Huang v Muse Beauty Salon Waterloo Pty Ltd

The statutory and legal principles applicable

1. Section 98(1)-(4) of the Civil Procedure Act 2005 (NSW) provides as follows: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to - (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount."
2. Part 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides as follows: "42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs."
3. Reference was made by the Xie interests to s 172 of the Legal Profession Uniform Law 2014 (NSW) which sets out the principles to be applied as to the costs which can be charged by a law practice. Such costs must be proportionately and reasonably incurred and proportionate and reasonable in amount taking into account the various factors set out in the remainder of the section which relate in substance to the nature of the matter, the issues involved, its complexity and the number and importance of any documents involved (other factors are also referred to).
4. It was not asserted by any party in the proceedings, including the Huang interests, that a relevant and valid offer of compromise was made under the Uniform Civil Procedure Rules.
5. In Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25, the High Court stated as follows in paragraphs 24 to 25: "24. It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion "cannot be narrowed by a legal rule devised by the court to control its exercise", the formulation of principles according to which the discretion should be exercised does not "constitute a fetter upon the discretion not intended by the legislature". Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power. 25. A guiding principle by reference to which the discretion is to be exercised - indeed, "one of the most, if not the most, important" principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the "just resolution of the real issues in civil proceedings with minimum delay and expense", that might have been taken into account to justify refusing the appellant an order for its costs."
6. In Sze Tu v Lowe (No 2) [2015] NSWCA 91 Gleeson JA (with whom Meagher and Barrett JJA agreed) stated the following in paragraphs 37-40: "37. Costs are not awarded by way of punishment of the unsuccessful party but, rather, "are compensatory in the sense that they are awarded to indemnify [the] successful party against the expense to which he or she has been put by reason of the legal proceedings": Latoudis v Casey [1990] HCA 59; 170 CLR 534 at 543 (Mason CJ); Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67]; Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 (Mahenthirarasa (No 2)) at [8] (Basten JA; Giles and Bell JJA agreeing). It follows that the inquiry as to what costs order should be made is primarily directed to the position of the successful party: Latoudis v Casey at 542; Mahenthirarasa (No 2) at [9]. 38. The starting position is s 98 of the Civil Procedure Act 2005 (NSW) which provides that, subject to the rules of court, costs are in the discretion of the Court including by whom, to whom and to what extent costs are to be paid. Reference should also be made to r 42.1, Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which provides that if the Court makes any order as to costs, it should be in terms that costs follow the event unless it appears to the Court that some other order should be made as to the whole or part of the costs. 39. How "the event" should be defined will depend upon the nature of the litigation. Generally the "event" refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861 - 37,862 (Waddell J). 40. In a proper case, the party that is successful overall may be deprived of part of its costs, or ordered to pay the costs of a discrete issue. The circumstances in which this may occur are not limited to cases where it was unreasonable for the successful party to raise the issue on which it failed: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 615D. The relevant principles were reviewed by this Court in Elite Protective Service Pty Ltd v Salmon (No 2) [2007] NSWCA 373, and summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA), as follows: • Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1996, unreported). • In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. • If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. • Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). • A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. • Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272."
7. Sze Tu was referred to with approval by the Court of Appeal in McInnes v Rheem Australia Pty Ltd [2021] NSWCA 89 at paragraphs 28 and 34.
8. Accordingly, the following general principles may be stated: 1. The power of the Court to award costs is a discretionary power; 2. However, it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation; 3. The Court has a wide discretion as to costs; 4. The successful party in litigation is generally entitled to his or her costs by way of compensation against the expense of litigation visited upon that party; 5. Costs are not awarded by way of punishment of the unsuccessful party but rather to compensate the successful party; 6. What costs order should be made is primarily directed to the position of the successful party; 7. Generally, costs should follow the event unless it appears to the Court that some other order should be made as to the whole or part of the costs - here the Huang interests were successful in the proceedings they commenced and were also successful in defending the proceedings which the Xie interests commenced. As a practical matter, the Huang interests were successful in both matters. The Xie interests accepted that in their submissions; 8. Whether an order contrary to the general rule that costs follow the event should be made, depends on the circumstances of the case viewed in the context of the wide discretionary powers of the Court as to costs.
9. The Huang interests relied on the Calderbank offer made in the 1 May 2020 letter.
10. In AB v Keanes (No 2) [2019] NSWDC 765, I stated as follows in paragraphs 42-43: "42. The first offer of compromise was served with a covering letter relying on the Calderbank principles. These were not addressed in submissions but I will consider them briefly. 43. The rejection of a Calderbank offer by a party does not necessarily mean that indemnity costs are ordered as a matter of course. The applicant for indemnity costs must demonstrate to the court that the rejection of the offer was "unreasonable" in all the circumstances of the case: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19]; Jones v Bradley (No 2) [2003] NSWCA 258 at [12]; Russell v Edwards (No 2) [2006] NSWCA 52 at [8]; Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [7]."
11. In Hutley v Costco (No 2) [2021] NSWCA 335, Basten JA stated as follows at paragraph 9: "9 The letters of offer each invoked the principles enunciated in Calderbank v Calderbank. Those principles envisage that such an offer, whilst made without prejudice, may be tendered on an application for costs in circumstances where the offer is not accepted, and the offer proposed a more favourable outcome than that achieved. To support an order that costs be assessed on the indemnity basis from the date of the offer, there had to be a basis to conclude that failure to accept the offer was unreasonable in all the circumstances."
12. In Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160, the Court of Appeal in a joint judgment considered the principles applicable to Calderbank offers at paragraphs 20-26.
13. In summary, the Court stated as follows: 1. Costs "are in the broad discretion of the court with the general rule being that they should follow the event and that, unless the court orders "otherwise", those costs are to be assessed on the ordinary basis": at [20]; 2. The rationale underlying Calderbank offers was to provide "an incentive for the disputants to end their litigation as soon as possible" and to discourage "wasteful and unreasonable behaviour by litigants": at [20]; 3. "The making of an offer of compromise in the form of a Calderbank letter may justify a departure from the ordinary basis on which costs are awarded and assessed…and the ultimate question is whether the offeree's failure to accept the offer, in all the circumstances warrants a departure from the ordinary rule": at [21]; 4. The "rejection of (what ultimately transpires to be) a more favourable offer is not decisive as to the awarding of costs on an indemnity basis". There is "no presumption that an offeree who does not accept an offer, and does not obtain a more favourable judgment, will necessarily pay indemnity costs from the date of the offer": at [24]; 5. The issue is whether the refusal to accept a Calderbank offer was unreasonable in all the circumstances.
14. In Valmont Interiors, in paragraph 25, the Court stated as follows: "In Miwa at [12], citing the Victorian Court of Appeal's decision in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, Basten JA (with whom McColl and Campbell JJA agreed) identified the following considerations as being relevant to the determination of whether the refusal to accept a Calderbank offer was unreasonable, including: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it."
15. In Della Franca v Lorenzato (No 2) [2022] NSWCA 53 at [19], Macfarlan JA stated the following principles: 1. The party seeking an indemnity costs order following a Calderbank offer "bore the onus of satisfying the court that an order for indemnity costs should be made on the basis of the service and non-acceptance of the offer"; 2. The question is "whether, in all circumstances, the failure to accept the offer warrants departure from the ordinary rules as to costs"; 3. Relevant factors included the stage of the proceedings at which the offer was made, the time allowed for a response, the extent of the compromise offered, the offeree's prospects of success, the clarity with which the offer is expressed and whether the offer foreshadowed an application for indemnity costs were the offeree to reject it.
16. At [47]-[50], Brereton JA stated a number of principles including: 1. An unaccepted Calderbank offer is "merely a relevant consideration in the exercise of the costs discretion"; 2. "Unlike a formal offer of compromise under the Rules, it does not have any presumptive effect as to the costs position if the offeree does not better it"; 3. As "a matter of discretion, a Calderbank offer may justify a special order for costs, including an order for costs on an indemnity basis, if the final judgment is no more favourable than the offer, its rejection was unreasonable, and the offer sufficiently foreshadowed its use to support a special costs order"; 4. "A party who seeks to rely on a Calderbank offer for costs purposes bears the onus of showing that an order for indemnity costs should be made on the basis of the offer".
17. In relation to the claim for an order for lump sum costs, the principles applicable were recently set out by Judge Gibson in Lu v Minter (No 4) [2022] NSWDC 127 at [23] and following.
18. In Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 the New South Wales Court of Appeal in a joint judgment stated the following at paragraphs 14-18: "14. The principles relevant to the Court's exercise of discretion under s 98 were set out in Hamod v New South Wales [2011] NSWCA 375 at [813]-[820] (Beazley JA) (Hamod). Her Honour noted at [813]: [813] The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison & Anor v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]-[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment. However, his Honour stated, at [22]: "The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available." 15. The principal purpose of a specified gross sum costs order under s 98(4)(c) is to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process: Hamod at [816]-[817]. As Basten JA noted in James v Australia and New Zealand Banking Group Ltd [2017] NSWCA 84 at [3]: The power to make such an order is governed by the obligation of the court to give effect to the overriding purpose of the Act, as identified in Pt 6 of the Civil Procedure Act. The court is to ensure that the issues between the parties are resolved "in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute" (Civil Procedure Act, s 60); that obligation extends to the disposal of disputes as to costs. Although questions of costs undoubtedly play an important practical role in commercial litigation, disputes as to quantification are ancillary to the primary issues in dispute and consequential upon the resolution of the primary issues. Costs provide an opportunity for ongoing litigation about "non-essential issues" which should be resolved with as little technicality and expense as reasonably practicable. [footnotes omitted] 16 Primary considerations relevant to the exercise of the s 98(4)(c) discretion include "the relative responsibility of the parties for the costs incurred; the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability": Hamod at [816]; see also Kostov v Zhang (No 2) [2016] NSWCA 279 at [22]; eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [30]. 17 The power to award a gross sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schip (2002) 54 NSWLR 734 at 743; [2002] NSWCA 213 at [22]. The power may be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod at [818]. 18 If it considers it appropriate to make the order, the Court may adopt a "broad brush" approach to quantification, as to require the Court to undertake a detailed examination of the kind carried out in a formal costs assessment would defeat the purpose of the order: Harrison v Schipp at 743; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. The costs ordered should be "based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills)": Hamod at [820]. Courts have typically applied a discount when assessing costs on a gross sum basis, though the aptness of a discount primarily depends on the accuracy and reliability of the costs evidence available to the Court: Hamod at [814]."
19. The principles stated by the Court of Appeal may therefore be summarised as follows: 1. The power to order a specified gross sum for costs instead of assessed costs is a discretionary power, is not confined, and may be exercised whenever the circumstances warrant its exercise; 2. The discretion may be exercised where the assessment of costs would be protracted and expensive; 3. This is particularly the case if a party obliged to pay costs appears not able to meet a liability under the order likely to result from the assessment; 4. The power should only be exercised where the court considers that it can do so fairly between the parties and that includes having sufficient confidence in arriving at an appropriate sum on the materials available; 5. The principal purpose of the order is to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process; 6. The primary considerations include the relative responsibility of the parties for the costs incurred, the degree of any disproportion between the issue litigated and the costs claimed, the complexity of proceedings in relation to their cost and the capacity of the unsuccessful party to satisfy any costs order; 7. If it considers it appropriate to make that order, the court may adopt a "broad brush" approach to quantification. However, that should be based on an informed assessment of the actual costs having regard to the information before the court. It is typically appropriate to apply a discount when assessing costs on a gross sum basis, although that depends on the accuracy and reliability of the costs evidence before the court. The degree of any disproportion between the issues litigated and the costs claimed is a relevant factor.
20. A successful plaintiff's conduct of proceedings may result in the court reducing the amount of costs which can be claimed by it if there is delay, an excessive time taken in the conduct of the proceedings or excessive cross-examination: Lollis v Loulatzis (No 2) [2008] VSC 35 at [27]-[29]; Jones v Sutton (No 2) [2005] NSWCA 203 at [48]-[53]; Moseley v AB (No 2) [2017] NSWSC 1812 at [71].
21. The Court must of course take into account sections 56 and 60 of the Civil Procedure Act 2005 (NSW) in deciding appropriate costs orders.

The submissions made by the parties

1. Detailed written submissions were filed by the parties. These were expanded in oral submissions. It is unnecessary for the purposes of these reasons to set out these submissions in detail. The Court has reviewed them and taken them into account.
2. In substance, the Huang interests submit as follows: 1. The case of the Xie interests has been rejected by the Court. The Court has made significant credit findings against Ms Xie and Ms Bai and has found that they have fabricated their evidence on some relevant matters: written submissions paragraphs 16-17. The conduct of the case, on behalf of the Xie interests, allows the inference properly to be drawn by the Court that attempts were made by the Xie interests to exhaust the financial resources of the Huang interests through litigation and to delay the proceedings. Extensive delays were caused by the Xie interests in the interlocutory stages: written submissions paragraphs 2-15; 19-20 and 31-32; 2. Having regard to this conduct, there should be an indemnity costs order against the Xie interests from the commencement of the Local Court proceedings to the end of the proceedings (I have assumed that this submission only relates to the persons and entities who were parties at the relevant times): written submissions paragraphs 25; 3. In the alternative, there should be an indemnity costs order against the Xie interests from the date the Local Court proceedings were transferred to the District Court as a result of the second proceedings being commenced by the Xie interests: written submissions paragraph 21; 4. In the further alternative, costs should be awarded on an indemnity basis from 1 May 2020, the date of the Calderbank letter offer: written submissions paragraphs 24; 5. Having regard to the nature of the cases, and the correspondence in evidence between the parties in 2018-2020, the Xie interests were in a good position to assess the nature of the offer made when it was made on 1 May 2020. The period allowed to consider the offer was reasonable in the circumstances; 6. It is highly desirable for the parties to avoid the assessment process and further litigation by the Court making a lump sum costs order. The proceedings were lengthy because of the nature of the proceedings and the factual disputes between the parties. It is appropriate to make the order despite there being a disproportion between the amounts claimed by Ms Huang and the Xie interests in the proceedings and the costs sought by the Huang interests: written submissions paragraphs 34-53. In oral submissions, emphasis was placed on the injurious falsehood proceedings commenced by the Xie interests, and the extensive damages claimed. The number of documents requiring careful review under this claim was also mentioned by counsel for the Huang interests; 7. There should be a limited discount to allow for a lump sum costs order being made without a formal assessment: written submissions paragraphs 44-46. In oral submissions, it was submitted that there should be no discount if the matters proceeded to assessment and no lump sum costs order was made.
3. The Xie interests submit, in summary, as follows: 1. The applications by the Huang interests are serious applications: written submissions paragraph 1; 2. The Xie interests must pay the Huang interests' costs on the ordinary basis due to their success in the proceedings: written submissions paragraph 3; 3. There is no relevant conduct by or on behalf of the Xie interests warranting an indemnity costs order against them. The Court could not be satisfied or draw the required inference that there was conduct by or on behalf of the Xie interests in the running of the proceedings which warranted such a costs order; 4. The rejection of the Calderbank offer was not unreasonable in all the circumstances. Very little evidence had been served by that time, the offer did not explain the Huang interests' case at all and the time allowed for consideration of the offer was not reasonable and too short. In particular, at that time the evidence as to the terms of the representations allegedly made that the deposit was refundable was not completed: written submissions paragraphs 4 and 19-22; 5. The oral offer said to be made on the first day of the trial was disputed and it was also not unreasonable to reject it in all the circumstances. In oral submissions, it was submitted that having regard to the differing oral evidence, the court could not be satisfied that Mr Ngo's account was established on the balance of probabilities; 6. No lump sum costs order should be made having regard to the limited material before the court. The court would not have sufficient confidence in arriving at an appropriate sum on the materials available. The invoices were limited in their terms and there were no retainer letters in evidence. There was a substantial disproportion between the costs claimed and the amount in issue in the two proceedings: written submissions paragraphs 5, 10-12, 23-27. In oral submissions, this submission was varied. It was submitted that a lump sum costs order should be made as it was in the interests of both parties but there needed to be very significant discounts to the amount claimed (these discounts have been referred to above); 7. There should be a discount of 65% on the assessed costs because of various disentitling conduct by the Huang interests or the conduct of the proceedings on their behalf including for the proportionality issue: written submissions paragraphs 5-6, 13-18, 28-41. Once that discount is applied, there should be a further discount of 40% if a lump sum costs order is made.
4. In reply, the Huang interests relied on written submissions filed 8 June 2022 (dated 8 May 2022). These submissions include the following submissions: 1. an assessment of costs, which would involve more costs and delay, is the "exception these days" (paragraph 4); 2. "a tax assessment is no longer the best way forward but rather an exception" (paragraph 7); 3. "a lump sum figure is the only and best way forward" (paragraph 10); 4. Much time was wasted in the way the Xie interests' witnesses prepared their affidavits and gave their evidence (paragraph 14e); 5. Sections 56-59 of the Civil Procedure Act must be taken into account (paragraph 15); 6. The rate charged by counsel for the Huang interests was not too high having regard to his experience (paragraphs 16-17); 7. The Huang fee notes in evidence were not inadequate (paragraph 18-22); 8. The nature and detail of the proceedings required extensive preparation and hearing time (paragraphs 23-36); 9. The Calderbank offers made justify an indemnity costs order (paragraphs 37-42); and 10. There is no basis for a discount in the Huang costs, particularly in the order of 65% as sought by the Xie interests (paragraphs 43-55).
5. At the costs hearing, senior counsel for the Xie interests stated that no point was taken as to the rates charged by counsel or the solicitor representing the Huang interests. Despite this, the amounts rendered to the Huang interests were said not to be proportionate having regard to the nature of the case and the amounts in dispute.
6. It was submitted by senior counsel for the Xie interests that a lump sum costs order should be made with a heavy discount despite there not being evidence, such as an assessment by an expert or detailed invoices with appropriate narratives, which would allow the Court to be confident in arriving at an appropriate amount. This was also despite retainer letters or agreements not being in evidence. The Court was not referred to any appellate authority supporting such an approach where the materials before the court were limited.

Submission that an inference should be drawn that the Xie interests or their legal representatives conducted the proceedings improperly or inappropriately with the aim of causing delay and exhausting the finances of the Huang interests

1. As set out above, the Huang interests submit that the Court should draw the inference and find that the Xie interests conducted the proceedings inappropriately and with the aim of achieving delay and exhausting the financial resources of the Huang interests.
2. That is a serious allegation. A court should only draw such an inference where there is a clear evidential basis for it.
3. I have taken into account the matters referred to in the evidence and submissions. In my view, there is not sufficient evidence to make that inference and to reach that finding. There is nothing persuasive in the evidence before the Court, in my opinion, which would enable such a conclusion to be made. In my view, clear evidence would be needed to allow such an inference to be drawn and made.
4. The various facts relied upon do not assist the Huang interests: regrettably, many parties have default judgments entered against them or breach orders for the filing of evidence. Delays in the filing of a Defence could have caused a Notice of Motion to be filed by the Huang interests, if they chose to do so. Hearing dates are promptly ordered in the District Court as a matter of practice when the evidence is complete. There is no evidence that a transfer to the District Court delayed the matters unduly.
5. I reject the submission made on behalf of the Huang interests.

Application for indemnity costs by the Huang interests from the commencement of the proceedings or from the time of transfer of the Local Court matter to the District Court

1. In my view, there is no proper basis on the evidence for an order for indemnity costs in favour of the Huang interests from the commencement of the Local Court proceedings by Ms Huang in 2018.
2. While the Court found against the Xie interests in the two matters and also concluded that some of the evidence of Ms Xie and Ms Bai was fabricated by them, the factual determination which had to be made by the Court required a careful examination of the evidence before the Court and the submissions made. The fact that the Court preferred the more significant evidence of one side or one series of witnesses does not mean that the claim made by the Xie interests was fraudulent or improper or an abuse of process. In the end, the Court preferred the evidence of Mr Nam and especially Ms Huang, for the reasons set out in detail in the reasons for decision handed down on 7 April 2022: see Judgment especially paragraphs [430]-[441].
3. It is submitted by the Huang interests in their written submissions in chief at paragraph 17 that "at all times Xie and Bai knew that such a claim would fail and was at risk of failing." There is no evidential basis for the inference or conclusion that Ms Xie and Ms Bai at all times knew their claims would fail and I decline to make it. I also decline to make a finding that "the claims were aimed at generating delay and exhausting…the funds of Huang and Nam in the hope they would not proceed": submissions paragraph 19. In my opinion, there is not a proper basis for making such a serious finding.
4. In my view, there is not a proper basis for ordering indemnity costs in favour of the Huang interests from the commencement of the Local Court proceedings in 2018 or at any time prior to the Calderbank offer in May 2020. The date of transfer of the Local Court proceedings does not seem significant. The Xie interests had commenced the breach of contract/injurious falsehood proceedings in the District Court and it was logical to seek to transfer the Local Court proceedings to the District Court to avoid similar factual issues being determined in two courts.

Indemnity costs order in favour of the Huang interests based on the rejection of the 1 May 2020 Calderbank offer

1. In accordance with the authorities set out above, the onus rests on the Huang interests to establish that the Calderbank offer made in the letter dated 1 May 2020 was unreasonably rejected or not accepted in all the circumstances by the Xie interests. There is no presumption in favour of the award of indemnity costs.
2. I accept that the offer by way of letter was a valid Calderbank offer to the extent that it was headed "Without prejudice except as to costs" and expressly stated that the Calderbank principle would be relied upon to seek an order for indemnity costs if the offer was rejected.
3. I also accept and find that the offer within the letter appears to be a genuine one and it involved a genuine compromise by the Huang interests of their claim, albeit that the amount sought had been reduced by a reasonably modest amount. By the time the offer was made on 1 May 2020, the proceedings had been in existence for two years and 18 months, respectively. There was a compromise in relation to costs at that time pursuant to the offer. Although there was no evidence before me as to the Huang interests' costs at the time the offer was made, some substantial amount of costs must have been incurred by that time. The offer clearly foreshadowed that it was a Calderbank offer and that an application would be made for indemnity costs in the event of the offeree rejecting it.
4. However, in my view, having regard to all the relevant circumstances, the implied rejection of the offer in the letter dated 1 May 2020 by the Xie interests should not result in an order for indemnity costs as sought. In my opinion, it was not unreasonable for the Xie interests to have not accepted the offer at the time it was made for the following reasons: 1. The stage of the proceedings at which the offer was received - although both proceedings had been on foot for some considerable time, very little affidavit evidence had been served in the proceedings by the parties at the time the offer was made. In evidential terms, the offer was made at a very early stage in the proceedings. In Carter v Mehmet (No 3) [2022] NSWCA 64, the Court of Appeal held that it was "highly relevant" at the time an offer of compromise was made that the parties had served only very limited evidence in chief: at [30]. In my view that consideration is also relevant in Calderbank offer cases. See also Valmont Interiors, above, at paragraph 25(a). Very substantial affidavit evidence was served by the parties, including the Huang interests, after the time of the offer. In particular, the affidavit served on behalf of Ms Huang dated 20 March 2020 was relatively limited in its terms and was expanded considerably in later affidavits. The Xie interests had not received Ms Huang's responsive affidavit to the Xie affidavit dated 31 March 2020 at the time the offer was made. The latter affidavit annexed a number of WeChat messages between the main witnesses. The terms of a number of conversations were also not fully stated in the Huang first affidavit: see paragraphs 7, 12, 13, 15, 16 and 32. Further, no affidavits had been served from Ms Lo at this time; 2. There were also inaccuracies in the first Huang affidavit - Ms Huang later altered her evidence about the conversation said to have occurred on 25 November 2017. She later also accepted that Ms Bai was not at the meeting on 9 December 2017: see first Huang affidavit paragraphs 5 and 10; 3. Whilst the correspondence from Mr Ngo in 2018 set out Ms Huang's claims in some detail, this was not the evidence to be relied on at any hearing; 4. The time allowed to the offeree to consider the offer - the amount of time allowed to the Xie interests to consider the offer was only six days. There were no time pressures at this stage to warrant such a short period for the offer to be accepted. I accept that there had been correspondence between the parties setting out their respective claims in 2018. However, the amount of time was relatively short, having regard to the time the proceedings were on foot and the fact that limited evidence had been served; 5. The extent of the compromise offered - I have found above that there was a genuine offer. However, the amount of reduction in the compromise was very limited being only $8,000 from $68,000 to $60,000. There was also a compromise as to costs which is relevant; 6. The offeree's prospects of success, assessed as at the date of the offer - it was difficult to assess the Huang interests' prospects of success at that time. There were clearly different factual versions and recollections as to what had been said in the important meetings. It was also difficult to assess the prospects of success of the Huang interests having regard to the limited evidence which had been served.
5. Having regard to these matters, I do not regard the failure to accept the offer by the Xie interests as being unreasonable in all the circumstances. I accept the Xie interests' submissions on this point.
6. The 7 May 2020 letter did not contain a new offer and largely related to the injurious falsehood claim.
7. The oral offer said to have been made on behalf of the Huang interests on 7 June 2021 is disputed. There is no contemporaneous file note in evidence recording the details of the offer or its rejection. In cross-examination, both solicitors confirmed they did not have a relevant file note. The Ngo version of the offer did not refer to the proceedings commenced by the Xie interests and what was proposed as to it. Having seen both witnesses being cross-examined on the issue, I accept that they both honestly believe their respective accounts of the offer to be accurate. In all the circumstances, and in the absence of a contemporaneous file note, I am not satisfied that it has been established on the balance of probabilities that the offer was made as alleged by Mr Ngo. In coming to that conclusion, I make no credit findings in relation to the conflicting accounts which are both possible. If the Gong version is considered, the compromise was only as to costs and not as to the amount of the Huang claim.
8. Having regard to these matters, I am unable to conclude that, whatever offer was rejected, that rejection on the first day of the hearing was unreasonable in all the circumstances.

The lump sum costs order sought by the Huang interests

1. The Huang interests seek a lump sum costs order in their favour under s 98 of the Civil Procedure Act. The Court clearly has the power to make such an order. Such an order is, on one level, highly attractive as it avoids the prospects of satellite litigation in the assessment process and would conclude the costs' aspects in the matter, subject to any appeal. It would also avoid the additional legal costs involved in the assessment process. Section 56 of the Civil Procedure Act is relevant to a consideration of the application. These factors no doubt led to the Huang interests in their oral submissions supporting a lump sum costs order but with a substantial discount.
2. Despite the appeal of such an order, in my view, on balance, a lump sum costs order as sought should not be made in the present case for the following reasons: 1. Although I accept that the assessment of costs in the matters may be protracted and potentially expensive, this is really the product of the nature of the proceedings, the way they were fought, the affidavits served, the nature and extent of the cross-examination and the large number of hearing days. Further, the costs referred to by the Huang interests of over $567,000 (Ngo first affidavit paragraph 13) are very large; 2. There was no persuasive evidence before me which would allow me to conclude or infer that the Xie interests, who would be obliged to pay any costs following an assessment, would not be able to meet a liability for a costs order likely to result from the assessment. Two of the Xie interests are individuals. There was no clear evidence as to the financial position of the parties. This is a relevant factor on the authorities in deciding whether to make a lump sum costs order; 3. It is clear on the authorities that the power to award a lump sum for costs should only be exercised when the court considers that it can do so fairly between the parties and that includes having sufficient confidence in arriving at an appropriate sum on the materials available. There was no expert evidence before me from a costs assessor as to the likely amount of costs which would be allowed on an assessment: see Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11 at [26] (Barrett J); SAB Closed 1 Pty Ltd v Bees & Honey Pty Ltd [2015] NSWSC 1162 at [10] (Stevenson J). The retainer letters and agreements between the Huang interests and their solicitors and between the solicitors and counsel were not in evidence. All the court had was the invoices rendered to the Huang interests and knowledge of the affidavits, court books and hearing days as well as the evidence; 4. Further, many of the invoices provided in evidence by the Huang interests were in fairly general terms. This matter was relied on by the Xie interests in their written submissions. Detailed narratives and breakdowns were often, but not always, absent. The invoice dated 20 April 2022 (Ngo first affidavit page 104) seeks a global figure for solicitors' costs of $97,405. Little detail is given in relation to the tasks undertaken for these fees. This is surprising having regard to the large sum involved. Also, little detail is provided in relation to some of the disbursements, although many are further clarified by the annexures to Mr Ngo's third affidavit. The total of $86,550 on page 105 of the first Ngo affidavit is different to the pre-GST amount of $88,550 at page 104. There are frequent references to "full day" without details being provided of the services rendered and the time referred to. Similar comments can be made about the 30 June 2021 invoice at page 111. Counsel's fees exceeded solicitor's fees for this period despite apparent similar rates (compare pages 111-112 and 113). Significantly more detail was provided in relation to earlier fee notes (see for example at 119-120, 125). Some counsel's fees did not provide narratives connected to specific hours of work (for example at pages 117, 121, 122 and 126). These matters cause some real concern to the Court in making a lump sum costs order, particularly having regard to the large sum sought by the Huang interests; 5. There is a very substantial disproportion between the amount in issue in the proceedings and the lump sum costs sought on behalf of the Huang interests. The overriding purpose in s 56(1) of the Civil Procedure Act must be taken into account. Section 60 is also relevant: James v Australia and New Zealand Banking Group Ltd [2017] NSWCA 84 at [3]. Basten JA held that these sections extend to disputes as to costs. On one level, that is a strong factor in favour of a lump sum costs order in the present case. However, in my view, the Court should be hesitant in making such an order, where there is that degree of disproportion, unless the materials before the court indicate such an order is appropriate and fair to the parties. In my opinion, the disproportion in costs, the length of the hearing, the voluminous affidavits relied upon and the limited materials before the Court as to the invoices, all lead to the conclusion that the costs claimed need to be considered in some detail in an assessment; 6. Clearly, amounts are likely not to be able to be claimed by the Huang interests in relation to the affidavit evidence of Ms Liu (her affidavits were not relied upon) and in relation to the preservation order application where a costs order was made in favour of the Xie interests. As to the Liu affidavits, see references in the fee notes at Ngo first affidavit page 116. One of the invoices annexed to Mr Ngo's first affidavit (page 109) related to the preservation application. This was confirmed by Mr Ngo in his oral evidence; 7. There were numerous affidavits filed in the proceedings on behalf of the Huang interests. Some affidavit evidence sought to qualify (or correct) or expand other affidavit evidence. There was therefore, it appears, some potential doubling up of evidence and the time taken to prepare it; 8. I accept that the proceedings were somewhat complex factually. Some cases are, but they do not take the number of hearing days involved in the present case, particularly having regard to the amounts in issue. The amount claimed for costs by the Huang interests is very large. While it appears that a substantial portion of the costs related to the actual hearing time, in the end, I am not satisfied that I can make a lump sum costs order fairly between the parties on the materials available. Even if an order was contemplated, the materials do not allow me to apply with any degree of satisfaction or confidence a "broad brush" approach to quantification and a reduction for any lump sum amount in the form of a discount.
3. As stated, I take into account the factors set out in ss 56 and 60 of the Civil Procedure Act 2005 (NSW) and those in s 172 of the Legal Profession Uniform Law 2014 (NSW). However, most regrettably, the Court does not have confidence in making a lump sum quantification in all the circumstances, having regard to the disproportion between the issues litigated and the costs claimed and the limited materials before the Court.

A discount to the Huang interests' costs?

1. The Xie interests submit that there should be a very substantial discount of 65% to the Huang interests' costs having regard to the way the proceedings were conducted by the Huang interests, the length of the cross-examination, repetition in the cross-examination, the length of the hearing and the limited factual issues in question: written submissions paragraphs 13-18 and 28-41.
2. Such a reduction is strongly opposed by the Huang interests. They point in particular to the injurious falsehood claim which sought a large sum. They submit that the cross-examination time was lengthened by the nature of the responses of witnesses, especially Ms Xie.
3. As the claim for a lump sum costs order has been rejected, some of the Xie interests' submissions do not arise or not to the same degree.
4. It is submitted by the Xie interests that the hearing was estimated at 5 days and should have lasted no more than 10 days. However, it must be remembered that interpreters were involved for a number of the main witnesses which often doubles the length of a witnesses' evidence, particularly where there are disputed meetings or conversations. There was also substantial cross-examination by both counsel, not just the counsel appearing for the Huang interests. Regrettably, later estimates as to additional hearing time were also exceeded. Both sides appeared determined to challenge most factual evidence from the other side.
5. In my view, the trial judge in a case like the present is in the best position to determine whether such a reduction is appropriate. It is clearly permitted in the exercise of the Court's discretion as to costs. I refer to the authorities on the point cited above which I accept.
6. In my opinion, the following are some of the factors which are relevant to the assessment of this issue: 1. The factual complexity of the proceedings; 2. The nature and extent of the affidavit evidence served and relied upon; 3. The service of numerous affidavits from some witnesses; 4. The accuracy of those affidavits; 5. The length of the cross-examination of the witnesses; 6. Repetition in the cross-examination on a number of issues; 7. The nature of the issues in dispute; 8. The complexity of the legal principles to be applied in the proceedings. In my view, the proceedings did not involve complex legal principles or heavily disputed areas of the law; 9. The fact interpreters were required for some witnesses; 10. The number of documents involved particularly the WeChat messages.
7. As stated, the Xie interests seek a very substantial discount of 65% to the costs whereas the Huang interests seek no discount at all.
8. In my opinion, some discount to the Huang interests' assessed costs is warranted in the present case for the following reasons: 1. The way the affidavit evidence developed - an examination of the affidavits served in the case shows that there was a disjointed approach adopted by the Huang interests in the presentation of aspects of their case. The first affidavits served were limited. They required substantial elaboration and expansion in later affidavits, including by reference to WeChat messages. Some aspects of affidavits were altered in oral evidence: see for example the first Huang affidavit paragraphs 5 and 10; second Huang affidavit paragraph 13 (as to the presence of Ms Bai). The third Huang affidavit was served 11 months after the affidavits to which it was responding. This would have required close attention (and rereading) by the Huang legal advisers well after the previous Xie interests' affidavits were received. The approach to the affidavit evidence, in my view, likely required additional time in preparation, cross-examination and hearing time; 2. The first affidavit of Ms Lo dated 15 May 2020 was, in essence, prepared by her. The second affidavit dated 16 May 2021 had a number of difficulties. First, it was considerably expanded factually. Secondly, it was not presented chronologically and involved the use of incorrect or unclear terms. See for example paragraph 19 cf paragraphs 20-21. This was referred to in some detail in the 7 April 2022 Judgment. Apparently, both affidavits were prepared by Ms Lo in Chinese and translated using Google translate: see Judgment at [396]. The nature of the affidavits involved unnecessary time in the cross-examination of her and time in considering Ms Lo's affidavit evidence and her oral evidence; 3. The cross-examination of Ms Xie and Ms Bai was extremely lengthy. Their evidence was given through an interpreter. The facts in the matter were somewhat complex but not unusually so. The length of the cross-examination was exceptionally lengthy having regard to the amounts in issue and the facts. It should, in my view, and with respect, have been much shorter. The factual issues were heavily traversed in the affidavits served. There was also, in my view, some unnecessary repetition in trawling over factual issues. While some repeated cross-examination on significant issues can often be justified in certain cases to test a witness's memory and credibility, in my view, standing back and looking at the cross-examination as a whole, the cross-examination was unduly lengthy. The fact the application to limit cross-examination was rejected ([2021] NSWDC 286) is not decisive as no application to limit had been made earlier and some topics had not yet been addressed in the cross-examination of the witness at that time. See [2021] NSWDC 286 at [9] and [11]; 4. The effect of the lengthy cross-examination of Ms Xie and Ms Bai was to increase the transcript/evidence which needed to be reviewed and considered for the purposes of evidence from other witnesses and submissions; 5. There was a real disproportion between the amounts in issue and the costs referred to as being rendered to the clients in Mr Ngo's first affidavit.
9. However, in my view any reduction that should be made to the amount to be allowed for assessed costs for the Huang interests should be nowhere near that sought by the Xie interests of 65%: 1. As set out in the 7 April 2022 Judgment, Ms Xie on a number of occasions refused to make concessions where these were clearly appropriate or gave unnecessarily lengthy or indirect answers to some questions asked; 2. While the amounts in issue were relatively modest, the factual contest between the parties was extensive. The injurious falsehood claim also sought a relatively large sum in damages; 3. The use of interpreters substantially lengthened the proceedings; 4. Some repetition and testing in cross-examination was justified in the case of both Ms Xie and Ms Bai; 5. Ms Bai herself conceded that there were errors in her affidavits in her oral evidence; 6. The number of meetings involved required fairly detailed cross-examinations. There were no file or other notes kept by the parties to assist in this regard. The WeChat messages needed careful examination; 7. Counsel for the Xie interests also conducted lengthy cross-examinations which increased the hearing time.
10. Taking into account all of these matters, and the respective submissions of the parties, in my view in the exercise of my discretion as to costs, a reduction in the order of 15% to the assessed costs of the Huang interests is appropriate.
11. Accordingly, I vary the orders made on 7 April 2022 in the following terms: 1. Order 3 made on 7 April 2022 is varied, such that in matter 2018/00117938, the defendants are to pay the plaintiff's costs of the proceedings as agreed or assessed, reduced by 15%; 2. Order 6 made on 7 April 2022 is varied such that in matter 2018/00364820, the plaintiffs are to pay the defendants' costs of the proceedings as agreed or assessed, reduced by 15%.
12. In relation to the costs of the applications, the Xie interests have been primarily but not totally successful. They failed to achieve a reduction in the costs of the Huang interests to the large extent which they sought. They also did not obtain a lump sum costs order which they sought in their altered submissions. In my view, the appropriate costs order to make in the exercise of the Court's discretion is that the Huang interests should pay 60% of the costs of the Xie interests of the applications as agreed or assessed. Although the indemnity costs application based on the 1 May 2020 Calderbank offer failed, the application was clearly arguable. However, I will provide an opportunity to file any submissions supporting a variation of that costs order.
13. Accordingly, for the above reasons, the following orders are made 1. The Huang interests' applications for special costs orders are dismissed; 2. Order 3 made on 7 April 2022 is varied, such that in matter 2018/00117938, the defendants are to pay the plaintiff's costs of the proceedings as agreed or assessed, reduced by 15%; 3. Order 6 made on 7 April 2022 is varied such that in matter 2018/00364820, the plaintiffs are to pay the defendants' costs of the proceedings as agreed or assessed, reduced by 15%. 4. The Huang interests are to pay 60% of the costs of the Xie interests of the applications as agreed or assessed. 5. In the event a party seeks a different costs order to that in (4) above, written submissions not exceeding three pages are to be filed within three days. The Court will determine the matter on the papers.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 July 2022