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[2026] NSWSC 884
Supreme Court of NSW
2026-07-24
Muston J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Sun v Chen; Yu v Chen (No 2) [2026] NSWSC 884
Hearing dates: On the papers
Date of orders: 24 July 2026
Decision date: 24 July 2026
Jurisdiction: Common Law
Before: Muston J
Decision: (1) Ms Sun is to pay Ms Yu’s costs of the proceedings, such costs to be calculated on the ordinary basis until 27 August 2024 and, thereafter, on the indemnity basis.
(2) Ms Sun is to pay Mr Chen’s costs of and associated with the separate question hearing conducted before me, such costs to be calculated on the ordinary basis.
(3) The freezing orders made by Dicker DCJ on 22 March 2024 (and extended by his Honour “until further order” on 28 March 2024) are discharged.
(4) Ms Sun is to pay Ms Yu’s costs of this application, such costs to be calculated on the ordinary basis.
Catchwords: COSTS — competing applications for costs — where defensive cross-claim was brought — where cross-claim was unsuccessful but cross-claimant was wholly successful in defence of the proceedings — where Calderbank offers made — whether rejection of Calderbank offers was reasonable — costs awarded on the indemnity basis following first Calderbank offer CIVIL PROCEDURE — question as to discharge of freezing orders — where freezing orders restrained dealing with the relevant property to proceedings — where notice of intention to appeal has been filed but no potential error has been identified — whether removal of freezing orders would render the potential appeal nugatory — freezing orders discharged
Legislation Cited: Civil Procedure Act 2005 (NSW) s 98
Uniform Civil Procedure Rules 2005 (NSW) rr 42.1, 42.2
Cases Cited: Access Training Group Ltd v Jane [2024] NSWCA 204
Allied Pinnacle Pty Ltd v G R Mailman & Associates Pty Ltd (No 4) [2026] NSWSC 725
Barngarla Determination Aboriginal Corporation RNTBC v District Council of Kimba [2019] FCA 1585
Calderbank v Calderbank [1975] 3 All ER 333
Calvo v Ellimark Pty Ltd (No 2) [2016] NSWCA 197
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Chalik v Chalik [2025] NSWCA 136
Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219
Frigo v Culhaci [1998] NSWCA 88
Golden Rain Development Pty Ltd (ACN 166 672 537) v The Owners – Strata Plan No 97938 [2026] NSWCA 135
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) 13 VR 435; [2005] VSCA 298
Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344
Sun v Chen; Yu v Chen [2026] NSWSC 765
Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd (No 3) [2023] NSWSC 498
York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2025] QCA 39
Texts Cited: Practice Note SC Gen 13
Category: Costs
Parties: Yiwen Sun (Plaintiff)
Tao Chen (First defendant/Cross-defendant)
Xia Yu (Second defendant/Cross-claimant)
Representation: Counsel:
J Nathan (Plaintiff)
Self-represented (First defendant/Cross-defendant)
H Fielder (Second defendant/Cross-claimant)
Solicitors:
Citilawyers (Plaintiff)
Self-represented (First defendant/Cross-defendant)
Broaden Legal (Second defendant/Cross-claimant)
File Number(s): 2024/00084205
On 1 July 2026, I delivered judgment in Sun v Chen; Yu v Chen [2026] NSWSC 765. I will assume familiarity with that judgment and adopt the defined terms used in it.
In that judgment, I expressed a tentative view that Ms Sun should be ordered to pay Mr Chen and Ms Yu’s costs of the hearing before me and otherwise made the following orders:
Proceedings were dismissed as against Ms Yu.
Ms Yu’s cross-claim was dismissed.
The parties were to file and serve submissions, along with any supporting evidence, on the question of costs, by 10 July 2026.
The parties were to respond to the submissions, and provide evidence in reply, on the question of costs by 15 July 2026.
The issue of costs would thereafter be determined in Chambers.
As contemplated by order 3, on 10 July 2026, Ms Yu filed and served written submissions in which she contended that Ms Sun should be ordered to pay her costs of the proceedings (including the costs of this costs argument):
On the indemnity basis.
Alternatively, on the ordinary basis up to 27 August 2024 and on the indemnity basis thereafter.
Alternatively, on the ordinary basis up to 17 July 2025 and on the indemnity basis thereafter.
Alternatively, on the ordinary basis.
Separately, Ms Yu sought the discharge of a freezing order made against her in the proceedings by Dicker DCJ on 22 March 2024 (and extended by his Honour “until further order” on 28 March 2024). In substance, the freezing order restrained Ms Yu from dealing in any way with the Berala property.
Ms Yu’s submissions were supported by an affidavit affirmed by her solicitor on 10 July 2026.
No submissions were filed by Mr Chen addressing the costs of the hearing before me or the freezing order. By close of business on 15 July 2026, no submissions or evidence addressing either issue had been filed by Ms Sun. On 17 July 2026, Ms Sun requested that the time within which she could file any submissions and evidence addressing these issues be extended to 21 July 2026. I acceded to that application.
On 26 July 2026, Ms Sun filed submissions in which she contended that Ms Yu was not wholly successful as she had not succeeded in her cross-claim. In these circumstances, it was said that:
“…the Court should take the approach taken in previous decisions where mixed outcomes have been achieved and make no order as to costs (see for example Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd (No 3) [2023] NSWSC 498). Alternatively, the Court ought to order Ms Sun to pay Ms Yu’s costs of the proceedings, excluding the costs of her cross-claim.”
The submissions filed by Ms Sun were silent on the issue of Mr Chen’s costs of the proceedings. She resisted the discharge of the freezing order.
Ms Sun’s submissions were supported by an affidavit affirmed by her solicitor on 21 July 2026.
...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.
Mr Chen was wholly successful in his defence of the aspect of the claim made against him by Ms Sun that was determined in the preliminary hearing before me. Ms Sun chose to make no submissions in response to the tentative view I expressed in relation to Mr Chen’s costs of that hearing. In these circumstances, I infer that she does not wish to be heard against an order that she pay his costs of and associated with that hearing, assessed on the ordinary basis.
Ms Yu was successful in her defence of the entire claim made against her by Ms Sun. That success meant that the issues in her cross-claim did not need to be determined and, on that basis, her cross-claim was dismissed.
Nevertheless, and in case I am found to have erred in my determination of Ms Sun’s claim, I indicated (at [181]-[186] of my earlier judgment) that I would not have accepted Ms Yu’s claim that Mr Chen held his interest in the Berala property on trust for her. However, I went on to note (at [187] of my earlier judgment) that the position may have been altered by the payment of $255,291.07 she made to discharge the mortgage over the Berala property upon its transfer to her; but that the relevant counterfactual against which this issue would need to have been assessed was unknown. In those circumstances, I considered that it was neither possible nor appropriate for me to express a view in relation to that aspect of Ms Yu’s claim.
It is against this background that Ms Sun’s submissions on the appropriate orders regarding Ms Yu’s costs must be considered.
Ms Sun’s primary argument invites me to accept that, despite Ms Yu’s successful defence of her claim, “some other order should be made”. I say this because, on any reasonable view, the successful defence of Ms Sun’s claim was an “event” that would ordinarily be followed by a costs order in favour of the successful defendant. Her alternative argument implicitly treats the outcome of Ms Sun’s claim and Ms Yu’s cross-claim respectively as separate “events”.
I remain of the view that it is appropriate that Ms Sun be ordered to pay Ms Yu’s costs of the proceedings. I will return to consider the basis upon which those costs should be assessed.
It is true that, in some respects, Ms Sun and Ms Yu achieved a “mixed outcome” in the hearing before me. I did not accept all of the factual contentions advanced by Ms Yu in connection with her cross-claim or her defence of Ms Sun’s claim. As I have already noted, I ultimately dismissed her cross-claim. However, no aspect of Ms Yu’s conduct can properly be said to have unfairly, improperly, or unnecessarily increased the costs of the proceedings. Nor were the issues on which she failed dominant or separable. This is not a case in which it would be appropriate to deal with costs on an issue-by-issue basis: c.f. Access Training Group Ltd v Jane [2024] NSWCA 204 at [191] and the cases cited therein.
While there are cases in which a mixed outcome has resulted in no order being made as to costs (see, for example, Allied Pinnacle Pty Ltd v G R Mailman & Associates Pty Ltd (No 4) [2026] NSWSC 725), the sole authority relied upon by counsel for Ms Sun in support of this proposition — Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd (No 3) [2023] NSWSC 498 — is not one of them.
As was observed in Calvo v Ellimark Pty Ltd (No 2) [2016] NSWCA 197 at [8]:
"Where a plaintiff is ultimately unsuccessful, but a defendant is unsuccessful on some - perhaps the majority - of matters raised by way of defence, there is recurringly a question whether costs should follow the event, or whether there should be a special costs order reflective of the plaintiff's success on individual issues. In each case, it is very much a matter of impression, based upon matters such as the severability of the issues, the reasonableness of reliance upon the issues, and the extent to which the issues incurred expending additional costs and time".
In my view, none of these considerations favours the making of a special costs order in the present case. On that basis, she is entitled to at least the costs of her successful defence.
Turning to Ms Sun’s alternative proposition — that separate costs orders should be made in relation to her claim and Ms Yu’s cross-claim — it is true that the relevant "event" is usually the event of the claim or counter-claim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15].
It is often appropriate to make costs orders which differentiate between a claim and cross-claim where a party has succeeded in one but not the other. However, in the present case, Ms Yu’s cross-claim was wholly defensive to the claim made against her by Ms Sun. There was substantial overlap in the evidence and issues raised by Ms Sun’s claim and Ms Yu’s cross-claim. The claims made in Ms Yu’s cross-claim did not result in any material increase in the length of the hearing before me nor the costs associated with it. In these circumstances, the appropriate course is to treat the costs of both Ms Sun’s claim and Ms Yu’s cross-claim collectively, and order that Ms Sun pay Ms Yu’s costs of the proceedings in which she was — in a practical sense — wholly successful.
Turning to the basis upon which those costs should be assessed, the general rule is that costs payable under an order of the Court are to be assessed on the ordinary basis: UCPR r 42.2. However, the Court retains a discretion to deviate from this general rule in appropriate circumstances and order that some (or all) of a party’s costs be paid on the indemnity basis: s 98(1) Civil Procedure Act.
In support of the contention that her costs of the entire proceedings should be paid on the indemnity basis, Ms Yu said that Ms Sun:
Made unfounded allegations of fraud; and
Conducted the proceedings in a manner which caused wasted costs.
I do not accept that either provides a proper basis for ordering that Ms Sun pay Ms Yu’s costs on the indemnity basis.
For the reasons I gave in my earlier judgment, Ms Sun failed to establish that Mr Chen transferred his interest in the Berala property to Ms Yu for the purpose of “defrauding” a creditor. However, I do not consider it to have been unreasonable or inappropriate for her to have made that allegation or brought that claim. While unsuccessful, Ms Sun’s claim was not without substance, groundless, fanciful or hopeless, or so weak as to be futile.
Ms Yu’s complaint about the manner in which Ms Sun conducted the proceedings relied on: the repeated and late amendment of Ms Sun’s pleadings, the number of separate affidavits she made and relied on, the fact that she required Ms Yu to incur the cost of giving discovery, delays in the preparation of a court book, the fact that no reference was made to a large number of documents within that court book, and the apparent unwillingness of Ms Sun’s legal representatives to provide a communal “witness box” copy of the court book, thus requiring Ms Yu to produce an additional copy for this purpose.
The conduct of Ms Sun’s claim in the hearing before me was no model of efficiency. However, that inefficiency did not rise to a level, or involve misconduct of a type, which justifies an order that Ms Yu have her costs of the proceedings paid on the indemnity basis.
Ms Yu’s alternative claim for an order that some portion of her costs be paid on an indemnity basis relied on two offers she made to the defendant.
The first offer was made on 27 August 2024. In it, Ms Yu offered to settle the proceedings on the basis that:
The proceedings against her were dismissed.
She and Ms Sun would each bear their own costs.
The first offer was expressed to have been made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333 and remained open for acceptance for a period of 21 days.
The second offer was made on 17 July 2025. In it, Ms Yu offered to settle the proceedings on the basis that:
The proceedings against her were dismissed.
She and Ms Sun would each bear their own costs.
She and Ms Sun would provide “the usual form of mutual releases in relation to the issues raised in these proceedings.”
It too was expressed to have been made in accordance with the Calderbank principles and remained open for acceptance for a period of 21 days.
Ms Yu contended that the failure by Ms Sun to have accepted either of the first or second offers meant that she should recover her costs of defending the proceedings on an indemnity basis from either 27 August 2024 or 17 July 2025.
One circumstance in which courts have ordered that a party recover a portion of their costs on the indemnity basis is where they have obtained a judgment which is no less favourable than an earlier offer made in accordance with the Calderbank principles.
Where, as here, the party who made the relevant offer chose not to avail themselves of the formal offer of compromise process provided for in Part 42 Division 3 of the UCPR, the mere fact of having bettered that offer will not, alone, be sufficient to secure an order that any portion of its costs be paid on an indemnity basis. Rather, as summarised in Chalik v Chalik [2025] NSWCA 136 at [137]:
“… where a plaintiff rejects a Calderbank letter, and the defendant obtains judgment which is no less favourable than the terms of the offer — the offeror is not presumptively entitled to indemnity costs: Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 at [23] –[24]. Rather, as the Court held in Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331; [2014] HCA 31 at [4]:
This Court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs.
Nonetheless, in exercising discretion as to costs in relation to Calderbank letters, the Court looks to (i) whether there was a genuine offer of compromise; and (ii) whether it was unreasonable for the offeree not to accept it: Ziegler atf Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 at [69]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8].”
It is now well accepted that the party seeking an order that its costs be paid on the indemnity basis bears the burden of persuading the court that a departure from the usual approach contemplated by UCPR 42.2 is warranted: Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [16].
In Miwa, Basten JA endorsed (at [12]) the following list of factors identified in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) 13 VR 435; [2005] VSCA 298 as being relevant to determining whether the rejection of an offer was unreasonable:
"(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;
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it."
The first offer was expressed in clear terms and foreshadowed that it would be relied upon in support of an application for indemnity costs if not accepted by Ms Sun. In the outcome, Ms Yu has obtained a judgment which was no less favourable than the offer contained in the first offer.
Although Ms Yu’s offer to bear her own costs was the only aspect of the first offer which represented a compromise, it was genuine, and the nature of the relief sought against her by Ms Sun did not readily lend itself to any greater compromise.
Ms Sun submitted that it was reasonable for her to have rejected the first offer given the early stage in the proceedings at which it was made and the fact that her claim “involved complex issues of fact … [that] … could only be determined at final hearing and after cross-examination of the relevant witnesses”. I disagree.
Ms Sun always bore the onus of proving her claim against Ms Yu. The information she had available to her when she received the first offer — supplemented by that which was conveyed to her in the text of that offer — was sufficient for her to have made an assessment of the prospects of that claim succeeding. Viewed objectively at that time, those prospects were, at best, mixed.
I am satisfied Ms Sun’s rejection of the first offer was sufficiently unreasonable to warrant an order that she pay Ms Yu’s costs of the proceedings on the indemnity basis from the date it was made, namely 27 August 2024.
Ms Sun resisted the discharge of the freezing orders. In doing so, she relied on the fact that she has filed a Notice of Intention to Appeal and “will require 6 weeks from 21 July 2026 to lodge her Notice of Appeal after obtaining advice from Senior Counsel”.
The affidavit affirmed by Ms Yu’s solicitor reported Ms Yu’s instructions that “due to the freezing orders, she is not able to sell the Berala Property or refinance the Berala property to repay her family members.”
Counsel for Ms Sun submitted that Ms Yu “never took steps until recently to seek to discharge or vary the freezing orders” and seized on the above instructions to her solicitor as evidence that she “intends to sell the property and transfer proceeds of sale to her relatives in China”. Accordingly, it was said that “there remains a real risk of imminent dissipation in the event the freezing orders are discharged.”
As was recently observed by the Chief Justice in Golden Rain Development Pty Ltd (ACN 166 672 537) v The Owners – Strata Plan No 97938 [2026] NSWCA 135 at [71]:
“…a payment of the kind “carved out” of a freezing order in the long line of cases reviewed earlier in these reasons (viz. the payment of genuine or bona fide debts as they fall due in the ordinary course of business) will not be treated or characterised as a payment made for the purposes of frustrating or inhibiting the Court’s process but rather as one made for the purpose of discharging existing obligations. In short, such a payment or payments will not engage the jurisdiction, and the freezing of such payments would be extraneous to the purpose for which the jurisdiction is conferred, namely to prevent an abuse of process.”
For those reasons, it is doubtful that Ms Yu’s stated desire to repay the moneys she borrowed from family members to facilitate the discharge of Westpac’s mortgage over the property can be properly characterised as “a real risk of imminent dissipation” of the type required to engage the jurisdiction to make a freezing order.
In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [51], the plurality cited with approval the observation in Frigo v Culhaci [1998] NSWCA 88 that:
"[A freezing order] is a drastic remedy which should not be granted lightly. ...
A [freezing order] is an interlocutory order which, if granted, imposes a severe restriction upon a defendant's right to deal with his or her assets. It is granted at the suit of a plaintiff whose status as a creditor is in dispute and who need not be a secured creditor. Its purpose is to preserve the status quo, not to change it in favour of the plaintiff. The function of the order is not to 'provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied; nor is it to improve the position of the plaintiff in the event of the defendant's insolvency' ... Many authorities attest to the care with which courts are required to scrutinise applications for [freezing orders]…”
Subject to one qualification, these considerations apply with equal force in the context of Ms Yu’s application to discharge the freezing orders and operate powerfully against the continuation of those orders: see Cardile at [53]. The qualification arises from the nature of Ms Sun’s claim against Ms Yu.
Although they are styled as freezing orders — and adopt the usual form of such orders provided in the Appendix to Practice Note SC Gen 13 — the only asset to which they apply is the Berala property. The orders are, in a practical sense, an unnecessarily complicated injunction aimed at preserving the subject matter of the proceedings against Ms Yu; namely, the Berala property.
If so, it might arguably be said that the absence of any imminent risk of dissemination should not, alone, determine whether those orders should be continued. The decision whether to grant — and, therefore, continue — an injunction to protect the subject matter of the proceedings pending appeal will be informed by the general principles governing the grant of interlocutory injunctions, namely the demonstration of a serious question to be tried and the balance of convenience: see recently, York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2025] QCA 39 at [19].
In the context of a possible appeal, it is necessary to inquire whether refusing to grant or continue an injunction would render the appeal nugatory. If so, the Court must consider whether there is a serious question to be tried on appeal and, if so, where the balance of convenience lies. Consideration of both matters requires at least some assessment to be made of the strength of the case on appeal: Barngarla Determination Aboriginal Corporation RNTBC v District Council of Kimba [2019] FCA 1585 at [36].
I accept that any appeal from my earlier judgment would potentially be rendered nugatory were Ms Yu to dispose of her interest in the Berala property; or at least that portion of it which she acquired from Mr Chen.
For the reasons given in my earlier judgment, I was not satisfied that Ms Sun established any entitlement to relief under s 37A of the Conveyancing Act 1919 (NSW) or s 90K of the Family Law Act 1975 (Cth). Whilst I do not exclude the possibility that I may have been wrong in one or both of those conclusions, Ms Sun has made no attempt to identify any potential error in my earlier judgment. In these circumstances, it is not possible to make any assessment of the potential strength of any appeal. Nor has Ms Sun established that the balance of convenience favours the continuation of the freezing orders.
Ms Sun did note that she had given the usual undertaking as to damages and asserted that she owns substantial real property which is the subject of these proceedings. However, as the plurality Cardile emphasised (at [52]):
“Another reason, unfortunately rarely adverted to in the cases, for care in exercising the power to grant a [freezing] order is that there may be difficulties associated with the quantification and recovery of damages pursuant to the undertaking if it should turn out that the order should not have been granted.”
These observations may be applied equally to the freezing orders made in the present case.
I am not satisfied that Ms Sun has established an entitlement to a continuation of the freezing orders pending any appeal she might choose to bring and, as such, those orders should be discharged.
For the reasons given above, I make the following orders:
Ms Sun is to pay Ms Yu’s costs of the proceedings, such costs to be calculated on the ordinary basis until 27 August 2024 and, thereafter, on the indemnity basis.
Ms Sun is to pay Mr Chen’s costs of and associated with the separate question hearing conducted before me, such costs to be calculated on the ordinary basis.
The freezing orders made by Dicker DCJ on 22 March 2024 (and extended by his Honour “until further order” on 28 March 2024) are discharged.
Ms Sun is to pay Ms Yu’s costs of this application, such costs to be calculated on the ordinary basis.
**********
[2026] NSWSC 725
[1999] HCA 18
[2026] NSWSC 765
(1999) 198 CLR 380
(2014) 252 CLR 331