Gemi 193 v Zhu

[2025] NSWSC 295

Supreme Court

New South Wales

Medium Neutral Citation:

Gemi 193 v Zhu [2025] NSWSC 295

Hearing dates:

14 November 2024 and further written submissions on 13 December 2024

Date of orders:

31 March 2025

Decision date:

31 March 2025

Jurisdiction:

Equity

Before:

Slattery J

Decision:

See paragraph [57]

Catchwords:

COSTS – Party/Party – Orders when proceedings involve multiple parties – the plaintiff fails in proceedings against the defendant – the defendant cross claims against the plaintiff and another party – the defendant/cross claimant fails against the other party but succeeds against the plaintiff on the Cross-Claim and on the Defence – what costs orders should be made between the parties – whether a pre-hearing letter sent by the defendant cross claimant has Calderbank letter consequences – what specified gross sum costs order should be made instead of assessed costs.

Legislation Cited:

Civil Procedure Act 2005 Part 6 and s 98(4)(c)

Cases Cited:

A v N [2012] NSWSC 549

Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006

Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119

Carelli v FS Architects Pty Ltd (No. 2) [2008] NSWCA 205

Castro v Hillery [2003] 1 Qd R 651; [2002] QCA 359

Chaina v Alvaro Homes Pty Limited [2008] NSWCA 353

Currabubula Holdings Pty Ltd v State Bank [2000] NSWSC 232

Equity 8 Pty Limited v Shaw Stockbroking Limited [2007] NSWSC 503

Evans Shire Council v Richardson (No. 2) [2006] NSWCA 61

Gemi 193 Pty Ltd v Zhu [2024] NSWSC 1113

Hadid v Lenfest Communications Inc [2000] FCA 628

Hamod v State of New South Wales [2011] NSWCA 375

Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213

Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 435; [2005] VSC 298

King Network Group Pty Ltd v Club of the Club's Pty Ltd (No 2) [2009] NSWCA 204

Leichhardt Municipal Council v Green [2004] NSWCA 341

Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344

Nationwide News Pty Limited v Naidu; ISS Security Pty Ltd v Naidu (2007) 71 NSWLR 471; [2007] NSWCA 377

Ofria v Cameron (No. 2) [2008] NSWCA 242

Penson v Titan National Pty Ltd (No.3) [2015] NSWCA 121

Rockcote Enterprises Pty Limited v FS Architects Pty Limited (No. 2)

Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited (2001) 53 NSWLR 626; [2001] NSWCA 461

Simone Starr-Diamond v Talus Diamond (No. 4) (2013) 272 FLR 414; (2013) 224 A Crim R 523; [2013] NSWSC 811

South Eastern Sydney Area Health Service v King [2006] NSWCA 2

Vale v Eggins (No. 2) [2007] NSWCA 12

Wardle v Agricultural and Rural Finance Pty Ltd [(No. 2) [2012] NSWCA 388

Texts Cited:

N/A

Category:

Costs

Parties:

Plaintiff/Cross Defendant: GEMI 193 Pty Ltd (ACN 641 815 492)
Second Cross Defendant: Justin Epstein
First Defendant/Cross Claimant: Xian Zhu
Second Defendant: Commonwealth Bank of Australia ACN 123 123 124

Representation:

Counsel:
Plaintiff/Cross Defendant: H. Somerville; L. Cooper-Hackman
First Defendant/Cross Claimant: A. Zahra SC; J. C. Lee

Solicitors:
Plaintiff/First & Second Cross Defendants: Paul Nathan Reese, Summer Lawyers
First Defendant/Cross Claimant: Brent Hedges, Walker Hedges & Co

File Number(s):

2021/183050

Publication restriction:

N/A

JUDGMENT

1. This is the Court’s second judgment in these proceedings. It should be read with the Court’s first judgment: Gemi 193 Pty Ltd v Zhu [2024] NSWSC 1113. This judgment assumes familiarity with the first judgment and deals with questions of costs which were argued at a relief hearing. Events, persons and things are referred to in both judgments in the same way.

2. In the Court’s first judgment, Mrs Zhu, the defendant/cross claimant was held to be in a position of special disadvantage in relation to a transaction entered into with the plaintiff, Gemi 193. The Court ordered that Mrs Zhu’s secured guarantee be set aside as against Gemi 193. But the second cross-defendant, Mr Epstein, was successful in resisting a claim that he had engaged in misleading and deceptive conduct which caused Mrs Zhu to enter the impugned transaction. Final relief and costs issues were reserved for further submissions.

3. The relief hearing took place on 14 November 2024. Supplementary written submissions were directed at the relief hearing and were completed during on 13 December 2024, after which judgment was reserved.

4. Appearances at the relief hearing were as before. Mr H. Somerville leading Ms L. Cooper-Hackman, instructed by Summer Lawyers, appeared for Gemi 193 and Mr Epstein. Mr A. Zahra SC leading Mr J. C. Lee, instructed by Crichton & Co Legal, appeared for Mrs Zhu.

5. The issues remaining for determination are costs up to the date of the first judgment, damages and apportionment questions. The Court may wish to seek further submissions from the parties on the damages and apportionment questions and is giving further consideration to that. But the Court has reached the view that it is desirable to decide issues of costs up to the time of the first judgment now. The success and failure of the parties up to the date of the first judgment is clear and is severable from the other argument that has taken place on the relief hearing. A separate judgment can be given in relation to the other issues, including guidance as to what separate costs issues arise after the first judgment, which are likely to differ somewhat from those considered in these reasons.

Events Relevant to Costs since the First Judgment and the Issues.

6. After the Court gave the first judgment on 30 August 2024 the proceedings returned to Court on 16 October 2024 for the making of orders to give effect to the first judgment. On that day declarations were made declaring void ab initio, as against Gemi 193, the Fucrez loan agreement and Mrs Zhu’s guarantee of the obligations under the Fucrez loan agreement and the mortgage in support of that guarantee. The Amended Statement of Claim was dismissed and the First Amended Statement of Cross Claim was dismissed as against Mr Epstein. Orders were made for the removal of the caveat over Mrs Zhu’s Gordon property and she was released from her undertaking of 22 October 2021 that she would not further encumber that property.

7. On 16 October 2024, the Court also made orders for the filing of evidence in relation to the arguments about costs and other consequential relief. The following affidavits were filed and read by the parties at the hearing on 14 November 2024 and certain correspondence that passed between the solicitors for the parties was tendered.

8. Ms Zhu relied upon two affidavits of Mr Brent Arthur Hedges of 24 October 2024 and 4 November 2024 together with accompanying exhibits. Gemi 193 relied upon affidavits of Ms Saurya Rajbhandari of 5 November 2024, 6 November 2024 and 12 November 2024.

9. The issues for present determination are –

1. whether Mrs Zhu should have indemnity costs after her solicitor’s Calderbank letter of 13 December 2023,

2. what costs orders are appropriate between these parties, and

3. how should the costs be quantified.

10. These issues bring into play several legal principles which are stated in the next section of these reasons.

Applicable Legal Principles.

11. The applicable legal principles rules are clear in respect of the three main costs issues here: (a) assessing costs where one defendant is successful and the other unsuccessful, (b) fixing a specified gross sum costs order under Civil Procedure Act 2005 s 98(4)(c), and (c) Calderbank letters.

12. Success against one Cross –Defendant only. Mr Epstein has been successful in resisting the Cross-Claim against him but Gemi 193 has been unsuccessful in the Cross-Claim against it. They both engaged Summer Lawyers and the same counsel. Where a plaintiff (or cross claimant such as Mrs Zhu) succeeds against one defendant but not the other, where the two defendants have the same legal representatives, the usual rule that applies is that the plaintiff will pay the successful defendant’s costs and receive costs from the unsuccessful defendant. This may be calculated according to a formula referred to by Campbell JA in Wardle v Agricultural and Rural Finance Pty Ltd [(No. 2) [2012] NSWCA 388 at [46] (“Wardle “) as a “per defendant” order, citing with approval the decision of Einstein J’s decision in, Currabubula Holdings Pty Ltd v State Bank [2000] NSWSC 232 at [90]-[106]. Campbell JA said in Wardle (at [46]):

46. An important basis upon which the primary judge decided to order that the defendants should all be liable jointly and severally for the plaintiff's costs was that all the defendants had been unsuccessful. The effect of Mr Holmes having succeeded in obtaining judgment on the appeal is that that situation no longer applies. In Currabubula Holdings Pty Ltd v State Bank NSW (2000) NSWSC 232 at [90]- [106], Einstein J helpfully collected the authorities relating to the circumstances in which it is appropriate for a court to order that unsuccessful defendants pay their several proportionate shares of the costs incurred by the plaintiff (a "per-defendant order"). Such an order can be appropriate where a plaintiff sues several defendants, the defendants appear by the same solicitor, and the plaintiff succeeds against some but not all of the defendants. His Honour summarised the rationale for the principle, at [95], as being:

"... to achieve substantial justice in the awarding of costs as between a partially successful plaintiff and variously successful and unsuccessful defendants. The rule operates upon the premise that defendants are proportionately responsible for and liable for the joint costs involved in mounting the defence. Thus, a successful defendant cannot claim from the plaintiff more than a proportionate share of the joint costs of the action in addition to any costs separately referable to that defendant. Conversely, the partially successful plaintiff is prevented from looking to each of the unsuccessful defendants for more than an equal proportionate share of the costs not solely referable to the plaintiff's case against one or other of the defendants individually, in addition to the costs which are so referable. In this way, the rule of thumb prevents both the unjust enrichment of the partially successful plaintiff or successful defendant and the casting of an unfair burden on the unsuccessful defendants. Where the premise is falsified or the rule does not achieve its intended effect, it finds no application."

13. That is the situation here. Echoing Einstein J’s statement that “the rule does not achieve its intended effect, it finds no application”, other authority has emphasised that this rule or approach is said to be convenient for the "ordinary case" but is not to be automatically applied in every case: King Network Group Pty Ltd v Club of the Club's Pty Ltd (No 2) [2009] NSWCA 204, at [25] - [35]), (per Young JA, Hodgson and Campbell JJA agreeing) ("King Network Group").

14. The Wardle and King Network Group approach to making an award of costs, where a plaintiff achieves different trial outcomes against each of two defendants, is also supported by another consideration. The approach promotes the overriding purpose of facilitating the just, quick and cheap resolution of real issues in the proceedings in accordance with the Civil Procedure Act, Part 6. The Court should be mindful of minimising inconvenience to the parties in any later assessment of costs, or in fixing a specified gross sum instead of assessed costs under Civil Procedure Act, s 98(4)(c). Attempting to separate out the respective legal costs incurred by Mr Epstein from other cross-defendants’ costs, other than using the clear approach in King Network Group is likely to be a difficult, time-consuming, artificial and conflict-prone exercise.

15. Fixing a specified gross sum instead of assessed costs. Both parties have invited the Court to fix a specified gross sum instead of assessed costs under Civil Procedure Act, s 98(4)(c), sometimes referred to as a “lump sum costs order”. The legal principles that apply to make lump sum cost orders are well settled.

16. Civil Procedure Act, s 98(4)(c) is expressed in general terms and is not limited to cases of a particular type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act, s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of a taxation or assessment: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119.

17. Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered, then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (“Schipp”) at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 (“Hadid”) (Lehane J).

18. As Gemi 193 is a special purpose vehicle against which full recovery may not be possible, the circumstances that warrant the exercise of the s 98(4)(c) power are enlivened here. Avoiding a potentially drawn-out costs assessment dispute is desirable where cost recovery may only be only limited.

19. The specified gross sum can be fixed under s 98(4)(c) by the application of what has been described as a “broad brush” approach, having regard to all the information available to the Court: Schipp at [22] and Hadid at [27] and Penson v Titan National Pty Ltd (No.3) [2015] NSWCA 121 at [7] and [25]. The approach taken to estimating costs must be “logical, fair and reasonable” and the powers should only be exercised when the Court considers it can do so “fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available”: Schipp at [22] per Giles JA.

20. A definitive statement of the applicable law in this state appears in Hamod v State of New South Wales [2011] NSWCA 375 at [813] to [820] (“Hamod”), which the Court applies in this case. Some of the relevant principles stated in Hamod are: that before exercising the power, the Court should be confident that the approach taken to estimating costs is fair logical and reasonable; that the terms of s 98(4), together with the more general considerations reflected in Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include the degree of any disproportion between the issue litigated and the costs claimed and the complexity of proceedings in relation to their cost; that the power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceeding; that the assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing; that in the exercise of its discretion, the Court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment; that the costs ordered should be based on an informed assessment of the actual costs, having regard to the information before the court (for example, by relying on costs estimates or bills); and that the approach taken to estimate the costs to be ordered must be logical, fair and reasonable and this may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment.

21. I have previously summarized the law regarding the powers available in Civil Procedure Act, s 98(4)(c) in Simone Starr-Diamond v Talus Diamond (No. 4) (2013) 272 FLR 414; (2013) 224 A Crim R 523; [2013] NSWSC 811.

22. Established authority justifies the making of such an order in circumstances such as the present.

23. Calderbank Letters. The principles that apply to making awards of indemnity costs based upon the non-acceptance of Calderbank letters are well established. Two fundamental principles must be satisfied. First, the Calderbank letter must be shown to have been a genuine offer of compromise: Leichhardt Municipal Council v Green [2004] NSWCA 341 (at [21] – [24]). Secondly, it must be demonstrated that rejection of the offer was unreasonable: Ofria v Cameron (No. 2) [2008] NSWCA 242 (at [20]). Offerors bear the persuasive burden of satisfying the Court to exercise its discretion in their favour: Evans Shire Council v Richardson (No. 2) [2006] NSWCA 61.

24. The considerations relevant to determining whether a refusal of a Calderbank offer is unreasonable were comprehensively stated in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 (“Miwa”) (at [12]), based on Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 435; [2005] VSC 298 (“Hazeldene's”) (at [25]). The Victorian Court of Appeal (Warren CJ, Maxwell P and Harper AJA) in Hazeldene’s stated the following factors were relevant considerations in determining whether the rejection of a Calderbank offer was unreasonable: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it. Ward J (as her Honour then was) also discussed the principles in A v N [2012] NSWSC 549 (“A v N”) (at [14]–[19]).

25. The determination of whether rejection of an offer was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all their relevant surrounding circumstances: King Network Group (at [11]). The test of unreasonableness should not be upheld other than on clear grounds: Chaina v Alvaro Homes Pty Limited [2008] NSWCA 353 (at [113]). The discretion to award indemnity costs may be refused where the litigation changes, for example: where all the relevant evidence has not been served before the offer, Vale v Eggins (No. 2) [2007] NSWCA 12 (at [22]); where the full parameters of the dispute were still uncertain at the time of the offer: Equity 8 Pty Limited v Shaw Stockbroking Limited [2007] NSWSC 503 (at [42]); or, where the offeror’s case changes after the offer: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 (at [85]). And the filing of other pleadings such as a Cross-Claim after the offer may make it more difficult to show that rejection was unreasonable: Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited (2001) 53 NSWLR 626; [2001] NSWCA 461.

26. Although a Calderbank offer may be made on an inclusive-of-costs basis, the failure to clearly separate out the costs component risks a finding that the evaluation of the reasonableness of the offer is impossible: Rockcote Enterprises Pty Limited v FS Architects Pty Limited (No. 2); Carelli v FS Architects Pty Ltd (No. 2) [2008] NSWCA 205 (at [51]).

27. More complex issues may render it difficult to show that rejection of the offer was unreasonable: Nationwide News Pty Limited v Naidu; ISS Security Pty Ltd v Naidu (2007) 71 NSWLR 471; [2007] NSWCA 377.

28. To assess the reasonableness of non-acceptance of an offer, the Court must evaluate what was disclosed in the material in the proceedings at the time of service of the offer: Castro v Hillery [2003] 1 Qd R 651 (“Castro”), (at [72]); [2002] QCA 359. This assessment of reasonableness must be made without the benefit of hindsight: Miwa (at [11]).

13. The issues are now dealt with under the following headings. The Court has had the benefit of detailed and helpful written submissions from both parties. On most of the issues to be decided the Court has not accepted the positions taken by either side but has taken an intermediate position explained in these reasons. It is not necessary to reject each party’s submissions with detailed explanation, as the reasons for that rejection are obvious from the Court’s own reasoning.

Is Mrs Zhu entitled to indemnity costs after 13 December 2022?

30. Mrs Zhu claims an entitlement to indemnity costs based upon a letter of offer sent by her then solicitors, Crichton & Co to Summer Lawyers on behalf of Gemi 193 and Mr Epstein.

31. The 13 December 2022 letter offered to pay Gemi 193 $500,000 from the controlled monies account (being the proceeds of sale of the Wahroonga property) and for the balance of the controlled monies account to be remitted to the solicitors for Mrs Zhu. The offer also required that Gemi 193 should take all reasonable steps to remove the caveat over the Gordon property and that the parties would give to each to the other mutual releases in the proceedings and the claim and the Cross-Claim would be dismissed on the basis that there be no order as to costs.

32. This offer does not merit an award of indemnity costs on Calderbank principles after 13 December 2022 against the cross-defendants. Rejection of the offer was reasonable. The offer was made as a composite offer to end the proceedings against both Gemi 193 and Mr Epstein. This was on the basis that $500,000 was paid to Gemi 193 and that Mr Epstein would have to pay his own costs of the proceedings.

33. Mrs Zhu did not make separate offers to Gemi 193 and Mr Epstein. Looked at as a whole, Mrs Zhu did not better the offer. She did better against Gemi 193 but not against Mr Epstein. Receipt of $500,000 by Gemi 193 is not receipt by Mr Epstein. Because Mr Epstein did better than the offer and he was not offered the choice of a separate offer. It was reasonable for he and Gemi 193 to reject the offer, which otherwise represented a reasonable compromise.

What Costs Order Are Appropriate Between the Parties

34. The parties’ respective submissions seek to apply the Wardle and King Network Group approach to their respective claims for costs. But they do so whilst producing quite different results as to the common costs incurred on behalf of all defendants and the separate costs incurred on behalf of and against Mr Epstein.

35. In the Court’s view, Mrs Zhu’s contention of allowing no reduction in the total costs to be awarded to her, because her claim against Mr Epstein failed, should not be accepted. But she is correct in her attack on the methodology used by Gemi 193 and Mr Zhu, which is somewhat artificial.

36. There should be a discount to her costs on account of her lack of success on the Cross-Claim against Mr Epstein. Although there was very substantial overlap in the presentation of the facts and the issues in the cases against Gemi 193 and Mr Epstein, they were not identical. The Court is well-placed to isolate the degree of separate evidentiary commitment, preparation and client engagement in relation to the Cross-Claim against Mr Epstein. He was giving instructions on behalf of Gemi 193 as well as himself. The misleading and deceptive conduct positive and negative claims involved an almost factually congruent contest with the cross claim against Mr Epstein.

37. But there were differences. There was greater concentration on both sides principally in preparation for and in cross examination of Mr Epstein in relation to the conversation inside and outside the CBA and a greater focus on Mr Epstein’s state of mind than would otherwise have occurred if he had not been joined as a cross–defendant. In the Court’s view, the proportion of the common costs incurred by the plaintiff and incurred on behalf of the defendants that relates to the claim against Mr Epstein is 10%.

38. This apportionment is appropriate to and should be used to apportion costs for Mrs Zhu’s Cross-Claim and the common costs for Mr Epstein and Gemi’s Defence to Cross-Claim.

39. On top of that there were some additional costs solely preferable to Mr Epstein defending the claim against himself as distinct from giving instructions to defend the claim against Gemi 193. These would have involved preparation of parts of his affidavit and filing the Defence to Cross-Claim on his behalf. But they would not have been many. They were far fewer than is claimed by Mr Epstein.

40. On Mrs Zhu’s side, it is difficult to isolate any additional costs solely referable to her claim against Mr Epstein except the parts of the Cross-Claim and the Amended Cross-Claim pleading the positive and negative cases of misleading and deceptive conduct against Mr Epstein and a small amount of evidence relating to what happened at the CBA. Although Ms Zhu says there were no such expenses, there were in fact some.

41. Finally, Mr Rajbhandari’s methodology, though stoutly defended in submissions behalf of Gemi 193 and Mr Epstein, was diligent but artificial and it does not accord with the Court’s perception of a correct apportionment. It was grounded in an apportionment based upon the proportion of the Amended Cross-Claim (47%) taken up by pleading the misleading deceptive conduct case against Mr Epstein. The pleadings are only one part of the overall presentation of the case on both sides, which was centrally focused on the contest between Gemi 193 and Mrs Zhu. The Court’s view Ms Rajbhandari’s methodology was flawed because of an excessive focus on the pleadings.

42. In the result, Mrs Zhu’s costs against the unsuccessful defendant Gemi 193 should be discounted by 10% on account of her failure against Mr Epstein. They should be further discounted on account of a limited number of additional costs referable solely to her claim against Mr Epstein.

43. Similarly, Mr Epstein should be treated as being able to recover 10% of the common costs incurred by both cross-defendants, together with a limited number of additional costs referable solely to his defensive Mrs Zhu’s claim against him. The respective numbers associated with this apportionment can be dealt with at the same time as the Court makes a lump sum costs order.

How Should Costs Be Quantified under Civil Procedure Act s 98(4)(c).

44. The Court has the benefit of detailed materials from the parties setting out the memoranda of fees on each side and can make a lump sum costs order as a result. But the Court will do so on the broadbrush basis that s 98(4)(c) allows for the making of lump sum cost orders. The plaintiff’s and the defendants’ costs are dealt with in turn here.

45. On both sides the Court can accept that there were fee agreements in place and in many instances the fees have already been paid.

46. Ms Zhu’s total costs and disbursements up to the date of Mr Hedges’ affidavit in the last week of October 2024 are specified in that affidavit. Late October 2024 is a convenient approximate cut-off date for assessing costs relating to the first hearing, as it does some preparation of orders implementing the reasons of the first judgment and, to a small degree, the preparation of the relief hearing. And both Mr Hedges and Mr Rajbhandari have isolated some separate costs incurred in preparation for the relief hearing.

47. Mrs Zhu’s costs for the period are a total of $894,103.28. Of that, counsels’ fees were $345,609.00 and other disbursements were $21,224.99 and solicitors’ professional costs were $527,269.29. Solicitors’ professional costs are therefore 59% ($527,269.29 divided by $894,103.28 multiplied by 100, rounded to the nearest whole) of total costs. 10% can be immediately taken off that total figure to represent the portion of the costs associated with maintaining the claim against Mr Epstein. That leaves figure of $804,692.95 (90% of $894,103.28). But there should also be deducted from that figure an amount representing individual costs referable to the claim against Mr Epstein. Doing the best the Court can with knowledge of the case and based on a comprehensive breakdown of the figures given by the plaintiff, in the Court’s view that would be another $45,000. Therefore, before any consideration of a lump sum cost order is brought into play the amount recoverable by Ms Zhu would be $759,692.95 (being $804,692.95 minus $45,000).

48. As there is no indemnity costs order in either direction, the lump sum costs order can be assessed on the basis that costs would be assessed on the ordinary basis. The Court is mindful of making allowance for what is likely to occur on a costs assessment but not being too heavy-handed in that regard. In that respect, disbursements and counsels’ fees are in a somewhat different category to solicitors’ professional costs, for which either no, or a much lesser discount should be allowed.

49. Doing the best the Court can in the broadbrush approach allowed in relation to a lump sum costs assessment, the Court will use Mrs Zhu’s resultant total recoverable costs figure of $759,692.95 after applying the Wardle and King Network Group approach and treat solicitors professional costs as being 59% (or $448,218.84) of that figure and counsels’ fees and other disbursements as being 41% (or $311,474.11) that figure. They will in turn be discounted by different amounts.

50. A discount of solicitor’s professional fees of 20% is appropriate, leading to figure of $358,575.07 (being 80% of $448,218.84). And in respect of counsels’ fees and other disbursements a 10% discount is appropriate leading to a figure of $280,326.70 (being 90% of $311,474.11). These figures can be recombined to produce a figure of $638,901.77 (being $358,575.07 plus $280,326.70).

51. This methodology has not expressly included as a separate integer in the calculations the interlocutory cost orders mentioned in the affidavit evidence, the costs against Mrs Zhu for the failed security for costs motion in September 2023 and the costs ordered by Darke J in May 2022 with respect to Mrs Zhu’s application to amend the Cross-Claim. These are relatively minor amounts and have been considered as part of the Court’s judgment about the discounts to be applied. This methodology also considers the overall role of Gemi 193 as a plaintiff as well as a cross-defendant and vice versa for Mrs Zhu.

52. Somewhat similar methodology should be used in relation to the cross-defendant’s costs but in reverse. In the same period (that is up to 4 November 2024), Summer Lawyers charged $1,152,580.28 in professional costs and a total of $429,787.40 was incurred in counsels’ fees and other disbursements for the cross-defendants. Total costs therefore on that side of the record were $1,582,367.68. Counsels’ fees and other disbursements were 27% of that and solicitors’ professional costs were 73%. In the Court’s view, about 10% of the common cross-defendants costs related to Mr Epstein’s separate defence of the proceedings namely $158,236.77.

53. But there should also be added to that figure an amount representing individual costs solely referable to Mr Epstein defending the claim against himself. Doing the best the Court can, that would be another $65,000 giving a total of $223,236.77 (being $158,236.77 plus $65,000).

54. Of this figure of $223,236.77, counsels’ fees and other disbursements were 27% (or $60,273.93) and solicitors’ professional costs were 73% (or $162,962.84). The solicitors’ costs of $162,962.84 should be discounted by 20% to reach $130,370.27. The counsels’ fees and other disbursements of $60,273.93 should be reduced by 10% to reach $54,246.54. These figures should then be recombined to reach a figure of $184,616.80 (being $130,370.27 plus $54,246.54).

55. In the result, Mrs Zhu should be ordered to pay Mr Epstein $184,616.80 and Gemi 193 should be ordered to pay Ms Zhu $638,901.77.

Conclusions and Orders

56. For these reasons the Court makes the following orders and directions.

57. The Court:

1. ORDERS the plaintiff/first cross-defendant to pay the defendant/cross claimant the sum of $638,901.77.

2. ORDERS the defendant/cross claimant to pay the second cross-defendant the sum of $184,616.80.

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Decision last updated: 31 March 2025