Deng v Lieu

CORAM: Boland J President; Walton J Vice-President; Backman J

COSTS - Appeal - Unfair contract - Costs at first instance and appeal - Calderbank offers - Offers of compromise - Successful appellant made offers at first instance - Whether unreasonable for respondents to reject offers - Party/party costs - Reasonable time to consider offer - Appellant awarded indemnity costs from the date of an unreasonable rejection of genuine offer - Appellant and first respondent shareholders in third respondent company - Third respondent awarded party/party costs. CATCHWORDS: APPEAL - Costs - Unfair contract - Costs at first instance and appeal - Calderbank offers - Offers of compromise - Successful appellant made offers at first instance - Whether unreasonable for respondents to reject offers - Party/party costs - Reasonable time to consider offer - Appellant awarded indemnity costs from the date of an unreasonable rejection of genuine offer - Appellant and first respondent shareholders in third respondent company - Third respondent awarded party/party costs.

LEGISLATION CITED: Industrial Relations Act 1996 Civil Procedure Act 2005

Boyd and Anor v Maxx Implementation Pty Limited and Ors (No 3) [2008] NSWIRComm 200 County Securities Pty Limited v Challenger Group Holdings Pty Limited (No 2) [2008] NSWCA 273 Deng v Lieu & Ors [2009] NSWIRComm 5 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Lahoud v Lahoud [2006] NSWSC 126 CASES CITED: Leichhardt Municipal Council v Green [2004] NSWCA 341 Lieu & Anor v Deng v Anor (No 5) [2008] NSWIRComm 67 McKerlie v New South Wales (No 2) [2000] NSWSC 1159 Ng v Chong [2005] NSWSC 385 West & Anor v The Owners Strata Plan No 54288 (No 2) [2009] NSWIRComm 61 Wheelahan v North Coast Area Health Service (No 2) [2008] NSWIRComm 244

APPELLANT: Parry Carroll Lawyers Ms C L Perry

LEGAL REPRESENTATIVES: FIRST & SECOND RESPONDENTS: Mr P Lieu

THIRD RESPONDENT: Bartier Perry Solicitors Mr P J Brand

CORAM: BOLAND J, President WALTON J, Vice-President BACKMAN J

MARGARET JIA SHA DENG v PAUL LIEU, LANDMARK ENTERPRISES (AUST) PTY LTD & DENGS INVESTMENTS PTY LTD

Application by Margaret Jia Deng for leave to appeal and appeal against a judgment and orders of Justice Staff given on 30 March 2007, 20 April 2007 and 4 April 2008 in Matter No IRC 2821 of 2001

1 On 20 February 2009, leave to appeal was granted and the appeal upheld in Deng v Lieu & Ors [2009] NSWIRComm 5. The appeal was from a judgment of Staff J given on 30 March 2007 concerning an application under s 106 of the Industrial Relations Act 1996 ("the Act"). The appellant, Ms Margaret Deng, was successful in her appeal by establishing that the contract that was the subject of the proceedings was not unfair in the terms as claimed by the first respondent, Mr Paul Lieu and his company, the second respondent, Landmark Enterprises Pty Ltd ("Landmark") at first instance. Background

2 The factual background of this case is outlined in both the first instance judgment (at [4] - [24]) and the appeal judgment (at [4] - [14]). It is not necessary to canvass the history of this matter other than to highlight some issues relevant to the determination of costs. 3 The first and second respondents brought their claim to this Court in 2001 against Ms Deng and the third respondent. The third respondent, Dengs Investments Pty Limited ("Dengs Investments"), had a 51 per cent shareholding by Ms Deng, 49 per cent shareholding by Landmark (a company wholly owned by Mr Lieu) and Ms Deng was the sole director. Dengs Investments filed a submitting appearance in the appeal proceedings, save as to costs. 4 Staff J delivered a judgment dealing with the costs of the first instance proceedings on 4 April 2008 (Lieu & Anor v Deng v Anor (No 5) [2008] NSWIRComm 67). Those orders were overturned on appeal and the issue of costs was addressed in a preliminary way on appeal at [83] - [84]: [83] It follows from our findings on the appeal that the appellant has been successful and that the appeal must be upheld. The consequences that has for costs is that his Honour erred in deciding that the Lieu interests should have 75 per cent of their costs, as agreed or assessed. The appellant shall have her costs of the proceedings at first instance and on appeal. [84] We note, however, that the third respondent filed a submitting appearance, save as to costs. We intend to provide the third respondent with 14 days to file any submission as to costs in light of our decision in this matter. The appellant and the other respondents have a further 14 days to respond. Costs will be dealt with on the papers. 5 Written submissions on costs were filed on behalf of the appellant, the first and second respondents jointly and the third respondent. This judgment deals with the costs issue. 6 The Court's power to award costs is contained in s 181 of the Act: 181 Costs (1) Subject to the rules of the Commission and any other Act or law:

(a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.

7 The Full Bench has previously determined that the appellant should be awarded her costs of the proceedings at first instance and on appeal (at [83]). The appellant, however, submitted that the following orders be made: 1. That all prior costs orders be vacated and that Paul Lieu and Landmark Enterprises (Aust) Pty Ltd pay Margaret Deng's costs and disbursements of Proceedings No. IRC2821 of 2001 and IRC535 of 2007 on an indemnity basis as agreed or assessed. 2. In the alternative, pursuant to Rule 216(6) of the Industrial Relations Commission Rules 1996 , Paul Lieu and Landmark Enterprises (Aust) Pty Ltd pay Margaret Deng's costs up to and including 24 April 2003 of Proceedings No. IRC2821 of 2001 and IRC535 of 2007 on a party and party basis as agreed or assessed and thereafter on an indemnity basis as agreed or assessed. 3. In the alternative, Paul Lieu and Landmark Enterprises (Aust) Pty Ltd pay Margaret Deng's costs of Proceedings No. IRC535 of 2007 at first instance and of the appeal, as agreed or assessed. 4. An order pursuant to s101(4) of the Civil Procedure Act 2005 that Paul Lieu and Landmark Enterprises (Aust) Pty Ltd pay interest at applicable court rates on the costs and disbursements as agreed or assessed from the date of payment by Margaret Deng until payment of those costs and disbursements by Paul Lieu and/or Landmark Enterprises (Aust) Pty Ltd. 5. The court declares that Paul Lieu and Landmark Enterprises Pty Ltd have no interest in the shareholding of Deng Investments Pty Ltd. 8 The bases of the appellant's claim for indemnity costs may be summarised as follows: · the Full Bench found on appeal that "Mr Lieu did not come to the Court with a just cause"; · the trial judge found that there was no unfairness in 8 of the 11 claims in the first instance judgment and the Full Bench subsequently found no unfairness in any of the claims; · Mr Lieu's conduct in commencing these proceedings and prolonging these proceedings constituted an abuse of process and exhibited unreasonable conduct, as evidenced in, inter alia: his instigating the action 3 years after his earlier claim in the Supreme Court; his repeated non-attendances at directions hearings and non-adherence to court timetables; delaying the hearing of the substantive matter by late arrival and non-attendance; engaging counsel after the commencement of the hearing requiring further adjournments; filing an amended summons and tendering an undiscovered expert report after the hearing had commenced; and the filing and service of an abandoned cross-appeal resulting in costs thrown away. 9 The appellant submitted that the circumstances of these proceedings warranted the awarding of indemnity costs, based on the cases highlighted in their submissions below: Indemnity costs are ordinarily awarded in circumstances to penalise a party where they have maintained a cause of action with no real prospect of success ( Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397) or for some ulterior motive ( J-Corp Pty Ltd v Australia Builders Labourers Federation Union of Workers (WA) (No 2) 1993 46 IR 301at 303) or with wilful disregard for known facts or clearly established law, made deliberately false allegations of fact ( Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 1 at 34) or having unreasonably rejected an offer or compromise not bettered in litigation. Orders for indemnity costs have been made both in cases of reprehensible conduct or bad faith (including taking of unnecessary points delaying or enlarging the time occupied by the proceedings and instances suggested in Re Smith; Ex parte Rundle (No 2) (1991) 6 WAR 299 at 301).

The court can voice its strong disapproval of conduct which subverts the spirit of litigation and, as a result, order payment forthwith of costs on an indemnity basis: Inform Formwork Pty Ltd v McInnes Concrete Service Pty Ltd (unreported, Full WA Court 1995, Lib No 950611).

Roberts-Smith J in Lee v Mavaddat [2005] WASC 68 at [13] made some useful general comments concerning indemnity costs. First his Honour at [13] commented that usually costs are ordered to be paid on a party and party basis. Indemnity costs "can be ordered as and when the justice of the case so requires". The last comment is important emphasising that costs are not restricted to any specified categories.

10 The appellant submitted that, in the alternative, the Court should award her indemnity costs on the basis of several offers made earlier in the proceedings, relying on the provisions in Part 27 of the Industrial Relations Commission Rules 1996 and common law principles concerning offers of settlement. Rule 216(6) relevantly provides: (6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis. 11 The appellant made a number of offers, which we shall shortly address, but none of them were offers of compromise in accordance with the provisions of Part 27 of the Commission's Rules. Accordingly, we do not propose to apply the provisions of Part 27 in this case.

12 The appellant's solicitors at the date of the offer of 24 April 2003, Lee and Kitching, wrote to the Somerville and Co., solicitors for the first and second respondents. The appellant submitted that the offer contained within the letter should be treated as one consistent with the intention in Part 27 of the Rules in that the appellant was compromising her position in order to encourage settlement and dispose of the proceedings at an early stage. The terms of the proposal in the letter were to effectively transfer the business of "Movie City" from Ms Deng to Mr Lieu to finalise the proceedings and that "all costs orders made in any of the court proceedings are to be vacated". There was no indication of consideration for the transfer, and whilst it might be inferred from the content of the letter that Ms Deng was willing to compromise her position by relinquishing her interests in the business, the terms are too ambiguous for it to be deemed as an offer that would trigger indemnity costs. As the terms of the offer are unclear, we do not consider this an genuine offer of compromise and it was not unreasonable for the first and second respondents to reject it; see County Securities Pty Limited v Challenger Group Holdings Pty Limited (No 2) [2008] NSWCA 273 at [31]-[36]. The second offer

13 Solicitors for the appellant, Parry Carroll, wrote to Somerville and Co. on 16 December 2004 outlining an offer that the appellant submitted should be treated as a Calderbank offer from which indemnity costs should flow. The letter attempted to summarise the position of the first and second respondents and suggested "it is obvious that the sum in dispute over this claim is negligible, and out of all proportion to the legal costs involved in litigating it". The appellant offered to settle the proceedings, together with the two Supreme Court proceedings on foot at the time by offering the following: 1. Our client [Ms Deng] transfer her 51% shareholding in the Company [Dengs Investments] to Landmark (or its nominee) for the sum of $89,515.91 and resign as the Company's Director, with the intent and to the effect that Landmark (or its nominee) will have sole ownership and control of the Company and the Coogee 'Movie City' video store business. 2. Our client do all other acts, matters and things necessary on her part to effect the transfer of ownership and control of the Company, and of its video store business, to Landmark (or its nominee). 3. These Industrial Relations Commission proceedings be dismissed. 4. Both sets of Supreme Court proceedings be dismissed. … 6. All existing costs orders in these Industrial Relations Commission proceedings, both sets of Supreme Court proceedings, and all other proceedings between our respective clients be vacated. 7. In all of those proceedings, there be formal consent orders that there is no order as to costs. 14 The letter clearly stated that it was made in accordance with the principles of a Calderbank offer, that the terms would be relied on in any costs claims should the Court(s) ultimately deliver judgment in terms no more favourable to the first and second respondents than those contained in the offer, and that the appellant would seek an order for indemnity costs from the date of the offer. The offer was open to the offerees for a period of 28 days. Although the terms of the second offer provide more clarity than that of the first, we do not consider the offer to be one that was unreasonably rejected by the first and second respondents. Whilst the Full Bench found that the contract was not unfair, an offer from the appellant to be paid $89,515.91 by the offerees and for there to be no order as to costs cannot be viewed as a compromise action from which indemnity costs may be triggered. This Court must be satisfied that the offeror has made a genuine offer of compromise in order for it to consider awarding costs on an indemnity basis following the rejection of the offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23]-[24]; West & Anor v The Owners Strata Plan No 54288 (No 2) [2009] NSWIRComm 61 at [14]; Wheelahan v North Coast Area Health Service (No 2) [2008] NSWIRComm 244. The third offer 15 The appellant's third offer of 21 August 2006 was in a similar vein to that of the second offer. The letter from Parry Carroll to Somerville and Co. reiterated the parties' respective positions and once again suggested that the net outcome of any judgment for the first and second respondents would be less significant than the legal costs associated with the continuing litigation. Due to legitimate time constraints placed on the parties at the time requiring them to finalise negotiations with the lessor of the premises of "Movie City", the offer was open to the offerees until 5pm on the day the letter was faxed to Somerville and Co. An offer open for such a limited period of time should not carry with it consequences of indemnity costs should it be rejected, and for this reason will we not consider awarding to the appellant costs on an indemnity basis from the date of her third offer. A rejection of an offer that might trigger indemnity costs must be open for a reasonable time in order for the offeree to assess its merits: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99]; Ng v Chong [2005] NSWSC 385 at [13]-[14]; Boyd and Anor v Maxx Implementation Pty Limited and Ors (No 3) [2008] NSWIRComm 200 at [29] - [32]. The fourth and fifth offers 16 The appellant, through her solicitors, made a fourth offer to the first and second respondents on 21 August 2006. The offer may be regarded as a Calderbank offer. The hearing of the matter had previously been set for February 2006, but was vacated and re-listed for hearing over four days commencing 28 August 2006. It is apparent from the terms of the offer that the appellant was eager to settle the matter. Ms Perry, solicitor for the appellant, submitted the following: The offer was: 1. made on a "without prejudice" basis; 2. was a genuine attempt to resolve the proceedings; 3. a final attempt before incurring the cost of the hearing to reach a settlement of the claims of Mr Lieu and Landmark in order to avoid the cost of the hearing; 4. provided for a transition of the company to Paul Lieu at no cost to him; 5. compromised Margaret Deng's position by transitioning the business and its assets to Paul Lieu for no consideration; 6. provided for a better outcome than was achieved by Paul Lieu in the proceedings; 7. was an acknowledgment of the substantial costs which had been incurred by that time which were yet to be incurred in relation to a protracted defended hearing conducted a settlement conference on 22 August 2006 which was followed by a formal offer of settlement incorporating the re-registration of Landmark Enterprises Pty Ltd which was in fact undertaken by the Appellant at her cost; 8. made provision for disposal of the proceedings with no order as to costs; 9. dealt with all ancillary aspects of the operations of the business including employee entitlements, motor vehicle, telephone accounts, interim arrangements, inventory of stock, rental and the like. 17 The appellant submitted the following in relation to the fifth offer made on 22 August 2008: In a final bid to avoid the cost of the hearing by email dated 22 August 2008 from Greg Ganz of Parry Carroll to Somerville & Co (copy enclosed) ("the Fifth Offer"), an offer of further compromise was made by a transfer of all assets of the "Movie City Coogee" business (excluding the motor vehicle) to Paul Lieu or his associated entity. The offer was unreasonably rejected and Somerville & Co subsequently ceased to act for Paul Lieu and Landmark on the eve of the hearing. 18 This Court must consider whether an offer was a genuine offer of compromise and whether it was unreasonable for the first and second respondents to reject the offer (Wheelahan v North Coast Area Health Service (No 2) at [55]; Leichhardt Municipal Council v Green at [23]-[24]). In relation to the fourth offer, the letter from the appellant's solicitors to Somerville and Co. opens with: "We refer to our conference on 21 August 2006 and thank you for taking the time to attend our office to see whether there is the making of a settlement between the parties". Following in the letter was a detailed outline of how the parties might execute a settlement which would effectively transfer the business to Mr Lieu for no consideration, by way of transferring to Mr Lieu the appellant's shareholding in Dengs Investments. The offer stipulated that "the proceedings be dismissed with an order that each party pay their own costs". 19 The letter stated that the "terms of this offer are open for acceptance until 9:00am on 22 August 2006". Whilst this period of time is again considered a limited time in which an offer may be regarded as appropriate upon which to grant indemnity costs, we are of the view that this offer is capable of justifying indemnity costs. The letter details the specifics of how the parties will deal with issues such as the vehicle transfer, stock bills and rental adjustments, delivery dates and accounts, information regarding the lease and the casual employees. It is apparent from the letter that negotiations had reached some level of detail in attempting to resolve the matter. The email from Mr Ganz (of Parry Carroll) to Somerville and Co. at 3:48pm on 22 August 2006 is further indication that negotiations were continuing between legal representatives throughout the following day in an attempt to finalise the matter. The email starts with "Further to your fax of this morning and our subsequent telephone conversation, I believe the following suggested course of action will, commercially, satisfy both of our clients' objectives (if settlement is to take place)". 20 The appellant's fourth offer was open for longer than originally stipulated in the terms of the letter, as evidenced by the ongoing discussions between solicitors. The terms of the appellant's offer were clearly compromising her position, in that the appellant offered to have all aspects of the business transferred to the first and second respondents at no costs to them. At this point in the proceedings, the matter had been on foot for over five years and the appellant had made several attempts to resolve the matter. For the following reasons we consider it was unreasonable for the first and second respondents to reject the fourth offer: (1) the offer was the culmination of a number of attempts by the appellant to resolve the dispute between the parties; (2) the offer was open to the offerees for a sufficient period of time to enable ongoing discussions between the parties; it allowed the offerees, with legal advice, reasonable time to assess the merits of the offer and their position in respect of it prior to the hearing dates; (3) the offer was a genuine one and a significant compromise on the appellant's part, as she was offering to transfer the business to which she had dedicated substantial time and energy. The appellant had previously paid $38,000 to the Liquidator of Lieu Investments, a sum she understood to be a final amount that would cause Mr Lieu's interests in the Deng interests to be finalised; and (4) the Full Bench gave judgment in terms no more favourable to the first and second respondents than those contained in the offer. 21 On behalf of the first and second respondents, Mr Lieu submitted that "the Appellant resisted and obstructed the Respondents throughout the proceedings and cannot now claim she should now be entitle [sic] to all of her costs". The Full Bench does not have before it such evidence, although the court records for this matter do suggest substantial delays occurring throughout the proceedings. The original summons was filed in April 2001 and the substantive matter was heard by December 2006, during which time there were several motions before the court, hearing dates vacated and re-listed, non-production or non-adherence to summonses for production, and other circumstances that caused delay in the hearing of the matter. 22 The Court's records indicate that there was a plethora of issues between the parties throughout the five and a half years resulting in much longer than usual litigation, but the first and second respondents have failed to show that it was the appellant who was obstructive in her dealings during this period. 23 The Full Bench considers that the appellant's fourth offer just prior to the hearing was a genuine attempt to settle the matter and unreasonably rejected by the first and second respondents. We, therefore, propose to order that the first and second respondents pay to the appellant her costs on an indemnity basis from 21 August 2006. Interest

24 The appellant has sought an order from this Court that the first and second respondents pay interest on the costs and disbursements incurred by the appellant throughout these proceedings. The appellant relied on Lahoud v Lahoud [2006] NSWSC 126: [82] In my view it is appropriate to make an order for the payment of interest on costs. There is no requirement, before an order for payment of interest on costs is made, for the Court to be satisfied that the circumstances of the case are out of the ordinary: Grogan v Thiess Contractors Pty Ltd & Anor [2000] NSWSC 1101 at [10] per Barr J; Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (in liq) & Ors [2002] NSWSC 280 at [23]-[25] per Einstein J; Puntoriero & Anor v Water Administration Ministerial Corporation [2002] NSWSC 217 at [10] per Grove J; Davies v Ku-ring-Gai Municipal Council [2003] NSWSC 1010 at [7] per Austin J.

[83] To the extent to which the plaintiffs have been out of pocket as a result of having to pay their lawyers' costs and disbursements, it is appropriate that the compensation which is recognised in the Court's order for costs take into account the fact that the plaintiffs have been out of pocket in that way: Hughes Bros v The Trustees of the Roman Catholic Church [1999] NSWSC 1051 at [60]; Grogan v Thiess Contractors Pty Ltd & Anor [2000] NSWSC 1101 at [12]; Woods v Woods [2001] NSWSC 1108 at [29]; Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (in liq) & Ors [2002] NSWSC 280 at [17]; Puntoriero & Anor v Water Administration Ministerial Corporation [2002] NSWSC 217 at [10]; Optus Networks Pty Ltd & Ors v Leighton Contractors Pty Ltd & Ors [2005] NSWSC 156 at [9]; Roads and Traffic Authority v Cremona (No 3) [2005] NSWCA 13 at [34]. Given the length of time the proceedings have been on foot and the extensive preparation, the amount by which the plaintiffs have been out of pocket could be large. It is relevant that the plaintiffs, and the defendants, each conduct businesses and so the amounts which the plaintiffs have had to pay to finance the litigation is likely to be money which otherwise could have been put to a productive use. Conversely, the defendants, by not being required to pay costs until some time in the future when the costs are agreed or assessed, are likely to have been able to retain, for their own productive use, the amount of those costs. 25 The appellant further relied on a judgment of Bergin J in McKerlie v New South Wales (No 2) [2000] NSWSC 1159. Her Honour applied Lahoud in that case: [28] There is no doubt that in this case that the defendant has been paying costs to its legal advisors during the period since the proceedings commenced. The proceedings were commenced two years ago and the defendant has been out of that money from the time it paid those costs. The plaintiff submitted that the circumstances of this case are not such as to warrant the exercise of my discretion in favour of the defendant as the defendant could hardly be described as being in "indigent circumstances". It is not necessary to establish that an applicant for an award of interest on costs is in such circumstances. This is particularly so in commercial causes. Parties to commercial litigation must understand that where large amounts of money are paid for litigating in this List interest on costs may be awarded to a successful party. [29] The exercise of this discretion is focused upon the fact that the successful party has been out of its money for some time and the consideration of whether the successful party will be appropriately compensated by an award of costs in its favour without an award of interest. It is not apt to suggest that the defendant is a large insurance company, as was suggested by the submission that it was not in indigent circumstances. It will depend upon the circumstances of each case but where the parties to the litigation are commercial parties suing and being sued for millions of dollars, the fact that the successful party has been out of money that could have been used otherwise in the commercial enterprise is a relevant factor to be taken into account in the exercise of the discretion. The matters to which Campbell J referred in Lahoud at [84] are relevant to this case. [30] I am satisfied in all the circumstances that the order for interest proposed by the defendant in its Notice of Motion should be made.

26 The order sought by the appellant was pursuant to s 101(4) of the Civil Procedure Act 2005. That Act has no application to this Court. No other basis was relied upon by the appellant as to the power of the Full Bench to award interest on costs. Accordingly, we do not propose to make any order relating to interest on costs and disbursements paid or payable by the appellant. Declaration

27 The appellant has sought that the Full Bench make a declaration that "Paul Lieu and Landmark Enterprises Pty Ltd have no interest in the shareholding of Deng Investments Pty Ltd". This was a matter that could have been raised in the appeal proceedings and was not or, at the very least, the subject of a notice of motion giving the first and second respondents proper and adequate notice of the appellant's intention. Accordingly, we do not now propose to countenance such an application.

Third respondent's claim for costs 28 The solicitor for the third respondent, Mr P Brand, filed written submissions and sought the following costs orders: In the circumstances, Dengs Investments submits that it is entitled to: 1. an order that the applicants at first instance pay the costs of the second respondent of the proceedings at first instance; 2. the costs of the second respondent at first instance to be paid on the usual party and party basis to 14 April 2005 and thereafter on the indemnity basis; 3. the first and second respondents to the appeal pay the costs of the third respondent of the appeal.

29 Mr Lieu did not make any submissions regarding the third respondent's costs in the proceedings. 30 Ms Deng and Dengs Investments were jointly represented by the same solicitors up until June 2003, after which time Dengs Investments was separately represented by Mr Brand of Bartier Perry Solicitors. Mr Brand submitted the following in relation to the matter at first instance: The summons for relief, and the amended summons for relief, did not seek any relief against Dengs Investments. However, the orders sought would affect the shareholding and operation of the business of Dengs Investments. Dengs Investments was initially represented by the same solicitors and counsel as the first respondent, Margaret Deng. Following the objection of the applicants, Dengs Investments became separately represented in the proceedings. Dengs Investments took a back seat in the course of the proceedings, however, during the proceedings at first instance, Dengs Investments incurred legal costs in responding to directions in the proceedings, answering notices to produce and complying with orders for discovery. In addition, Dengs Investments filed and served affidavit evidence in the proceedings. By letter of 14 April 2005… the solicitors acting on behalf of Dengs Investments sought to resolve the claim of the applicants. Dengs Investments was not in a position to make an offer to compromise the proceedings as there was no substantive relief sought against it. In this context the following proposition was put to the applicants by the letter of 14 April 2005: "As the conduct of these proceedings, including a contested hearing, will further dissipate the assets of our client through incurring further legal fees, in the interests of Dengs Investments Pty Limited, we advise that, in the event of these proceedings being determined by the Industrial Relations Commission, and the Commission delivering a judgment in terms no more favourable to your clients than those contained in the offer in settlement set out in the letter of 16 December 2004 (from the solicitors acting on behalf of the first respondent) , that offer in settlement will be relied upon by Dengs Investments Pty Limited in support of an application that your clients pay the costs of our client on the same basis as set out in the letter of 16 December 2004." … After the commencement of the hearing before Justice Staff on 28 August 2006 Dengs Investments sought to be, and was, excused from further attending the hearing and was granted leave to make submissions at the conclusion of the hearing. After the conclusion of the hearing Dengs Investments served and filed written submissions on 7 December 2006…. The thrust of the submissions of Dengs Investments have been highlighted …. It is submitted that these submissions are central to the finding of the Full Bench …. Dengs Investments is entitled to its costs on an indemnity basis from 14 April 2005 as the offer in settlement made by the letter of 16 December 2004 offered to settle the proceedings on a better basis for the applicants than they ultimately achieved and Dengs Investments gave adequate prior notice of its intention to make the claim for indemnity costs, yet the applicants maintained Dengs Investments as a party to the proceedings in consequence of which Dengs Investments incurred expense. 31 Given that this Court has not accepted the appellant's submission that indemnity costs should flow from her offer of 16 December 2004, we do not propose to order costs on an indemnity basis to Dengs Investments from the date of their letter of 14 April 2005 relying on the appellant's offer. The appellant's offer was not a genuine offer of compromise and we do not consider the first and second respondents are liable for indemnity costs as a result of rejecting the offer. 32 We appreciate that the third respondent has found itself in a difficult position throughout these proceedings, as it has incurred legal costs at first instance and on appeal. It was a passive party that remained unable to resolve or attempt to resolve the proceedings. We consider the third respondent should be entitled to its costs at first instance and on appeal on a party and party basis. Orders

33 The Full Bench makes the following orders: (1) All prior costs orders in Matter Nos IRC 2821 of 2001 and IRC 535 of 2007 are vacated or set aside as the case may be. (2) The first and second respondents shall jointly and severally pay the appellant's costs up to and including 21 August 2006 of proceedings in Matter Nos IRC 2821 of 2001 and IRC 535 of 2007 on a party and party basis as agreed or assessed and thereafter on an indemnity basis as agreed or assessed. (3) The first and second respondents shall jointly and severally pay the third respondent's costs of the proceedings in Matter Nos IRC 2821 of 2001 and IRC 535 of 2007 on a party and party basis as agreed or assessed.

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