Ling v Beyond Development Group Pty Ltd (No 2)

Case •

[2022] NSWSC 817

•

21 June 2022

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Ling v Beyond Development Group Pty Ltd (No 2) [2022] NSWSC 817
Hearing dates: On the papers
Date of orders: 21 June 2022
Decision date: 21 June 2022
Jurisdiction:Equity
Before: Ward P
Decision:

1.   Order that the sum held in Court as security for the fourth defendant’s costs ($100,000) plus any interest that has accrued thereon, be released forthwith to the trust account of the fourth defendant’s solicitor (details of which are set out below) in partial discharge of the plaintiffs’ obligation to pay the fourth defendant’s costs of the proceeding.

2.   Order the third defendant to indemnify the plaintiffs for the amounts paid by the plaintiffs to the second and fourth defendants pursuant to the orders made for costs in their favour.

3.   Otherwise, there be no variation to the costs orders made on 30 May 2022.

Catchwords:

COSTS – Party/Party – Exceptions to the general rule that costs follow the event – whether plaintiffs’ conduct in joining the second and fourth defendants to the proceedings supported an order for costs to be assessed on an indemnity basis

COSTS – Party/Party – Orders when proceedings involve multiple parties – Bullock and Sanderson orders – whether the burden of an unsuccessful defendant’s insolvency should be cast on the plaintiffs or the successful defendants

Legislation Cited:

Bankruptcy Act 1966 (Cth), s 58(3)

Civil Procedure Act 2005 (NSW), ss 56, 98

Uniform Civil Procedure Rules 2005 NSW rr 41.3, 41.8, 42.1

Cases Cited:

123 259 932 Pty Ltd v Cessnock City Council (No 4) [2021] NSWSC 1598

Bankamerica Finance Ltd v Nock [1988] AC 1002

Bullock v London General Omnibus Co [1907] 1 KB 264

Chong v Super Equity Invests Pty Ltd & Anor [2012] NSWSC 27

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536

Commonwealth Bank v Estate of late Slieman [2010] NSWSC 661

Commonwealth of Australia v Gretton [2008] NSWCA 117

Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176

Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491; [2007] NSWCA 266

Dwight v Federal Commissioner of Taxation (1992) 37 FCR 178

Fennell v Supervision and Engineering Services Holding Pty Ltd (1988) 47 SASR 6

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202

In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676

Jin Lian Group Pty Ltd (in Liq) v ACapital Finance Pty Ltd (No 2) [2021] NSWSC 1202

Kenneth John Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; [2007] HCA 56

Lackersteen v Jones (No 2) (1988) 93 FLR 442

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Leichhardt Municipal Council v Green [2004] NSWCA 341

Ling v Beyond Development Group Pty Ltd [2022] NSWSC 685

Mid-City Skin Cancer and Laser Centre v Zahedi-Anarak [2006] NSWSC 1149

Ohn v Walton (1995) 36 NSWLR 77

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Refina Pty Ltd v Binnie (Costs) [2009] NSWSC 1098

Roberts v lnvestwell Pty Ltd (in liq) (2012) 88 ACSR 689; [2012] NSWCA 134

Sanderson v Blyth Theatre Co [1903] 2 KB 533

Steppke v National Capital Development Commission (1978) 21 ACTR 23

Stevedoring Industry Finance Committee v Gibson (2000) 20 NSWCCR 417; [2000] NSWCA 179

Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 211

Sydney City Council v Geftlick [2006] NSWCA 280

Sze Tu v Lowe (No 2) [2015] NSWCA 91

Thomson v Golden Destiny Investments Pty Ltd (No 2) [2015] NSWSC 1929

Vagg v McPhee (No 2) [2013] NSWCA 126

Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343; [2008] NSWSC 505

White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303

Texts Cited:

G E Dal Pont, Law of Costs (2009, LexisNexis Butterworths, 2nd ed; 2018, 4th ed;)

G E Dal Pont, Law of Costs (2021, LexisNexis Butterworths, 5th ed)

Category:Costs
Parties: Kuo Shu Ling (First Plaintiff)
Chuan Dian International Trade Co Ltd (Second Plaintiff)
Beyond Development Group Pty Ltd (First Defendant)
Liping Wang (Second Defendant)
Peter Zhuang (Third Defendant)
Pang (trading as O Pang & Co) Oliver (Fourth Defendant)
Representation:

Counsel:
DP O’Connor with P Lin (Plaintiffs)
DC Eardley (Second Defendant)
DA Lloyd SC with C Robertson (Fourth Defendant)

Solicitors:
Pinnacle Lawyers (Plaintiffs)
Praxis Lawyers (Second Defendant)
DLA Piper (Fourth Defendant)
File Number(s): 2018/00012504
Publication restriction: Nil

Judgment

  1. HER HONOUR: On 30 May 2022 I published reasons for judgment in this matter, which involved a dispute as to moneys claimed under two instruments each titled a “Mortgage Linked Loan Agreement” (and referred to collectively in submissions as the Loan Agreements). In their terms, the Loan Agreements guaranteed the obligations of the first defendant, Beyond Development Group Pty Ltd (a company now in liquidation), to repay sums totalling $900,000 plus interest to the plaintiffs. For convenience, I will adopt the same abbreviations as used in the principal judgment (Ling v Beyond Development Group Pty Ltd [2022] NSWSC 685).

  2. For the reasons set out in the principal judgment, I dismissed with costs the plaintiffs’ claim against each of the second and fourth defendants (Ms Wang and Mr Pang, respectively). I entered judgment for the plaintiffs against the third defendant (Mr Zhuang) in the sum of $800,000 plus interest and costs. Mr Zhuang is the husband of Ms Wang (from whom she is now separated) and, at the time of the hearing, Mr Zhuang was an undischarged bankrupt (whose trustee in bankruptcy was notified of, but sought to take no part in, the proceeding).

  3. As to costs, I was of the preliminary view (see at [402] of the principal judgment) that costs should follow the event. However, I noted that Ms Wang had (in her written submissions at the hearing) sought costs on an indemnity basis (or alternatively on an ordinary basis) if the claims against her were to fail (as they did). As it was not clear to me whether the plaintiffs wished to respond to the special costs order sought by Ms Wang (and it was possible that Mr Pang might seek to make submissions as to costs), I made directions for any further submissions as to the costs of Ms Wang and Mr Pang to be filed within 14 days.

  4. What then happened, so far as the plaintiffs are concerned, was that the plaintiffs filed written submissions as to costs within the 14 day time period (which I address in due course) but in those submissions indicated that they wished to “reserve the right” to reply to any application that Ms Wang might advance for an indemnity costs order, stating that it was not clear to them on what basis such an application would be advanced. I regarded this as most unsatisfactory, in circumstances where one of the stated purposes for the making of the directions as to costs submissions (as noted at [402] of the principal judgment) was to give the plaintiffs just that opportunity; and in circumstances where I consider that there can be little doubt as to the basis on which Ms Wang was advancing in her submissions at hearing a claim for indemnity costs (see [29]-[30] of those submissions), that being identified at [402] of the principal judgment.

  5. If the plaintiffs were left in any doubt as to the basis of the special costs order sought by Ms Wang (notwithstanding the reference in her submissions to the academic commentary by G E Dal Pont, Law of Costs (2009, LexisNexis Butterworths, 2nd ed) at [16.51] and to Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536 (Colgate-Palmolive) where Sheppard J summarised the authorities and principles to be applied to an order for indemnity costs (see at [5]), and notwithstanding the position made clear for Ms Wang at the hearing that the expert forensic evidence was in effect fatal to the plaintiffs’ case against her), then I consider that it was incumbent on the plaintiffs (to facilitate the just, quick and cheap resolution of the real issues in dispute) to seek clarification from Ms Wang’s legal representatives on this issue (rather than prolonging the submission process and causing no doubt yet further costs to be incurred in relation to the costs submissions).

  6. Presumably, having regard to the reference in Ms Wang’s submissions to Professor Dal Pont’s text, all that would surely have been required was confirmation as to whether the special costs order was sought on the basis that the application had been commenced or continued in circumstances where, properly advised, the plaintiffs should have known that they had no chance of success (such that the presumption referred to by Professor Dal Pont as to some ulterior motive or wilful disregard of the known facts or clearly established law might be said to arise).

  7. In any event, I permitted a further period for the plaintiffs to make written submissions on this issue; and am now in a position to determine the issues as to costs that have arisen and to dispose of the proceeding.

Summary as to the parties’ competing positions on costs

  1. The position of the parties in relation to costs can be summarised as follows.

  2. The plaintiffs seek a Sanderson order (so-called after the decision in Sanderson v Blyth Theatre Co [1903] 2 KB 533) to the effect that their costs liability to Ms Wang and Mr Pang be paid directly by Mr Zhuang (as noted, an undischarged bankrupt); thus, in effect, passing the burden of Mr Zhuang’s bankruptcy onto the successful defendants in the proceeding.

  3. Ms Wang, as noted already, seeks her costs on an indemnity basis (alternatively, on the ordinary basis).

  4. Mr Pang contends for the order foreshadowed in the principal judgment (namely, that the plaintiffs pay his costs of the proceeding on the ordinary basis) and submits that there is no reason to depart from the “general rule” identified by Professor Dal Point in the above cited text at [11.14] (see below) to the effect that the burden of an unsuccessful defendant’s insolvency be cast upon the plaintiff so far as costs are concerned.

Plaintiffs’ submissions

  1. The plaintiffs point to the judgment in their favour as against Mr Zhuang, in the amount of $800,000 plus costs plus interest; and they refer to the finding that it was Mr Zhuang who forged Ms Wang’s signature and that of Mr Pang on the relevant documents. (Relevantly, the finding made (at [385]) was somewhat more nuanced than the plaintiffs record in their submissions. However, nothing turns on this for present purposes.) At [385], I said:

385.   Balancing all of the above, I am not comfortably satisfied that the overall mosaic when pieced together reveals or points to the conclusion that the purported signatures of Mr Pang on the Loan Agreements are authentic signatures. On the balance of probabilities, I consider it more likely that the signatures were placed on the documents by someone else (most likely the “chief rogue”, as Mr Zhuang was identified by the plaintiffs in oral submissions – see T 328.19 – or someone at his behest).

  1. The plaintiffs note that the bankruptcy of Mr Zhuang is no bar to the Court making a cost order as against him (the plaintiffs in this regard citing Kenneth John Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; [2007] HCA 56, where the plurality of the High Court accepted that, since the costs order would not be a debt provable in the appellant’s bankruptcy, s 58(3) of the Bankruptcy Act1966 (Cth) was no impediment to the making of a costs order against the appellant in that case (see at [67] per Gleeson CJ, Gummow, Hayne and Crennan JJ; cf Kirby’s dissenting judgment at [117]-[129])). The plaintiffs say that, in the present case, any costs order would similarly not be a provable debt in Mr Zhuang’s bankruptcy, it having been incurred after the act of bankruptcy (and hence s 58(3) does not apply).

  2. As to the relevant costs principles, reliance is placed on Commonwealth of Australia v Gretton [2008] NSWCA 117 (Gretton) at [121] per Hodgson JA for the proposition that costs should be paid in a way that is fair having regard to what the Court considers to be the responsibility of each party for incurring the costs.

  3. As to the seeking of a Sanderson order, reference is made to what was said by King CJ in Fennell v Supervision and Engineering Services Holdings Pty Ltd (1988) 47 SASR 6 (Fennell) at [7], namely that:

The unsuccessful defendant has caused the litigation by his wrongful act and by disputing liability for it. He therefore ought to pay all costs reasonably incurred by the plaintiff in connection with the litigation. If it was reasonable, as between the plaintiff and the unsuccessful defendant, for the plaintiff to sue the successful defendant, the unsuccessful defendant ought therefore in justice be liable to indemnify the plaintiff against the costs of doing so, including those which he is ordered to pay the successful defendant.

  1. Pausing here, there is of course a distinction between an order that requires an unsuccessful defendant to indemnify the plaintiff against costs that the plaintiff is ordered to pay a successful defendant (which would not expose the successful defendant to the burden of the unsuccessful defendant’s insolvency) and an order of the kind that the plaintiffs here seek (which is in effect that the successful defendants’ costs should be borne directly by the unsuccessful defendants – thus exposing the successful defendants to the burden of the unsuccessful defendant’s insolvency).

  2. The plaintiffs note that, as a matter of practicality, the law discourages a multiplicity of actions; and they say that if, out of the same facts, a plaintiff is uncertain as to which of two of more potential defendants to sue, then it makes sense (from the perspective of avoiding unnecessary use of Court time and resources) for the plaintiff to be encouraged to join each of the defendants in the one action (here citing a more recent, though not the latest, edition of Professor Dal Pont’s text on costs – the 4th edition) at [11.19]). Hence, the plaintiffs argue that the principal enquiry should be whether they acted reasonably in joining each defendant (citing Fennell at 7), though they accept that it must also be determined whether “the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant” (referring to Steppke v National Capital Development Commission (1978) 21 ACTR 23 at 30-31 per Blackburn CJ).

  3. It is noted that, where an unsuccessful party may be unable to pay the costs as ordered (as would seem likely here to be the case), a Sanderson order may still be made if it is just in the circumstances to spread the hardship caused by the unsuccessful defendants’ impecuniosity more fairly between the plaintiff and the successful defendants (the plaintiffs here citing Bankamerica Finance Ltd v Nock [1988] AC 1002 at 1011-12 per Lord Brandon).

  4. As to the reasonableness of the joinder of the defendants in the present case, the plaintiffs say that it was reasonable and proper for them to have sued the successful defendants because the causes of action against the various defendants were substantially connected and interdependent (referring to Stevedoring Industry Finance Committee v Gibson (2000) 20 NSWCCR 417; [2000] NSWCA 179 (Stevedoring Industry), in which Mason P at [128] cited with approval the decision of Asche CJ in Lackersteen v Jones (No 2) (1988) 93 FLR 442 (Lackersteen v Jones) at 449).

  5. The plaintiffs point out that the common factual scenario centred upon the two Loan Agreements under which Mr Zhuang and Ms Wang purportedly gave personal guarantees, and that those guarantees were purportedly witnessed by Mr Pang. The plaintiffs say that it was reasonable to have joined all the defendants because, on the face of it, the documents were signed by all of Mr Zhuang, Ms Wang and Mr Pang. In particular, it is submitted that it was reasonable to join Mr Pang and to maintain the proceeding as against him because he never denied that it was his signature on the Loan Agreements and he expressly accepted the possibility that the signature might be his.

  6. As to whether there was something in the conduct of the unsuccessful defendant (Mr Zhuang) which makes a Sanderson order a proper exercise of the discretion (see Stevedoring Industry at [128] per Mason P), the plaintiffs say that not only did Mr Zhuang not appear to defend the case against him but also, on the evidence, Mr Zhuang was the chief rogue in the proceedings (referring to the principal judgment at [399] where I referred to Mr Zhuang as the principal culprit – “chief rogue” being the plaintiffs’ term). It is submitted that Mr Zhuang is “overwhelmingly” responsible for the incurring of the costs of this litigation such that it is fair that he should be held responsible for those costs by way of a Sanderson order.

  7. The plaintiffs submit that all the parties, including the successful defendants, are in one way or another victims of Mr Zhuang and that the proceeding was necessary in order to reach a conclusion as to “which of the competing narratives would ultimately prevail”. As such, the plaintiffs submit that the hardship that Mr Zhuang has caused should be spread evenly across his victims (i.e., the plaintiff and the successful defendants); and that the obvious way to do this is to make a Sanderson order to the effect that Mr Zhuang pay the costs of the successful second and fourth defendants (Ms Wang and Mr Pang). Effectively, if Mr Zhuang is unable to meet any such costs order, this would mean that each party would be required to bear his or her own costs.

Ms Wang’s submissions

  1. As noted earlier, Ms Wang made brief submissions at the substantive hearing as to costs, by reference to what was said at [16.51] of Professor Dal Pont’s text and to the principles set out in the Colgate-Palmolive decision. Ms Wang did not make any further submissions as to costs.

Plaintiffs’ further submissions addressing Ms Wang’s costs submission

  1. In response to the submission made by Ms Wang made at the hearing that her costs should be paid by the plaintiffs on the indemnity basis, the plaintiffs maintain their primary position (referred to above) that Mr Zhuang should be ordered to pay the costs of the successful defendants. In the alternative, the plaintiffs contend that no valid reason has been advanced to ground Ms Wang’s submission that her costs should be paid on the indemnity basis.

  2. Complaint is made that Ms Wang’s written submissions (of 5 November 2021 and 17 November 2021) did not identify the conduct of the plaintiffs that would support such an order. The plaintiffs submit that there has been no relevant “sufficient or unusual feature” or any “ delinquency” in the plaintiffs’ conduct of the case (adopting the language in Colgate-Palmolive at 230-231 per Sheppard J and Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [44] per Gaudron and Gummow JJ, respectively) such as to warrant an order for costs to be assessed on the indemnity basis.

  3. The plaintiffs say that they pursued a claim for indemnity based on what appeared to be Ms Wang’s signature on the Loan Agreements, noting that initially Ms Wang did not engage in the proceeding at all and “allowed” a default judgment to be entered as against her. It is said that the plaintiffs’ decision to proceed with its case as against Ms Wang on the basis that she was clearly lying about a range of issues was at least in part vindicated in the rulings made in the principal judgment (referring, as I understood it, to the findings I made as to Ms Wang’s unreliability as a witness).

  4. The plaintiffs maintain that their case was a bona fide attempt to enforce prima facie valid agreements. It is said that Ms Wang’s expert evidence (that of Ms Holt) did not foreclose the possibility that Ms Wang made the signatures in a way as to disguise her signature or as an accidental occurrence; and that, in the circumstances, it was proper for the plaintiffs to have prosecuted their case against Ms Wang.

Mr Pang’s submissions

  1. For Mr Pang, it is noted that the plaintiffs sued him on a number of causes of action, each of which failed; and made allegations of dishonesty against him. It is said that, even on an issue by issue basis, the plaintiffs achieved little success against Mr Pang (reference being made in this context to the contingent findings on the contributory negligence and proportionate liability defences to the effect that, had the plaintiffs been successful against Mr Pang, their damages would have been reduced on account of each of those defences by 75%). It is said that, in circumstances where Mr Zhuang did not appear in the proceeding, the plaintiffs cannot have incurred anything other than minimal costs in pursuing the case against him.

  2. Pausing here, while that may be the case, there would nevertheless presumably have been costs necessarily incurred by the plaintiffs in establishing the basis for the claim for default judgment against Mr Zhuang; but that is not the issue here – rather, the question arising on the plaintiffs’ submissions is as to who should bear the burden of Mr Zhuang’s insolvency when it comes to the costs of the proceeding. In that regard, Mr Pang contends that the burden of Mr Zhuang’s insolvency should fall on the plaintiffs.

  3. As to the plaintiffs’ submission (at [20] of their written submissions) that Mr Zhuang is “overwhelmingly responsible” for incurring the costs of this litigation, Mr Pang says that the costs of the litigation (as between the plaintiffs and Mr Pang) were not generated by anything that Mr Zhuang did in this case, as he never appeared in the proceeding. Mr Pang also cavils with the plaintiffs’ submission (at [21] of their written submissions) that “these proceedings were necessary to come to a conclusion as to which of the competing narratives would ultimately prevail”. In that regard, Mr Pang points out that what was involved in the hearing was not the exercise of an inquisitorial function; noting that, in the adversarial system, the case is determined on the causes of action brought by the plaintiffs against the relevant defendants (here, Mr Pang and Ms Wang). (As to this last submission, I rather think that the plaintiffs in their submissions were not suggesting that there was an inquisitorial system of justice here being adopted; rather that, as a practical matter, in order to determine the claims made against (relevantly) Mr Pang, it was necessary to determine which of the differing factual contentions was established on the balance of probabilities – in particular, whether Ms Wang’s signature on the documents was genuine and whether Mr Pang witnessed Ms Wang’s execution of the documents in her presence.)

  4. For Mr Pang, it is said that the fact that he accepted that the signature on the Loan Agreements may have been his (acceptance of that possibility being said to have been both proper and reasonable) is not a discretionary factor in favour of the plaintiffs’ application for a Sanderson order; but, rather, that it underscores the reasonable approach that Mr Pang took both to his evidence and to the conduct of the case.

  5. Mr Pang argues that, as a matter of principle, the plaintiffs’ position is objectionable. It is said that the present case is a not uncommon instance where a fraud is perpetrated by a person who, by the time of the hearing has absconded or is insolvent, and the victim of the fraud (here, the plaintiffs) seeks to recover damages from a range of defendants (in Mr Pang’s case, a professional accountant). It is contended that, as a matter of principle, a plaintiff who unsuccessfully sues parties other than (or in this case in addition to) the principal wrongdoer in a fraud case should not be absolved of the obligation to pay the costs of unsuccessfully suing those parties. Mr Pang argues that such an approach would encourage parties in the plaintiffs’ position pointlessly to sue the fraudster in order to ground a submission of the kind presently made. Further, it is said that acceptance of the plaintiffs’ approach may operate to encourage plaintiffs to bring litigation of the present kind against parties who are not the principal wrongdoer on the basis that, if their case fails, they will not be required to compensate the successful defendants for the costs in defending themselves.

  6. Finally, if the order that the plaintiffs pay Mr Pang’s costs of the proceeding on the ordinary basis is undisturbed, Mr Pang seeks the release to him of the amount paid into Court as security for his costs ($100,000). An order has been proposed to this effect (see the affidavit of his solicitor, Mr Berg, sworn on 10 June 2022 at [3]). Reliance is placed on Mr Berg’s affidavit for the proposition that, on any assessment of Mr Pang’s costs, it is inconceivable that they would be less than the amount held as security plus interest accrued thereon. In this regard, it is noted that Mr Pang’s disbursements alone total $145,619 (see Mr Berg’s affidavit at [12]), the bulk of which comprise Counsel’s fees and expert witness fees (see at [13]) but which also comprise transcript fees.

  7. It is noted that the plaintiffs’ solicitor was advised of Mr Pang’s proposed order for the release of security (see Mr Berg’s affidavit at [14]; and Annexure H thereto); and that Mr Tupou’s response, by email on 7 June 2022, adopted the position that “In the event the Court does order that the plaintiffs pay your clients [sic] costs, then they propose to revisit the matters raised in your correspondence at such time”. Complaint is (understandably, perhaps, in light of the history of the making of submissions outlined above) made as to any suggestion that there should be a later opportunity given to the plaintiffs to “revisit” the question of Mr Pang’s entitlement to the sum held by the Court as security for costs. It is submitted that there is no reason that those funds should not be released now.

Plaintiffs’ reply to Mr Pang’s submissions

  1. In reply to Mr Pang’s submissions on costs (albeit without leave), the plaintiffs say that the submission by Mr Pang (at [6]) that the costs of the litigation as between the plaintiffs and Mr Pang were not generated by anything that Mr Zhuang did in this case, as he never appeared is “something of an artificial distinction”. It is said that Mr Zhuang’s conduct plainly precipitated the proceeding and that the fact that he did not take an active step in the proceeding, despite being served, is immaterial. (As I see it, Mr Pang’s submissions were drawing the obvious distinction between, on the one hand, wrongdoing that led to the proceeding and, on the other hand, misconduct in the way in which the litigation was prosecuted; Mr Zhuang having nothing to do with the latter.)

  2. As to the distinction between inquisitorial and adversarial systems of justice, the plaintiffs disavow any suggestion on their part that the Court was exercising an inquisitorial function in this case; rather, they argue that it was necessary for them to join all the parties to obtain a curial decision as to who was liable and that there is nothing inquisitorial about the making of a curial decision as to which of competing narratives is to be preferred.

  3. As to Mr Pang’s submissions made as to the import of the imposition of a costs order as sought by the plaintiffs on fraud cases in general, the plaintiffs say that there is “no objectional matter of principle” and they note (as is trite) that each costs application turns on its own facts. The plaintiffs emphasise that Mr Pang never denied that the signature was his (and they reiterate in this context their application for Mr Zhuang (“the forger”) to pay the costs of Mr Pang).

  4. Insofar as Mr Pang seeks an order that the funds paid into Court be released to him prior to any costs awarded in his favour being assessed, the plaintiffs say that they cannot comment on how “unthinkable” it is that the costs would be assessed at anything less than the amount of the security (adopting the language of Mr Pang’s submissions at [10]) in circumstances where the plaintiffs have not been served with any application for assessment evidencing invoices in a taxable form; and it is noted that Mr Pang makes no application for a lump sum costs order.

  5. That submission, insofar as it suggests an inability to comment on the quantum of costs incurred seems to me a somewhat surprising submission in circumstances where the plaintiffs’ solicitors have been provided with copies of the relevant invoices and it is by no means uncommon for solicitors to be able to form a view, and comment upon, the likely recoverability of costs (particularly counsel’s fees and disbursements) at least in a broad brush fashion. One only has to look at the kind of evidence regularly relied upon in support of security for costs applications to make good that observation.

  6. The plaintiffs say that Mr Pang has no “priority right” in the moneys held in Court but, at best, a right in the nature of an equitable charge or lien giving a right to recourse to the fund to secure reimbursement if an order for cost is made in his favour (referring to Dwight v Federal Commissioner of Taxation (1992) 37 FCR 178 at 186 per Hill J). The plaintiffs further say that no such equitable charge or lien would arise until Mr Pang obtained an immediate right of recourse to the moneys (citing Roberts v lnvestwell Pty Ltd (in liq) (2012) 88 ACSR 689; [2012] NSWCA 134 at [29] per Bathurst CJ, with whom Beazley JA, as Her Excellency then was, and Tobias AJA agreed (and that this would be, in the usual course, after those costs had been assessed). Pausing here, the authorities here cited by the plaintiffs concern whether a defendant has a proprietary interest in the property forming the security; they do not prevent the Court from making an order of the kind here sought by Mr Pang for the release of the security.

  7. The plaintiffs argue that “at the minimum” the release of the funds paid into Court as security for costs should not be ordered prior to costs being assessed.

Determination

  1. The relevant principles in relation to costs are well-known. There is a broad discretion as to costs (see s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act); Oshlack at [63]-[66] per McHugh J with whom Brennan CJ agreed) but the discretion must be exercised judicially and having regard to the overriding statutory purpose mandated by s 56 of the Civil Procedure Act.

  2. The usual order is that costs follow the event (r 42.1 of the Uniform Civil Procedure Rules 2005 NSW (UCPR)); unless it is considered that some other order ought to be made (see Gretton, to which the plaintiffs have referred, at [38] per Beazley JA, as Her Excellency then was (with whom Mason P agreed)). A significant factor which informs the exercise of that discretion is who is the successful party (see Mid-City Skin Cancer and Laser Centre v Zahedi-Anarak [2006] NSWSC 1149 at [48] per Campbell J, as his Honour then was). The function of costs orders is compensatory not punitive (see Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 per Mason CJ, cited with approval by Cole JA in Ohn v Walton (1995) 36 NSWLR 77 at 84 and by Gleeson JA, with whom Meagher and Barrett JJA agreed, in Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37]).

  3. Special costs orders will be warranted in certain circumstances, relevantly including where the conduct of the case by the party against whom costs are sought is “plainly unreasonable” or amounts to “relevant delinquency” by the party as a litigant (see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202 per Woodward J; Sydney City Council v Geftlick [2006] NSWCA 280 at [90] per Tobias JA, with whom Mason P and Hodgson JA agreed; Dunstan v Rickwood (No 2) (2007) 38 Fam LR 491; [2007] NSWCA 266 at [44] per McColl JA, with whom Beazley JA, as Her Excellency then was, and Ipp JA agreed; Leichhardt Municipal Council v Green [2004] NSWCA 341 at [57] per Santow JA, with whom Bryson and Stein JJA agreed; Oshlack at [44] per Gaudron and Gummow JJ).

  4. “Relevant delinquency” in that context does not mean moral delinquency or some ethical shortcoming but delinquency bearing a relevant relation to the conduct of the case (see, for example, White Constructions ACT Pty Ltd (in liq) v White [2004] NSWSC 303 at [11] per McDougall J). Thus, it has been said that indemnity costs may be awarded in cases commenced or continued where there is no chance of success, the claim is “without substance”, “groundless”, “fanciful or hopeful” or so weak as to be futile (see Vagg v McPhee (No 2) [2013] NSWCA 126 (Vagg) at [31] per Tobias AJA; with whom I agreed). However, it has also been said that “mere weakness of a case will not be sufficient to warrant the exercise of the discretion to award indemnity costs” (see Vagg at [32] per Tobias AJA); and that something more is required (which generally involves some form of wilful conduct) to justify the conclusion that the relevant proceeding should not have been instituted (or not have been pursued). In Refina Pty Ltd v Binnie (Costs) [2009] NSWSC 1098, Brereton J, as his Honour then was, referred at [6] to the concept of a proceeding being doomed to fail as being “whether the proceedings were obviously or manifestly hopeless at the outset, or at some earlier stage”. It has been said that there will not lightly be a departure from awarding costs on the ordinary basis (see Vagg at [30] per Tobias AJA).

  5. As to the making of Sanderson orders, in Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [16], Beazley JA (as Her Excellency then was), together with Hodgson and McColl JJA, referred to the relevant considerations articulated in Stevedoring Industry, per Mason P (Stein JA and Heydon JA agreeing) (at [128]), as adopted from those stated by Asche CJ in Lackersteen v Jones, namely, that:

1.   It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.

2.   The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.

3.   While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.

4.   Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.

  1. I note that a related type of costs order is a Bullock order (such an order so-called by reference to the orders made in Bullock v London General Omnibus Co [1907] 1 KB 264 at 269, per Collins MR, with whom Cozens-Hardy and Farwell LLJ agreed at 272, 273 respectively), which is an order requiring the unsuccessful defendant(s) to pay to the plaintiff the costs that the plaintiff is ordered to pay to the successful defendant(s). (The plaintiffs do not here seek such an order – no doubt because the bankruptcy of Mr Zhuang makes it unlikely that he would be able to meet such an order.) In Professor Dal Pont’s text, Law of Costs (2021, LexisNexis Butterworths, 5th ed) (at [11.14]), the author says the following as to such orders:

The most common situation in which the court may choose a Bullock order over a Sanderson order is where the latter would cast upon the successful defendant the burden of the unsuccessful defendant’s insolvency. A Sanderson order made where the unsuccessful defendant is insolvent would in effect deny the successful defendant an indemnity for his or her costs. Courts generally cast the burden of an unsuccessful defendant’s insolvency, so far as costs are concerned, upon the plaintiff; a Bullock order gives effect to this practice. The logic appears to be that a successful defendant has a stronger moral claim to an indemnity for costs than a plaintiff who, having initiated litigation, has proven only partly successful.

  1. Turning then to the issues here raised (whether Ms Wang should have her costs on an indemnity basis and whether there should be a Sanderson order) I deal first with the indemnity costs issue.

Indemnity costs

  1. The relevant delinquency, if any, can only be the continuation of the proceeding against Ms Wang once the expert forensic analysis of the signatures was obtained. Ms Melanie Holt’s expert evidence in her report dated 20 October 2018 (annexed to her affidavit filed 22 October 2018) was that (see at [21]-[22]) there was strong support that someone other than Ms Wang wrote the signatures attributed to Ms Wang.

  2. The plaintiffs adduced no expert evidence to rebut the report of Ms Holt. However, as the plaintiffs submitted at the hearing (and as I accepted in the principal judgment see at [201]), the Court is not bound to accept expert forensic evidence and may come to its own conclusion as to the similarities or differences of the signatures in question (reference being made in that context to Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343; [2008] NSWSC 505 at [245]-[247] per Young CJ in Eq as his Honour then was).

  3. Further, in the present case, Ms Wang was not a reliable witness (see my findings in the principal judgment at [138]) and therefore there was a not unreasonable basis in my opinion for the plaintiffs to challenge her evidence and to contend that, notwithstanding the expert evidence, Ms Wang did sign the relevant documents and was bound thereby.

  4. While I ultimately had no hesitation in concluding (on the balance of probabilities) that the signatures purporting to be those of Ms Wang on the Loan Agreements were not Ms Wang’s genuine signatures (and placed weight on the forensic analysis of Ms Holt, which to my mind overcame the problematic nature of Ms Wang’s evidence - see at [212]), I cannot conclude that the claim against Ms Wang was doomed to fail at the outset and I cannot conclude that it was unreasonable for the plaintiffs to commence and then continue the proceeding against Ms Wang. Nor has any wilful misconduct in that regard been established (particularly in circumstances where a finding as to the authenticity of Ms Wang’s signature was a necessary integer in the claims against Mr Pang – and Ms Wang was a necessary party in order to be heard on that issue even if the claim against her on the guarantee had not been pursued).

  5. Accordingly, I do not consider that an indemnity costs order is warranted in respect of Ms Wang’s costs.

Sanderson order

  1. In the present case, I accept that it was reasonable and proper for the plaintiffs to have commenced proceedings against the successful defendants (Ms Wang and Mr Pang), having regard to the information of which the plaintiffs were aware at the time. It will be recalled that Mr Pang was not initially joined to the proceeding and that it was not until after default judgment was sought against Ms Wang that Ms Wang filed a defence denying that it was her signature on the documents; whereupon enquiries were made of Mr Pang and he was joined as a defendant (having purportedly witnessed Ms Wang’s signature on the documents). Moreover, in circumstances where Mr Pang did not deny that it was his signature on the documents (albeit denying that he witnessed any such document not in the presence of Ms Wang), I consider that it was reasonable and proper for the plaintiffs to have continued to prosecute the proceeding against Mr Pang.

  2. The continuation of the proceeding as against Ms Wang after the expert report was obtained from Ms Holt as to the authenticity of her signature is more problematic but I accept that it was not unreasonable for the plaintiffs to seek to test that evidence in cross-examination of the expert (and that a finding of the authenticity of Ms Wang’s signature was necessary in any event as part of the facts to be determined in relation to the claims against Mr Pang).

  1. I also accept that the causes of action against the respective defendants were substantially connected or dependent on the other causes of action.

  2. As to whether there is conduct of the unsuccessful defendant (Mr Zhuang) that would make it a proper exercise of discretion for him to bear a costs liability in respect of the costs of the successful defendants, I have no difficulty with the proposition that (on the factual findings that I have made in the principal judgment) it is most likely his conduct that has exposed the plaintiffs (and the successful defendants) to the costs of this litigation (and hence the policy consideration that an unsuccessful defendant should not have to pay more than one set of costs merely because he or she is unsuccessful does not arise in the present case). It seems to me entirely appropriate that the principal culprit should bear responsibility for the costs incurred by the plaintiffs in seeking to enforce liabilities arising from the very conduct of that wrongdoer (Mr Zhuang).

  3. However, while I also accept that an unnecessary multiplicity of actions should not be forced on litigants, I see no basis on which it would be appropriate for the successful defendants to bear the burden of Mr Zhuang’s insolvency (i.e., to deprive the successful defendants of the usual costs orders in their favour). Nor do I accept that, if all were victims of the conduct of Mr Zhuang, this makes such an order appropriate.

  4. The plaintiffs have chosen to commence, and to prosecute to the conclusion of a contested hearing, their claims against Ms Wang and Mr Pang. There is nothing to suggest that either of Mr Wang or Mr Pang facilitated the conduct of which complaint is made against Mr Zhuang (or induced the bringing of the claims against themselves). I have already observed in the principal judgment that Mr Pang’s evidence as to the possibility of signing the documents bore the hallmarks of an honest witness who could not recall what had happened but who was confident that, had he in fact signed the document as witness it could only have been done in the presence of Ms Wang (since his invariable practice was only to witness signatures in the presence of the signatory).

  5. Therefore, while I accept that it was not unreasonable of the plaintiffs to institute the claims against Mr Pang and to pursue the claims to the conclusion of the hearing – which from a practical point of view required the authenticity of Ms Wang’s signature on the document to be established and hence for the plaintiff to pursue the contentions against her (at least in the absence of an agreed fact as to the authenticity of her signature) to the conclusion of the hearing, the fact remains that the plaintiffs were unsuccessful in the proceeding as against both Ms Wang and Mr Pang. Moreover, I make the observation that the plaintiffs will hardly be penalised or lose the fruits of their victory against Mr Zhuang by the making of costs orders against them in favour of Ms Wang and Mr Pang if, as is the premise for the application for a Sanderson order in the first place, Mr Zhuang is now insolvent and the victory against him is likely therefore to be a Pyrrhic victory in any event.

  6. In those circumstances, as between the plaintiffs and Mr Pang, the usual costs order should follow (and, in light of my conclusion as to her application for indemnity costs, the same position should apply to Ms Wang). However, I consider that it is appropriate (for what it might ultimately be worth) to order that Mr Zhuang indemnify the plaintiffs for the costs that they are ordered to pay to the successful defendants (Ms Wang and Mr Pang), i.e., to make a Bullock order in his respect.

Release of moneys paid into Court as security for costs

  1. Rules 41.3 and 41.8 of the UCPR deal with the release of amounts paid into Court and interest accrued thereon. Here, the release is sought by way of a partial discharge of the plaintiffs’ liability pursuant to the costs orders made at the time of the principal judgment (and now left undisturbed).

  2. The general principles applicable where there is an application for payment out of funds held in Court (such as disputed trust funds) were considered by Slattery J in Commonwealth Bank v Estate of late Slieman [2010] NSWSC 661 (see [8]ff) and Chong v Super Equity Invests Pty Ltd [2012] NSWSC 27 at [12]); In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676. What is required on such an application is that the applicant establish: the identity of the person primarily entitled to the funds and the basis of that entitlement; that the applicant is not merely an unsecured creditor but has a beneficial interest in the fund paid into court; and the identity of other potential claimants and their entitlement to the fund (and that they have been notified).

  3. Where funds have been paid into Court as security it has been recognised that property remains with the person providing the funds (see Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 211 (Equititrust) at [24] per McColl JA); and it has been suggested that, pending the resolution of the dispute and the making of a costs order, such property is subject to a right of the party whose interest is secured in the nature of an equitable charge or lien “giving a right of recourse to the fund to satisfy the terms of the judgment, that is, to secure reimbursement if an order for costs be made in his or her favour” (see Equititrust).

  4. At least where there have not been agreed limitations or conditions on the release of funds held as security for costs, there is a general discretion as to the release of funds held as security for costs (see Thomson v Golden Destiny Investments Pty Ltd (No 2) [2015] NSWSC 1929 at [151] per Sackar J).

  5. In the present case, the substantive dispute has been determined and an order has been made in Mr Pang’s favour in respect of costs. Therefore, the right of recourse to the fund to satisfy the costs order has arisen. The fact that for Mr Pang to enforce that costs order (in the absence of agreement as to costs) would require him to complete the costs assessment process does not to my mind affect the position that he now has an entitlement to those funds in accordance with the costs order. The only issue of contention could be the quantum of the recoverable costs on the ordinary basis.

  6. The evidence makes abundantly clear that the costs and disbursements incurred by Mr Pang, when assessed on the ordinary party and party basis, will almost certainly exceed the amount that is held in Court as security. In other words, even if there were to be a limitation on the amount recoverable for Counsel’s fees and expert witness fees in a greater amount than is the ordinary experience on a costs assessment (since one would ordinarily assume that those fees unless unreasonably incurred would be recoverable almost in full), and even taking into account the usual contingencies that may arise in the assessment process (for which a discount of, say, 10% might be allowed by analogy with the usual such allowance on gross sum costs order applications), the sum paid into Court and any interest accrued thereon is most unlikely to exceed the amount recoverable on a party and party assessment of Mr Pang’s costs and disbursements. In those circumstances, it may comfortably be expected that there will be no amount repayable to the plaintiffs out of the funds held as security (rather, it is highly likely that there will be a shortfall to be met by the plaintiffs in respect of Mr Pang’s costs).

  7. In those circumstances, where there is evidence that the amount of costs incurred by Mr Pang exceeds the total amount of the funds paid into Court and, in my opinion, does so by a sufficient margin to make it highly unlikely that the costs as assessed would ultimately be reduced to below the total sum of the security (and any accrued interest), I consider that it is appropriate that the security and any accrued interest now be released to Mr Pang (see 123 259 932 Pty Ltd v Cessnock City Council (No 4) [2021] NSWSC 1598 at [6]-[9] per Adamson J; Jin Lian Group Pty Ltd (in Liq) v ACapital Finance Pty Ltd (No 2) [2021] NSWSC 1202 at [74] per Stevenson J).

  8. It is relevant in this context to note that no issue has been raised concerning the ability of Mr Pang to repay any or all of the security so released if it were ultimately to be found on a costs assessment that he has been paid more than the assessed costs (and if that had been such a concern then it could have been met by the seeking of an appropriate undertaking as to retention of the funds).

  9. I see no reason for Mr Pang to continue to be out of pocket for his costs and disbursements of the proceeding when the purpose of the order for security for costs was to provide him with just that – security. In those circumstances, I consider that it is consistent with the just, quick and cheap resolution of the real issues in dispute that the sum paid into Court as security for Mr Pang’s costs (and any accrued interest thereon) be released to Mr Pang in partial satisfaction of the costs order that has been made in his favour.

Orders

  1. Accordingly, in addition to the orders made on 30 May 2022, I make the following orders:

  1. Order that the sum held in Court as security for the fourth defendant’s costs ($100,000) plus any interest that has accrued thereon, be released forthwith to the trust account of the fourth defendant’s solicitor (details of which are set out below) in partial discharge of the plaintiffs’ obligation to pay the fourth defendant’s costs of the proceeding.

Bank:   ANZ

Address:   115 Pitt Street, Sydney NSW 2000

Account Name:   DLA Piper Australia Law Practice, Trust Account (Sydney)

Account Number:   xxxxxxxx

BSB:   xxxxxx

Reference:   xxxxxxxxxx

  1. Order the third defendant to indemnify the plaintiffs for the amounts paid by the plaintiffs to the second and fourth defendants pursuant to the orders made for costs in their favour.

  2. Otherwise, there be no variation to the costs orders made on 30 May 2022.

**********

Decision last updated: 21 June 2022

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

2

Ballam v Ferro (No 2) [2022] NSWSC 1358
De Bruyne v Welstead [2022] NSWSC 886
Cases Cited

34

Statutory Material Cited

3

123 259 932 Pty Ltd v Cessnock City Council (No 4) [2021] NSWSC 1598
Chong v Super Equity Invests Pty Ltd [2012] NSWSC 27
Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536