WIB Australia Pty Ltd v Bi

The statutory and legal principles applicable

1. Section 98(1)-(4) of the Civil Procedure Act 2005 (NSW) provides as follows: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to - (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount."
2. Part 42.1 of the Uniform Civil Procedure Rules 2005 provides as follows: "42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs."
3. In Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25, the High Court stated as follows in paragraphs 24 to 25: "24. It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion "cannot be narrowed by a legal rule devised by the court to control its exercise", the formulation of principles according to which the discretion should be exercised does not "constitute a fetter upon the discretion not intended by the legislature". Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power. 25. A guiding principle by reference to which the discretion is to be exercised - indeed, "one of the most, if not the most, important" principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the "just resolution of the real issues in civil proceedings with minimum delay and expense", that might have been taken into account to justify refusing the appellant an order for its costs."
4. In Sze Tu v Lowe (No 2) [2015] NSWCA 91 Gleeson JA (with whom Meagher and Barrett JJA agreed) stated the following in paragraphs 37-40: "37. Costs are not awarded by way of punishment of the unsuccessful party but, rather, "are compensatory in the sense that they are awarded to indemnify [the] successful party against the expense to which he or she has been put by reason of the legal proceedings": Latoudis v Casey [1990] HCA 59; 170 CLR 534 at 543 (Mason CJ); Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67]; Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 (Mahenthirarasa (No 2)) at [8] (Basten JA; Giles and Bell JJA agreeing). It follows that the inquiry as to what costs order should be made is primarily directed to the position of the successful party: Latoudis v Casey at 542; Mahenthirarasa (No 2) at [9]. 38. The starting position is s 98 of the Civil Procedure Act 2005 (NSW) which provides that, subject to the rules of court, costs are in the discretion of the Court including by whom, to whom and to what extent costs are to be paid. Reference should also be made to r 42.1, Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which provides that if the Court makes any order as to costs, it should be in terms that costs follow the event unless it appears to the Court that some other order should be made as to the whole or part of the costs. 39. How "the event" should be defined will depend upon the nature of the litigation. Generally the "event" refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861 - 37,862 (Waddell J). 40. In a proper case, the party that is successful overall may be deprived of part of its costs, or ordered to pay the costs of a discrete issue. The circumstances in which this may occur are not limited to cases where it was unreasonable for the successful party to raise the issue on which it failed: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 615D. The relevant principles were reviewed by this Court in Elite Protective Service Pty Ltd v Salmon (No 2) [2007] NSWCA 373, and summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA), as follows: • Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1996, unreported). • In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. • If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. • Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). • A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. • Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272."
5. This case has been confirmed recently by the Court of Appeal in McInnes v Rheem Australia Pty Ltd [2021] NSWCA 89 at [28] and [34].
6. In the present case, the defendants relied on the Calderbank offers in the two letters and their success in the proceedings.
7. In AB v Keanes (No 2) [2019] NSWDC 765, I stated as follows in paragraphs 42-43: "42. The first offer of compromise was served with a covering letter relying on the Calderbank principles. These were not addressed in submissions but I will consider them briefly. 43. The rejection of a Calderbank offer by a party does not necessarily mean that indemnity costs are ordered as a matter of course. The applicant for indemnity costs must demonstrate to the court that the rejection of the offer was "unreasonable" in all the circumstances of the case: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19]; Jones v Bradley (No 2) [2003] NSWCA 258 at [12]; Russell v Edwards (No 2) [2006] NSWCA 52 at [8]; Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [7]."
8. In Hutley v Costco (No 2) [2021] NSWCA 335, Basten JA stated as follows at paragraph 9: "9 The letters of offer each invoked the principles enunciated in Calderbank v Calderbank. Those principles envisage that such an offer, whilst made without prejudice, may be tendered on an application for costs in circumstances where the offer is not accepted, and the offer proposed a more favourable outcome than that achieved. To support an order that costs be assessed on the indemnity basis from the date of the offer, there had to be a basis to conclude that failure to accept the offer was unreasonable in all the circumstances."
9. See also Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 at paragraphs 20 to 26.
10. In Huang v Muse Beauty Salon Waterloo Pty Ltd (No 5); Muse Beauty Salon Waterloo Pty Ltd v Huang (No 5) [2022] NSWDC 248 I summarised the principles relating to Calderbank offers in paragraph 41 as follows: "41. In summary, the Court stated as follows: (a) Costs "are in the broad discretion of the court with the general rule being that they should follow the event and that, unless the court orders "otherwise", those costs are to be assessed on the ordinary basis": at [20]; (b) The rationale underlying Calderbank offers was to provide "an incentive for the disputants to end their litigation as soon as possible" and to discourage "wasteful and unreasonable behaviour by litigants": at [20]; (c) "The making of an offer of compromise in the form of a Calderbank letter may justify a departure from the ordinary basis on which costs are awarded and assessed...and the ultimate question is whether the offeree's failure to accept the offer, in all the circumstances warrants a departure from the ordinary rule": at [21]; (d) The "rejection of (what ultimately transpires to be) a more favourable offer is not decisive as to the awarding of costs on an indemnity basis". There is "no presumption that an offeree who does not accept an offer, and does not obtain a more favourable judgment, will necessarily pay indemnity costs from the date of the offer": at [24]; (e) The issue is whether the refusal to accept a Calderbank offer was unreasonable in all the circumstances."
11. I also made reference in that case to statements of principle in Della Franca v Lorenzato; Burwood Council v Lorenzato (No 2) [2022] NSWCA 53 at [19] and at [47]-[50]. At [19], Macfarlan JA stated the following principles: 1. The party seeking an indemnity costs order following a Calderbank offer "bore the onus of satisfying the court that an order for indemnity costs should be made on the basis of the service and non-acceptance of the offer"; 2. The question is whether in all the circumstances of the case the failure to accept the offer warranted departure from the ordinary rules as to costs; 3. Relevant factors for the court to include included the stage of the proceedings at which the offer was made, the time allowed for a response, extent of the compromise offered, the offeree's prospects of success, the clarity with which the offer is expressed and whether the offer foreshadowed an application for indemnity costs were the offeree to reject it.
12. Brereton JA at [47]-[50] stated: 1. "An unaccepted Calderbank offer is merely a relevant consideration in the exercise of the costs discretion." 2. "Unlike a formal offer of compromise under the Rules, it does not have any presumptive effect as to the costs position if the offeree does not better it"; 3. As "a matter of discretion, a Calderbank offer may justify a special order for costs, including an order for costs on an indemnity basis, if the final judgment is no more favourable than the offer, its rejection was unreasonable, and the offer sufficiently foreshadowed its use to support a special costs order"; 4. "A party who seeks to rely on a Calderbank offer for cost purposes bears the onus of showing that an order for indemnity costs should be made on the basis of the offer".
13. Accordingly, the defendants in the present case bear the onus of showing that an order for indemnity costs should be made on the basis of one or both of the offers taking into account the matters I have indicated and, in particular, whether the rejection of the offers was unreasonable.
14. In some cases, a party will have not succeeded on a number of significant points which it had pleaded. Generally, the proper approach of a court is not to discourage a party raising all proper issues in a matter: see Sze Tu above. Thus, often a lack of success on some issues will not warrant a different costs order: United Resource Management Pty Ltd v Par Recycling Services Pty Ltd (No 2) [2024] NSWCA 29 at [3]. However, if a party unreasonably pursues or persists with points which have minimal merit or no merit, such conduct will constitute a consideration for the court as to the ordering of costs even where the party is generally successful: Oshlack v Richmond River Council [1998] HCA 11; (1988) 193 CLR 72 at 122; McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 at [19]. It seems that a distinction is made where there are reasonable or arguable defences raised by the defendant even if they are ultimately proved to be unsuccessful and severable: Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [40]-[41]. However, in Real Estate Property Management Pty Ltd v WaterCorp Investments Pty Ltd [2018] NSWCA 194 at [44], White JA (with whom Basten JA agreed) expressed the opinion that the distinction between the position of plaintiffs and defendants in such a situation was "elusive".

Application of above principle to these facts

1. In accordance with the above principles, the rejection of the Calderbank offers made by the defendants by the plaintiff does not automatically entitle the defendants to an indemnity costs order. There is no prima facie presumption that such an order should be made in those circumstances. The onus remains on the defendants to establish that the rejection of the offers was unreasonable in all the circumstances of the case. The Court accepts the submissions of the plaintiff in relation to these matters (see paragraph 6 of the written submissions).
2. It is clear that the defendants bettered their offer in their letter dated 9 January 2023. In addition: 1. A period of 14 days would appear to be adequate to consider the offer; 2. The sum of $10,000 offered together with the proposed order that each party bear their own costs of the proceedings was a more than nominal offer although relatively modest; 3. The offer appears to be genuine. The Court does not accept that the first offer essentially involved "capitulation by the plaintiff" as asserted by the plaintiff (written submissions paragraph 16); and 4. There was an express mention that the offer was a Calderbank offer.
3. However, the following is noted: 1. The offer was made at an early stage of the proceedings prior to the parties having served any evidence. The offer was made after pleadings had been served but before the service of the proposed Amended Defence; 2. The offer referred to matters in relation to which the defendants were in substance unsuccessful; 3. The letter did not expressly refer to the matters on which the defendants were successful. I accept the plaintiff's submission on this point; 4. The Deed proposed to be executed was not apparently annexed. However, this point was expressly not taken by the plaintiff during the argument as to costs; 5. The offer made was not of a large amount compared to the amount sought; and 6. The question of whether the defendants signed the relevant documents was central and remained to be determined.
4. In all the circumstances, in my view it was not unreasonable for the plaintiff to reject the offer in the first Calderbank letter dated 9 January 2023. It was a relatively modest offer made before the service of the evidence. It did not refer expressly to the point on which the defendants were successful.
5. In relation to the Calderbank offer in the 12 October 2023 letter, the following is noted: 1. The offer was made much later in the proceedings after most of the evidence had been served but prior to the filing of the Amended Defence (although leave had been granted to file that pleading); 2. The amount offered of $50,000 was a reasonably substantial sum; 3. It was proposed that a Deed be executed but a copy of the Deed does not appear to have been attached to the letter. Again, as stated above, this point was not taken during the costs argument; 4. The matters expressly relied on by the defendants in the letter were ultimately not vindicated and were not determinative. Similarly, the matters specifically raised in the Amended Defence were not upheld; 5. The letter did refer to the offer being made on a Calderbank basis.
6. Taking into account all the circumstances, the Court concludes again that it was not unreasonable for the plaintiff to fail to accept the second Calderbank letter and to continue with the litigation. The Court accepts the plaintiff's written submissions on this issue.
7. In particular, I note: 1. The lack of specific reference in the letter to the issue on which the defendants succeeded. I accept the plaintiff's submission on this point that the letter did not expressly refer to the issue; 2. The issue of the signing of the documents being an issue which was raised in the Amended Defence and required the careful cross-examination of the defendants at the trial in the light of the relevant documents; 3. The amount offered being significantly less than the amount sought to be recovered; 4. The plaintiff had not served all its affidavit evidence (in relation to the issues raised in the Amended Defence) at this date.
8. A further factor in determining whether the Court should order indemnity costs as sought by the defendants was their failure in relation to a number of important factual and legal points raised on the pleadings. In relation to the letter offers, this must be considered as at the date of each offer. The execution of the documents by the defendants was an important issue raised by the defendants as at the date of each letter. It had also been pleaded that the defendants were under a special disadvantage including as to language (in the case of Mrs Begum). This was not reasonably arguable as at the date of either letter. That was a matter on which the defendants failed.
9. As stated above, the plaintiff was successful on a number of issues which were raised by the defendants in the proceedings. However, the defendants were successful in the ultimate outcome. In my view, very substantial time was taken up during the hearing and in the detail of the evidence concerning whether the defendants signed the loan agreements and the drawdown notices. Substantial time was also taken up in relation to the unconscionability issue in light of the defendants' circumstances. However, there was no evidence that Mr Shen for the plaintiff was aware of the matters alleged. Nor were the defendants' circumstances known, on the evidence, to Mr Shen. In my view, the Court should pay particular regard to the defendants' failure on these issues. I also conclude that the following matters were not reasonably raised by the defendants: 1. That the defendants did not sign the loan agreements and drawdown notices; 2. That Mrs Begum was under a special disadvantage; 3. That Ms Bi and Mrs Begum had no real commercial experience; 4. That the plaintiff acted unconscionably; 5. That the relevant loan agreements were void for uncertainty.
10. On one approach, the defendants could be denied their costs on a number of the significant issues discussed. Alternatively, the defendants could be ordered to pay the plaintiff's costs of these issues.
11. Balancing up all the various matters referred to above, and exercising the discretion as to costs which the Court has, in my view the appropriate order as to costs taking into account all the circumstances and the parties' respective success on the various issues, is that there should be no order as to costs with the intent that each party is to bear their own costs of the proceedings. I conclude that costs should not simply follow the "event".
12. For the above reasons, the Court makes the following order: 1. There be no order as to the costs of the proceedings with the intent that each party is to bear its or their costs of the proceedings.
13. The matters raised by the defendants as to costs issues were matters which were reasonably arguable. There should be no separate costs order for the hearing as to costs.

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: 01 March 2024