Australian Special Opportunity Fund LP v Equity Trustees Wealth Services Ltd

[2015] NSWCA 22

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Ke Qin Ren v Hong Jiang; Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2015] NSWCA 22

Hearing dates:

On the papers

Decision date:

23 February 2015

Before:

Barrett JA; Gleeson JA; Leeming JA

Decision:

2012/240805:
1. Vary order 6 made on 13 November 2014 such that it provides:
“Ms Hong Jiang and Mr Yongan Xie to pay the costs of the 1st, 2nd and 4th appellants of the appeal (including the applications for leave and the notice of motion filed on 26 April 2013 but excluding any costs thrown away by reason of the amendment of the application for leave to appeal):
(a) on an indemnity basis in respect of costs of the notice of motion filed on 26 April 2013 incurred after 2 October 2014; and
(b) otherwise, on an ordinary basis.”

2. Ms Hong Jiang and Mr Yongan Xie to pay the costs of the 1st, 2nd and 4th appellants of the applications concerning costs.

2014/211574:
1. Dismiss the notice of motion filed 25 November 2014 with costs.

Catchwords:

COSTS – Calderbank offer – whether offer to consent to dismissal of notice of motion with no order as to costs a substantial compromise – whether different costs order warranted by reason of appellants succeeding on points not run at first instance

Legislation Cited:

Uniform Civil Procedure Rules 2005, rr 36.16, 42.1

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333
Ke Qin Ren v Hong Jiang; Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014] NSWCA 388
Taheri v Vitek (No 2) [2014] NSWCA 344
Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in Liq) [2014] NSWCA 350

Category:

Costs

Parties:

2012/240805
Ke Qin Ren (1st Applicant)
Pei Xu (2nd Applicant)
Gloconnect Pty Ltd (4th Applicant)
Hong Jiang (1st Respondent)
Yongan Xie (2nd Respondent)
Wan Ze Property Development (Aust) Pty Ltd (in liq) (3rd Respondent)

2014/211574
Yi Cheng Jiang (Applicant) (formerly, 3rd Applicant in 2012/240805)
Wan Ze Property Development (Aust) Pty Ltd (in liq) (1st Respondent)
Hong Jiang (2nd Respondent)
Yongan Xie (3rd Respondent)

Representation:

Counsel:
2012/240805:
Mr JE Sexton SC / Mr JC Lee (Applicants)
Mr DA Smallbone (1st and 2nd Respondents)
Mr DC Eardley (3rd Respondent)

2014/211574:
Mr JC Giles / Mr E Yin (Applicant)
Mr DC Eardley (1st Respondent)
Mr DA Smallbone (2nd and 3rd Respondents)

Solicitors:
2012/240805
Ren Zhou Lawyers (Applicants)
AHL Legal (1st and 2nd Respondents)
Downeys Lawyers (3rd Respondent)

2014/211574
Gadens (Applicant)
Downeys Lawyers (1st Respondent)
AHL Legal (2nd and 3rd Respondents)

File Number(s):

2012/240805; 2014/211574

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2012] NSWSC 722; [2012] NSWSC 821

Date of Decision:

29 June 2012 (judgment); 19 July 2012 (orders)

Before:

Black J

File Number(s):

2011/51745

Judgment

1. THE COURT: On 13 November 2014, the Court granted leave to appeal, leave to proceed pursuant to s 471B of the Corporations Act 2001 (Cth) and allowed appeals in separate proceedings brought by Mr Ke Qin Ren, Ms Pei Xu and Gloconnect Pty Ltd on the one hand and Mr Yi Cheng Jiang on the other. This Court also dismissed a notice of motion filed by Ms Hong Jiang and Mr Yongan Xie which, in substance, contended that the application for leave to appeal in the first of those proceedings was itself an abuse of process. The Court set aside the substantive orders against Mr Ren, Ms Xu and Mr Jiang made at first instance and remitted the proceedings to the Equity Division for determination in accordance with law. In relation to costs, Ms Hong Jiang and Mr Yongan Xie were ordered to pay the active parties’ costs of the appellate proceedings, with the costs of the proceedings at first instance left to be determined as part of the remitter: Ke Qin Ren v Hong Jiang; Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014] NSWCA 388.

2. In accordance with the time limits contained in r 36.16 of the Uniform Civil Procedure Rules 2005, all active parties have filed notices of motion seeking variations in the orders made. Speaking generally, Mr Ren, Ms Xu and Gloconnect seek an order for indemnity costs, based upon a Calderbank letter. Ms Hong Jiang and Mr Yongan Xie seek a more favourable order in both proceedings, principally on the basis that the appeals succeeded on a point not run at first instance. A separate notice of motion filed by Mr Yi Cheng Jiang seeking restitutionary orders has been resolved consensually. All parties have consented to the unresolved applications being determined on the papers, and their motions have been accompanied by a suite of written submissions (dated 5, 8 (two submissions), 10, 17 and 19 (two submissions) December 2014).

Application for indemnity costs by Mr Ren, Ms Xu and Gloconnect

3. This application is based upon an offer contained in a letter dated 18 September 2014 from the solicitors acting for Mr Ren, Ms Xu and Gloconnect. The letter referred to the non-compliance by Ms Hong Jiang and Mr Yongan Xie with the Court’s directions for written submissions, stated that “the overwhelming majority of the material that you have filed is either inadmissible or requires a grant of leave of the Court to rely upon it”, advised that the “Abuse of Process motion has close to nil prospects of success” and asked for them to “please clarify with precision” a series of questions including how it could be maintained that “the current appeal is an abuse of process when the very appeal is one resulting from proceedings instituted by your client”. The letter then contained an offer of compromise, expressed to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 in respect of the abuse of process motion. The offer was that the motion be discontinued with no order as to costs. It was open for acceptance until close of business 2 October 2014.

4. There was no response to the letter.

5. The abuse of process motion was described in [63]-[66] of the Court’s judgment on 13 November 2014. After summarising the submissions advanced, this Court said (at [66]):

Only if this Court were satisfied, to a high standard commensurate with the seriousness of the allegation, that there were an abuse of process, would the application for leave be stayed. The material does not come close to establishing that the challenge to a large judgment, which on its face discloses material error sufficient to warrant the grant of leave, is itself an abuse of process.

Indeed, ultimately only a handful of documents out of more than 3000 which had been served were tendered in support of the motion.

6. It is put in opposition by Ms Hong Jiang and Mr Yongan Xie that because there was no substantial element of compromise and no separate hearing date allocated, the ordinary position as to costs ought not to be disturbed. There are cases when that submission would have force. However, the circumstances of these proceedings were unusual. First, it may readily be inferred that, by 2 October 2014, Mr Ren, Ms Xu and Gloconnect had incurred considerable costs attributable to the abuse of process motion. In particular, there had been a review of the thousands of pages of material which had been served in support of it. Accordingly, the offer of compromise did involve a significant element of compromise, even though it involved the discontinuance of the notice of motion with no order as to costs, because Mr Ren, Ms Xu and Gloconnect were foregoing their entitlement to a favourable costs order.

7. Secondly, the abuse of process motion was distinct from the rest of the matter, and not merely conceptually. There were separate appeal books and separate submissions by the parties.

8. Thirdly, the abuse of process motion was the reason the matter was set down for more than one day, and before a Court constituted by three Judges of Appeal.

9. Fourthly, the prospects of success in demonstrating that an otherwise well-founded application for leave to appeal ought be stayed or dismissed because of some abuse of process, whose demonstration required the voluminous materials served by Ms Hong Jiang and Mr Yongan Xie, were at all times close to nil. As much was reflected in their failure to respond to the Calderbank letter.

10. In those circumstances, it was unreasonable for Ms Hong Jiang and Mr Yongan Xie not to accept the offer. There should be a variation in relation to the costs orders in respect of the abuse of process motion, from 3 October 2014 onwards, in accordance with well settled principles: see eg Taheri v Vitek (No 2) [2014] NSWCA 344 at [12]-[14].

Different costs order because of points not taken at first instance?

11. Ms Hong Jiang and Mr Yongan Xie have submitted that the applicants in both proceedings succeeded on points not taken in the court below, with the result that there should be no order for costs of the leave applications and appeals. Alternatively, they submit that the favourable costs order should only be made for costs incurred subsequent to 21 July 2014, when directions were made for new white folders and summaries of argument. That date corresponds to a change in the legal representation of all applicants, which led to a change of case from that previously filed in 2012. In particular, Ms Hong Jiang and Mr Yongan Xie referred to the abandoning of a charge of bad faith, which was not pursued. (Ms Hong Jiang and Mr Yongan Xie have made the same submissions as to costs in each proceeding, although it appears that they only filed a motion in proceeding 2014/211574, presumably on the basis that the motion filed by Mr Ren, Ms Xu and Gloconnect in proceeding 2012/240805 seeks the costs discretion to be re-exercised. What follows addresses the point on its merits, and it is unnecessary to express a view whether a separate motion should, strictly, have been filed.)

12. Mr Ren, Ms Xu and Gloconnect concede that Ms Hong Jiang and Mr Yongan Xie are entitled to an order for their costs thrown away as a result of the amendment of the application for leave to appeal. (The same concession does not arise in the case of Mr Yi Cheng Jiang, because rather than amending, he discontinued his involvement in that proceeding at the time he became separately represented: see Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in Liq) [2014] NSWCA 350 at [3].)

13. The concession proffered by Mr Ren, Ms Xu and Gloconnect should be reflected in the Court’s orders, but otherwise Ms Hong Jiang’s and Mr Yongan Xie’s submission that there be a more favourable exercise of the discretion than the general rule as to costs stated in r 42.1 of the Uniform Civil Procedure Rules 2005 must be rejected, for at least three reasons. First, the essential point that summary judgment ought to be entered against the appellants was advanced at first instance, albeit succinctly and without reference to the details of the evidence. Secondly, much of the time and expense incurred on appeal was attributable to new points raised unsuccessfully by Ms Hong Jiang and Mr Yongan Xie (the so-called “notice of contention points” addressed at [58]-[62] and the abuse of process motion). Thirdly, the submissions advanced by Ms Hong Jiang and Mr Yongan Xie do not raise any new matter beyond that already addressed in the Court’s reasons. Examples are the facts that the appellants’ former solicitor made very limited submissions, and that the primary judge was not taken to particular aspects of the evidence which cast doubt upon the strength of the plaintiffs’ case: see at [14], [37] and [38]. All those matters were known when the costs order was made.

14. The costs order should not be varied as sought by Ms Hong Jiang and Mr Yongan Xie, save in respect of the costs thrown away which is conceded.

Costs and orders

15. The fact that Ms Hong Jiang and Mr Yongan Xie have been largely unsuccessful in the contested applications after the principal judgment was delivered makes it appropriate for them to pay the costs of the other parties in respect of the motions as to costs.

16. Accordingly, the Court’s formal orders are:

In 2012/240805:

1. Vary order 6 made on 13 November 2014 such that it provides:

“Ms Hong Jiang and Mr Yongan Xie to pay the costs of the 1st, 2nd and 4th appellants of the appeal (including the applications for leave and the notice of motion filed on 26 April 2013 but excluding any costs thrown away by reason of the amendment of the application for leave to appeal):

(a) on an indemnity basis in respect of costs of the notice of motion filed on 26 April 2013 incurred after 2 October 2014; and

(b) otherwise, on an ordinary basis.”

2. Ms Hong Jiang and Mr Yongan Xie to pay the costs of the 1st, 2nd and 4th appellants of the applications concerning costs.

In 2014/211574:

1. Dismiss the notice of motion filed 25 November 2014 with costs.

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Decision last updated: 23 February 2015