Shao v Crown Global Capital Pty Limited

Supreme Court of NSW|2023-09-14|Before: Ball J

Introduction

I delivered judgment in this matter on 14 July 2023 (see Shao v Crown Global Capital Pty Limited [2023] NSWSC 820). At that time, I dismissed the plaintiff's claim and ordered that the plaintiff pay the defendants' costs, but I gave liberty to the parties to apply to vary the costs order within 21 days. The plaintiff, in exercise of that liberty, seeks in place of the costs order I made one of the following orders: (a) "The Court makes no order as to costs"; or, in the alternative, (b) "The Defendants are to pay the Plaintiff's costs of the proceedings prior to 25 May 2023 and the Plaintiff is to pay the Defendants' costs of the proceedings on and from 25 May 2023"; or, in the further alternative, (c) "The Defendants are to pay the Plaintiff's costs of the mediation held on 26 April 2023, and otherwise, the Plaintiff is to pay the Defendants' costs of the proceedings." This judgment concerns that application. It assumes familiarity with my earlier judgment and uses the same abbreviations as used in that judgment.

A preliminary matter

After the plaintiff had filed her submissions in support of her application, provisional liquidators were appointed to each of the defendants. As a consequence, the plaintiff now also seeks leave under s 471B of the Corporations Act 2001 (Cth) to proceed against the defendants.

Basis of the application

The defendants essentially defended the plaintiff's claim on two bases. One was that the plaintiff's husband, Mr Peng, did not have actual or ostensible authority to authorise the repayment of a loan made by the plaintiff and Mr Peng to the defendants to an account controlled by Mr Peng alone (the Authority Defence). The other was that the plaintiff ratified Mr Peng's conduct by pursuing him for the amount that was repaid by the defendants (the Ratification Defence). The Ratification Defence was only raised by an amendment made to the defendants' list response on 25 May 2023, although the defendants had previously raised a defence that the proceeding was an abuse of process because the plaintiff had previously joined the defendants in proceedings that she had commenced against Mr Peng, but elected not to pursue the claim against them in those proceedings.
The plaintiff advances three reasons for why the costs orders should be varied.
First, the defendants only succeeded on the Ratification Defence. They failed on the Authority Defence. The defendants should not be entitled to all of their costs when they only succeeded on a defence that was not raised until shortly before the hearing. One possibility is to order that the defendants pay the plaintiff's costs of the proceedings prior to the date that the Ratification Defence was raised and the plaintiff pay the defendants' costs of the proceedings from that date (alternative (b) of the orders sought by the plaintiff). However, the plaintiff submits that a preferable approach is to take a broad-brush approach and order that there be no order as to costs (alternative (a)).
Second, the plaintiff submits that, as a consequence of the defendants' conduct, she lost the opportunity to settle the proceedings. She also submits that, as a result of the amendment, the costs of a mediation between the parties was wasted because the mediation proceeded on a false basis. In those circumstances, at the very least, the plaintiff submits that she should recover her costs of the mediation (alternative (c)).
Third, the plaintiff submits that the Court should depart from the normal principle that costs follow the event because the defendants did not win the case based on any merits of their own, but rather because the plaintiff made an election in litigation that enabled the defendants to escape liability for their conduct.

Consideration

In my opinion, none of these matters justifies a departure from the usual order provided for in Uniform Civil Procedure Rules 2005 (NSW), r 42.1 that costs follow the event.
As to the first point, it is well established that a plaintiff which only succeeds on a late amendment to its case may be deprived of its costs up until the time the amendment was made: see Murrihy v Radio 2UE Sydney Pty Limited [2000] NSWSC 318 at [8] and [9] per Studdert J; Ciaglia v Ciaglia [2010] NSWSC 723 at [9] - [10] per White J; David v Abdishou [2007] NSWSC 890 at [10] per Hidden J; Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2) [2007] NSWSC 568 at [13] - [15] per Bergin J.
There are some cases which suggest that the same principle applies where the defendant only succeeds on a late amendment to its defence: see Bonic v Pacific General Security Limited [2009] NSWSC 1221 at [14] per White J; Harrington v Greenwood Grove Estate Pty Ltd (No 2) [2011] NSWSC 1598 at [6]ff per Slattery J (Harrington). But in my opinion, statements of general principle to that effect must be treated with considerable caution. The position of a plaintiff and of a defendant is not analogous in this respect. It is the plaintiff that commences the proceedings and chooses the issues that it will raise. The issues raised by the defendant will necessarily be responsive to those issues. If a plaintiff chooses to commence proceedings and fails, generally it should bear the consequences of having done so. It will not normally be an answer to that point to say that it should not be able to do so because the defendant overlooked a defence available to it until shortly before the hearing, at least when all the facts relevant to the defence were known to the plaintiff at the time the proceedings were commenced. It was always open to the plaintiff knowing the facts not to commence the proceedings. No analogous right is available to a defendant. It is not for the defendant to anticipate the claims the plaintiff might raise and defend the case accordingly.
There may be cases which warrant a departure from these general considerations. For example, where the defence appears on its face to provide a complete answer to the plaintiff's claim, it may be unreasonable to visit on the plaintiff all the costs of the fact that both parties overlooked that defence until late in the proceedings when it might have been expected that the plaintiff would have discontinued the proceedings had the defence been raised earlier. The decision in Harrington appears to be an example of a case of that type.
In my opinion, no such exception applies in the present case. There is nothing in the way in which the case was conducted to suggest that, faced with the Ratification Defence earlier in the proceedings, the plaintiff would have discontinued them or conducted them any differently. Indeed, the plaintiff sought to characterise her claim as a claim for damages which, if correct, largely made the Ratification Defence irrelevant. One of the principal issues between the parties was whether that characterisation was correct. That contest was unaffected by the late raising of the Ratification Defence.
As to the plaintiff's second point, it is not possible on the evidence to say that the plaintiff would have acted any differently in relation to settlement if she had known of the Ratification Defence earlier and there is no reason to think that the outcome of the mediation would have been any different. As I have said, the plaintiff chose to characterise her claim in a way that largely made the Ratification Defence irrelevant; and it was that characterisation that was the focus of the debate between the parties at the final hearing.
In support of her third point, the plaintiff relies on the decision in Williamson v Bors (1900) 21 LR (NSW) Eq 302. In that case, the plaintiff entered into a contract with the second defendant, Woods, to buy a parcel of land. Woods repudiated the contract and sold the land to the first defendant, Bors. The Court held that the plaintiff was not entitled to specific performance of the contract because, as a consequence of his delay and failure to seek relief knowing Bors asserted rights over the land, he had made an election not to seek specific performance. It also held that the plaintiff was not entitled to damages at common law because the contract did not comply with the Statute of Frauds. Nonetheless, Walker J refused to order the plaintiff to pay Woods' costs on the basis that he succeeded "but on no merits of his own" (at 310).
In my opinion, that case is distinguishable from the present one. There was a finding in that case that Woods had deliberately breached the contract by selling the land to Bors. As Walker J explained: He [Woods] escapes specific performance, because the plaintiff, having at one time the right to that relief, elected to forego it. He escapes the payment of damages for the deliberate breach of a contract into which he entered for valuable consideration, through the fact that the plaintiff, in drawing up what he thought was a sufficient memorandum of the contract, unfortunately drew up one which did not satisfy the Statute of Frauds. These pieces of good fortune the Court cannot take away from Woods, but it will not, in the circumstances of the case, add to that good fortune by giving him his costs. (at 310)
In the present case, as a consequence of the plaintiff's ratification, there was no breach by the defendants in paying the money to Mr Peng, since the plaintiff had ratified the conduct that permitted them to do so. The result of ratification was to deprive the plaintiff of a claim, not to deprive her of relief in respect of an admitted breach.

Conclusion

It follows that the application to vary order 2 of the orders made on 14 July 2023 must be dismissed.

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: 14 September 2023

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