FEDERAL COURT OF AUSTRALIA
Zhang v Lu [2025] FCA 806
File number(s): NSD 186 of 2025 Judgment of: BROMWICH J Date of judgment: 16 July 2025 Catchwords: COSTS – costs of discontinued cross-claim – where discontinuing party liable for costs under r 26.12(7) of the Federal Court Rules 2011 (Cth) subject to contrary order or consent – whether discontinuing party’s impecuniosity a good reason to order that each party bear their own costs – whether consolidated costs order should be made – HELD: respondent pay the applicant’s costs of the cross-claim; consolidated costs order be made allowing for set off Legislation: Federal Court Rules 2011 (Cth) rr 26.01(1), 26.12(7)
Defamation Act 2005 (NSW) s 40(1)(a)
Federal Court of Australia, Costs Practice Note (GPN-COSTS), 25 October 2016, [3.7]
Cases cited: Datta v AAI Limited trading as GIO & Ors (No 2) [2025] NSWSC 373
Division: General Division Registry: New South Wales National Practice Area: Other Federal Jurisdiction Number of paragraphs: 27 Date of last submission/s: 4 April 2025 (respondent); 7 May 2025 (applicant) Date of hearing: Determined on the papers Solicitor for the Applicant: Moray & Agnew Solicitor for the Respondent: Jo’kaklian Lawyers ORDERS
NSD 186 of 2025 BETWEEN: SOPHIE ZHANG
Applicant
AND: JINGYAN LU
Respondent
AND BETWEEN: JINGYAN LU
Cross-Claimant
AND: SOPHIE ZHANG
Cross-Respondent
ORDER MADE BY:
BROMWICH J
DATE OF ORDER:
16 JULY 2025
THE COURT ORDERS THAT:
1.The respondent pay the applicant’s costs of the cross-claim.
2.A consolidated costs order be made, allowing for set off between:
(a)Order 1 of the orders made on 21 March 2025;
(b)Order 2 of the orders made on 21 March 2025; and
(c)Order 1 of these orders made on 16 July 2025.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BROMWICH J:
This is an adjudication on costs in relation to a cross-claim filed by the respondent on 14 March 2025 and discontinued on 4 April 2025. It is useful to set out a brief background of the matter and the costs orders previously made in this proceeding as they will be relevant to the question of costs and whether an alternative form of costs order such as a consolidated costs order would be appropriate.
On 14 February 2025, the applicant commenced this defamation proceeding by way of an originating application which sought damages and an order that the respondent be restrained from publishing the alleged defamatory material.
On 14 March 2025, the respondent filed a notice of cross-claim which claimed, inter alia, that the applicant had harmed the respondent’s reputation by posting defamatory remarks on social media platforms and had initiated the proceedings in bad faith to intimidate the respondent. The notice of cross-claim also sought compensation and alleged that the applicant’s proceeding constituted “an abuse of…
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- AGLC
- Zhang v Lu [2025] FCA 806
- Case
- [2025] FCA 806
- Decision Date
CaseChat Overview and Summary
The court examined the default position under Rule 26.12(7) of the Rules, which mandates that a party who discontinues a proceeding is liable to pay the costs of the other party unless otherwise ordered by the court or by consent. The onus was on Lu to demonstrate a reason for departing from this default position. The court found that Lu's conduct in commencing and continuing the cross-claim, which contained unparticularised allegations of dishonesty and vague defamatory statements, was unreasonable. Furthermore, the court noted that Lu's inclusion of scandalous and irrelevant material in her submissions reflected a level of unreasonableness. Despite Lu's arguments about her financial situation and mental health, the court held that these factors did not warrant a departure from the default rule, which prioritises compensating successful parties for unmeritorious litigation.
The court concluded that Lu should pay Zhang's costs of the discontinued cross-claim and ordered a consolidated costs arrangement to allow for set-off between the parties' costs awards. This decision ensured that the costs process was streamlined and avoided the creation of multiple competing costs orders.
The final orders made by the court were that the respondent, Lu, pay the applicant, Zhang's, costs of the cross-claim, and a consolidated costs order be made allowing for set-off between the parties' costs awards. This outcome reflects the court's adherence to the principles of compensating successful parties for unmeritorious litigation while considering the appropriate circumstances of the case.
Orders
Orders of the court
1. The respondent pay the applicant’s costs of the cross-claim.
2. A consolidated costs order be made, allowing for set off between:
(a) Order 1 of the orders made on 21 March 2025;
(b) Order 2 of the orders made on 21 March 2025; and
(c) Order 1 of these orders made on 16 July 2025.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Overall, the applicant submits that the respondent has disclosed no basis to justify a departure from the underlying policy reflected in r 26.12 of the Rules. Legal principles and consideration Rule 26.12 of the Rules provides that a party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance. Rule 26.12(7) addresses the costs consequences of filing a notice of discontinuance: Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued. The onus is on the respondent, as the discontinuing party, to demonstrate why costs should not be awarded in accordance with this default position: Taylor v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCA 1760 at [10] (Flick J). The conduct of the parties and the reasons for discontinuance are relevant to the question of whether a party should be relieved from the costs consequences of discontinuing a proceeding. As to the reasonableness of the respondent’s conduct in commencing and conducting the cross-claim, I note that she was ordered to file an amended notice of cross-claim in the event that the cross-claim was not discontinued, as it contained unparticularised allegations of dishonesty and bad faith, as well as vague allegations of defamatory statements that were not identified. Those inadequately pleaded allegations contained in the notice of cross-claim were of a serious nature, especially in the context of the applicant being a legal practitioner, as they called into question her honesty and her ability to uphold professional and ethical obligations. The respondent’s submissions also contained unnecessary and scandalous material unrelated to the question of costs. Instead, they were directed towards the applicant’s discontinued claim and the applicant’s past behaviour in her capacity as the respondent’s former legal representative. It is not necessary to detail those allegations, except to reiterate that the conduct of the applicant in commencing her claim, for which costs have already been ordered, is not relevant in determining whether the respondent should be required to pay the costs of the discontinued cross-claim. Given the respondent was warned against including unsubstantiated and scandalous material in her filed documents, I consider that their inclusion in her submissions reflects a level of unreasonableness on her part. The primary reason advanced by the respondent for why costs should not be awarded against her relates to her lack of financial means and poor mental health, which she contends has been worsened by the applicant’s actions in this proceeding. In response, the applicant submits that r 26.12(7) reflects the “basic justice that a successful party should be compensated for expenses it has incurred because it has been obliged to litigate by the unsuccessful party”: Sangare at [27] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ). Importantly, for the circumstances of this case, their Honours went on to state at [27]:That consideration of basic justice does not lose its compelling force simply because the successful party happens to be wealthy: the successful party, whether rich or poor, did not ask to be subjected to the expense of unmeritorious litigation. The statutory power to order costs affords the successful party necessary protection against unmeritorious litigation; and unmeritorious litigation is no less unmeritorious because it is pursued by a person who is poor or who is a litigant-in-person.