Chan v Eastern Blue Pty Ltd
[2021] VSCA 152
•4 June 2021
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2020 0110
| MICHELLE SIU PIK CHAN | First Applicant |
| ASSETS CHINA PTY LTD (ACN 093 530 593) | Second Applicant |
| v | |
| EASTERN BLUE PTY LTD (ACN 620 756 694) | First Respondent |
| MIAN ZHANG | Second Respondent |
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| JUDGES: | KYROU and NIALL JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | Determined on the papers |
| DATE OF JUDGMENT: | 4 June 2021 |
| MEDIUM NEUTRAL CITATION: | [2021] VSCA 152 |
| JUDGMENT APPEALED FROM: | [2020] VSC 685 (Ierodiaconou AsJ) |
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COSTS – Respondents made claims in contract and restitution against applicants – Magistrate dismissed applicants’ no-case submission against respondents – Magistrate awarded respondents damages in contract and dismissed applicants’ counterclaim – Applicants’ appeal to Trial Division against damages award dismissed – Court of Appeal held first applicant had no defence to claim in restitution, and damages award in contract could not be sustained – First applicant refused leave to appeal – Second applicant granted leave to appeal and its appeal allowed – Applicants ordered to pay respondents’ costs of no‑case submission and counterclaim, otherwise parties to bear own costs of Magistrates’ Court proceeding, Trial Division proceeding and Court of Appeal proceeding.
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| APPEARANCES: | Counsel | Solicitors |
| No appearances |
KYROU JA
NIALL JA:
Introduction and summary
On 12 May 2021, this Court made an order which relevantly granted leave to appeal to the second applicant (‘Assets China’), refused leave to appeal to the first applicant (‘Ms Chan’), and gave directions for the parties to file written submissions on costs.[1] These reasons assume familiarity with the Court’s principal judgment.
[1]Chan v Eastern Blue Pty Ltd [2021] VSCA 121 (‘principal judgment’).
On 31 May 2021, this Court made an order by consent which relevantly:
(a) allowed the appeal by Assets China;
(b)modified the magistrate’s judgment so that it only applied as between the respondents and Ms Chan;
(c)set aside costs orders made by the magistrate, other than the order awarding costs to the respondents in respect of the applicants’ no-case submission;
(d)modified the associate judge’s order dismissing the appeal so that the dismissal applied only to Ms Chan’s appeal;
(e)set aside the associate judge’s costs orders; and
(f)gave directions for the parties to file supplementary written submissions on costs.
We have considered the parties’ written submissions on costs filed pursuant to our order dated 12 May 2021 and their supplementary written submissions filed pursuant to our order dated 31 May 2021.
For the reasons set out below, we have concluded that the parties should bear their own costs of the Magistrates’ Court proceeding, the Trial Division proceeding and the Court of Appeal proceeding, save as follows:
(a)the magistrate’s order that the applicants pay the respondents’ costs of the applicants’ no-case submission should not be disturbed; and
(b)the applicants should pay the respondents’ costs of the applicants’ counterclaim.
Costs of the Magistrates’ Court proceeding
In the Magistrates’ Court proceeding, the respondents relied heavily on their claim in contract, which, on our analysis, was flawed. The respondents devoted relatively little time to their claim in restitution, in respect of which we determined that Ms Chan (but not Assets China) had no defence. There is some merit in the proposition that our findings should result in an order requiring the respondents to pay the applicants’ costs of the contract claim and Assets China’s costs of the restitution claim, and an order requiring Ms Chan to pay the respondents’ costs of the restitution claim. However, such orders would not be appropriate in the present case for two reasons.
First, had it not been for Ms Chan’s refusal to repay the $50,000 to the respondents — in circumstances in which she had no legal basis for such refusal — the entire proceeding would have been unnecessary. In that sense, the costs incurred by the parties can be attributed to Ms Chan’s conduct.
Secondly, the applicants were jointly represented by a solicitor advocate and the respondents were jointly represented by counsel in the Magistrates’ Court proceeding. As we observed in our principal judgment, Ms Chan is the sole director and shareholder of Assets China and the second respondent (‘Ms Zhang’) is the sole director and shareholder of the first respondent (‘Eastern Blue’). The applicants’ costs were intermingled, as were the costs of the respondents, and it would be difficult to disentangle them.
In these circumstances, we are of the view that the interests of justice will be best served by an order that the parties bear their own costs of the Magistrates’ Court proceeding. However, we see no reason to disturb the magistrate’s order that the applicants pay the respondents’ costs of the unsuccessful no-case submission, which related to both the contract claim and the restitution claim.[2] Similarly, as the applicants’ counterclaim was unsuccessful, they should pay the respondents’ costs relating to the counterclaim.[3]
[2]It appears from the transcript that the magistrate made an order that the applicants pay the respondents’ costs of the applicants’ no-case submission in the fixed amount of $2,538 based on scale ‘F’ of the Magistrate’s Court scale of costs: see Transcript of Proceedings (27 June 2019) 232.26–235.24. The applicants did not explicitly submit that this costs order should be disturbed.
[3]The applicants did not explicitly submit that they should not pay the respondents’ costs of the counterclaim.
The magistrate’s costs order provided that the applicants pay the respondents’ costs of their claim and the counterclaim on scale ‘F’ of the Magistrates’ Court scale of costs until 13 May 2019 and after that date on scale ‘G’.[4] She did so apparently in reliance upon an offer of compromise under O 26 of the Magistrates’ Court General Civil Procedure Rules 2010 (‘Rules’) that was made by the respondents on 10 May 2019, by which they offered to accept $49,000 and bear their own costs.[5] As our order for costs in favour of the respondents is limited to the costs of the counterclaim, we are of the view that neither the offer of compromise nor the two other offers that the respondents made[6] should affect the scale to be applied.
[4]Scale ‘F’ applies to a claim for an amount between $40,000 and less than $70,000, and scale ‘G’ applies to a claim for an amount of $70,000 or more.
[5]It is not entirely clear from the transcript that the magistrate relied upon O 26 of the Rules: see Transcript of Proceedings (17 July 2019) 371.22–373.2.
[6]The respondents made an informal offer by email on 24 April 2019 to accept $46,500 and bear their own costs, and a Calderbank offer on 10 May 2019 on the same terms as the offer of compromise under O 26 of the Rules.
Accordingly, in relation to the Magistrates’ Court proceeding, we will make an order that: the respondents pay the applicants’ costs of the counterclaim on scale ‘F’; the magistrate’s order relating to the costs of the no-case submission not be disturbed; and, otherwise, the parties bear their own costs.
Costs of the Trial Division proceeding
In the Trial Division proceeding, the applicants sought to set aside the magistrate’s judgment. The proceeding focused almost entirely on the magistrate’s decision on the contract claim. The associate judge made orders dismissing the proceeding and requiring the applicants to pay the respondents’ costs. We have modified the associate judge’s order so that Ms Chan’s appeal is dismissed and Assets China’s appeal is allowed. Ordinarily, such an outcome would result in an order requiring the respondents to pay the costs of Assets China and an order requiring Ms Chan to pay the respondents’ costs.
However, such an order would not be appropriate in circumstances where, first, we have held that Ms Chan had no defence to the respondents’ claim in restitution for repayment of the amount of $50,000 and, secondly, the applicants commenced the Trial Division proceeding for the purpose of overturning the magistrate’s order requiring repayment of that amount. In our opinion, the interests of justice will be best served by an order that the parties bear their own costs of the Trial Division proceeding.
Costs of the Court of Appeal proceeding
In the Court of Appeal proceeding, Ms Chan failed in her endeavour to overturn the magistrate’s order that she repay $50,000 to the respondents. Her application for leave to appeal was refused. The appeal by Assets China was successful. In the light of these outcomes, this Court would ordinarily make an order that Ms Chan pay the respondents’ costs of her application for leave to appeal and an order that the respondents pay the costs of Assets China’s appeal. However, such orders would be inappropriate for the following reasons.
First, Ms Chan’s application for leave to appeal was refused not for the reasons upon which the respondents relied but on discretionary grounds based on restitution principles which the Court raised on its own initiative for the parties’ consideration.
Secondly, as we have already stated, Ms Chan had no defence to the respondents’ claim in restitution for repayment of the amount of $50,000. The applicants commenced the Court of Appeal proceeding for the purpose of overturning the magistrate’s order requiring repayment of that amount. The proceeding would not have been commenced — and no costs would have been incurred by the parties — if Ms Chan had repaid the amount in accordance with the magistrate’s order.
Thirdly, Ms Chan represented herself as well as Assets China. To the extent that any costs incurred by them are recoverable,[7] it would be difficult to disentangle the costs referrable to Ms Chan and the costs referrable to Assets China.
[7]Only out-of-pocket expenses incurred by a successful self-represented litigant are potentially recoverable: see Cachia v Hanes (1994) 179 CLR 403, 409–15; [1994] HCA 14; Bell Lawyers Pty Ltd v Pentelow (2019) 372 ALR 555, 557 [1], 561 [22]–[23]; [2019] HCA 29.
In our opinion, the interests of justice will be best served by an order that the parties bear their own costs of the Court of Appeal proceeding.
Additional observations regarding parties’ submissions
As we have already stated, we have considered the parties’ submissions and supplementary submissions regarding costs. It is implicit in the observations we have already made that we have rejected those submissions insofar as they contended for costs outcomes that differ from those set out above. There is little to be gained by discussing all of the parties’ detailed submissions on costs. However, we will make observations on some of them.
The applicants submitted that the respondents breached certain overarching obligations in the Civil Procedure Act 2010 (‘CPA’) and that those breaches should be taken into account by us in determining costs issues.[8] On the evidence before us, we are not satisfied that the respondents breached any overarching obligation. However, we are satisfied that all parties lost their sense of perspective in relation to this litigation. They have expended substantial legal costs and tied up scarce judicial resources — at three levels of the judicial hierarchy and, in the case of the Magistrates’ Court, in hearings extending over multiple days — concerning a relatively modest amount of $50,000.
[8]See CPA s 29.
Assets China submitted that, by virtue of this Court’s orders, it was ultimately successful as against both respondents at all three levels of the proceeding, and therefore it should be awarded its costs. It also submitted that it and Ms Chan were separate legal entities and parties in their own right. In our opinion, these submissions are too simplistic and do not have sufficient regard to the matters discussed earlier in these reasons, particularly those set out at [6]–[7], [12] and [14]–[16] above.
Ms Chan submitted that the Court should make orders for costs on an issues basis. Although there were two distinct issues in the respondents’ claims against the applicants — contract, in respect of which the respondents were unsuccessful against both applicants, and restitution, in respect of which the respondents were successful against Ms Chan — we have not accepted that submission for the reasons set out at [6]–[7], [12] and [14]–[16] above.
The respondents referred to certain conduct of the applicants, including in connection with applications under the Judgment Debt Recovery Act 1984 and an undertaking said to have been given by the applicants’ solicitor in relation to the holding of an amount of $50,000 in a trust account. These matters — upon which this Court does not have detailed evidence — do not relate to the conduct of the proceeding by the applicants and therefore have not been taken into account by us in determining costs issues. Similarly, the respondents’ assertion that Ms Chan has received ‘considerable input from a legal practitioner throughout the appeal’ is not relevant to the costs issues we need to decide. We would add the obvious observation that, if the applicants’ solicitor has given an undertaking, the solicitor is bound to comply with the terms of that undertaking.
The respondents submitted that the Court should make a Bullock order,[9] the effect of which would be that any costs that the respondents were ordered to pay to Assets China would be recovered by the respondents from Ms Chan. For the reasons set out above, the interests of justice will be best served in the present case by the orders for costs we have outlined already, rather than a Bullock order.
[9]Bullock v The London General Omnibus Co [1907] 1 KB 264.Under a Bullock order, a court orders that the costs payable by the plaintiff to a successful defendant be recovered by the plaintiff from an unsuccessful defendant.
The respondents have relied upon an offer of compromise dated 20 August 2020 that they served on the applicants in the Trial Division proceeding, offering to accept $50,000 in full settlement of that proceeding, inclusive of costs. They submitted that, ‘[a]s a result of the time which has elapsed, interest running and costs incurred up to the decision of this Court, and the consent given by [Ms] Chan to [this Court’s order dated] 31 May 2021, [their] offer represented a significantly better outcome’.
The offer of compromise was not produced to this Court. However, the terms of the offer are set out in Ierodiaconou AsJ’s decision on costs in the Trial Division proceeding.[10] Ierodiaconou AsJ held that the respondents could not rely upon the offer as a basis for an indemnity costs order because its terms lacked clarity — there was some doubt as to whether the amount of $50,000 was the same as, or additional to, the damages sum of $50,000 awarded by the magistrate.[11]
[10]Assets China Pty Ltd v Eastern Blue Pty Ltd [2020] VSC 786, [6] (‘Trial Division costs judgment’).
[11]See Trial Division costs judgment, [37]–[40].
In our opinion, the offer of compromise does not assist the respondents for two reasons. First, the offer was made to the applicants jointly. As Assets China has been successful, it cannot be said that the outcome of the proceeding for Assets China was not better than the terms of the offer. Secondly, for the reasons explained by Ierodiaconou AsJ, the terms of the offer were not clear.
Conclusion
For the reasons set out above, the end result is that the parties will bear their own costs of the Magistrates’ Court proceeding, the Trial Division proceeding and the Court of Appeal proceeding, save as follows:
(a)the magistrate’s order that the applicants pay the respondents’ costs of the applicants’ no-case submission will not be disturbed; and
(b)the applicants will pay the respondents’ costs of the applicants’ counterclaim.
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