damage as a consequence of the negligence of Mr Nguyen. The argument is difficult to understand and has a circular quality. That argument would, if correct, operate even if there were no excess involved. It says that Mr Chen should be able to recover costs from the Registrar General under s 129 even though he has, on this hypothesis, failed against the Registrar General. Mr Nguyen denied liability to Mr Chen and if successful in that defence Mr Chen would, on his case, have a claim against the Torrens Assurance Fund, so I think Mr Chen acted reasonably in joining the Registrar General against the possibility that Mr Nguyen's defences would be upheld. On Mr Chen's case (and leaving aside his claim against Ms Gu as to whose capacity to meet a judgment was at the very least unclear), either Mr Nguyen or the Registrar General was liable to compensate him for loss of his half interest in the property at Penhurst. Mr Nguyen's solicitors encouraged Mr Chen to bring a claim against the Registrar General and if he had not joined Mr Nguyen, he ran the very real risk that the Registrar General would make out the defence that the Registrar General did in fact make out, without having any recourse against Mr Nguyen. 17The issue of Mr Nguyen's liability was a critical plank of the Registrar General's position and of course a critical issue in Mr Chen's case against Mr Nguyen, so the resolution of that matter adverse to Mr Nguyen rebounds against him in both contexts. Absent the issue of the excess which has not been determined, and may never be, the costs that Mr Chen has incurred cannot be visited on the Registrar General where the Registrar General had succeeded in resisting the claim but are properly to be paid by Mr Nguyen. 18Nothing has been advanced on behalf of Mr Nguyen to cause me to alter my view that the appropriate order is that Mr Nguyen should pay all of Mr Chen's costs of the proceedings. Conclusion 19It follows that Mr Chen is entitled to an order for indemnity costs against Ms Gu and an order for costs of the proceedings against Mr Nguyen on the usual basis up to 11 August 2011 and thereafter on an indemnity basis. ********** 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: 25 September 2012