Federal Court of Australia

ZACD Group Limited v Bao (Costs) [2025] FCA 1601

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to rule 1.34 of the Federal Court Rules 2011 (Cth), compliance by the plaintiffs with rule 25.02 is dispensed with in relation to their “Notice of offer to compromise” attached to their solicitors’ letter dated 18 July 2023.

2.    Pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth), the defendant pay interest in the amount of $1,862,770.61 on the damages awarded to the plaintiffs on 3 December 2025.

3.    The defendant pay the plaintiffs’ costs on the standard basis up until 11.00 am on 20 July 2023 and on an indemnity basis after 11.00 am on 20 July 2023.

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

REASONS FOR JUDGMENT

DOWNES J

1    On 3 December 2025, I published reasons for judgment in ZACD Group Limited v Bao [2025] FCA 1500 (J) and sought submissions from the parties on the questions of costs and interest. This judgment addresses those questions. Definitions used in the judgment are adopted in these reasons.

background

2    The relevant background is set out at [1]–[16] J. The outcome is recorded at [17] and [391] J. In particular, it was determined that ZACD is entitled to recover from Mr Bao and will be awarded:

(1)    damages in the amount of $4.7 million, representing the unrecovered balance of the $37.5 million which ZACD paid into the trust account;

(2)    damages in the amount of the unrecovered legal costs of $610,327.67 which ZACD incurred in prosecuting the Landerer proceeding to a favourable settlement, representing reasonable mitigation costs;

(3)    interest under s 51A of the Federal Court of Australia Act on the amounts in (1) and (2) above.

Interest

3    There are two disputes in relation to the award of interest.

4    First, ZACD submits that interest should be calculated on the whole of the $37.5 million that it paid into the trust account of Landerer & Co, while Mr Bao submits that it should be calculated by reference to the $4.7 million damages award entered against him.

5    Secondly, ZACD submits that interest on the amount of $610,327.67 that it incurred in prosecuting the Landerer proceeding to a favourable settlement should be calculated from the date on which the respective payments fell due, while Mr Bao submits that it should be when they were made.

6    As to the first question, the primary purpose of an award of pre-judgment interest under s 51A of the Federal Court of Australia Act is to compensate a successful plaintiff for the loss or detriment which they suffered by being kept out of their money: see Whitaker v Commissioner of Taxation (1998) 82 FCR 261 at 269 (Lockhart J). At [369] J, I found that it was a just outcome that Mr Bao be responsible for 12.5% of ZACD’s $37.5 million loss, being $4.7 million. Further, at [17] and [391] J, I determined that ZACD be awarded interest on the damages award in the amount of $4.7 million. This was aligned with [82] of the Third Further Amended Statement of Claim, by which ZACD sought interest on the amount of $4.7 million (and not $37.5 million). Finally, it is consistent with the primary purpose of s 51A for the award of pre-judgment interest to be calculated by reference to the $4.7 million damages award against Mr Bao, rather than the whole loss. It follows that ZACD is entitled to pre-judgment interest of $1,669,008.63 on the damages award of $4.7 million, adopting Mr Bao’s calculations.

7    As to the second question, interest accrues from the point at which the loss is actually incurred, being the date on which the respective payments were made, rather than when the debts were incurred. In the absence of evidence as to the precise date on which the payment of each invoice was in fact made, it is appropriate to proceed on the basis that each invoice was paid on the date that it fell due to be paid, and interest will be calculated accordingly. It follows that ZACD is entitled to pre-judgment interest of $193,761.98 on the damages award of $610,327.67, adopting ZACD’s calculations.

8    In light of the above, the total pre-judgment interest Mr Bao will be ordered to pay ZACD is $1,862,770.61.

Costs

9    It is common ground that costs should follow the event, and there is no dispute that ZACD is entitled to indemnity costs following Mr Bao’s rejection of a Calderbank offer on 3 September 2025. The issue is whether ZACD should be awarded indemnity costs by reason of Mr Bao’s rejection of an offer to settle made by it in Form 45 on 18 July 2023 (2023 offer), which proposed that judgment be entered against Mr Bao for $500,000 and the proceeding otherwise be dismissed.

10    Rule 25.02 of the Federal Court Rules requires that the notice containing the offer be signed by the offeror. In this case, the notice which comprised the 2023 offer was not signed.

11    ZACD submits that the non-compliance with r 25.02 should be dispensed with under r 1.34, and Mr Bao did not make any submissions against this, instead dealing with the offer on the basis that it is a Calderbank offer.

12    The 2023 offer was made in Form 45 and was attached to a signed covering letter which made plain that it was an offer being made under the Federal Court Rules and that the offer was open for a period of 14 days, as required by r 25.05(3). The 2023 offer was otherwise compliant in all respects with the requirements of the Federal Court Rules and Form 45, and Mr Bao did not submit to the contrary.

13    In these circumstances, it is appropriate to dispense with compliance by ZACD with r 25.02.

14    As the 2023 offer was not accepted and having regard to the outcome of the trial, it follows that ZACD is entitled to an order that Mr Bao pay their costs on the standard basis before 11am on 20 July 2023 and on an indemnity basis thereafter: see r 25.14(3). The question of whether Mr Bao acted unreasonably in failing to accept the offer has no relevance.

Associate:

Dated:    16 December 2025