Bao v Li (No 3)

1. [1]

   This judgment concerns the costs of two notices of motion.

2. [2]

   The substantive dispute in this matter related to two properties located in North Ryde and St Ives. On 17 October 2022, judgment was given declaring that the first defendant, Ms Cheryl Li, held her title in both properties on trust for the benefit of the second defendant: Bao v Li [2022] NSWSC 1335. The Court ordered that the North Ryde property be sold, with fifty percent of the net profit of the sale to be paid to the plaintiff, and also ordered the first defendant to deliver up to the second defendant all documents, personal effects and furniture left by the first defendant at the North Ryde Property. With respect to the St Ives Property, the Court ordered that the first defendant transfer title of the property to the second defendant within 180 days of judgment.

3. [3]

   On 23 December 2022, the first defendant filed an application to appeal the orders concerning the St Ives Property only. That appeal was dismissed: see Li v Tao [2023] NSWCA 310.

4. [4]

   The first defendant also failed to vacate the property at North Ryde and comply with the Court's orders of 17 October 2022. The first defendant's breach of the Court's orders continued for a period of many months.

5. [5]

   On 21 July 2023, two notices of motion were heard.

6. [6]

   On 18 July 2023, the First Defendant had filed a motion, in which she sought orders for the sale of the St Ives Property, with the proceeds to be paid into Court, pending the appeal judgment. She also sought a stay for the sale of property at North Ryde, pending the outcome of proceedings she had instituted in the Federal Circuit and Family Court of Australia, in which she seeks a property settlement from the second defendant in the sum of $2 million.

7. [7]

   That motion was dismissed by way of an ex tempore judgment. I determined that the Court did not have any power to make an order concerning the sale of the St Ives Property. Further, I did not consider that the circumstances were an appropriate case to order a stay where each of the plaintiff and second defendant were otherwise entitled to enforce a judgment given in their favour in relation to the North Ryde Property.

8. [8]

   On 15 July 2023, the second defendant had filed a notice of motion, in which he sought, inter alia, orders for the appointment of a trustee to affect the sale of the North Ryde Property. On 21 July 2023, at the hearing of that motion, I made those orders, for reasons including that the first defendant had not complied with all of the Court's orders and was not otherwise co-operating with the sale process.

9. [9]

   That 15 July 2023 motion also sought that the first defendant be found guilty of contempt. Those prayers for relief were stood over for hearing in the Real Property List on 18 August 2023.

10. [10]

    However, rather than that part of the second defendant's motion concerning contempt progressing to a determination, on 18 August 2023, the Court charged and convicted the first defendant with contempt of its own motion.

11. [11]

    Also on 18 August 2023, orders were made granting leave to the second defendant to amend the charges of contempt and setting a timetable for evidence. The remainder of the motion was stood over for directions on 20 October 2023.

12. [12]

    On 19 October 2023, orders were made in Chambers granting leave to the second defendant to re-apply for a timetable to amend the charges of contempt by 1 December 2023.

13. [13]

    On 1 December 2023, the second defendant sought to delay the hearing of the remainder of his motion, until further evidence had been "examined". The motion was stood over until 9 February 2024. The determination of the costs of the motions was therefore delayed.

14. [14]

    On 9 February 2024, the second defendant indicated to the Court that a position on the contempt motion had not yet been finalised and sought further adjournment. That was refused, and the remainder of the second defendant's motion was dismissed of the Court's own motion for want of expeditious prosecution.

15. [15]

    As the motions had been finally determined, the issue of costs related to the motions could be determined, based on all the parties' written submissions and an affidavit of Mr Gang Wang for the second defendant dated 7 August 2023.

Costs

1. [16]

   The plaintiff seeks the following costs orders:

   1. (1)

      Second defendant pay plaintiff's costs of his motion on an indemnity basis, but first defendant to indemnify second defendant;

   2. (2)

      First defendant pay plaintiff's costs of her motion on an indemnity basis.

2. [17]

   The second defendant submits that the first defendant ought pay the costs of both notices of motion on an indemnity basis in a gross sum amount of $33,003.90, less 10%. The first defendant resists such an order, submitting that the costs claimed are unreasonable for a matter of “no complexity”. The first defendant seeks that the costs of the motion be assessed.

3. [18]

   The Court’s general discretion as to costs need not be explained: see eg s 98 Civil Procedure Act 2005 (NSW). While no party cites any authority for the orders sought, the following principles concerning indemnity costs and gross sum costs orders are uncontroversial.

4. [19]

   The principles relating to an award of indemnity costs that does not depend on an unaccepted offer have been summarised in Australian Competition and Consumer Commission v Colgate Palmolive Pty Ltd (No 5) (2021) 151 ACSR 26. At [11], Wigney J commented:

5. [20]

   Indemnity costs are not punitive. Rather, they can be awarded in circumstances where the reckless conduct of one party has led to another party unnecessarily incurring costs.

6. [21]

   In Kalloghlian v Mitry Lawyers Pty Ltd (No 3) [2022] NSWSC 1201 at [21]-[22], I set out the relevant principles for gross sum costs orders:

7. [22]

   However, there must be sufficient evidence before the Court to warrant an exercise of the discretion to order costs on a gross sum basis. In Colquhoun v District Court of New South Wales (No 2) [2015] NSWCA 54, the Court said at [6]-[7] (Beazley P, Barrett and Leeming JJA):

8. [23]

   This passage has been cited with authority in subsequent cases: see eg South Western Sydney Local Health District v Gould (No 2) [2018] NSWCA 160 (at [11] (Basten, Meagher and Leeming JJA); Riva NSW Pty Ltd v Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers (No 4) [2018] NSWCA 327 at [74] (Leeming JA). These cases also serve as examples of circumstances where the Court has refused to make a gross sum costs order where there is insufficient information as to the basis on which the costs are sought.

9. [24]

   I do not accept that the plaintiff is entitled to his costs of the second defendant’s motion. While the plaintiff was necessarily named as a party affected by the orders sought, no relief was sought against the plaintiff. I do not accept the submission that the alleged prejudice the plaintiff has suffered by reason of the defendants’ failure to comply with the Court’s judgment is relevant to the question of costs of the second defendant’s motion. Each party ought to pay their own costs.

10. [25]

    In relation to the first defendant’s motion, I accept it was appropriate for the plaintiff to consider and oppose the relief sought, including the stay. The first defendant ought to pay the plaintiff’s costs of her motion.

11. [26]

    I consider it is appropriate that the first defendant pay those costs on an indemnity basis, particularly because her motion failed as it was manifestly deficient; the orders sought were beyond the Court’s power and were inconsistent with the Court’s previous 17 October 2022 orders, with which the first defendant had failed to comply.

Determination of second defendant’s application for costs of the motions

1. [27]

   I am satisfied that the first defendant ought to pay the second defendant's costs of both notices of motion on an indemnity basis, for the following reasons:

   1. (1)

      Her motion was manifestly deficient; the orders sought were beyond the Court's power and were inconsistent with the Court's previous 17 October 2022 orders, with which the first defendant failed to comply.

   2. (2)

      The second defendant's motion was necessitated by the first defendant's failure to comply with the Court's orders. On 30 June 2023, Hammerschlag CJ in Eq informed the first defendant of the gravity of her conduct: "there is an order of the Court binding you…and presently it looks to me you are in contempt of it". She continued to resist complying with the Court's orders, despite the clear indication that "the time for delaying is now gone…in an extreme case you might be arrested". The first defendant was charged and convicted of contempt on the Court's own motion on 18 August 2023.

   3. (3)

      Had the first defendant complied with the Court's orders in a timely way, the costs incurred by the second defendant in relation to the notice of motion would have been saved.

2. [28]

   With regard to a gross sum costs order, the second defendant submits that such an order would avoid the need for a costs assessment and would minimise delay. He further submits that a gross sum costs order would efficiently resolve the issue of costs in circumstances, where the Court cannot be confident that the parties would be able to agree on quantum and assessment and a further dispute would be inevitable.

3. [29]

   The second defendant relies on an affidavit of his solicitor, Mr Wang, which annexes itemised tax invoices totalling $57,762.00. That sum includes disbursements, including the following:

   1. (1)

      $5,775.00 relates to counsel's itemised invoice "brief on hearing of motions on 21 July 2023";

   2. (2)

      $1,764.58 relates to counsel's itemised invoice, including $1,400.00 plus GST "preparing notice of motion and statement of charge";

   3. (3)

      $3,529.17 relates to counsel's itemised invoice "brief to advise and appear on D1's motion filed 18/7/23 and D2's motion filed 15/7/23".

4. [30]

   The affidavit annexes the solicitors’ costs agreement, apparently executed by the second defendant on 18 October 2022. In the agreement, the solicitors provided an estimate of $60,000.00 to “provide legal advice and enforce the orders made on 17 October 2022 in the proceedings of 2020/00182140 Zhong Bao v Cheryl Shu Yan Li & Zhiyog Tao”.

5. [31]

   The costs agreement sets out the hourly rates, at which the solicitors intended to charge their time, including $500.00 per hour plus GST for a “principal”, $350.00 per hour plus GST for a “lawyer” and $200.00 per hour plus GST for a “paralegal”. The invoices do not state who within the firm completed different tasks, but rates of $500.00, $350.00 and $200.00 per hour plus GST have been charged.

6. [32]

   The second defendant’s submissions on costs were that $33,003.90 of the total costs related to the motions, excluding the contempt component that was dismissed. While Mr Wang’s estimate was $51,985.80, I will use the lower figure submitted by counsel to be correct as the starting point of the gross sum order determination.

7. [33]

   I consider there is sufficient evidence to warrant the making of a gross sum costs order in the form of the invoices and costs agreement. These invoices provide a basis for the Court to logically and fairly quantify an appropriate sum.

8. [34]

   In addition, the animosity between the parties and the likely delay of any assessment process support the conclusion that a gross sum costs order is appropriate.

9. [35]

   However, while it is not necessary for the Court to analyse the invoices as if on an assessment, I consider the invoices either demonstrate an excessive amount has been charged or include matters not relevant to the motions. For example, the invoice numbered 5064 indicates that discussions in relation to the enforcement of the Court’s orders had commenced on 2 May 2023. However, it was not until 1 July 2023 that the prospect of filing a motion to appoint a trustee to affect sale was contemplated. Despite this, several thousands of dollars of work during the period between 2 May 2023 and 1 July 2023 is included in the costs claimed by the second defendant. Further, the invoices include work unrelated to the two motions, for example in relation to various subpoenas and other motions, which have since been dismissed. Other invoiced time concerns the preparation of the prayers for contempt and the charges of contempt, which were never heard, and for which the first defendant ought not be liable. Further, other time charged appears to concern issues relating to the St Ives property and correspondence with the mortgagee bank, which were not matters relevant to those parts of the second defendant’s motion that was determined. There has been no attempt to explain what parts of the invoices are in fact referrable to those parts of the motions determined.

10. [36]

    In addition, some of the amounts charged appear excessive. For example, the second defendant’s written submissions on costs are signed by counsel and total 3 pages. Mr Wang has invoiced $3,500.00 plus GST preparing the costs submissions, but counsel has also invoiced over $1,600.00 plus GST finalising those submissions.

11. [37]

    Therefore, while the second defendant seeks $33,003.90 for costs of the motions on an indemnity basis without explanation, I consider in light of the duplication and inclusion of irrelevant charges, and taking a “broad brush” approach to a gross sum costs order, it is appropriate to discount the amount by more than the estimate of 10% suggested by Mr Wang and counsel’s submissions, and discount them by approximately 40% to $20,000.00, inclusive of GST.

Orders

1. [38]

   For the reasons above, the appropriate orders are:

   1. (1)

      First defendant to pay the plaintiff's costs on an indemnity basis, as agreed or assessed.

   2. (2)

      First defendant to pay the second defendant's costs on an indemnity basis.

   3. (1)

      No order as to costs as between the plaintiff and second defendant.

   4. (2)

      First defendant to pay the second defendant's costs on an indemnity basis.

   5. (1)

      The quantum of the second defendant's costs pursuant to order 2 and 4 is assessed in the sum of $20,000.00 including GST.