FEDERAL COURT OF AUSTRALIA

Li v Wu [2013] FCA 1265

THE COURT ORDERS THAT:

1.    The respondent pay the applicant’s costs as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The remaining issue in this matter is costs.

2    Consequential upon my principal reasons for judgment published on 22 October 2013 (Li v Wu [2013] FCA 1067) and the subsequent orders dated 6 November 2013 giving judgment for the applicant in the sum of $976,866.80 plus interest, the applicant seeks the usual order as to costs.

3    I use the same abbreviations in these reasons as used in my principal reasons for judgment.

4    The respondent contends that the applicant should receive only 20% of its costs on the basis that the applicant succeeded on one issue only and failed on all other issues. As the respondent put it in written submissions:

The respondent estimates that at least 80% of preparation and court time related to the parts of the applicant’s claim that were unsuccessful. The part of the claim that succeeded involved construction of the text of the 2008 agreement. While some context would have been needed to understand the document, her Honour’s reasons on this issue reflect that the necessary context was largely uncontroversial. The case would have taken a day or two, at the most.

5    I am unable to agree with the respondent’s characterisation of the proceeding or view of the time involved in respect of the issues on which the applicant failed. It seems to me that the respondent’s approach to these matters is almost wholly disconnected from the reality of the issues which were in dispute, the conduct of the hearing, and the context which was essential to resolution of the issues.

6    It is true that the applicant obtained judgment in his favour on one issue (the indemnity provision in the shareholder agreement) and failed in his claims for damages for misleading and deceptive conduct, breach of contract, and equitable compensation. However, it is not true that the context of the shareholder agreement was “relatively uncontroversial”. It was also not true that the issues concerning the shareholder agreement could have been heard “a day or two, at the most”.

7    The reasons for this are that the respondent put many matters in issue which required a much broader context than the respondent would now allow was necessary.

8    First, the respondent claimed that the shareholder agreement had expired on its own terms or been overtaken by the subsequent February 2008 agreement. I rejected both arguments but the relevant fact for present purposes is that the latter agreement in particular called up for consideration the terms and context of the February 2008 agreement.

9    Second, the respondent sought to resile from terms of the 2008 agreement which required the conduct of both the applicant and the respondent up to February 2008 to be considered.

10    Third, the respondent took issue with the fact that the applicant had made member loans to GEI thus forcing the applicant to prove what should have been clear to the respondent from GEI’s own books and records. The fact that the applicant sought to rely on the Viisum accounts as part of this proof is merely one evidentiary foundation which I rejected. The relevant fact is that it was the respondent who put the matter in issue despite the terms of GEI’s own accounts and the respondent’s acceptance at all previous times that the applicant had indeed made these member loans.

11    Fourth, the respondent put in issue the construction of the February 2008 agreement, thus requiring the applicant to prove the position in relation to his own personal expenses and how they had been treated.

12    Fifth, the respondent sought to deduct from the member loans personal expenses of the applicant which had allegedly been paid by other companies. This allegation raised for consideration to the broader issue of the applicant’s lack of knowledge of the existence of those companies.

13    It was this conduct of the respondent, rather than the failed claims of the applicant, which involved substantial time, money and cost.

14    In respect of the misleading and deceptive conduct claim, the applicant proved such conduct but failed to prove loss. The issue took little time relative to the indemnity claim. The same can be said of the breach of contract and equitable compensation claims.

15    It follows that the actual course of this proceeding does not support the making of an order which reduces the applicant’s entitlement to costs. While there is no doubt about the applicable principles, particularly that the purpose of costs is compensatory so that in the appropriate case a party who has failed on one or more issues should not have the benefit of an order for the whole of its costs, the facts of the present case fall far short of engaging this concept. The applicant ran its case the way it did because the respondent denied virtually all aspects of the applicant’s claims. The applicant succeeded in respect of the claim fundamental to his case and, in doing so, was forced by the respondent’s defence to adduce evidence about the relationship between the parties over many years. The respondent cannot now be heard to complain that, had the applicant run his case differently, the hearing would have taken one or two days. The issues on which the applicant failed were subsidiary both conceptually and in terms of time.

16    The usual order as to costs should be made.

Associate:

Dated:    29 November 2013