Wang v 1348 Pty Ltd (No 2); Wang v 1313 Pty Ltd; 1348 Pty Ltd v Wang
[2025] ACTSC 290
•11 July 2025
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Wang v 1348 Pty Ltd (No 2); Wang v 1313 Pty Ltd; 1348 Pty Ltd v Wang |
Citation: | [2025] ACTSC 290 |
Hearing Date: | 07 July 2025 |
Further submissions: | 08 July 2025 |
Decision Date: | 11 July 2025 |
Before: | Elkaim AJ |
Decision: | (1) Ms Siru Zheng and Ms Shaoqing Song, jointly and severally, are to pay Mr Hao (Jack) Wang’s costs incurred between 16 July 2024 until 28 April 2025. (2) The costs order in the previous paragraph is to include costs associated with preparation for the hearing on 16 July 2024 and costs associated with the hearing on 7 July 2025. (3) The costs order in Order 1 is to be paid by way of a fixed sum assessed in the amount of $100,000. (4) Each party is to pay its own costs in respect of SC 151, SC 389, SC530 and SC 531 all of 2023 which costs were not the subject of any of the above orders. (5) Noted, that the costs order in Order (1) above specifically includes the costs ordered to be paid by Mossop J on 11 February 2025, in Order 19 of his Honour’s orders. |
Catchwords: | PRACTICE AND PROCEDURE — COSTS — Whether non-party costs order should be made under Court Procedures Rules 2006 (ACT) r 1703(2)(e) — whether directors acted unreasonably — complex proceedings — whether appropriate to make fixed sum costs order and determine amount |
Legislation Cited: | Court Procedures Rules 2006 (ACT) r 1703 |
Cases Cited: | Australian Conservation Services v Liladel Holdings (No 2) [2017] ACTSC 170 Edward Moses Obeid Snr v David Andrew Ipp (Costs) [2020] NSWSC 1329 FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 Jones v Dunkel (1959) 101 CLR 298 Muriniti v Lawcover Insurance Pty Ltd [2022] NSWSC 1593 Wang v 1348 Pty Ltd [2025] ACTSC 28 |
Parties: | Hao (Jack) Wang ( Plaintiff) Siru Zheng ( Cross Defendant in SC 151 of 2023) Shaoqing Song ( Cross Defendant in SC 151 of 2023) 1313 Pty Ltd (ACN 640 822 564) (Defendant in SC 530 of 2023) |
Representation: | Counsel WDB Buckland ( Plaintiff) R Markham ( Defendants) |
| Solicitors Longton Blackwell ( Plaintiff) Adero Law ( Defendants) | |
File Number: | SC 530 of 2023 SC 531 of 2023 SC 151 of 2023 |
ELKAIM AJ:
Introduction
1․There is a multiplicity of proceedings with the same persons or entities often being on both sides of the litigation (i.e. plaintiff and defendant, cross claimant and cross-defendant). For convenience I will refer to the parties by their names.
2․Ms Song and Ms Zheng are the directors of 1348 Pty Ltd. This company was placed in liquidation on 28 April 2025. As a result proceedings against the company were no longer tenable. Until this time the company had taken part in proceedings by it and against it.
3․Mr Wang, who was a party to the proceedings, wants his costs to be paid by Ms Song and Ms Zheng. He says he is entitled to such an order by virtue of rule 1703(2)(e) of the Court Procedures Rules 2006 (ACT).
4․The costs in issue relate to four proceedings: by number they are SC 151, SC 389, SC 530 and SC 531 all of 2023. The claim for costs is qualified by these factors:
(a)There is no claim for costs incurred prior to 21 December 2023.
(b)No interference is sought in respect of any prior costs orders.
(c)Notwithstanding the previous factor, the costs orders made by Mossop J on 11 February 2025 fall within the current claim.
5․I have just mentioned the involvement of Mossop J on 11 February 2025. On that day his Honour dealt with, effectively, the adjournment of proceedings arising from the failure on the part of 1348 Pty Ltd to apprise the court of reasons for which the hearing that was due to be heard by his Honour could not proceed. In essence the matter had been set down for a single day of hearing whereas it was known to 1348 Pty Ltd that the matter would require as much as five days to complete.
6․In the reasons given on 11 February 2025 (Wang v 1348 Pty Ltd [2025] ACTSC 28), Mossop J describes some of the background to the litigation which I gratefully adopt. There are some other background facts which, for present purposes, need to be added or emphasised. These are:
(a)1313 Pty Ltd has never traded and its involvement in the litigation is of no consequence. A claim made on behalf of 1313 Pty Ltd for costs was abandoned.
(b)The original litigation (SC 151) involved suits demanding the possession of certain motor vehicles. There were two luxury vehicles, a Bentley and a Lamborghini and one more mundane mode of transport, a Toyota Alphard. The proceedings were commenced on 19 April 2023.
(c)On 21 December 2023 Mr Wang filed proceedings 530 and 531 seeking the winding up of 1348 Pty Ltd and 1313 Pty Ltd. One of the criticisms made against Mr Wang was that there had never been a need to file separate proceedings. SC 151 could have been expanded to include the winding up applications.
(d)SC 389 is essentially a New South Wales proceeding that was transferred to the ACT but does not play any specific part in the argument before me. It was common ground that this proceeding was consumed into the other proceedings.
(e)On 18 June 2024 Baker J made orders that proceedings 151, 530 and 530 be heard and determined together. The proceedings were effectively consolidated.
(f)On 16 July 2024 consent orders were made appointing a receiver and manager to 1348 Pty Ltd and 1313 Pty Ltd. The receiver, Mr Henry McKenna, produced a report on 27 September 2024. It will be necessary to return to the content of the report below.
(g)On 28 April 2025 the directors of 1348 Pty Ltd (Ms Zheng and Ms Song) placed the company into liquidation. This had the effect of rendering the proceedings against the company to be of no avail.
(h)On 23 June 2025 Mossop J made consent orders which included:
Order 1: Proceedings SC 151 of 2023 and SC 530 of 2023 are dismissed insofar as they concern claims by or against 1348 Pty Ltd (ACN 629 610 957) (in liquidation).
Order 2: There is no order as to costs in respect of the dismissal of 1348 Pty Ltd from these proceedings.
Order 4: Proceedings SC 531 of 2023, and the remainder of proceedings SC 151 and SC 530 of 2023, are discontinued with the court’s leave under r 1163(2), with the costs of such discontinuance to be determined at the hearing dates set in accordance with order (7).
7․The costs question before me is that envisaged by Order 4 made on 23 June 2025.
8․The orders sought by Mr Wang are that his costs be paid, jointly and severally, by Ms Zheng and Ms Song and that they be paid by way of a fixed sum costs order. Ms Zheng and Ms Song are third parties to the proceedings involving 1348 Pty Ltd. Mr Wang says, however, that as directors they were responsible for the actions of 1348 Pty Ltd and should be responsible for the costs arising from the actions of the company.
9․In seeking the order Mr Wang relied upon r 1703(2)(e). Rule 1703 commences with a blanket ban against an order for costs “in proceeding against a person who is not a party to the proceeding”. Subrule (2) allows for exceptions to the general rule. In particular subrule (2)(e) allows:
(e)“for costs against a person who starts or carries on a proceeding, or purports to do so, as an authorised director of a corporation”.
10․Ms Zheng and Ms Song were at all relevant times directors of 1348 Pty Ltd and therefore, says Mr Wang, subrule (2)(e) allows an order to be made against them.
11․The fixed sum costs order is sought in reliance upon r 1720(3) which allows for:
(c)an amount for costs decided by the court.
12․Mr Wang relied upon the affidavit of Mr Darrell Kake dated 30 June 2025 together with the court book which is Exhibit A. Mr Kake’s affidavit is primarily concerned with the quantum of costs that have been incurred by Mr Wang and which would be a starting point in the assessment of a fixed sum costs order. Mr Kake states that the amount capable of being recovered on a legal costs assessment “would be no less than $229,052 (inclusive of GST)”. It was accepted that a fixed sum costs order might well be for a lesser sum.
13․Ms Zheng and Ms Song opposed the making of a non-party costs order against them and also opposed, if they lost on the first order, the making of a fixed sum costs order. Ms Zheng and Ms Song suggested that the following orders should be made:
(a)Mr Wang should pay the costs of Ms Zheng and Ms Song of this costs hearing.
(b)Mr Wang should pay Ms Zang’s and Ms Song’s costs associated with SC 151 for the period from 7 February 2024 until 28 February 2025.
(c)Each party should bear its own costs, to the extent not already covered by the above orders, or other court orders, in respect of SC 151, SC 389, SC 503 and SC 531.
14․Ms Zheng and Ms Song have not filed any evidence for this costs hearing. This was submitted to be a major failing on their part giving rise to an inference that any evidence they might have filed would not have assisted their case (in the manner permitted by Jones v Dunkel (1959) 101 CLR 298).
15․There is a significant danger in this case of allowing the complexities of the litigation, including the shifting claims of the parties, to dictate the fundamental facts at the core of the path of the litigation.
16․Bringing in Ms Zheng and Ms Song to pay for the costs incurred by 1348 Pty Ltd is a step that should not be lightly taken. As seen above, r 1703 has a starting point that such an order should not be made.
17․In Australian Conservation Services v Liladel Holdings (No 2) [2017] ACTSC 170 (Liladel Holdings) Mossop J said, at [40]:
I accept the submissions of counsel for the plaintiff that the power to make a costs order against a non-party director is not enlivened merely because a director has caused a company to bring proceedings that have ultimately failed. Further I accept that care must be taken not to inappropriately invade the principles of limited liability under company law: see the discussion in FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 at [204]-[214].
18․Turning to the case referred to by his Honour, FPM, the New South Wales Court of Appeal, from [204], referred to a number of instances where a non-party costs order might be made. They included a circumstance where the actual party “was a person of straw and that the real driving force behind the proceedings was a different person, with financial resources” and where a company, which was a party to the litigation, was in receivership. Three criteria were listed as justifying a costs order against a non-party:
(a)The actual party is “insolvent or a person of straw”.
(b)The non-party must “have played an active part in the litigation.”
(c)The non-party had “an interest in the subject of the litigation”.
19․Returning to Liladel Holdings, a non-party was ordered to pay costs because:
(a)The non-party was a director of the plaintiff company and was responsible for its dealings with a particular person.
(b)The non-party had a motivation to bring the proceedings so as to “advance his interests as a creditor of the plaintiff…”
(c)The plaintiff had a share capital of $200 and no assets.
20․Although perhaps by inference from the criteria set out in FPM, Ms Zheng and Ms Song submitted that, in addition, before a non-party costs order could be made there must be a finding that the non-party had acted unreasonably. I agree with the submission.
21․Turning to the facts in the current case, I think the relevant period is not from the commencement of the winding up proceedings on 21 December 2023 but rather from the order for the appointment of the Receiver on 16 July 2024 continuing until 28 April 2025 when 1348 Pty Ltd was placed into liquidation.
22․The ‘start’ date is actually after the date put forward by Ms Zheng and Ms Song in supplementary submissions where it is suggested, if a fixed sum costs order is to be made, that there be a costs order in respect of SC 530 of 2023 from 12 March 2024.
23․Mr Wang submitted that the receiver had identified a conflict in the assessment of the solvency of the 1348 Pty Ltd because an examination of the loans made to and from the company revealed an unclear picture which could either favour the solvency of the company or its insolvency. The liquidator stated at [3.4.1]:
If appointed as Liquidator of the company, I would investigate each loan and pursue recoveries of what I consider legitimate amounts owing to the company where it is commercial to do so. I would also adjudicate on the claims of Mr Wang, Ms Song and Ms Zheng which would also consider whether there are any set-all claims against them for monies that they may have taken out of the company or where they used company money to buy goods or services for themselves.”
24․In his conclusions, Mr McKenna stated:
1348 is not clearly either solvent or insolvent. From the sale of motor vehicles there is now sufficient cash at bank to pay the DCT.
It might make sense that an external administrator be appointed to 1348 to collect in monies owed to the company; adjudicate on competing claims; and pay dividends to creditors of the company, including the DCT.
25․DCT refers to the Deputy Commissioner of Taxation, who then had a claim for $171,174.58.
26․An external administrator was never appointed to “adjudicate on competing claims” raising, in my view, a strong inference that the placing of 1348 Pty Ltd into liquidation was an acceptance by its directors that it was insolvent. In other words, an admission by them that any examination would have fallen in favour of insolvency.
27․This inference is supported by the absence of any evidence from the directors.
28․Another inference derived from the absence of evidence is that there was no relevant change of circumstances between the date the Receiver was appointed and the company being placed in liquidation.
29․Taking these inferences to their logical conclusion, and highlighting the absence of any evidence of a change of circumstances between the receiver being appointed and the company going into liquidation, it follows that the directors acted unreasonably in delaying the company’s liquidation between the appointment of the Receiver and 28 April 2025. During this period the proceedings went to the February hearing and continued with the company still being a ‘live’ party until 28 April 2025.
30․Looking at the criteria derived from FPM, if not actually, at least by inference, 1348 Pty Ltd will not be able to meet a costs order. It apparently has $270,000 in cash, all of which will be consumed by the costs of liquidation. Secondly Ms Zheng and Ms Song played an active part in the proceedings because, as directors of the company, they dictated its actions. Thirdly, again as directors, and with the company seeking orders against Mr Wang, and orders being sought against it, Ms Zheng and Ms Song had a clear interest in the result of the litigation.
31․As mentioned above, Mr Wang’s claim is for the costs from 21 December 2023 when the application for the winding up of the companies was made. I do not think the evidence is sufficient for me to draw any inference about the conduct of Ms Zheng and Ms Song prior to the appointment of the Receiver. It may well be that they had a strong suspicion that the company was insolvent, but I think it took the Receiver, his investigations and his report to put the issue of solvency squarely before them.
32․Ms Zheng and Ms Song submitted that the commencement of the winding up proceedings, as separate proceedings, was unjustified. I agree to the extent that extra administrative fees, such as filing fees, may have been unnecessarily incurred but any such failing was remedied by Baker J on 18 June 2024 when the matters were ordered to be heard together. Thereafter, and in particular in the period following the Receiver’s report, any costs incurred related to an effectively consolidated proceeding.
33․In respect of all other costs not covered by the orders I intend to make for the period from 16 July 2024 to 28 April 2025, I will take up the submissions made on behalf of Ms Zheng and Ms Song that each party bear its own costs.
34․I specifically intend to include in the orders against Ms Zheng and Ms Song the costs covered by the orders of Mossop J made on 11 February 2025. Order 19 made by his Honour, in SC 530 and 531 was that 1348 Pty Ltd and 1313 Pty Ltd should pay Mr Wang’s costs on an indemnity basis. His Honour, in order 20 then authorised the receiver to pay the costs after they had been agreed or assessed.
35․Orders 19 and 20, which were clearly designed to reflect the inappropriate conduct of the two companies, were frustrated by 1348 Pty Ltd going into liquidation and 1313 Pty Ltd having no assets. On the basis of my overall view that the path to liquidation dictated by the directors was one which allowed the proceedings to continue until 28 April 2025 despite, on the basis of the inferences I have drawn, the directors being aware that the company was insolvent, they should not escape the obvious intent of Mossop J’s orders.
36․Turning now to whether there should be a fixed sum costs order against Ms Zheng and Ms Song, useful guidance was provided by Hammerschlag CJ in Eq in Edward Moses Obeid Snr v David Andrew Ipp (Costs) [2020] NSWSC 1329, from [4]:
4. Einstein J pointed out in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9] that a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place, and the gross sum can only be fixed broadly having regard to the information before the Court.
5. A broad brush approach can be taken provided it is logical, fair, and reasonable: see Baychek v Baychek [2010] NSWSC 987 and, more recently, In the matter ofMosman & Co Pty Limited [2020] NSWSC 1245 and the authorities cited in those decisions.
6. A broad brush approach is particularly apt to be taken here where there are multiple parties and the proceedings are complex.
37․Hammerschlag CJ in Eq made these further comments in Muriniti v Lawcover Insurance Pty Ltd [2022] NSWSC 1593, from [41]:
41. The circumstances which might justify a gross sum order are not a closed category and each case will, of course, turn on its own facts. The Court must determine whether the order should be made and, if so, what the gross sum is that should be specified. The two questions are related.
42. Even though the Court takes a broad-brush approach to the determination of a gross sum, the assessment must still be fair and reasonable. The quantification should be based on an informed assessment of the costs (incurred or expected to be incurred) and may (and often does) entail applying an impressionistic discount to take account of the possibility that the formal assessment process could involve contingencies, which will not be recognised on a broad-brush approach.
43. Also, s 60 of the CPA applies. It provides:
In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.
44. An application for a gross sum order should not be a vehicle which exacerbates expense and contributes to delay rather than assuages them. It should therefore be conducted with the appropriate degree of care, but as quickly and summarily as fairness permits. In this respect, I consider it to be no different to the manner in which the Court should deal with whether a costs order should be made against legal practitioners: see Newell; Muriniti v De Costi (2018) 97 NSWLR 398 at [76]. The application should be measured in hours and not in days or weeks.
45. Whilst a broad-brush approach is applied, an application for gross sum orders is not an occasion for the successful party to attempt to overreach the loser on quantum. It is not an opportunity to make an exaggerated ambit claim on the footing that some discount will be applied by the Court to eliminate extravagance. It is incumbent on the applicant for a gross sum order to place enough material before the Court to facilitate a fair and reasonable assessment.
38․I think this is an appropriate matter for a fixed sum costs order. The proceedings are complex, and assessment will be expensive and I have refined the extent of the costs order to a period which I think is susceptible to a broadbrush quantification.
39․Ms Zheng and Ms Song submitted that should I make a fix costs order, it should be assessed at 30% of the invoiced amount, including disbursements. I do not intend to follow that suggestion but do note that the amount that I will allow will be significantly discounted from the overall figure put forward by Mr Wang.
40․As already mentioned, Mr Kake, in his affidavit, assesses costs at $229,052. However, this sum seems to include all of the costs associated with all of the litigation.
41․Because of the defined period which I think should attract the costs order, Mr Kake’s assessment must be significantly reduced. Taking into account preparation for the 16 July 2024 hearing and the course of the litigation thereafter, including the indemnity costs associated with the 11 February 2025 hearing, I think a fixed sum costs order in the sum of $100,000 is appropriate.
42․In assessing the $100,000 I have taken into account the hearing on costs before me. Although Mr Wang was not entirely successful, and there was some success on the part of Ms Zheng and Ms Song, overall I think Mr Wang has succeeded and should be entitled to the costs of the costs hearing.
43․I make the following orders:
(1)Ms Siru Zheng and Ms Shaoqing Song, jointly and severally, are to pay Mr Hao (Jack) Wang’s costs incurred between 16 July 2024 until 28 April 2025.
(2)The costs order in the previous paragraph is to include costs associated with preparation for the hearing on 16 July 2024 and costs associated with the hearing on 7 July 2025.
(3)The costs order in Order 1 is to be paid by way of a fixed sum assessed in the amount of $100,000.
(4)Each party is to pay its own costs in respect of SC 151, SC 389, SC530 and SC 531 all of 2023 which costs were not the subject of any of the above orders.
(5)Noted, that the costs order in Order (1) above specifically includes the costs ordered to be paid by Mossop J on 11 February 2025, in Order 19 of his Honour’s orders.
| I certify that the preceding forty-one [41] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Elkaim. Associate: Date: |
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