Shi v Zhong (No.2)

[2021] NSWDC 466

District Court

New South Wales

Medium Neutral Citation:

Shi v Zhong (No.2) [2021] NSWDC 466

Hearing dates:

On the papers

Date of orders:

6 September 2021

Decision date:

06 September 2021

Jurisdiction:

Civil

Before:

Gibson DCJ

Decision:

Order:

(1)   Vary orders 1 of the orders dated 17 August 2021 to include interest of $22,273.91 in the judgment sum, making a total of $246,521.69

(2)    Vary order 2 of the orders dated 17 August 2021 to provide that the defendant pay the plaintiff’s costs in the gross sum of $19,930.36.

Catchwords:

COSTS – application for gross sum costs order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) – indemnity costs sought on the basis of an offer of compromise – interest on judgment sum – no issue of principle

Legislation Cited:

Uniform Civil Procedure Act 2005 (NSW) ss 98(4) and 100(1) and 100(2)

Uniform Civil Procedure Rules 2005 (NSW) r 42.14(2)

Cases Cited:

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

Sedgwick v Varzonek (No. 3) [2015] NSWSC 1982

Shi v Zhong [2021] NSWDC 419

Texts Cited:

Practice Note District Court (Civil) No. 15

Category:

Costs

Parties:

Plaintiff:
Mr Yongcheng Shi

Defendant:
Mr Chen Zhong

Representation:

Solicitors:
Plaintiff:
Juris Chamber Lawyers

File Number(s):

2020/00253476

Judgment

1. The plaintiff was successful in proceedings against the defendant, the guarantor of a lease, and was awarded $224,247.78: Shi v Zhong [2021] NSWDC 419. I made an order for costs to follow the event, with liberty to apply concerning costs and interest.

2. Pursuant to that leave, the plaintiff seeks an order pursuant to s 98(4) of the Uniform Civil Procedure Act 2005 (NSW)(“the Act”) and Uniform Civil Procedure Rules 2005 (NSW)(“UCPR”) for a gross sum costs order as well as for interest on the judgment sum.

The application for a gross sum costs order

3. The relevant principles are set out in Hamod v State of New South Wales [2011] NSWCA 375 at [813] and following, and may be summarised as follows:

1. The discretion conferred by s 98(4) is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision. While an order under s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases, they are also appropriate in cases of limited complexity where the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event.

2. The sum assessed should be based on an informed assessment of the actual costs, having regard to the information before the court. 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 form of costs assessment.

4. The plaintiff relies upon the affidavit of his solicitor sworn on 20 August 2021, which sets out the relevant costs.

5. The defendant’s submissions in reply were to the effect that he proposes, at an unspecified time in the future, to file a petition for bankruptcy. He makes no response to the calculations of costs or interest.

The fairness of the order

6. The circumstances of this case are particularly appropriate for a gross sum costs order, given the defendant’s statements during the hearing that he has no assets. The likelihood is that, if assessed costs are ordered, not only will the plaintiff be obliged to incur additional costs and incur further delays, but that these additional costs and delays will be a further burden for him.

7. There is an additional handicap in the present proceedings, in that the plaintiff and defendant have limited English skills. Given the way the hearing was conducted, it is likely that the defendant would call for many of the documents on assessment to be translated into Chinese. At the hearing, the defendant told the court that he could not afford an interpreter and the plaintiff’s interpreter was obliged to translate for him on a number of occasions, although the defendant’s English was, to my observation, quite fluent. Other potential factors relevant to delay in costs assessments are the defendant’s dilatory conduct of the litigation to date and by reason of the fact that the defendant is self-represented.

The reasonableness of the plaintiff’s costs

8. The court must not only be satisfied that a gross sum costs order is appropriate, but that there is sufficient information for the court to be satisfied that the sum assessed is fair and reasonable.

9. The plaintiff consulted two law firms, incurring a total of $23,447.48 as follows:

1. Legal costs including GST: $21,538.00

2. Court filing fee: $1,546.00

3. Other disbursements: $363.78.

10. Both law firms charged $330 per hour (GST inclusive) and the total time spent on the proceedings is thus 60 hours.

11. Notably absent from these costs is any allowance for counsel. Mr Chen not only drafted the pleadings and affidavits but also ran the proceedings. This included discussions and negotiations with a defendant who failed to comply with court orders and who sent a great deal of irrelevant correspondence. In those circumstances, the total of 60 hours for a hearing raising commercial law issues which ran for two days and involved an interpreter and two overseas witnesses is very moderate.

12. A “rule of thumb” discount of 10% - 35% is often allowed, to take into account the likelihood of deductions if the costs had gone to assessment (Sedgwick v Varzonek (No. 3) [2015] NSWSC 1982). Before determining such a percentage, it is necessary to determine whether costs are to be awarded on an indemnity basis, as the deductions on assessment in indemnity costs applications are considerably less.

The offer of compromise made by the plaintiff

13. On 9 April 2021, the plaintiff served an offer of compromise for $150,000, which was open for 28 days. The defendant did not accept this offer, ask for an extension of time, or make a counter-offer.

14. UCPR r 42.14(2) provides:

“42.14 Where offer not accepted and judgment no less favourable to plaintiff

…

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim--

(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b) assessed on an indemnity basis--

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.”

15. The amount awarded ($224,247.78) is well in excess of the amount the subject of the offer of compromise. Ordinarily, the plaintiff would be entitled to indemnity costs from the time of expiry of the offer. In practical terms, 90% of the costs were incurred after that date, including the hearing costs, so I do not propose to make any further deductions from Mr Chen’s calculations.

16. Mr Chen calculates that a discount of 15% “rule of thumb” to the total costs the plaintiff has incurred amounts to $19,930.36. In the circumstances, I consider that to be a fair and reasonable sum.

17. Mr Chen did not address me on the question of interest on costs, so I have made no allowance for this.

Interest

18. Practice Note District Court (Civil) No. 15 has set the rate of pre-judgment interest that may be awarded under s 100(1) and (2) of the Act that:

1. In respect of the period from 1 January to 30 June in any year – the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and

2. In respect of the period from 1 July to 31 December in any year – the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced.

19. Applying the Practice Note to the calculations, the pre-judgment interest rate over the relevant period would be as follows:

Period Pre-judgment interest rate	Period Pre-judgment interest rate
1/7/18 to 31/12/18 5.50%	1/7/18 to 31/12/18 5.50%
1/1/19 to 30/6/19 5.50%	1/1/19 to 30/6/19 5.50%
1/7/19 to 31/12/19 5.25%	1/7/19 to 31/12/19 5.25%
1/1/20 to 30/6/20 4.75%	1/1/20 to 30/6/20 4.75%
1/7/20 to 31/12/20 4.25%	1/7/20 to 31/12/20 4.25%
1/1/21 to 30/6/21 4.10%	1/1/21 to 30/6/21 4.10%
1/7/21 to 31/12/21 4.10%	1/7/21 to 31/12/21 4.10%

20. The judgment sum is $224,247.78. However, the plaintiff acknowledged that this amount is not a lump sum debt that the defendant owed to the plaintiff from the date of default, but a total of unpaid rent and outgoings, which becomes due and payable monthly. The plaintiff therefore submitted that it was appropriate to calculate the interest on those amounts only when these became due and payable, as if the defendant had paid on time without default.

21. The first step in calculation of interest is to consider the following two periods:

1. Period 1 – September 2018 to May 2020, 21 months/instalments;

2. Period 2 – June 2020 to August 2021, 15 months/instalments.

22. The calculations based on these periods are as follows:

1. Period 1 is the period from when the defendant was in default and rent became unpaid, to the date the plaintiff found the new tenant and the judgment sum became liquidated. The plaintiff has divided the judgment sum into 21 instalments, with each instalment in amount of $10,678.45 ($224,247.78 / 21) and applied the interest rate to each instalment in the relevant period.

2. Period 2 is the period after period 1 until date of judgment. The interest is calculated based on the sum of $224,247.48 applying the interest rate in the relevant period.

23. On the basis of the above calculations, the plaintiff is entitled to interest in the sum of $22,273.91.

Order:

1. Vary orders 1 of the orders dated 17 August 2021 to include interest of $22,273.91 in the judgment sum, making a total of $246,521.69

2. Vary order 2 of the orders dated 17 August 2021 to provide that the defendant pay the plaintiff’s costs in the gross sum of $19,930.36.

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Decision last updated: 10 September 2021