Wang v Cai

Supreme Court of NSW|2021-09-23|Before: Ward CJ

Financial Consultants Pty Ltd ACN 086 674 179 (No 5) [2014] NSWSC 437 Wang v Cai [2021] NSWSC 1162 Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 Young v Cooke (No 2) [2018] NSWSC 1787 Category: Costs Parties: Xiaobo Wang (First Plaintiff) Haixin Australia Pty Ltd (Second Plaintiff) Wan Hao Cai (First Defendant) Yun Xia Fang (Second Defendant) Yi Guang Zhang (Third Defendant) Mayland Australia Pty Ltd (Fourth Defendant) Ozjian Trading Pty Ltd (Fifth Defendant) Aqua Blu Swimwear Pty Ltd (Sixth Defendant) Giant Project Group Pty Ltd (Seventh Defendant) VIP Sale Pty Ltd (Eighth Defendant) Diamond Bay Developments Pty Ltd (Ninth Defendant) PJE918 Pty Ltd (Tenth Defendant) Representation: Counsel: DA Smallbone with A Smythe (Plaintiffs) J Williams SC (1st, 3rd, 4th, 6th Defendants) J Mee (2nd & 5th Defendants) PR Hudson (Solicitor) (7th Defendant)

Judgment

HER HONOUR: On 15 September 2021, I determined an interlocutory application brought by the plaintiffs by notice of motion filed on 13 April 2021 (see Wang v Cai [2021] NSWSC 1162). In that motion, the plaintiffs (Ms Xiaobo (Bonny) Wang and her company, Haixin Australia Pty Ltd (Haixin)) sought a variety of orders for the production of documents and information from the respective defendants.
As to the costs of that application, I indicated at the time (see at [386]) that I proposed to reserve the question of costs to be dealt with at a later stage in the proceedings, adding parenthetically that I would seek the views of the parties as to whether this should be at the time of determination of the application for a general administration order or at the final hearing. (I should here add that the matter is not one that has yet been listed for final hearing and it cannot be assumed that I will be the trial judge since that will depend on listing demands.)
The reference to the application for a general administration order was a reference to the plaintiffs' notice of motion filed on 6 April 2021, which was listed before me for hearing on 23 September 2021. The protagonists to that application were principally the plaintiffs, on the one hand, and the Zhang defendants on the other; although there was also on that occasion an appearance by Counsel for the seventh defendant (Giant) and the solicitor for the eighth defendant (VIP Sale), that company being the company sought to be the subject of the general administration order.
As it transpired, it was not necessary to determine the application for a general administration order as the parties had agreed to the appointment of Ms Wang as a director of VIP Sale on terms set out in the orders made by consent on that occasion (after some debate about suggested amendments thereto). Instead, as had been adverted to by the Fang defendants in submissions in advance of the listing on 23 September 2021, the Fang defendants (and ultimately the Zhang defendants and Giant joined in seeking this as well) sought to be heard on the costs of the disclosure motion. I acceded to that request (rather than simply leaving the question of costs reserved and to be dealt with on a later occasion, albeit that this was the position of the plaintiffs) for the reason that there was Court time available to do so (since the motion for the general administration order had been listed on that day) and it seemed to me consistent with the just, quick and cheap resolution of the real issues in dispute, particularly because the issues raised on the 13 April 2021 motion were then (relatively) fresh in everyone's mind; it was by no means clear when the matter would ultimately be heard; and, since the matter was not listed for hearing and there was no certainty as to who would be listed for the final hearing, it seemed to me sensible that the judge with familiarity as to the interlocutory application should deal with costs in relation to it.
The background to the disclosure motion and the underlying dispute between the parties is set out in my earlier judgment and will not be repeated except as is necessary in relation to the application for costs. I here adopt the same definitions and abbreviations used in my earlier judgment.

Zhang defendants' submissions

The Zhang defendants' submissions, in summary, as to why it was appropriate to deal with costs at this stage mirrored in large part the basis on which they sought a costs order in their favour in respect of the 13 April 2021 notice of motion (it being said that deferring the costs of the application was unlikely to advance the Court's ultimate determination of the appropriate manner in which costs should be resolved).
The Zhang defendants seek an order that their costs be paid but they do not seek an indemnity costs order and (unlike the Fang defendants) they do not seek an order that the costs be assessable forthwith.
In essence, the Zhang defendants say that: the plaintiffs were almost wholly unsuccessful on the application against the Zhang defendants (with the exception of the limited leave granted under s 247A of the Corporations Act 2001 (Cth) (Corporations Act)); that an important part of the reason for the substantive dismissal of the motion was that it was based on allegations of fact (some pleaded, some not) which were not capable of being resolved other than at a final hearing and, hence, the resolution of the motion was in a sense independent of content of the factual allegations raised in the material on the application (and it was said that it was not known how many of the issues that were raised on the application would eventually arise at the final hearing); that the application was essentially for final relief (asserting contractual, equitable and statutory rights to documents and information) not in aid of existing claims; and that the application was significant and sizeable in terms of the amount of issues in dispute and the time it took for hearing (two days).
Further, reliance was placed on a without prejudice offer that had been made by letter dated 27 July 2021 (annexed to an affidavit affirmed 22 September 2021 by the Zhang defendants' solicitor, Mr Woodhouse) in which (after making clear that the Zhang defendants did not dispute Haixin's entitlement to trust records properly so-called of VIP Sale) there was an offer to consent to orders made giving the plaintiffs access to all books and records of VIP Sale (i.e., all company records including but not limited to those which are trust records). Proposed short minutes were attached to the letter. It is noted that the response from the plaintiffs' solicitors on 29 July 2021 raised uncertainty as to what was being offered in practical terms; to which the Zhang defendants' solicitors clarified on 30 July 2021 that what was being offered did not turn on whether or not the books and records constituted trust records; rather that what was being offered was production of all documents of VIP Sale whether or not they were trust records.
Pausing here, it seems to me that on any view of what was being offered, it was no less favourable to the plaintiffs than the relief ultimately granted (on their application pursuant to s 247A of the Corporations Act) in terms of the direction for them to specify the company documents to which access was sought.
The plaintiffs, however, and no doubt due to the suspicion they clearly hold as to the respective defendants' conduct, responded through a letter from their lawyers on 2 August 2021 in which, relevantly, they appear to have effectively been seeking confirmation that the defendants had reviewed the documents and that what would be produced would answer all of the queries that the plaintiffs' solicitors had raised. The Zhang defendants (perhaps unsurprisingly) refused to engage in that kind of exercise but responded on 5 August 2021 effectively to confirm that a compromise had been proposed and that they regarded it as having been rejected. They also maintained a willingness to adapt a constructive approach.
The Zhang defendants say that there was an offer for the production of all of VIP Sale's company records, whether trust documents or not, by the sole director of the company and that this must encompass the relief that was ultimately granted in that respect.

Fang defendants' submissions

In circumstances where the application for relief as against the Fang defendants was dismissed, the Fang defendants seek an order that the plaintiffs pay their costs of the notice of motion filed 13 April 2021, and that those costs be payable forthwith.
The Fang defendants note that (at [386]), when indicating that I proposed to reserve the question of costs to be dealt with at a later stage in the proceeding, I said that: I accept that the plaintiffs have serious concerns as to the maladministration of the respective trusts and that in due course much of the information that has been sought may well have to be provided on discovery or, as a practical matter, in the form of affidavit evidence from the defendants responding to the plaintiffs' claims.
The Fang defendants submit that it is appropriate for the orders that they seek to be made now (whether or not costs orders are made in relation to the entirety of the disclosure motion) because the application against them was discrete. It is noted that no aspect of the claim for relief sought against them was reserved for further determination; and they say that there is no reason why its costs outcome should be dependent upon any current or future orders, determination or outcome with respect to any other defendant, whether in relation to the disclosure motion or in the proceeding generally.
As a starting point it is said that all of the plaintiffs' claims against the Fang defendants in the notice of motion of 13 April 2021 were dismissed and the Fang defendants invoke the operation of r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that costs follow the event.
The Fang defendants say that the general rule that costs follow the event founds a reasonable expectation on the part of a successful party of being awarded costs against the unsuccessful party, unless for some reason connected with the case a different order is specifically warranted (citing Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [134]); and that any departure from this expectation would require that there should be material upon which the adverse discretion could be properly exercised (again citing Oshlack at [134], where reference was made to Ritter v Godfrey [1920] 2 KB 47 at 60 per Atkin LJ).
Reference is made to the observation by the High Court in Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 (Sangare) at [25] per Kiefel CJ, Bell, Gageler, Keane and Nettle JJ to the effect that the guiding principle that costs follow the event is "one of the most, if not the most, important" principle (there citing Smeaton Hanscomb & Co Ltd v Sasson I Setty, Son & Co (No 2) [1953] 1 WLR 1481 at 1484 per Devlin J).
The Fang defendants accept that 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 (citing Sangare at [25]). However, they note that the onus lies on the unsuccessful party to demonstrate a basis for departing from the usual rule (citing Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10] per Brereton J as his Honour then was).
The Fang defendants say that there is no basis in this case for departure from the general rule: that there was no disentitling conduct on their part nor any of the other factors that have in other cases been held to warrant such departure (such as late amendment, nominal success, proportionality, public interest, indulgences, or offers of compromise). Further, they emphasise that their success on the motion was absolute (not mixed). The Fang defendants say that any unreasonable conduct in relation to the disclosure motion was on the plaintiffs' part (as to which, see the submissions below).
As to the proposition that the costs should be payable forthwith, it is noted that, while the usual position under r 42.7(2) of the UCPR is that the costs of an interlocutory application are not payable until the end of the proceedings, there is a discretion for an order to be made that an interlocutory costs order be payable forthwith (referring to Solarus Products Pty Ltd v Vero Insurance (No 4) [2013] NSWSC 1012 (Solarus); Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; [2004] NSWSC 664 at [171]-[173] per Austin J (Fiduciary v Morningstar); Australian Securities and Investments Commission v Rich [2003] NSWSC 297). In Fiduciary v Morningstar, Austin J said that an order will be made if the costs relate to a discrete aspect of the litigation which is "sufficiently self-contained and detached or detachable from the proceedings yet to be heard, whether between the same or associated parties, as to make it seem just for an actual payment to be made in the meantime". These observations were subsequently applied by Sackville J in Australian Agricultural Co Ltd v AMP Life Ltd [2003] FCA 1134. For both Barrett J and Sackville J it was a relevant consideration that the final determination of the proceeding would be likely to take a considerable period of time.
In this context, the Fang defendants refer to an observation by Lindgren J to the effect that a provision in the Federal Court rules for leave to tax costs before the conclusion of proceedings and to order that those costs be paid forthwith was "possibly under utilised", particularly in lengthy and complex cases (see Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 14) (Federal Court of Australia, 18 August 1995, unrep) cited in Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 2) [2010] FCA 1347 at [13] per Katzmann J).
It is noted that in Solarus, Campbell J (as his Honour then was) summarised (at [4]) three non-exhaustive factors relevant to the discretion, as discussed by Barrett J (as his Honour then was) in Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 (Morningstar), namely that: the subject matter of the interlocutory application is discrete and self-contained making it a suitable vehicle for a separate order for costs; whether some of the conduct of the unsuccessful party to the motion may be seen as being unreasonable; and that there is still some considerable distance to go in the litigation so that it may be appropriate that the successful party obtain the fruits of its costs order now.
It is noted that the third factor is particularly apt where costs of the interlocutory application are significant, and the successful party's limited resources have been substantially diverted to contesting an interlocutory application on which it succeeded (see Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351 at [29] per Biscoe AJ).
The Fang defendants emphasise that the above factors are non-exhaustive; and point to the recognition that the discretion to order the immediate payment of interlocutory costs is wide and that "the demands of justice are the only determinant" (see Morningstar at [7]; Gattelleri v Meagher [1999] NSWSC 1279 at [9] per Simpson J; Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 (Pavlovic) at [17]-[18] per Bathurst CJ, Beazley P (as Her Excellency then was) and Meagher JA). The Fang defendants point out that, in Pavlovic, the Court noted at [23] that the question as to whether costs should be payable forthwith "necessitates a consideration of practical impediments to justice", which included, in that case, "keeping a party out of costs of a finally determined aspect of the claim for a considerable period of time".
Reference is also made to McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [16], where Weinberg J noted that Kiefel J (as her Honour then was) accepted in Harris v Cigna Insurance Australia Ltd & Dicke (1995) ATPR 41,445 (Harris v Cigna) at [41,011] that an order that certain costs be taxed and paid forthwith was justified in circumstances where there had been "long delay in close of pleadings by the pursuit of an ill-considered and perhaps unnecessary claim".
The Fang defendants say that the disclosure motion was a discrete and self-contained application that was separately determined; and that it was a substantial and costly distraction from the orderly and efficient progress of the primary proceedings in the usual course.
It is noted that in Megna v Marshall [2005] NSWSC 1326, Studdert J gave, as an example of the categories of cases in which it is appropriate for orders for costs to be made prior to the final hearing, an unsuccessful application for an order to interrogate a party's opponent in pending litigation. The Fang defendants say that examples of discrete applications in which costs of an interlocutory application have been ordered to be paid forthwith include, among others: an unsuccessful application for an interlocutory injunction (Fiduciary v Morningstar); an unsuccessful application for summary judgment (Perpetual Trustee Co Ltd v McAndrew [2008] NSWSC 790); an application for a charge or for a Mareva order (McNamara Business & Property Law v Kasermidis (No 3) [2006] SASC 262); a security for costs application (Young v Cooke (No 2) [2018] NSWSC 1787).
Further, the Fang defendants submit that the conduct of the plaintiffs in relation to the disclosure motion was unreasonable. It is noted that the only request that was made of the Fang defendants, prior to the plaintiffs filing their disclosure motion on 13 April 2021, was a letter dated 7 April 2021 from the plaintiffs' solicitors (sent less than a week earlier). It is said that the Fang defendants' refusal to answer those extensive interrogatories was entirely reasonable, being interrogatories which were found to "go well beyond the permissible scope for interrogatories or what is necessary at the present stage" (earlier judgment at [384]); and that the disclosure motion then proceeded to seek an extensive range of relief against the Fang defendants, none of which had previously been foreshadowed or requested.
It is noted (see as recorded at [268] of the earlier judgment) that the plaintiffs served thousands of pages of evidence and lengthy submissions, most of which, it is said, did not relate to the orders sought against the Fang defendants. The Fang defendants say that their requests in correspondence for the basis on which the orders were sought went unanswered. It is said that new complaints were raised for the first time in evidence and submissions (for example, in relation to payment of the deposit on the Burleigh Street Site - see the earlier judgment at [263]).
It is noted that, in relation to the orders sought that Ms Fang do all things necessary to cause and enable each of the trustees to comply with orders that the plaintiffs in turn sought against those trustees, Ms Fang deposed that, while she could not see how her assistance would be necessary, if it were in fact the case that her assistance was necessary, and VIP Sale or Giant requested her assistance, then she would comply with that request; and it is said that there was nothing for her to do in advance of any request.
Further, it is said that there is no indication that the Fang defendants would have opposed orders for discovery in due course at an appropriate point in the proceedings, once the issues were defined and confined.
The Fang defendants say that their conduct in relation to the disclosure motion was reasonable, and that they sought at all times to comply with s 56 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act). However, it is said that, despite that, they were put in the position of having to defend a substantial and costly motion; a defence which was ultimately successful on all counts.
The Fang defendants complain that, by contrast, the plaintiffs did not comply with s 56 of the Civil Procedure Act. Reference is made in this context to Tugrul v Tarrants Financial Consultants Pty Ltd ACN 086 674 179 (No 5) [2014] NSWSC 437, where an application for security for costs was filed by the third defendant without any prior correspondence with the plaintiffs' lawyers and Kunc J considered (at [63]) that there was no reason for the peremptory filing of that application and that to have done so was a departure from proper practice. It is noted that Kunc J made the following observations: (at [64]) that "parties to proceedings in this Court and their lawyers are required to engage in prompt, courteous and genuine cooperation (including the provision of reasonably required information or explanations) with the firm intention of resolving interlocutory issues, as far as possible, without involving the processes of the Court"; (at [72]) that "if one party requires information or an explanation from another, then the request should be reasonable and focused. A clear justification for the request should be given"; (at [74]) that "the filing of a motion should be regarded as a last resort. It will inevitably add to costs, and delay the progress of the matter to hearing"; and (at [75]) that "no motion should be filed without the putative respondent being given final, written notice of the relief to be sought, the reason for it and a reasonable opportunity to respond". The Fang defendants complain that those requirements were not met in this case.
Further, it is submitted that the disclosure motion was an extraordinarily extensive and expensive motion for an interlocutory application at such a preliminary stage of the proceedings. The Fang defendants contend that this is the kind of case described by her Honour in Harris v Cigna (see above).
The Fang defendants note that there is still some considerable distance to go in the litigation, pointing to the chronology of the proceeding (set out at [50]-[54] of the earlier judgment), emphasising that it is now more than a year after the proceeding was commenced and the plaintiffs are still at the stage of finalising their statement of claim. The Fang defendants have expressed the view (which I certainly do not share) that there is therefore no prospect of a final hearing in 2022.
In any event, whether or not with appropriate case management the case can proceed to a final hearing earlier than the Fang defendants anticipate, it is said by them that there is clearly still some considerable distance to go in the litigation such that it is appropriate that they obtain the fruits of the costs order they seek now, rather than being held out of costs "of a finally determined aspect of the claim for a considerable period of time" (citing again Pavlovic at [23]).

Giant's submissions

Although Giant took the position at the hearing of the notice of motion that it neither consented to nor opposed the orders sought, its solicitor was in attendance during the two days on which the motion was heard; and Giant sought an order for its costs, adopting the general submissions of the Zhang and Fang defendants with regard to the scope of the motion. It was submitted that the motion prematurely dealt with matters more appropriate to the final hearing. Emphasis was placed on the fact that there were thousands of pages of evidence and lengthy submissions to be reviewed.
On the application for costs, an affidavit was read of Giant's solicitor, Mr Hudson, annexing correspondence that had passed between the legal representatives in relation to the request that had been made by the plaintiffs for production of documents by Giant. Relevantly, Mr Hudson deposed to the position that, at the time the motion was served (seeking by prayer 1 an order that, within 21 days, Giant provide either to VIP Sale or the Court a copy of all books and records of the Everspring Develop Group Unit Trust remaining in its possession, or in the possession of any agent of it), there had not been any request since the commencement of the proceedings for access to any books and records of the trust (save for a request for further and better particulars, to which there had been a response) (see at [5]-[6] of his affidavit).
It is noted that the correspondence sought clarification of the plaintiffs' position (in effect as to whether Giant was directly being asked to produce the records or whether the order was in effect an administrative order to enable the carrying out of orders if a general administration order were to be made against VIP Sale). Pausing here, the relief sought in the motion seemed to me to be clear on its face but in any event Giant's solicitor on 7 May 2021 asked that the plaintiffs: (a) identify, with precision, the documents comprising in the books and records of the Everspring Trust that your [sic] clients seek copies of; and (b) the source of law, together with an explanation of how you say such source of law is engaged in the present circumstances, that entitles your clients to such documents.
The plaintiffs' solicitors responded to that request with a letter explaining the ability of VIP Sale to request access to the records (as to which Giant does not cavil) but it is noted that there was no request that the documents be produced directly to the plaintiffs. There was further correspondence, including a request on 13 May 2021 as to whether it was suggested that Giant presently had a legal obligation to provide the plaintiffs with copies of the books and records of the Everspring Develop Group Unit Trust or whether it was suggested that such obligation only arose in the event of relief being granted entitling Haixin to exercise the rights and powers of VIP Sale, and Haixin exercising those rights and powers by requesting that Giant provide it with copies of such books and records. In the former event, Giant's solicitor requested identification of the legal basis that entitled Haixin to such books and records.
There was then further communication between the solicitors (the content of which it is not necessary here to detail) culminating in a letter of 25 June 2021 from the plaintiffs' solicitors, shortly after submissions had been filed in relation to the notice of motion. Giant's solicitor says that once there was a direct request for production of the books and records of the trust to the plaintiffs, Giant advised, on a no admissions basis, that it neither consented to nor opposed the orders sought in the notice of motion.
Giant's position is that the plaintiffs' conduct necessitated the review by Giant's legal representatives of thousands of pages of evidence, and also very lengthy submissions, in order to be able to understand what it is that was really being asked of Giant; and that when that exercise was completed Giant did not seek to oppose the relief sought by the plaintiffs; rather, Giant (as trustee) left it to the Court to determine the appropriate course in circumstances where the primary dispute was between the other active parties.
Giant says that it was reasonable for its solicitor to attend on the hearing of the notice of motion (although it took a neutral stance in effect on the motion) and that significant costs were incurred as a result of the way that the motion was brought (including that the plaintiffs were not forthcoming with answers to Giant's request for clarification as to the relief sought in the motion).

Plaintiffs' submissions

In response to those submissions, the position of the plaintiffs was, in essence, that it is premature to determine the costs issues now because of the possibility that decisions in relation to the issues in the proceedings and the further outcome of the proceedings may have an impact on whether the positions taken at this stage were correct or reasonable (noting that in [386] I referred to the plaintiff's concerns as to administration of the trust(s); that at a later stage of the proceedings, some of this information may emerge on discovery or in affidavits; and as to the possible impact of the general administration order).
As to Giant's submission that it was unclear whether the plaintiffs were seeking to make a direct claim against Giant or whether Giant was simply an incidental party, the plaintiffs say that Giant was clearly named as a respondent to the motion for the purpose of the relief claimed, and note that that relief was ultimately granted.
It is noted that the plaintiffs' solicitor's letter of 11 May 2021, responding to the enquiry of 7 May 2021 as to the juridical basis for Haixin claiming access to records of the Everspring Develop Group Unit Trust, provided a detailed answer to the question. It is said that Giant could have been under no doubt that the plaintiff was seeking to make an application as a beneficiary asserting an entitlement to access to its records. It is said that Giant could have taken, from an early point, the position that it ultimately took. Insofar as Giant's solicitor said that the submissions had to be reviewed, the plaintiffs note that Giant's solicitor conceded that he received the June letter confirming the plaintiffs' position within a day of the submissions. In any event, the plaintiffs say that the short answer to the application is that they have obtained the relief sought.
As to the assertion that there was never any request of Giant to provide information before the motion was filed, the plaintiffs note that affidavit evidence was filed showing such requests had been made on multiple occasions.
As to the position of the Fang defendants, insofar as it was suggested that they were always willing to provide information, the complaint made by the plaintiffs is that there has been nothing produced other than what is in their affidavits. Complaint was made that the response from the Fang defendants raised the question as to whether what was there being asserted was that there were no records of the trust (as opposed to no records at all).
The plaintiffs say that if at the final hearing it is found that Ms Fang took part in the management of the trust and that she is a fiduciary and owes obligations of confidence and has records that she is obliged to disclose, then the position will be that she has failed to produce information that she is under a legal obligation to disclose (not merely as a result of the compulsory processes in respect of discovery or interrogatories, but in terms of substantive rights) and that this would have a very powerful impact on the proper incidence of the costs of the application. Accordingly, it was said that the Court is not in a position yet to determine the appropriateness of the costs order sought.
In relation to the application for costs to be assessable forthwith, it is submitted that the nature of the application is not discrete from the ultimate course of the proceedings and does not fall into the category where it is appropriate to make such an order for that reason.
While the Fang defendants submitted that they do not have anything further to provide by way of documents (trust records or not), the plaintiffs do not accept that this is what ultimately will be found, pointing to the criticism made at the hearing of the affidavits filed for the Fang defendants and how they are to be interpreted.
As to the position in relation to the Zhang defendants, the plaintiffs submit that it was not unreasonable for them not to accept the offer of 27 July 2021. My understanding of the Zhang defendants' position in the letter of 27 July 2021 is that they were prepared to consent to orders requiring the production of all books and records of VIP Sale (irrespective of whether they were trust records, and irrespective of in whose possession they were). Had that been accepted, only the application against Giant (as to which there was no opposition) and applications on which the plaintiffs were not successful would have remained. The plaintiffs say, however, that there were questions as to what were the books and records for VIP Sale. (I interpose to note that, while in correspondence following the rejection by the plaintiffs of the offer, the solicitors for the Zhang defendants said "we do not propose to continue to engage with you in relation to your various ongoing inquiries", it was also noted that "[o]ur clients remain willing to adopt a sensible and constructive approach to your clients' motion".)
The plaintiffs submit that the offer did not cover all of the relief that the plaintiffs obtained (although it is not clear to me how this is put at least vis a vis the Zhang defendants) but in any event that the Zhang defendants were active contradictors in respect of all of the relief. There was some dispute in submissions on the issue of costs as to whether the Zhang defendants had in fact sought to oppose the grant of any relief against Giant (see from T 61.20-27, for example) but at the very least it can be accepted that they were the only contradictors on that issue.

Submissions in reply

The Zhang defendants in reply say that the s 247A point occupied a very small part of the application and that on the balance of the motion, they were entirely successful. As to the production of documents by Giant, it is said that the Zhang defendants made clear that they did not oppose any order that Giant produce documents. It is said that the circumstances were that: Giant was not opposing the application; and the Zhang defendants opposed orders that they or VIP Sale be required to take steps effectively to gather and handover information to Giant (noting that the orders sought against them included orders that Mr Zhang serve a verified affidavit as to the affairs of the Everspring Trust, which is the trust of which Giant is a trustee and answer voluminous interlocutories about the affairs of Giant and the Everspring Trust).
The Zhang defendants emphasise that their submissions were directed to the proposition that they and VIP Sale, the trustee of the Burwood Trust, should not be required to provide that sort of information to the plaintiffs to the extent that it concerned the Everspring Trust; but that they did not oppose an order being made against Giant.
In reply to the plaintiffs' submission that the Zhang defendants did not provide a practical indication of the documents that would be provided over pursuant to the 27 July 2021 offer, the Zhang defendants point to their solicitors' letter dated 30 July 2021 that states that if the order was made their clients would undertake "reasonable searches necessary to identify responsive documents". The letter indicated that based on instructions, it was expected that the bulk of the documents would consist of emails and attachments (senders and recipients including unit holders, the tax adviser, Mr Elias, Urban Apartments (the builder), and lawyers for Hai Tao). It was said that the attachments include the draft trust deed and invoices issued by HL Tax Services. Accordingly, the Zhang defendants resist the suggestion that there was no indication of what documents might be produced if the offer was accepted.
The Fang defendants noted that the request in the 7 April 2021 letter included the request for explanations of various things including enquiries in relation to Ms Fang's personal bank account, being inquiries in relation to why she did things in her position as a beneficiary or otherwise. It is said that nothing in the further determination of the proceedings will turn out to be that there was anything inappropriate in her failure to answer the specific question in that letter and that that is distinct from any subsequent orders sought by way of discovery in relation to the production of documents.
As to the enquiry I made as to the documents, Counsel for Ms Fang made clear that her instructions were that she has no documents and in particular has no documents in relation to the $1.2 million transaction referred to by the plaintiffs in their submissions.

Determination

The applicable principles on costs applications of this kind are well known. The power to award costs pursuant to s 98(1) of the Civil Procedure Act is discretionary, subject to the rules of court and statute (and, in particular, the requirement that it be exercised judicially) and the discretion is very wide (Oshlack). It is also relevant here to emphasise that the overriding mandate in respect of the conduct of litigation in this Court is for the just, quick and cheap resolution of the real issues in dispute (see s 56 of the Civil Procedure Act). Further, an order for costs is compensatory in nature, not punitive (Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59; Ohn v Walton (1995) 36 NSWLR 77).
The general rule (which the Zhang and Fang defendants here invoke) is that costs follow the event unless it appears that some other order ought to be made as to the whole or part of the costs (r 42.1 of the UCPR). Rule 42.7 provides that the costs of interlocutory applications are to be paid and otherwise dealt with in the same way as the general costs of the proceedings, unless the Court otherwise orders.
Ordinarily, where an interlocutory application is brought (say, for example, where an interlocutory injunction is granted and the defendant did not concede that injunctive relief) the costs of that application will be costs in the cause (or the successful party's costs in the cause) (see the explanation given by the Court of Appeal in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142 (the Macedonian Church case) at [16]-[32] in the joint judgment of Beazley JA (as Her Excellency then was), Giles and Hodgson JJA).
Further, it is relevant to note that it is well recognised that where there has been no hearing on the merits the usual order that is appropriate to be made will be that there be no order as to costs (since it is not appropriate for the Court to conduct what would amount in effect to an hypothetical trial in order to determine an application for costs) (see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin) at 624-625 per McHugh J). In Lai Qin, McHugh J observed, among other things, that when there has been no hearing on the merits, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order (namely, success in the action or on particular issues. However, his Honour went on to note that in some cases the court may be able to conclude that one of the parties has acted "so unreasonably" that the other party should obtain the costs of the action and that in some cases, although both parties have acted reasonably, a judge may be so confident that one party was "almost certain to have succeeded" if the matter had been fully tried to make such an order. However, his Honour considered that such cases were likely to be rare. The use of the word "so" in the first of the phrases extracted above indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred (as I noted in Renton v Kelly [2018] NSWSC 1377 at [56]). See also in this context Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Agribusiness) at [8] per Basten JA.
As to the making of an order that costs be payable forthwith, such an order in relation to an interlocutory application (involving a departure from the ordinary rule in that regard) may be appropriate (as the Fang defendants have submitted is here the case) where: there has been the determination of a separately identifiable matter or the completion of a discrete aspect of the proceedings; there is some unreasonable conduct on the part of the party concerned; or the final disposal of the dispute will not be until some time hence (see Morningstar at [11]-[13]; Sayour v Elliott (No 2) [2018] NSWSC 146 at [44]).
Turning first to the application by Giant for its costs on the notice of motion, I consider that the appropriate order is simply that both its and the plaintiffs' costs be costs in the cause. I accept that it was not unreasonable for Giant's solicitor to seek to clarify the basis on which production of documents was sought and that it would in all likelihood have been necessary for Giant's solicitor, in fulfilment of his professional obligations to his client and the Court, to have reviewed the material and submissions in support of the plaintiffs' notice of motion whatever position Giant took on the motion (not least because they raised issues likely to be relevant to the final hearing). I also accept that the forensic decision for Giant's legal representative to be present at the hearing of the motion was not on its face unreasonable (again having regard to the possibility that issues that might impact on the final hearing may well have been raised), though this is an issue ultimately for determination on a costs assessment process if it comes to that.
However, I see no reason for the question of Giant's costs not to abide the outcome of the final hearing, in circumstances where these costs would seem to fall within the general rubric of costs necessary for the preparation of the matter for hearing.
As to the question of the costs of the Fang defendants, where they successfully defended the relief sought against them, I make two general observations at the outset (which are relevant not only to the Fang defendants' costs application but also that of the Zhang defendants).
First, there is no doubt that the final determination of the proceeding is likely to be some way off - particularly in light of the timetable which will not bring the matter back for directions until after close of pleadings in early December this year (although I am, hopefully not unduly, optimistic that with compliance by the parties with their obligations as litigants, the matter could be ready for hearing by the second half of next year).
Second, there was both an element of prematurity in the bringing of the plaintiffs' application (in relation to the discovery and interrogatories aspects of the motion) and an element of circularity (as the plaintiffs have submitted) in the argument put by the defendants that the application required findings of fact that could not be made until final hearing and the submission that the determination of the application is a separate and discrete matter from the issues that will or may be made at the final hearing. There is force in the submission by the plaintiffs that the future course of the proceeding is capable of having an impact on the just order to be made as to the costs of the application. The tension between those two aspects of the application is what makes it problematic in my view to make the order for costs that the Fang defendants seek (I will come in due course to the position of the Zhang defendants which involves additional considerations).
In respect of the Fang defendants, the difficulty as I see it is this. The application for disclosure and interrogatories was certainly premature if that application was predicated only on the procedures under the rules for such case management processes. However, the primary basis on which relief was sought was that the plaintiffs maintained that the Fang defendants were obliged to produce documents and to provide information because (see as recorded at [154]ff of the earlier judgment) they owed fiduciary obligations arising out of the circumstances in which it is alleged that the Fang defendants were promoters of the venture and Ms Fang had an ongoing management role in the venture. Further, in respect of Ms Fang's authority to draw on Haixin's bank account, it was said that Ms Fang owed direct equitable obligations of confidence which oblige her to disclose records and report her activities in that capacity, as well as the obligations of a fiduciary which oblige her to disclose all material facts relative to what the plaintiffs say were the obvious conflicts that Ms Fang had. As noted in the earlier judgment, it was contended that Ms Fang was sufficiently closely involved in using her personal association and influence over the plaintiffs in her promotional activities that she ought be held to have been in a relationship of trust and confidence importing direct fiduciary obligations.
I accepted that those issues could not be determined on the application then before me. However, there remains the prospect that when tested at a final hearing some or all of the plaintiffs' contentions as to the Fang defendants will be accepted, in which case it may ultimately be held that the Fang defendants have wrongly denied access to documents or information requested by the plaintiffs.
To my mind, that means that it cannot be said that the dismissal of the notice of motion, insofar as it sought relief against the Fang defendants, amounts to the determination of a separately identifiable matter or the completion of a discrete aspect of the proceedings such as to warrant the making of a "forthwith" costs order in favour of the Fang defendants; nor do I consider that the prematurity of the application warrants such relief (where it may later turn out that the plaintiffs were justifiably seeking some or all of the documents or information in question from the Fang defendants).
Nor do I consider that there has been unreasonable conduct on the part of the plaintiffs in the bringing of the application at this stage or in the manner in which the application was conducted so as to warrant an adverse costs order on a forthwith basis. As to the complaint that Ms Fang has deposed to not having any documents or information of the kind requested, that is a matter that cannot possibly be tested at this stage. As to the complaint that the ambit of the information sought went well beyond the scope of permissible disclosure or interrogatories, that will be reflected to an extent in the order I propose to make but does not to my mind warrant a final order as to costs of the motion at this stage.
Accordingly, the appropriate costs order in my opinion in relation to the Fang defendants' costs is an order that they be the Fang defendants' costs in the cause. That reflects the prematurity of the application but also the possibility that the Fang defendants could be found wrongly to have refused to accede to the relief sought at this stage.
Finally, as to the Zhang defendants' costs, that to my mind is the most difficult of the present applications. But for the without prejudice offer, I would have concluded that the considerations referred to above in relation to the Fang defendants' application would equally apply to the Zhang defendants (i.e., that although the relief sought was premature and would have required the impermissible making of factual findings in advance of a contested hearing, there remains the possibility that it will ultimately be found that the Zhang defendants should have provided some or all of the documents and information sought). Moreover, as indicated by my parenthetical comment (at [386]), I was of the view at the time of the hearing of the disclosure notice of motion that a compelling aspect of that application was that it was being pressed as an appropriate order in lieu of the making of a general administration order. I rather considered that that was where the real gravamen of the plaintiffs' application was (and I had in mind that if the application for a general administration order - then yet to be determined and, as it transpired, ultimately not pressed - were otherwise to have been successful then the orders for disclosure might well have been appropriate).
However, as already noted, the application for a general administration order was not pressed; and the fact that Ms Wang may now be able to obtain much of the documentation or information sought in her position as a director of VIP Sale is not to the point when considering the costs orders (if any) that should be made as to the unsuccessful application for disclosure.
As to the fact that (albeit not directly opposing the relief sought against Giant) submissions were made by the Zhang defendants as to the power to grant such relief (which I understood to be in the nature of an active contradictor to the otherwise uncontested application), I do not consider that this disentitles the Zhang defendants from an order for the costs necessarily incurred in successfully defending the applications made against themselves (and I do not consider that any considerable time was spent on the submissions relating to the orders against Giant such as to warrant some proportionate adjustment in relation to otherwise recoverable costs of the motion).
The critical factor to my mind, when addressing the question of the Zhang defendants' costs, is the making of the without prejudice offer that, had it been accepted, would have resulted in the plaintiffs obtaining in essence all (and in fact more) of the relief that was ultimately obtained on the notice of motion against the Zhang defendants. The Zhang defendants (and it is relevant to note that Mr Zhang was at this stage the sole director of VIP Sale) there offered to consent to the provision to the plaintiffs of all of the company books and records of VIP Sale (including but not limited to all books and records of the Burwood Trust). The plaintiffs say that the offer was at a fairly late stage in the process; and they described the offer as a "closed box", in that they complained that they were not provided with specific information of a practical nature in order to help them evaluate what the offer really meant in a practical way. However, I do not see it as being incumbent on the solicitors for the Zhang defendants to engage in an exercise of attempting to satisfy the plaintiffs' solicitors as to whether the information provided would answer the many questions that the plaintiffs have raised as to the venture.
The Zhang defendants do not rely on the without prejudice offer in support of some special costs order (which would have required an analysis of the factors relevant on the application of the Calderbank principles - Calderbank v Calderbank [1975] 3 All ER 333). Hence, it is not necessary for me to form a view as to whether it was unreasonable for the plaintiffs not to have accepted that offer. Rather, as I understand it, the Zhang defendants point to this as a factor in support of their application for costs under the general rule (on the basis that the only aspect on which the plaintiffs succeeded was one that, in effect, it had been unnecessary for them to pursue in light of the offer to provide that material that had been made before the contested hearing). In this regard, I also take into account that this was a lengthy interlocutory application (involving a hearing over two days and with a large volume of material). I am inclined to the view that the just, quick and cheap resolution of the real issues in dispute did not warrant such an excursus in circumstances where the plaintiffs could have accepted the offer and obtained the relevant company books and records without the cost of the hearing (and with the prospect of disclosure in the ordinary course under the case management rules).
Taking into account the possibility that it might be found at the final hearing that the Zhang defendants did have an obligation to provide more extensive documents and information than they here offered to provide, I nevertheless consider that in all the circumstances the appropriate order is that the plaintiffs pay the Zhang defendants' costs of the motion. As such an order (without more) is not assessable until after the conclusion of the final hearing, it remains open for the trial judge to make a determination (as to costs or otherwise) that may vary or impact upon the order now to be made. Nevertheless, the making of such an order at this stage means that the trial judge will not necessarily have to consider issues as to the conduct of the 13 April 2021 motion.

Orders

For those reasons, I make the following orders: 1. As to the costs of the plaintiffs' notice of motion filed on 13 April 2021: 1. order that, as between the seventh defendant and the plaintiffs, the costs be costs be costs in the cause. 2. order that the costs of the second and fifth defendants be those defendants' costs in the cause. 3. order that the plaintiffs pay the first, third, fourth and sixth defendants' costs on the ordinary basis. 1. Otherwise there be no order as to the costs of the plaintiffs' notice of motion filed on 13 April 2021, which has now been disposed of.

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: 07 October 2021

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