Mills v Walsh [2023] NSWCA 97 | Case summary

Court of Appeal (NSW)|2023-02-09|Before: Bell CJ, White JA, Brereton JA

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The appellant Mr Mills and his estranged wife the second respondent Ms Zhang commenced an appeal in this Court against the first respondent Mr Walsh. Ms Zhang authorised solicitors Coleman & Greig to file a Notice of Intention to Appeal, however, did not respond to the fee proposal and draft Notice of Appeal sent by her solicitors, which was then filed. Whilst there were some communications with her solicitors, Ms Zhang did not clearly and unequivocally give instructions to discontinue the appeal until 2 September 2022. At the outset of the hearing of the substantive appeal on 6 September 2022, the Court made orders granting leave to Ms Zhang to discontinue the proceedings. The appeal was dismissed on 8 December 2022, and Mr Mills - pursuant to leave reserved by the Court when delivering judgment - seeks an order having the effect that Ms Zhang be liable jointly and severally with him for the costs of Mr Walsh, up to and including 6 September 2022. Held, per White JA at [18] and Brereton JA at [28]; Bell CJ at [1] agreeing): As to whether Ms Zhang authorised the appeal:

Judgment

BELL CJ: I agree with the orders proposed by Brereton JA for the reasons given by him and for the separate reasons of White JA.
WHITE JA: The circumstances giving rise to the outstanding costs issue in this appeal are explained in the reasons of Brereton JA which I have had the advantage of reading in draft.
The successful first respondent, Mr Walsh, made no submissions in respect of what order for costs, if any, should be made against the second respondent (and former appellant), Ms Zhang.
For the reasons given by Brereton JA (at [25]), Ms Zhang ratified the conduct of her solicitors, Coleman Greig, in filing an appeal in her name.
On 30 May 2022, and again on 4 June 2022, Ms Zhang informed Coleman Greig that she did not wish to proceed with the appeal, but that if Mr Mills decided to go ahead she would give her support, but only on the basis that Mr Mills were willing to pay the costs.
Mr Mills deposed that he did not receive a copy of Ms Zhang's email of 4 June 2022 but was told by a lawyer with Coleman Greig that Ms Zhang had sent an email saying she did not want to continue. He deposed that he told the solicitor "If Crystal leaves, I'm leaving too". He also asked if she had been made aware that if she did not continue she would be jointly liable to pay for all of the costs.
On 9 June 2022, Mr Nath of Coleman Greig sent an email to Ms Zhang in which he advised that Mr Mills' response to her email of 4 June 2022 was as follows: "The appeal is to stop these guys in their tracks. If Crystal does not want to join, then please advise that she is jointly liable for the full costs order". Ms Zhang replied "Noted with thanks".
On 14 June 2022, Ms Zhang received an email from Coleman Greig attaching a copy of the respondents' submissions for the appeal and advising that the appeal had been set down for hearing on 6 September 2022 with an estimate of two days. She replied on the same day saying: "Please do not give me further update as I am not going to participate in this appeals [sic] due to the disagreement on legal cost arrangement".
It does not appear that Ms Zhang was advised that she should file a notice of discontinuance of her appeal.
On 1 August 2022, Coleman Greig wrote to both Ms Zhang and Mr Mills noting that that firm was presently acting for them both in relation to the appeal. They stated: "In the event that either one (or both) of you make the decision to no longer proceed with the Appeal, it is important that we advise you that there is likely to be cost consequences of undertaking such an action". They then advised on the potential quantum of Mr Mills' and Mr Zhang's liability to Mr Walsh for costs of the District Court proceedings and the appeal up to that date. They advised that matters of complexity would arise if one of their clients sought to withdraw from the appeal as this would create a conflict of interests for them. Coleman Greig asked as a matter of urgency that Ms Zhang and Mr Mills provide the letter to their respective lawyers acting for them in family law proceedings. They stated that if Coleman Greig were instructed not to proceed, they would be required to file appropriate notices with the court by no later than 10 August 2022. They asked that instructions be provided by 5 August 2022.
Ms Zhang overlooked the letter and did not read it until 2 September 2022 when she then advised Coleman Greig that she did not wish to proceed with the appeal.
Mr Mills understood from Coleman Greig's letter of 1 August 2022 that Ms Zhang had not yet decided not to proceed with the appeal. He deposed that it was only on 5 September 2022 that he was advised by Coleman Greig that Ms Zhang was not proceeding with the appeal. Until then he understood that she was proceeding with the appeal and that they were both liable for costs if the appeal were unsuccessful.
Costs are in the discretion of the Court (Civil Procedure Act 2005 (NSW) s 98). The effect of r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) is that a plaintiff (which includes an appellant (r 51.56)) must ordinarily pay the defendant's (respondent's) costs incurred up to the date of the filing of a notice of discontinuance unless the Court orders otherwise. The discontinuing party has the onus of establishing a factual basis for such a different order and the burden of persuading the Court that some other order is appropriate (Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [3]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [70]).
Considering the matter as between Mr Walsh (the first respondent) and Ms Zhang, there would be no basis for making a different order under r 42.19. But Mr Walsh has not made any submissions as to what orders should be made against Ms Zhang in respect of his costs of the appeal. It can be inferred that Mr Walsh is content to recover his costs of the appeal from Mr Mills. As Brereton JA explains, the real issue appears to be the extent to which Ms Zhang is required to make contribution to Mr Mills (subject to possible adjustment by orders in Family Court proceedings). In the particular circumstances of this case, I think it appropriate that the costs discretion be exercised having regard to the position as between Mr Mills and Ms Zhang, rather than as between Mr Walsh and Ms Zhang.
The question is whether Ms Zhang should be liable for Mr Walsh's costs up to 5 September 2022, being the date of filing of her notice of motion seeking leave for discontinuance, or only up to 4 June or 14 June 2022.
Although Coleman Greig's letter of 1 August 2022 suggests that they did not consider that Ms Zhang had given definite instructions that she did not wish to proceed with the appeal, her email of 14 June 2022 clearly stated otherwise. However, Mr Mills did not know this. His evidence, untested by cross-examination, is that if he had known that Ms Zhang was resolved against proceeding with the appeal, he would also have withdrawn. He deposed that, after learning on 5 September that Ms Zhang was not proceeding, he continued the appeal both because of the imminence of the hearing and his understanding that the additional costs to be incurred for the actual hearing would not be significant.
Had Ms Zhang attended promptly to Coleman Greig's letter of 1 August 2022 the present dispute about liability for costs could have been avoided. As it was, the hearing proceeded at Mr Mills' risk as to costs, but for Ms Zhang's possible ultimate benefit, albeit one she was willing to forego. Had the appeal succeeded only Mr Mills would have obtained judgment, but that would have been of indirect benefit to Ms Zhang in reducing the amount for which she may have been liable in restitution to Mr Mills (or reducing the quantum of contribution he can claim to their joint welfare in family law proceedings).
Having regard to all of these circumstances, I am not persuaded that Ms Zhang has made out a case for a contrary order under r 42.19. I agree with the orders proposed by Brereton JA.
BRERETON JA: At the outset of the hearing of this appeal on 6 September 2022, the Court made the following orders: (1) Grant leave to the First Appellant, Ms Crystal (Lu) Zhang, to discontinue her appeal. (2) The Respondent to become the First Respondent on the appeal. (3) Ms Zhang to be joined as Second Respondent on the appeal. (4) The costs thrown away by Ms Zhang's discontinuance to be dealt with following the delivery of reasons on the appeal.
Upon delivering judgment in the appeal on 8 December 2022, [1] the Court made the following orders: (1) Dismiss the appeal. (2) Order that the appellant pay the first respondent's costs of the appeal. (3) Direct the parties that any application for costs by or in respect of the second respondent should be made by written submission, accompanied by any evidence, lodged and served within 14 days.
Pursuant to order (3) made on 8 December 2022, the appellant ("Mr Mills") now seeks an order having the effect that the second respondent ("Ms Zhang") be liable jointly and severally with him for the costs of the first respondent ("Mr Walsh") costs up to and including 6 September 2022 (being the date of Ms Zhang's discontinuance), with Mr Mills to remain solely liable for Mr Walsh's costs thereafter. The foundation of the application is that, unless the Court otherwise orders, Ms Zhang as a discontinuing appellant is liable for the respondent's costs up to the date of discontinuance, [2] and that where Mr Mills is also responsible for those costs, they should be jointly and severally liable. The benefit to Mr Mills of such an order (where Mr Walsh does not seek it) is that it would give Mr Mills a right of contribution against Ms Zhang, his ex-wife, albeit subject to such orders as might be made in their matrimonial property adjustment.
Ms Zhang resists the application, on the basis that she never authorised Coleman & Greig, the solicitors who acted for her and Mr Mills though they were estranged in the District Court proceedings and at least purported to do so on the appeal, to commence or continue the appeal. According to Ms Zhang, in late December 2021 or January 2022, after the primary judge delivered judgment, she authorized the filing of a Notice of Intention to Appeal, but stated that she reserved her position thereafter. [3] She received a draft Notice of Appeal by email on 10 March 2022, [4] and she received a fee proposal on 22 March 2022, [5] but did not respond to either communication. [6] On 12 May 2022, she informed Coleman & Greig that "I'm really not sure if I want to continue get involved in such matter". [7] On 30 May 2022, she informed Coleman & Greig in a telephone conference that she did not wish to pursue the appeal, but that if advised that it was best for her ex-husband to do so, then she would do so solely on the basis that he paid the costs of the appeal. [8] In an email to Coleman & Greig of 4 June 2022, she stated: [9] "As per previous phone conversation. My position and view to the appeal is not to go ahead with the appeal. However, if Mr David Mills decides to go ahead I will give my support and be happy to attend courts to give evidence if necessary. If the appeal requires me to be one of the applicants, I will only participate if Mr Mills is willing to pay for all relevant legal costs. On the same token, if Mr Mills wins the appeal and is able to gain any financial compensation, I will forgo my share to claim for any benefit. I only want to help to get the right justice"
On 9 June 2022, Coleman & Greig relayed a response from Mr Mills which did not accept her proposal and observed that "in the absence of an agreement between you and Dave going forward, it is recommended that your family solicitors should communicate directly with Dave's family lawyers to see if an arrangement can be put in place". [10] On 14 June 2022, Ms Zhang was provided with Mr Walsh's submissions and responded by email "Please do not give me further update as I'm not going to participate in this appeals due to the disagreement on legal cost arrangement". [11] On 1 August 2022, Coleman & Greig provided advice to Mr Mills and Ms Zhang in relation to the consequences, both as to the prospects of the appeal succeeding and as to costs, if either or both of them decided not to proceed with the appeal, including the risk that if one of them did so it might create a conflict for Coleman & Greig. They sought instructions "as a matter of urgency" and "by 5 August 2022". [12] Ms Zhang did not respond until 2 September 2022, when she replied: [13] "I refer to my previous email that I DO NOT wish to proceed any dispute regarding to such matter. Your letter above dated 1st of Aug is not under my authority nor on my instruction. If the instruction was under Mr Mills please refer to him."
Mr Mills' response was in substance that he was unaware of Ms Zhang's position as to prosecution of the appeal, save for being informed by Coleman & Greig on 7 June 2022 that she did not wish to proceed with the appeal and would do so only if he bore all the costs, to which he responded "If Crystal does not want to join then please advise that she is jointly liable for the full costs order", following which he received only a communication from Coleman & Greig on 9 June 2022 that his email had been passed on and that if Ms Zhang wished to cease her involvement the parties' family lawyers should communicate, until 5 September 2022, when Ms Zhang's new solicitor informed Coleman & Greig that she was not proceeding with the appeal and sought leave to discontinue.
If Ms Zhang had not authorised the institution of the appeal, Mr Mills' ignorance of that fact would not entitle him to the relief he seeks. However, Ms Zhang admittedly authorised the filing of a Notice of Intention to Appeal. There was undoubtedly a retainer on her part of Coleman & Greig. When she received a draft Notice of Appeal and fee proposal in March 2022, she failed to respond. Coleman & Greig, acting prudently, proceeded to file the Notice of Appeal. When Ms Zhang became aware of that, she did not repudiate the act as unauthorised and contrary to or without her instructions, but said only "I'm really not sure if I want to continue get involved in such matter". [14] When she ultimately indicated that she did not wish to pursue the appeal, she left open that she would do so if Mr Mills paid the costs. When her instructions were sought urgently on 1 August 2022, she failed to respond for more than a month. She did not clearly and unequivocally give instructions for a discontinuance until 2 September 2022. In my view, having given instructions for a Notice of Intention to Appeal, having failed to respond one way or the other when a draft Notice of Appeal and fee proposal was submitted, and thereafter being aware that the appeal was being prosecuted in her name, she by her conduct ratified the conduct of Coleman & Greig in filing an appeal in her name, if they did not have actual authority to do so. Accordingly, she was from the outset a party to the appeal.
As I see it, this is really a contribution claim, in which Mr Mills contends that both he and Ms Zhang should be jointly liable to Mr Walsh, and so he is entitled to contribution from her. The first question concerns liability for costs between Ms Zhang and Mr Walsh, rather than between Ms Zhang and Mr Mills. So viewed, it is beside the point that Ms Zhang informed her solicitors that she did not wish to pursue the appeal: there is no suggestion that that was conveyed to Mr Walsh. In any event, she did not take formal steps to discontinue until very shortly before the hearing, although she was evidently thinking about it. Mr Walsh was entitled to regard her as an active appellant until she applied to discontinue. As between Ms Zhang and Mr Walsh, she should be liable until she discontinued. Her private communications with her own solicitors cannot affect that - although they might give her rights against her own (former) solicitors.
Once it is established that she should be liable to Mr Walsh, it follows that Mr Mills is entitled to contribution from her. Ms Zhang's remedy, if any, is against her solicitors. Moreover, the appeal was for her benefit. Insofar as it impugned the costs order made in the District Court, that order was made against both Mr Mills and her. Insofar as it might have resulted in a judgment in favour of Mr Mills (in circumstances where Ms Zhang had herself suffered no loss), such a judgment would have enhanced the joint matrimonial estate available for division between the parties in their family matrimonial property adjustment.
In those circumstances, I am unpersuaded that it is fair and reasonable to "otherwise order". It follows that Ms Zhang should be jointly and severally liable with Mr Mills for the first respondent's costs up to 6 September 2022. As I have foreshadowed, that still leaves to the Family Court in dealing with their matrimonial property how the liability is ultimately borne as between them.
I propose the following order: 1. Vary order (2) made on 8 December 2022 to read as follows: "(2) Order that the appellant and the second respondent pay the first respondent's costs of the appeal up to and including 6 September 2022 and that the appellant pay the first respondent's costs of the appeal thereafter."

Endnotes

Mills v Walsh [2022] NSWCA 255.
See Uniform Civil Procedure Rules 2005 (NSW) r 51.56(8) read with r 42.19 ("UCPR").
Affidavit of C Zhang, 5 September 2022, at [10].
Affidavit of C Zhang, 5 September 2022, at [12].
Affidavit of C Zhang, 5 September 2022, at [13].
Affidavit of C Zhang, 5 September 2022, at [14].
Affidavit of C Zhang, 5 September 2022, Ex CZ-1, p 90.
Affidavit of C Zhang, 5 September 2022, at [18].
Affidavit of C Zhang, 5 September 2022, at [19] and Ex CZ-1, p 94.
Affidavit of C Zhang, 5 September 2022, at [20] and Ex CZ-1, p 93.
Affidavit of C Zhang, 5 September 2022, at [23] and Ex CZ-1, pp 98-99.
Affidavit of C Zhang, 5 September 2022, Ex CZ-1, pp 103-104.
Affidavit of C Zhang, 5 September 2022, at [26] and Ex CZ-1, pp 105.
Affidavit of C Zhang, 5 September 2022, Ex CZ-1, p 90. 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: 16 May 2023

Court (Civil Procedure Act 2005(NSW)s 98).

See Uniform Civil Procedure Rules 2005(NSW)r 51.56(8)

Mills v Walsh

At a glance

Court

Decision date

Before

Source

Judgment (4 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (5)