Xiao v BCEG International (Australia) Pty Ltd (No 2)

This matter concerned an appeal before the New South Wales Court of Appeal, brought by the fourth defendant against the plaintiff and other defendants. The appeal arose from a primary judge's decision concerning a dispute over profits and an associated costs order. The primary judge had found that the fourth defendant, despite being largely successful in defending the plaintiff's claim, had engaged in disentitling conduct, leading to a costs order against it.

The Court of Appeal was required to determine two principal issues. Firstly, it had to consider the appropriate apportionment of costs for the appeal itself, given that the appeal was allowed in part. Secondly, the Court was tasked with re-exercising the costs discretion at first instance, particularly in relation to the order made against the fourth defendant, given the different outcome on appeal. This involved assessing whether the primary judge's finding of disentitling conduct was still a relevant consideration for costs in light of the appeal's success.

The Court reasoned that while the fourth defendant had succeeded on appeal, the plaintiff had also achieved some success in that the appeal did not entirely overturn the primary judge's findings. Consequently, the Court ordered that the respondent (the plaintiff) pay 25 per cent of the appellants’ (including the fourth defendant) costs of the appeal. Regarding costs at first instance, the Court set aside the order made against the fourth defendant, finding that the primary judge's assessment of disentitling conduct was not sufficiently established or pleaded in a manner that justified the adverse costs order, especially given the fourth defendant's overall success in defending the claim. The Court therefore made no order for costs at first instance as between the plaintiff and the fourth defendant, except that the plaintiff was to pay the fourth defendant’s costs of the inquiry as to profits.