Federal Court of Australia

Credit Suisse AG v Gu (Final orders) [2026] FCA 1306

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00pm on 16 September 2026, the eighth respondent, i-Prosperity Pty Ltd (in liquidation) (IPPL), and the third to sixth respondents (the Hu Parties), confer and email the Associate to Cheeseman J proposed joint short minutes of order to give effect to the reasons for judgment.

2.    If the proposed joint short minutes of order are not agreed, then by 4.00pm on 16 September 2026, IPPL and the Hu Parties are to email the Associate to Cheeseman J short minutes marked-up to show any areas of disagreement and each party’s competing formulation of each order.

3.    The proceeding be reopened for the limited purpose of receiving the following evidence:

(a)    the affidavit of Alexander Helmut Roth sworn 23 February 2021, marked Exhibit 16;

(b)    the affidavit of Alexander Helmut Roth sworn 16 June 2021, marked Exhibit 17; and

(c)    Exhibit AR-2 to the affidavit of Alexander Helmut Roth sworn 16 June, marked Exhibit 18.

4.    The costs of IPPL be paid as follows:

(a)    50% by the Hu Parties (jointly and severally) in an amount to be agreed or assessed by lump sum procedure; and

(b)    $540,000 by the second respondent, Great Lands Investment Pty Ltd (Great Lands).

5.    The following amounts of the surplus proceeds of sale of the Superba Property (Surplus Funds) be paid from the controlled monies account (Account) in which the Surplus Funds are held within 14 days of these orders:

(a)    the amount of $1,653,209.62 (being the amount of $2,193,209.62 less the value of the costs order made in IPPL’s favour under Order 4(b)) be paid to Great Lands in respect of its entitlement pursuant to s 121(5) of the Bankruptcy Act 1966 (Cth); and

(b)    the amount of $540,000 be paid to IPPL in satisfaction of Order 4(b).

6.    For the avoidance of doubt, all other funds in the Account are to be retained pending further order.

7.    There be no order as to costs as between Great Lands and the Hu Parties, with the intention that each of Great Lands and the Hu Parties are to bear their own costs of the proceeding, and that any and all costs orders between those parties be discharged.

THE COURT NOTES THAT:

A.    The ninth respondent, Jing Spring Hill Pty Ltd (JSH), filed a notice of withdrawal of pleading on 7 June 2023 in respect of its defences to the Hu Parties’ first cross-claim, IPPL’s second cross-claim, and Great Lands’ third cross-claim.

B.    The eleventh respondent, Chunshan Jing, filed a notice of withdrawal of pleading on 7 June 2023 in respect of his defence to the Hu Parties’ first cross-claim.

C.    JSH filed a notice of discontinuance on 7 June 2023 in respect of its cross-claim, being the fourth cross-claim.

D.    On 9 June 2023, consent orders were made vacating all costs orders concerning JSH and Mr Jing and for the release of security for costs made in connection with JSH and Mr Jing in this proceeding.

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

REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

1    On 17 April 2026, I published reasons for judgment in Credit Suisse AG v Gu (No 3) [2026] FCA 439 (principal judgment) and made declarations determining the parties’ substantive rights in relation to the surplus proceeds of sale of the property at 10 Superba Parade, Mosman, New South Wales (the Superba Property). The proceeds of sale remaining after payment of the registered mortgagee and the receivers’ costs are held in an interest bearing controlled monies account (Surplus Funds).

2    Familiarity with the principal judgment is assumed for the purpose of these reasons. The following should be read as a summary only and does not, in any way, qualify the principal judgment.

3    The principal judgment declared, among other matters, that:

(1)    clause 7.2 of the Deed of Guarantee and Indemnity dated 2 June 2020 did not create an equitable charge or other equitable proprietary interest in favour of the third to sixth respondents (Hu Parties) over the Superba Property or the Surplus Funds;

(2)    the mortgage granted by the first respondent, Mr Menghong Gu, in favour of the second respondent, Great Lands Investment Pty Ltd, dated 28 June 2019 was void against the trustee in bankruptcy pursuant to s 121(1) of the Bankruptcy Act 1966 (Cth);

(3)    Great Lands was entitled pursuant to s 121(5) of the Bankruptcy Act and s 100-5 of Sch 2 to that Act (Insolvency Practice Schedule (Bankruptcy) (IPSB)), to be paid $2,193,209.62 from the Surplus Funds, without interest;

(4)    the eighth respondent, i-Prosperity Pty Ltd (in liquidation) (IPPL), was subrogated to the rights formerly held by Credit Suisse AG as registered mortgagee to the extent of $280,000;

(5)    IPPL held an equitable proprietary interest in the Surplus Funds to the extent of $1,045,246.14 and any traceable accretions to that amount; and

(6)    IPPL’s interests were not postponed to any interest claimed by the Hu Parties.

4    The orders made on 17 April 2026 did not provide for the immediate distribution of the Surplus Funds or determine costs. The parties were directed to confer and, to the extent that the parties could not agree proposed joint short minutes of order to give effect to the principal judgment, identify the disputed orders and provide short written submissions. Any remaining disputes were to be determined on the papers.

5    Following an extension of the timetable, the parties conferred and agreed on some of the material aspects of the orders necessary to finalise the proceeding. In particular, the Hu Parties and IPPL now agree that:

(1)    IPPL’s proportionate interest arising from its contribution to the acquisition of the Superba Property is 9.80%; and

(2)    the proceeds of sale after settlement adjustments were $11,962,658.80.

6    Five discrete disputes remain for determination:

(1)    whether the receivers’ remuneration of $105,406.82 should be deducted as a cost of caring for, preserving and realising the Superba Property before the parties’ proportionate shares are calculated;

(2)    whether Great Lands’ statutory entitlement of $2,193,209.62 pursuant to s 121(5) of the Bankruptcy Act and s 100-5 of the IPSB should be deducted before calculating IPPL’s proportionate entitlement to the Surplus Funds and the accretions thereto;

(3)    the rate and basis of interest in the period up to completion of the sale on the $280,000 subrogated amount;

(4)    the treatment of that interest after completion of the sale; and

(5)    whether the Hu Parties should pay any part of IPPL’s costs on an indemnity basis by reason of offers made on 15 September 2022, 20 April 2023 and 22 November 2023.

7    The parties expect to be in a position to agree upon the necessary calculations once these issues of principle are determined.

8    In these reasons, I first identify the effect of the principal judgment and the matters that the parties have agreed. I then address the four disputes concerning distribution of the Surplus Funds before addressing IPPL’s application for indemnity costs.

THE PRINCIPAL JUDGMENT AND ORDERS

The effect of the declarations made on 17 April 2026

9    The declarations summarised at paragraph [3] establish the legal framework for distribution of the Surplus Funds.

10    IPPL has two distinct interests in the Surplus Funds. First, IPPL is subrogated to the rights formerly held by Credit Suisse as registered mortgagee to the extent of $280,000. Secondly, it has a proportionate equitable proprietary interest arising from the application of $1,045,246.14 towards the acquisition of the Superba Property. That interest attaches to the proceeds of sale and the traceable accretions thereof. The interests are distinct in source and character. See the principal judgment at [354], [420]-[422], [432], [437]-[442], [472].

11    IPPL’s declared interests are to be satisfied according to their proper content and character before the Hu Parties may participate in any residue of the Surplus Funds: principal judgment at [420]-[422], [437]-[460], [472], [474]-[475].

12    Great Lands has no surviving proprietary interest in the Superba Property or the Surplus Funds. Its entitlement is a statutory right to payment of $2,193,209.62 under s 121(5) of the Bankruptcy Act and s 100-5 of the IPSB. That entitlement ranks ahead of unsecured personal debt claims but does not carry interest. See the principal judgment at [193]-[198], [432]-[435], [471], [474].

13    Neither Great Lands nor the Hu Parties has otherwise established a proprietary interest in the Surplus Funds. The Hu Parties pursue the trustee’s assigned rights under s 121 of the Bankruptcy Act. Their entitlement to participate in any residue is subject to the prior satisfaction of IPPL’s proprietary interests, Great Lands’ statutory entitlement under s 121(5), and any costs or expenses properly payable from the Surplus Funds. See the principal judgment at [95], [198], [432]-[435], [474].

MATTERS AGREED

IPPL’s proportionate acquisition interest

14    The parties agree that the relevant acquisition cost was $10,666,242.61 and that IPPL’s contribution of $1,045,246.14 represented 9.80% of that amount.

Adjusted proceeds of sale

15    The parties agree that the proceeds of sale after settlement adjustments were $11,962,658.80. The Hu Parties adopted IPPL’s revised calculation, resolving an earlier numerical difference between them.

Ordinary costs

16    The Hu Parties do not oppose an order that they pay 50% of IPPL’s costs on the ordinary basis. What is in dispute is whether any part of those costs should be paid on an indemnity basis.

Great Lands

17    Great Lands has reached agreement with IPPL and the Hu Parties on the question of costs. The parties have provided proposed joint short minutes of order. I am satisfied that it is appropriate to make orders directed to giving effect the consent position that has been reached.

CONSIDERATION

18    The first four of the five remaining disputes affect the amount or method by which IPPL participates in the Surplus Funds and the accretions thereto. The last issue is the indemnity costs dispute.

Issue 1 - Receivers’ remuneration

19    The issue is whether the receivers’ remuneration of $105,406.82 should be deducted as a cost of caring for, preserving and realising the Superba Property before calculating IPPL’s 9.80% proportionate share. The parties agree that common deductions of $290,146.86 are to be made. That agreed amount does not include any amount for the receivers’ remuneration. If the receivers’ remuneration is also deducted, the net proceeds are $11,567,105.12 and IPPL’s proportionate share is $1,133,576.30. If it is not deducted, the net proceeds are $11,672,511.94 and IPPL’s proportionate share is $1,143,906.17.

The Roth affidavits

20    The evidence relevant to this issue includes two affidavits of Alexander Helmut Roth, Principal Lawyer at Independent Legal Pty Limited, sworn 23 February 2021 and 16 June 2021. Mr Roth acted as solicitor for the applicant, Credit Suisse AG, and the receivers. The affidavits were prepared in connection with the receivership and the proceedings in the Supreme Court of New South Wales concerning the sale and distribution of the proceeds of the Superba Property. The affidavit of 16 June 2021 contains Exhibit AR-2, which includes settlement documents, correspondence and the receivers’ accounts and time records. The applicant filed this affidavit in this Court in the present proceeding.

21    The Hu Parties seek leave to reopen the proceeding to read the affidavit of 16 June 2021 and tender Exhibit AR-2. They submit that the orders made on 27 July 2021 in the Supreme Court of New South Wales were based on that affidavit and rely on it to establish the proceeds received on completion, the payments made from those proceeds, the receivers’ remuneration and the balance of the Surplus Funds.

22    IPPL did not expressly oppose that limited reopening application. IPPL itself provided to the Court both Roth affidavits and Exhibit AR-2 along with its submissions on 29 May 2026. IPPL relied on the affidavit sworn on 23 February 2021 in identifying sale, repair, maintenance and enforcement costs, and relied on Exhibit AR-2 in calculating the adjusted sale proceeds. However, IPPL disputes the significance of the evidence, particularly whether it establishes that the whole of the receivers’ remuneration was incurred in caring for, preserving or realising the property.

23    I am satisfied that the proceeding should be reopened to the limited extent necessary to receive both Roth affidavits and Exhibit AR-2. The material is directly relevant to the calculation of the fund and the character of the work for which the receivers’ remuneration was charged. The Hu Parties and IPPL have relied on the material in advancing their respective calculations. No evidentiary objection or forensic prejudice has been identified. The affidavits and Exhibit AR-2 will therefore be admitted for the purpose of determining the remaining questions concerning the sale proceeds and their distribution. The Roth affidavit of 23 February 2021 will be Exhibit 16 in the proceeding, the Roth affidavit of 16 June 2021 will be Exhibit 17, and Exhibit AR-2 will be Exhibit 18.

The parties’ positions

24    The Hu Parties contend that the receivers were appointed to care for, preserve and realise the Superba Property and that their remuneration was incurred in producing the fund in which IPPL and the Hu Parties claim interests. They submit that the remuneration is a common realisation cost having priority under the principles considered in Re Universal Distributing Co Ltd (in liq) [1933] HCA 2; 48 CLR 171 at 174-175 (Dixon J) and Thackray v Gunns Plantations Ltd [2011] VSC 380; 85 ACSR 144 at [40]-[42] (Davies J). The Hu Parties say that they have adopted a conservative approach by excluding certain legal costs, and the amounts paid to discharge the mortgage and remove the mortgage and caveats, on the basis that those amounts are properly attributable solely to Mr Gu.

25    IPPL submits that it was neither a mortgagor nor liable under the Credit Suisse mortgage. Because Credit Suisse appointed the receivers under Mr Gu’s mortgage, IPPL says that the receivers’ remuneration should be borne by Mr Gu’s share. IPPL does not dispute that the receivers were entitled to payment. Rather, it submits that the Hu Parties have not established that any of the receivership costs were reasonable incurred in caring for, preserving, or realising the Superba Property, as distinct from general receivership costs.

Applicable principle

26    The Hu Parties relied on Universal Distributing and Thackray. Those authorities provide the general starting point. The scope and rationale of the principle, including its application to work undertaken in caring for or preserving property and its operation in relation to receivers appointed under a private security, are addressed more directly in Stewart v Atco Controls Pty Ltd (in liq) [2014] HCA 15; 252 CLR 307 at [22]-[23], [41] (Crennan, Kiefel, Bell, Gageler and Keane JJ), Primary Securities Ltd v Willmott Forests Ltd (in liq) [2016] VSCA 309; 50 VR 752 at [11] (Maxwell P), [122]-[125] (Whelan and Santamaria JJA), Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310; 288 FLR 236 (Sanderson M), and Preston, in the matter of the Forum Group of Companies Pty Ltd (in liq) [2025] FCA 883; 176 ACSR 498 at [89]-[97].

27    The principle is founded on the concept of “salvage”. Costs, expenses and remuneration reasonably incurred in caring for, preserving or realising particular property may have priority over proprietary claims to that property or its proceeds because those claiming the benefit of the resulting fund obtain the benefit of the work and should not escape the corresponding burden of the cost of those efforts. The priority is confined to work having the necessary connection with the property and the benefit obtained. It does not extend to all costs or remuneration of a receivership merely because the receivers were appointed under a security affecting the property.

28    The source of the receivers’ appointment is therefore relevant, but not determinative. Work undertaken solely to enforce or administer Credit Suisse’s mortgage is properly attributable to Mr Gu’s share. Work reasonably undertaken to preserve or realise the Superba Property benefitted the fund to which IPPL’s proprietary interest attaches and should not be allocated exclusively to Mr Gu’s share.

What the evidence establishes

29    The parties referred to the Roth affidavits but did not analyse the individual time entries in Exhibit AR-2 or propose a basis for classifying and apportioning the remuneration according to the work performed. The analysis that follows is therefore based on the Court’s examination of that material, without the benefit of detailed submissions directed to the entries.

30    The Roth affidavit of 23 February 2021 provides contemporaneous evidence of expenditure associated with the proposed sale. IPPL relies on [21(b), (c), (d), (f) and (g)] of that affidavit for costs associated with repairs, maintenance, the sales agent, marketing and the sale. IPPL relies separately on [21(e)] for legal costs associated with enforcement of the Credit Suisse mortgage. The affidavit therefore assists in distinguishing work and expenditure directed to preserving and selling the property from work directed to enforcing Credit Suisse’s security.

31    The Roth affidavit of 16 June 2021 records the completed sale and the payments made from the proceeds and deposit. The Hu Parties rely on [16]-[17] for payments including repairs, maintenance, sales commission and marketing, and on [23] and [29(d)] for the receivers’ remuneration of $105,406.82. Exhibit AR-2 includes the Grant Thornton accounts and time records underlying that remuneration.

32    The Grant Thornton accounts and time records are itemised. They identify the dates of work, the persons performing the work, the time charged, the value attributed to the work and a description of the task. The correspondence in Exhibit AR-2 also records rectification work undertaken after exchange and before completion, including work concerning louvres, the front door, curtains, floor tiles, and internal roof damage. The evidence records that settlement was deferred, that funds were retained pending repairs and that the identified work was undertaken so that the sale could proceed to completion.

33    That evidence establishes directly, and in any event supports the necessary inference, that some of the receivers’ remuneration was incurred in caring for, preserving and realising the Superba Property. The inference does not arise merely from the fact of their appointment. It arises from the contemporaneous identification of the work performed, the time charged for it and its relationship to the completed sale.

Limits of the evidence

34    The evidence does not establish that the whole of the $105,406.82 has that character. The Grant Thornton accounts and time records also contain entries concerning Credit Suisse as appointing secured creditor, enforcement and discharge of the mortgage, statutory and administrative aspects of the appointment, taxation, preparation of remuneration accounts, banking administration, personal property, a motor vehicle, retirement and finalisation of the receivership. The connection between those tasks and the care, preservation or realisation of the Superba Property is not established.

35    IPPL is therefore correct to distinguish the receivers’ entitlement to remuneration from the allocation of that remuneration between the beneficial interests. The fact that the receivers were entitled to payment does not establish that the whole of their remuneration should be borne by the fund in which IPPL has a proprietary interest. The Hu Parties’ submission that the entire amount is deductible because the receivers were appointed to care, preserve and realise the property fails adequately to account for the mixed functions revealed by the receivers’ accounts.

36    IPPL’s submission that the whole amount must be allocated to Mr Gu’s share is likewise too broad. It treats the source of the receivers’ appointment as determinative, without sufficient regard to the work actually performed. The detailed accounts and time records disclose identifiable work undertaken by the receivers to preserve the property, facilitate its marketing and sale, address matters that threatened or delayed completion, and thereby produce the fund to which IPPL’s proprietary interest attaches.

Conclusion

37    Neither party’s all-or-nothing position should be accepted. The receivers’ remuneration is properly treated as a common deduction to the extent that the contemporaneous records establish that it was reasonably incurred in caring for, preserving or realising the Superba Property. Remuneration for work directed solely to enforcing Credit Suisse’s mortgage, or to other aspects of the receivership not shown to have produced or preserved the relevant fund, should be borne by Mr Gu’s share. Entries reflecting work performed for both purposes should be apportioned reasonably by reference to the work described.

38    The remaining task is therefore one of classification and calculation, not speculation. The records permit at least the clearly property-related entries to be identified by date, task, time and amount. Any common deduction should comprise:

(1)    the value of entries shown to relate to the care, preservation or realisation of the Superba Property;

(2)    any reasonable apportionment of mixed entries supported by their descriptions;

(3)    GST properly attributable to the included remuneration; and

(4)    disbursements shown to have the same property-related character.

39    The following are not to be included without a demonstrated connection to the Superba Property and Surplus Funds:

(1)    enforcement and discharge of Credit Suisse’s mortgage;

(2)    general reporting to or administration for Credit Suisse;

(3)    statutory and internal administration of the receivership;

(4)    work concerning personal property or the motor vehicle;

(5)    preparation of remuneration claims and internal accounting;

(6)    taxation work not shown to be necessary to the sale or preservation of the Superba Property; and

(7)    retirement and finalisation work not shown to be connected with the Superba Property or its proceeds.

40    Nothing in these reasons should be taken to preclude the parties reaching an agreement as to the amount to be deducted in respect of property-related entries by way of compromise. Having regard to the amount in dispute, the parties should use all reasonable efforts to reach such an agreement.

41    The agreed common deductions of $290,146.86, together with the amount calculated in accordance with paragraphs [39]-[40] or otherwise agreed, are to be deducted from the sale proceeds before IPPL’s 9.80% proportionate share is calculated. The balance of the receivers’ remuneration is to be allocated to Mr Gu’s share.

42    If not agreed, the parties should calculate the amount in accordance with these reasons by reference to the Grant Thornton accounts and time records and provide an agreed calculation. The issue of principle is otherwise determined.

Issue 2 - Great Lands’ statutory payment and the calculation of IPPL’s percentage

43    The issue is whether IPPL’s proportionate entitlement to the Surplus Funds at completion should be calculated before or after deducting Great Lands’ entitlement of $2,193,209.62 payable to Great Lands under s 121(5) of the Bankruptcy Act and s 100-5 of the IPSB. The Hu Parties submit that IPPL’s dollar entitlement should be expressed as a percentage of the whole Surplus Funds at completion, before deducting the Great Lands amount. IPPL submits that the Great Lands amount should first be deducted and that IPPL’s percentage should be calculated by reference to the reduced fund. The first approach produces a lower percentage, presently calculated by the Hu Parties as 21.44% of the net proceeds. The second produces a higher percentage, presently calculated by IPPL as 36.97%. Those percentages depend on the amount determined under Issue 1.

The parties’ positions

44    The Hu Parties submit that the Great Lands amount should not be deducted before calculating IPPL’s percentage. Their submission rests on the different character of the parties’ rights. IPPL holds an equitable proprietary interest in the sale proceeds and the traceable accretions thereto. Great Lands has no surviving proprietary interest in either the Superba Property or the Surplus Funds. Its mortgage was avoided under s 121(1) of the Bankruptcy Act, and its surviving entitlement is the statutory right to compensation declared by Order 3. On that basis, the Hu Parties submit that the Great Lands amount is therefore payable from the residue to which they are entitled as assignees of Mr Gu’s trustee, after IPPL’s proprietary interest has been identified.

45    IPPL submits that the Great Lands amount should be deducted from the Surplus Funds before the respective percentage interests of IPPL and the Hu Parties are calculated. It relies principally on the determination in the principal judgment that Great Lands’ statutory entitlement does not attract interest. IPPL contends that the Hu Parties’ approach would confer on the Hu Parties the benefit of interest earned on the Great Lands amount, notwithstanding that Great Lands itself is not entitled to interest.

46    IPPL also relies on the fact that the Hu Parties claim the benefit of earnings accruing before the Deed of Assignment dated 17 January 2022. The Surplus Funds were held in Credit Suisse’s controlled monies account following completion on 26 February 2021 and were subsequently paid into the Supreme Court of New South Wales, transferred to this Court and, pursuant to an order made on 13 May 2022, transferred to the interest-bearing controlled monies account maintained by the Hu Parties’ solicitors. IPPL submits that deducting the Great Lands amount before calculating the parties’ percentages avoids over-compensating the Hu Parties.

The nature and source of the relevant interests

47    The nature and priority of the relevant interests have been addressed earlier in these reasons under the heading “The effect of the declarations made on 17 April 2026”. It is sufficient for present purposes to identify four additional features of the principal judgment.

48    First, IPPL’s proportionate equitable proprietary interest arose from its contribution of $1,045,246.14 to the acquisition of the Superba Property. That interest attached to the property from the time of acquisition and, following the sale, to the corresponding proportion of the proceeds and their traceable accretions. Order 5 declared the existence and amount of that interest. It did not create a new interest as at the date of judgment. See the principal judgment at [340], [349]-[354], [472].

49    Secondly, the Hu Parties did not establish an equitable charge or other proprietary interest under the Deed of Guarantee and Indemnity (described as the “Hu Deed” in the principal judgment). Their present claim to participate in any residue is advanced by reference to the assignment by Mr Gu’s trustee in bankruptcy. Subject to the interests and priorities established in the principal judgment, they stand in the position formerly occupied by the trustee for the purposes of the rights assigned to them, but do not thereby acquire a proprietary interest in the Surplus Funds. See the principal judgment at [76], [99], [101], [456].

50    Thirdly, Great Lands has no surviving proprietary interest in the Superba Property or the Surplus Funds. The Great Lands Mortgage was void against the trustee under s 121(1) of the Bankruptcy Act. Great Lands’ surviving entitlement is a statutory right under s 121(5), given effect through s 100-5 of the IPSB, to receive the fixed amount of $2,193,209.62 from the Surplus Funds. That amount does not carry interest. See the principal judgment at [193]-[196], [432]-[433], [471].

51    Fourthly, Order 3 provides that the Great Lands amount is to be paid from the Surplus Funds. The order does not describe Great Lands as holding a proportionate or other proprietary interest in that fund. Nor does it direct that the statutory payment is to be deducted from the Surplus Funds before the extent of IPPL’s proprietary interest is ascertained. The order of application of the Surplus Funds must therefore be resolved consistently with the nature and priority of the interests determined in the principal judgment.

Whether the Great Lands payment alters IPPL’s proprietary interest

52    There is force in the Hu Parties’ submission that deducting the Great Lands amount before calculating IPPL’s percentage would alter the content of IPPL’s proprietary interest by reference to a right of a different character. IPPL’s interest arose from its contribution to the acquisition of the Superba Property. Its dollar entitlement to the proceeds of sale at completion is calculated by applying its agreed acquisition proportion to the net proceeds determined after making the deductions considered under Issue 1. That dollar amount is then expressed as a proportion of the Surplus Funds as constituted following completion, to determine IPPL’s corresponding entitlement to that fund and its subsequent accretions.

53    Great Lands’ statutory entitlement does not form part of that calculation. It is not an interest that competed with IPPL’s resulting trust interest in the Superba Property or its proceeds. Nor is it a cost incurred in acquiring, preserving or realising the property. Rather, it is a fixed statutory entitlement to compensation arising from the avoidance of the Great Lands Mortgage. Its satisfaction diminishes the amount ultimately available to the holder of Mr Gu’s residual interest, but does not retrospectively reduce the fund against which IPPL’s pre-existing proprietary interest is to be measured.

54    IPPL’s proposed method would increase its percentage by first excluding the fixed statutory liability borne by the holder of the residual interest from the denominator. The resulting percentage would not represent IPPL’s proportionate ownership of the Surplus Funds at completion. Rather, it would express IPPL’s dollar entitlement as a proportion of a differently constituted fund, from which a non-proprietary claim had already been deducted. That calculation may be useful in allocating the earnings subsequently accruing on the account, but it does not define the content of IPPL’s proprietary interest.

55    The strength of IPPL’s position is that it focuses on the fund available in practical terms after the Great Lands payment is made. Once that payment is deducted, only the balance remains available for distribution between IPPL and the Hu Parties. The difficulty is that this practical sequence does not alter the legal basis for or content of IPPL’s interest. It treats the satisfaction of Great Lands’ statutory claim as though it reduced the proprietary fund against which IPPL’s pre-existing interest is to be measured. Such an approach would be inconsistent with the findings and declarations in the principal judgment.

56    The Hu Parties’ approach better reflects the legal structure established by the principal judgment. IPPL’s proprietary percentage is to be calculated by reference to the Surplus Funds as constituted at completion, before the Great Lands amount is deducted. Payment of that amount then diminishes the residue otherwise available to the Hu Parties as assignees of Mr Gu’s trustee. See the principal judgment at [433]-[435], [474]-[476].

The allocation of earnings on the Great Lands amount

57    The conclusion concerning the calculation of IPPL’s proprietary percentage does not dispose of IPPL’s separate submission concerning the allocation of interest earned on the controlled monies account. The principal judgment determined that Great Lands is entitled to receive $2,193,209.62 without interest. IPPL submits that, under the Hu Parties’ proposed calculation, the Hu Parties would nevertheless receive the benefit of the earnings generated by that amount while it remained part of the Surplus Funds. See the principal judgment at [196]-[197].

58    The determination that Great Lands is not entitled to interest does not alter the fact that the account earned interest on the whole balance held from time to time, the amount of the funds corresponding to that ultimately payable to Great Lands. The earnings attributable to that amount do not cease to exist merely because Great Lands has no entitlement to them. It remains necessary to determine how those earnings are to be allocated.

59    The Hu Parties’ proposed method has the advantage of simplicity. It treats the Surplus Funds as a single interest-bearing fund and applies IPPL’s proprietary percentage to the whole of the interest earned, leaving the balance to the Hu Parties. The difficulty is that the balance allocated to the Hu Parties includes interest earned on the amount ultimately payable to Great Lands. The Hu Parties, as assignees of Mr Gu’s trustee, did not hold those funds free from the statutory obligation to satisfy Great Lands’ entitlement. Allocating the balance of all earnings to the Hu Parties without adjustment would therefore confer on them the benefit of interest earned on capital subject to that obligation, a benefit that does not follow from the character of their residual interest.

60    IPPL correctly identifies that anomaly. Its proposed solution, however, goes further than is necessary to address it. IPPL seeks to deduct the Great Lands amount before calculating the percentage that represents IPPL’s proprietary share of the capital fund. That would alter the content of IPPL’s proprietary interest to resolve a separate question concerning the allocation of interest earned after completion. The calculation of IPPL’s proprietary interest in the Surplus Funds and the allocation of subsequent interest earnings should remain distinct.

61    The appropriate course is to deduct the Great Lands amount before determining the respective shares of IPPL and the Hu Parties in the interest earned on the controlled monies account. That deduction is made solely for the purpose of allocating those earnings. It does not affect the antecedent calculation of IPPL’s proprietary percentage by reference to the Surplus Funds as constituted at completion. Great Lands is to receive the fixed statutory amount of $2,193,209.62 without interest, and the Hu Parties should not obtain the benefit of the interest earned on that amount merely because it is payable from the residue to which they would otherwise be entitled.

62    The interest earned on the controlled monies account is therefore to be allocated between IPPL and the Hu Parties by reference to their respective interests in the Surplus Funds after the Great Lands amount is deducted. This treatment gives effect to IPPL’s submission that the Hu Parties should not receive the benefit of interest earned on the Great Lands amount, without adopting its proposal to calculate IPPL’s proprietary percentage by reference to the reduced fund. The deduction affects only the allocation of interest earned on the account. It does not alter the nature or extent of IPPL’s proprietary interest in the capital fund.

63    This is not the precise method proposed by either party. It preserves the substance of the Hu Parties’ submission that Great Lands’ non-proprietary statutory entitlement should not increase IPPL’s proprietary percentage of the capital fund. At the same time, it gives effect to IPPL’s submission that the Hu Parties should not receive the benefit of account earnings attributable to the Great Lands amount.

64    The resulting treatment gives effect to the different interests determined in the principal judgment. IPPL’s proprietary percentage is calculated by reference to the Surplus Funds at completion, before deducting the Great Lands amount. Great Lands’ statutory entitlement is then satisfied from the residue otherwise available to the Hu Parties. When the account earnings are allocated, however, the Great Lands amount is excluded from the fund by reference to which the Hu Parties’ share of those earnings is determined. Great Lands receives no interest, consistently with the principal judgment.

65    IPPL also relies on the date of the Deed of Assignment and Sale and on the Hu Parties’ maintenance of their unsuccessful proprietary claim. Neither matter alters the method of calculation. Any entitlement of the Hu Parties to earnings accrued before the assignment falls to be determined according to the proper construction and effect of the Deed of Assignment and Sale. The parties should take that matter into account in preparing the final calculation. The Hu Parties’ maintenance of that claim may be relevant to costs, but it does not alter the nature or extent of IPPL’s proprietary interest or provide a basis for increasing its percentage of the capital fund.

Conclusion and method of calculation

66    The issue of principle is therefore determined as follows:

(1)    IPPL’s dollar entitlement arising from its resulting trust interest is to be calculated by applying its agreed 9.80% acquisition proportion to the net sale proceeds after making the deductions determined in principle under Issue 1;

(2)    that dollar amount is to be expressed as a percentage of the Surplus Funds as constituted at completion, before deducting the Great Lands amount;

(3)    the Great Lands amount of $2,193,209.62 is then to be deducted from the residue otherwise available to the Hu Parties;

(4)    solely for the purpose of allocating the earnings on the controlled monies account, the Great Lands amount is to be excluded from the participating capital; and

(5)    the account earnings are to be allocated between IPPL and the Hu Parties by reference to their respective interests in the participating capital after the Great Lands amount has been excluded.

67    The final percentage and dollar amounts cannot be fixed until the calculation required by Issue 1 has been completed. The figures presently appearing in the parties’ joint table of disputed matters use different numerators because they reflect the parties’ competing treatments of the receivers’ remuneration. Accordingly, those figures cannot be adopted in their present form. The parties are to recalculate IPPL’s proprietary percentage of the capital fund and the allocation of the account earnings in accordance with the principles stated above.

68    The parties should also verify the arithmetic in the joint table. The joint table states that deducting $2,193,209.62 from $5,287,560.97 produces $3,094,351.97. The correct result is $3,094,351.35. That discrepancy does not affect the determination of principle but must be corrected in the parties’ final calculations.

69    The parties should be able to agree upon the resulting figures once the amount of the common deduction under Issue 1 has been determined. If any disagreement remains, the parties should identify each disputed arithmetic entry and their respective calculations. Further submissions concerning the principles determined in this section should not be necessary.

Issue 3 - Interest on IPPL’s subrogated interest to completion

70    Issue 3 concerns the rate and basis of interest on the $280,000 in respect of which IPPL was declared to be subrogated to Credit Suisse’s rights. The relevant period ends on completion of the sale on 26 February 2021, when Credit Suisse’s mortgage was discharged. The Hu Parties calculate interest by reference to the Court’s pre-judgment rates, producing $43,850.10. IPPL applies the interest rate and compounding provisions of the Credit Suisse facility, producing $45,961.24 according to its revised calculation. The difference is $2,111.14.

The parties’ positions

71    The Hu Parties submit that interest should be calculated at the Court’s pre-judgment rates. They rely on the equitable character and flexibility of subrogation and on the fact that IPPL was not an incoming lender whose intended security failed. IPPL did not advance funds on the terms of the Credit Suisse facility. The Hu Parties submit that allowing IPPL Credit Suisse’s contractual compound return would confer a benefit for which IPPL did not bargain and which is not required to give effect to the equity arising from the discharge of the secured debt.

72    The Hu Parties rely principally on Titles Strata Management Pty Ltd v Nirta [2015] VSC 187 at [109]-[125] (Daly AsJ) and Warwick Entertainment Centre Pty Ltd v Silkchime Pty Ltd (No 4) [2018] WASC 120 at [141]-[155] (Tottle J). They submit that the availability, rate and basis of interest are governed by principles of equitable compensation and that the interest rights conferred by subrogation may be modified where necessary to ensure that the subrogated party does not receive more than it bargained for. They also rely on Chu v Lin, in the matter of Gold Stone Capital Pty Ltd (Trial Judgment) [2024] FCA 766 at [252] (Jackman J) and DC Rd DC Pty Ltd v Zhang (Trial Judgment) [2026] FCA 16 at [421] (Jackman J), where interest was awarded at Court rates rather than at a fixed trustee rate.

73    IPPL relies on the declaration summarised earlier in these reasons at paragraph [3(4)] and submits that its subrogation to Credit Suisse’s former rights includes the contractual right to compound interest until completion of the sale and discharge of the mortgage on 26 February 2021. It relies on the statement in the principal judgment that a subrogated party is treated in equity as standing in the position of the creditor whose debt has been discharged, to the extent of that discharge. See the principal judgment at [388].

74    IPPL submits that Nirta should be distinguished. There, the contractual rate was far outside the range of usual commercial lending rates that it would likely have constituted an unenforceable penalty in the absence of special circumstances. The claim in Nirta also assumed that the original loan would have remained outstanding for several years. IPPL submits that neither consideration arises here. Its claim ends when the property was sold and Credit Suisse’s mortgage was discharged on 26 February 2021, and no party contends that Credit Suisse’s contractual rate was penal or outside the range of ordinary commercial lending.

Applicable principles

75    As explained earlier under the heading “The effect of the declarations made on 17 April 2026”, IPPL’s subrogated interest is distinct from its proportionate equitable proprietary interest. The payments giving rise to the former interest reduced the indebtedness secured by Credit Suisse’s mortgage.

76    Subrogation does not effect a legal assignment of the discharged creditor’s rights. It is an equitable remedy which regulates the parties’ relations as though the benefit of the relevant rights or security had been assigned, but only to the extent required by the circumstances giving rise to the equity. The creditor’s rights provide the starting point, but the remedy may be fashioned or modified where necessary to ensure that the subrogated party obtains no more than the equity requires: Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269 at [1], [4]-[8], [45]-[50], [90]-[94] (Gummow, Hayne, Heydon, Kiefel and Bell JJ); Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393; 86 NSWLR 174 at [49]-[59] (Gleeson JA, Meagher and Leeming JJA agreeing); Nirta at [109]-[120]; Warwick at [141]-[155].

77    Credit Suisse’s contractual right to compound interest is therefore not imported automatically. The question is whether giving effect to that right is necessary to satisfy the equity arising from IPPL’s discharge of the secured debt or would confer a recovery exceeding what that equity requires. Adjustment may be warranted where, for example, the contractual rate is penal or commercially exceptional, or where the claimed period of interest depends on an unrealistic assumption that the original loan would have remained outstanding for an extended period.

Consideration

78    IPPL did not advance funds to Mr Gu on the terms of the Credit Suisse facility and did not bargain for its contractual return. That consideration favours examining, rather than assuming, whether Credit Suisse’s contractual entitlement to compound interest should be conferred on IPPL without adjustment.

79    That consideration does not require displacement of the contractual interest in the present case. IPPL’s payments reduced the debt secured by the Credit Suisse mortgage by $280,000. Had those payments not been made, Mr Gu would have remained liable to Credit Suisse for interest on that part of the secured indebtedness while the mortgage remained on foot. As the Hu Parties accept, Mr Gu should not be relieved of that interest obligation merely because IPPL’s funds were applied in reduction of the secured debt.

80    Two matters distinguish the present case from Nirta. First, IPPL’s calculation ends on the actual discharge of the mortgage on 26 February 2021 and does not assume that the loan would have continued for a hypothetical or extended period. Secondly, no party contends that Credit Suisse’s contractual rate was penal, commercially exceptional or otherwise unenforceable. IPPL seeks, for the pre-completion period, the interest to which Credit Suisse would have been contractually entitled on the corresponding part of the secured debt while the mortgage remained in force.

81    The Hu Parties’ contention that contractual compounding may over-compensate IPPL must nevertheless be considered. Their calculation produces a total subrogated entitlement of $323,850.10, comprising principal of $280,000 and interest of $43,850.10. IPPL’s revised calculation produces a total of $325,961.24, including interest of $45,961.24. The difference of $2,111.14 is approximately 0.65% of the total entitlement calculated by either party. That limited difference does not establish that applying Credit Suisse’s contractual rights until the actual discharge of the mortgage would produce a material over-recovery or confer on IPPL a recovery disproportionate to the benefit obtained by Mr Gu. Given the confined issue and the limited practical difference between the parties’ positions, it is an issue that ought reasonably to have been capable of resolution by agreement.

82    A more granular reconstruction is not required. In particular, it is unnecessary to calculate separately, for each payment or compounding period, the precise benefit received by Mr Gu and compare that benefit with interest calculated at a rate derived independently from the Credit Suisse facility. The contractual calculation is confined to the period during which the mortgage remained on foot, no objectionable feature of the contractual interest provisions has been identified, and the difference from the calculation based on the Court’s pre-judgment rates is not material so as to attract an equitable adjustment. In those circumstances, IPPL’s revised calculation provides a sufficiently reliable and proportionate measure of the interest component of the subrogated entitlement.

83    That conclusion does not treat the “standing in the shoes” analysis as an inflexible rule. The creditor’s rights remain subject to equitable adjustment as the circumstances require. No adjustment is warranted here because the matters relied on by the Hu Parties do not establish that IPPL’s revised calculation would materially over-compensate IPPL or otherwise confer on it more than the relevant equity requires.

The revised calculation

84    IPPL initially claimed compound interest of $50,239.81 to completion of the sale. In reply, it revised that amount to $45,961.24. The revised figure is recorded in the joint table and supersedes the amount initially advanced.

85    The revised calculation applies Credit Suisse’s contractual interest and compounding provisions only to completion of the sale on 26 February 2021. In preparing the final calculations, the parties are to verify the arithmetic and the underlying dates, rates and compounding intervals consistently with the principle determined above.

Conclusion

86    IPPL is entitled to interest on the $280,000 subrogated amount at the rate and on the compounding basis applicable under the Credit Suisse facility until completion of the sale and discharge of the mortgage on 26 February 2021. On IPPL’s revised calculation, the interest amounts to $45,961.24. IPPL’s subrogated entitlement at completion is therefore $325,961.24. Its treatment after completion is addressed under Issue 4.

Issue 4 - Treatment of the subrogated amount after completion

The issue and the parties’ positions

87    In Issue 3 I determined that IPPL’s subrogated entitlement at completion was $325,961.24, comprising principal of $280,000 and contractual interest of $45,961.24 calculated to 26 February 2021. Issue 4 concerns the treatment of that fixed amount after completion. The Hu Parties’ primary submission is that the amount should be expressed as a percentage of the Surplus Funds and should participate proportionately in the actual earnings of the controlled monies account. In the alternative, they submit that interest at Court rates should accrue only on the $280,000 principal. IPPL submits that its entitlement remained a fixed monetary sum and should attract pre-judgment interest at Court rates from completion to judgment, but no corresponding share of the earnings of the controlled monies account.

Character of the entitlement after completion

88    The Hu Parties’ primary position should not be accepted. As explained earlier at paragraph [10], IPPL’s subrogated interest is distinct from its proportionate equitable proprietary interest arising from its contribution to the acquisition of the Superba Property. The latter interest attaches proportionately to the Surplus Funds and their traceable accretions. The former preserves, to the extent of the discharge effected by IPPL’s payments, the relevant rights formerly held by Credit Suisse under its mortgage. The declaration of subrogation did not confer on IPPL a proportionate beneficial interest in the controlled monies account or in the interest earned on the funds held in that account.

89    At completion, Credit Suisse’s mortgage was discharged and the contractual calculation came to an end. For the reasons given in relation to Issue 3, IPPL’s subrogated entitlement as at completion is fixed at $325,961.24. Expressing that amount as a percentage of the Surplus Funds would convert an entitlement measured by reference to the rights secured by the discharged mortgage rights into a fluctuating proprietary interest in the sale proceeds and their subsequent earnings. Neither the declaration nor the reasoning in the principal judgment provides a basis for that treatment.

90    The Hu Parties’ percentage method would also permit the whole of the completion amount, including the contractual interest accrued before completion, to participate in the subsequent earnings of the controlled monies account. It therefore would not avoid the payment of a further return on the pre-completion interest, to which they object in their alternative submission. It would alter only the source and method of calculating that further return.

The post-completion interest basis

91    The basis on which IPPL’s entitlement is quantified changes at completion. Until 26 February 2021, IPPL’s entitlement was measured by reference to Credit Suisse’s contractual rights under the mortgage. Upon discharge of the mortgage, the contractual calculation came to an end, and the amount recoverable by way of subrogation crystallised at $325,961.24. The question thereafter is whether, and on what basis, interest should be allowed to compensate IPPL for the delay in receiving that crystallised sum. The appropriate measure is simple interest at the Federal Court’s pre-judgment rates from 27 February 2021 to the date of judgment.

92    IPPL pleaded a claim for interest under s 100 of the Civil Procedure Act 2005 (NSW), reflecting the commencement of the proceeding in the Supreme Court of New South Wales. Following the transfer of the proceeding to this Court, any statutory award of pre-judgment interest is governed by s 51A of the Federal Court of Australia Act 1976 (Cth) (FCA Act). Section 51A(1) provides, upon application, for interest to be included in a judgment for the recovery of money unless good cause is shown to the contrary. Section 51A(2)(a) provides that s 51A(1) does not authorise the award of interest upon interest, while s 51A(2)(d) preserves the operation of any enactment or rule of law that otherwise provides for an award of interest.

93    In the present case, the equitable working out of IPPL’s right of subrogation requires an allowance of interest after completion to compensate IPPL for the period during which payment of its crystallised entitlement was postponed. That relief comes from the equitable jurisdiction to do no more than is necessary to protect IPPL’s equity and achieve an equitable adjustment between the parties: Warwick at [145]-[155]. Section 51A(2)(d) leaves that jurisdiction unaffected. The rates specified in the Court’s Interest on Judgments Practice Note (GPN-INT) are appropriate as the measure of that equitable allowance for the post-completion period.

The interest-on-interest objection

94    The Hu Parties submit that applying interest at Court rates to the whole completion amount would constitute interest upon interest. That characterisation does not sufficiently recognise the different legal bases for, and periods covered by, the two calculations. The sum of $45,961.24 is not interest awarded to compensate for delay in the proceeding. It forms part of the substantive measure, as at completion, of the Credit Suisse rights to which IPPL was subrogated. Upon discharge of the mortgage, the contractual calculation ceased and IPPL’s subrogated entitlement crystallised at $325,961.24.

95    The interest awarded after completion serves a different purpose. It neither continues Credit Suisse’s contractual right to compound interest nor continues further contractual interest upon the interest accrued to completion. In these circumstances, it is not properly characterised as an award of interest upon interest.

96    That conclusion does not treat s 51A(2)(a) as capable of avoidance merely by describing accrued interest as principal. The post-completion interest is awarded as part of the equitable working out of IPPL’s crystallised subrogated entitlement, being an entitlement arising under a rule of law whose operation is preserved by s 51A(2)(d). The Federal Court rates are adopted as the measure of that award. Because IPPL does not also receive any part of the actual earnings of the controlled monies account attributable to the subrogated component, no question of double recovery arises.

Conclusion

97    IPPL’s subrogated entitlement crystallised upon completion and discharge of the Credit Suisse mortgage on 26 February 2021 at $325,961.24, comprising principal of $280,000 and contractual interest accrued to that date of $45,961.24. The contractual calculation then ceased. The entitlement did not thereafter become a proportionate beneficial interest in the Surplus Funds or their earnings.

98    In the equitable working out of IPPL’s subrogated entitlement, simple interest is to be allowed on the crystallised sum of $325,961.24 from 27 February 2021 to the date of judgment. That interest is to be calculated by applying, for each relevant half-yearly period, the applicable pre-judgment rate published by this Court. IPPL is not also entitled, in respect of its subrogated entitlement, to any part of the interest or other earnings actually received on the controlled monies account.

99    The Hu Parties’ primary submission, that the completion amount be converted into a proportionate share of the Surplus Funds, and their alternative submission, that post-completion interest should be confined to the $280,000 principal, are rejected. The parties are to calculate the resulting amount in accordance with these reasons and submit agreed orders or, if agreement cannot be reached, competing forms of order that identify any remaining point of difference.

Issue 5 - Indemnity costs

The issue

100    The Hu Parties do not oppose an order that they pay 50% of IPPL’s costs on the ordinary basis. IPPL submits that the same share of its costs should be paid on an indemnity basis from 1 October 2022 by reason of an offer dated 15 September 2022. Alternatively, IPPL relies on offers dated 20 April 2023 and 22 November 2023 and seeks indemnity costs from 28 April 2023 or 14 December 2023 respectively. The Hu Parties oppose each basis on which indemnity costs are sought and submit, in effect, that their liability for IPPL’s costs should remain on the ordinary basis throughout.

The agreed liability for 50% of IPPL’s ordinary costs

101    IPPL succeeded in establishing its subrogated interest and its equitable proprietary interest in the Surplus Funds and in resisting the contention that those interests were postponed to any interest asserted by the Hu Parties. The Hu Parties opposed those claims. Those issues occupied a substantial part of the proceeding and IPPL obtained substantive relief against the position advanced by the Hu Parties. In those circumstances, there is an appropriate basis for the Hu Parties to bear a substantial proportion of IPPL’s costs.

102    The proposed apportionment also recognises that the proceeding involved other parties and other claims, including the separate contest with Great Lands. IPPL does not seek to impose the whole of its costs on the Hu Parties. The Hu Parties’ acceptance of liability for 50% of IPPL’s costs on the ordinary basis reflects a reasonable allocation of responsibility for the costs of the issues on which IPPL and the Hu Parties were opposed. I am satisfied that it is appropriate to make an order to the effect of the parties’ agreement.

103    That parties’ agreement does not determine whether the Hu Parties’ share of IPPL’s costs should be assessed on an indemnity basis from any of the dates advanced by IPPL. That question depends on whether IPPL has established that the Hu Parties acted unreasonably in not accepting one or more of its offers.

Applicable principles

104    The power to award indemnity costs forms part of the broad discretion conferred by s 43 of the FCA Act. The usual order is that the unsuccessful party pay the successful party’s costs on the ordinary basis. A departure from that position requires a sufficient reason, and the discretion must be exercised judicially: Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [5]-[8] (Nicholas, Yates and Beach JJ).

105    Where reliance is placed on a Calderbank offer (taking its name from Calderbank v Calderbank [1975] 3 All ER 333), the offeror must establish that the offer involved a real and genuine compromise and that the offeree’s failure to accept it was unreasonable having regard to the circumstances existing at the time the offer was made. The fact that the offeree ultimately obtained a less favourable result is relevant to assessing the value of the compromise offered, but does not of itself establish unreasonableness. The assessment is prospective and must not be distorted by hindsight: CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] (Moore, Finn and Jessup JJ); Brosnan v Katke [2016] FCAFC 156 at [6] (Gleeson J, Dowsett and Edelman JJ agreeing).

106    The relevant considerations include the stage of the proceeding at which the offer was made, the period for which it remained open, its clarity and capacity for acceptance, the extent of the compromise, the parties’ knowledge of the facts and issues, any conditions attached to acceptance, whether indemnity costs were foreshadowed, and the litigation risks reasonably apparent at the time. The assessment must also take account of the nature of the proceeding. Those considerations are neither exhaustive nor to be applied as a checklist, and no one factor is determinative: Anchorage Capital Partners at [7].

Preliminary observation

107    In the present context, the proceeding was a commercially complex, multiparty dispute concerning competing claims to a limited fund. The claims depended on different legal and equitable doctrines, including resulting trusts, tracing, subrogation, statutory avoidance, priority, and postponement. The decisive issues were distilled over an extended period from a substantially larger body of contested facts, evidence and legal propositions. To recognise that is not to engage in hindsight following delivery of judgment. It was an enduring feature of the proceeding and formed part of the context in which each offer had to be evaluated.

108    The principal judgment resolved the competing claims. That does not mean that the route to that resolution was equally clear when the offers were made. The reasonableness of the Hu Parties’ decisions must be assessed against the commercial and forensic uncertainty confronting them at those times, including uncertainty as to the character, extent and priority of IPPL’s claims and the effect of the claims advanced by Great Lands and the other parties.

The September 2022 offer

109    IPPL made an offer to the Hu Parties dated 15 September 2022, served on 16 September 2022, which remained open until 30 September 2022. The offer provided two alternatives. Under the first, IPPL would assign its relevant rights, title, interests and claims concerning the Superba Property and the Surplus Funds to the Hu Parties for $900,000, payable within 60 days. Under the second, the Hu Parties would pay $450,000 within 30 days and IPPL would retain specified deferred rights to participate in any recovery, together with one of several alternative deferred payments.

110    The offer also required the Hu Parties to indemnify IPPL and its liquidators against any adverse costs orders made in respect of the assigned claims from the date of the assignment. Each side was otherwise to bear its own costs. The transaction was subject to any approval required from the Committee of Inspection, the Court or IPPL’s creditors.

IPPL’s submission

111    IPPL submits that the $900,000 alternative was straightforward, capable of acceptance independently of the other alternative, and represented a substantial commercial compromise. The offer was made well before the hearing, identified the claims and their legal and factual bases, remained open for 14 days, and expressly foreshadowed an application for indemnity costs. IPPL relies on the eventual value of its declared interests to submit that acceptance of the $900,000 alternative would have produced a materially better outcome for the Hu Parties.

112    IPPL further submits that the need for approval under s 477(2B) of the Corporations Act 2001 (Cth) did not prevent the offer from being capable of acceptance or relied upon for the purpose of an indemnity costs application. It relies on Re NewSat Ltd (in liq) [2022] FCA 1559 at [36] (Stewart J) and on cases in which the rejection of an offer made by a liquidator resulted in an indemnity costs order.

Consideration

113    The September 2022 offer provides IPPL’s strongest basis for indemnity costs. The first alternative identified a fixed “purchase price” of $900,000 and was capable of acceptance independently of the more complex contingent calculations contained in the second alternative. Viewed against the value of the interests IPPL ultimately established, the amount of $900,000 represented a genuine financial concession. The offer was also explicit as to the cost order that IPPL would seek if it were not accepted.

114    The fact that the transaction required approval under s 477(2B) is not, by itself, decisive. A liquidator’s need to obtain approval for a transaction of the relevant kind does not render an offer expressed to be subject to that approval incapable of acceptance. Nor does the existence of that condition establish that approval would have been refused. IPPL is therefore correct to submit that the approval condition cannot alone answer its application.

115    The offer nevertheless had features which materially affected the reasonableness of its rejection. It did not provide for IPPL’s claims to be discontinued or finally resolved. It proposed that the claims be assigned to the Hu Parties. Acceptance would therefore have transferred to the Hu Parties both the prospective benefit of IPPL’s claims and the responsibility, cost and risk of prosecuting those claims against other parties. The requirement that the Hu Parties indemnify IPPL and its liquidators against adverse costs orders made in respect of those claims from the date of assignment reinforced the transfer of litigation risk.

116    The offer also required the Hu Parties to fund the purchase price independently of the Surplus Funds at a time when their entitlement to the fund remained subject to competing claims. The claims of Great Lands and Jing Spring Hill (which ceased to be an active party on about 7 June 2023) were then advanced on bases which, if successful, were said to be capable of substantially exhausting the available fund. IPPL’s claims were themselves contested as to their character, factual foundation, subrogation, proprietary status, priority and possible postponement.

117    These were not difficulties exposed only by my reasons. They were features of the proceeding at the time the offer was received. The Hu Parties were required to assess whether to pay $900,000 for claims whose value depended on the resolution of a substantial and complex body of contested evidence and multiple interrelated legal and equitable issues, while also assuming the costs and risks associated with pursuing those claims.

118    The offer remained open for 14 days. That period was not nominal, but it was limited having regard to the nature of the proposed transaction and the context in which it fell to be addressed. The decision required more than a comparison between the purchase price and the amount asserted in any particular claim. It required an assessment of the value of an assignment of contested litigation rights, the funding and adverse-costs exposure attached to those rights, the possible effect of the competing claims of other parties upon the fund, and the implications of the requirement for external approval.

119    The ultimate result confirms that the $900,000 alternative involved a substantial compromise. It does not of itself establish that the Hu Parties acted unreasonably in declining to accept it. The offer is to be evaluated as a proposal for the assignment of contested claims in the circumstances then existing, not as an opportunity to acquire rights whose validity and value had already been determined.

120    The authorities concerning offers made by liquidators do not produce a different result. They demonstrate that neither the offeror’s status as a liquidator nor the need for approval necessarily prevents reliance on a Calderbank offer: Jainti Pty Ltd v Fraser Panorama Pty Ltd (No 2) [2021] NSWSC 965 at [57]-[71] (Ward CJ in Eq); Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (No 3) [2016] VSC 431 at [40]-[42] (Daly AsJ). They do not establish that an offeree acts unreasonably by rejecting an offer where, on the terms presented here, the proposed transaction transfers to the offeree unresolved litigation together with its associated costs and risks.

121    I am not satisfied that the Hu Parties acted unreasonably by not accepting the September 2022 offer. Accordingly, IPPL’s reliance on that offer does not justify an order that their share of IPPL’s costs be assessed on an indemnity basis from 1 October 2022.

The April 2023 offer

122    The offer dated 20 April 2023 was addressed jointly to Great Lands and the Hu Parties and remained open for seven days. It proposed two alternatives: payment of $800,000 within seven days after the parties executed a deed of settlement and release, or payment of $850,000 within 30 days after the determination of the proceeding, supported by first registered mortgages over real property in New South Wales and subject to relevant approvals. Under either alternative, the parties were to execute consent orders providing for IPPL to discontinue its claim, with no orders as to costs.

Consideration

123    The April 2023 offer was, in some respects, more expressly directed to ending IPPL’s participation in the litigation than the September 2022 offer. It proposed the discontinuance of IPPL’s claim rather than assignment of its rights and claims. By April 2023, the parties also had approximately seven further months in which to investigate and consider the competing claims.

124    Those matters do not establish that the Hu Parties acted unreasonably in rejecting the offer. The offer was made jointly to the Hu Parties and Great Lands. Those parties had competing claims to the same fund and were not in a common position. Neither the Hu Parties nor Great Lands could accept the offer independently. They first had to agree whether to accept the offer, which alternative to select, and how the financial and other obligations arising under the selected alternative would be allocated between them.

125    The offer contemplated a deed of settlement and release, but no draft of the proposed deed was supplied. The releases extended beyond a simple discontinuance of IPPL’s pleaded claims and included claims involving Mr Zhang and Mr Hu. The Hu Parties and Great Lands therefore did not have before them all of the terms necessary to assess the legal effect of acceptance. Further negotiation was required as to the identity of the parties to the deed, the scope of the releases and the other terms and obligations to be included in the deed.

126    The deferred-payment alternative also required security over real property but did not identify the properties to be offered, the terms or priority of the mortgages, or the allocation of security between the joint offerees. The offer therefore left unresolved matters including the security to be provided by each offeree and the obligations that security would support. Those were not matters of mechanical implementation. Agreement on them was necessary before the proposed settlement could be reduced to binding and complete terms.

127    The seven-day period was particularly short in that context. The Hu Parties and Great Lands were required not only to assess IPPL’s claims, but also to coordinate with each other despite their competing interests, select between the two alternatives, resolve questions concerning releases and security, and negotiate terms that were not specified in the offer.

128    The commercial and forensic context remained complex. Although the proceeding had developed since September 2022, the competing proprietary, statutory and priority claims had not been reduced to the defined issues resolved in the principal judgment. The eventual result does not establish that the terms absent from the offer were immaterial or that agreement between the joint offerees could reasonably have been reached within seven days.

129    IPPL has not established that the April 2023 offer was capable of immediate and unqualified acceptance without material further agreement or otherwise demonstrated that the Hu Parties acted unreasonably in declining to accept it. The offer does not justify an order that the Hu Parties’ share of IPPL’s costs be assessed on an indemnity basis from 28 April 2023.

The November 2023 offer

130    The offer dated 22 November 2023 adopted a structure similar to the April offer. It was again addressed jointly to Great Lands and the Hu Parties and proposed alternatives of $800,000 or $850,000, with the parties to execute consent orders providing for the discontinuance of IPPL’s claim with no order as to costs. It remained open for 21 days.

Consideration

131    The longer period for acceptance weighs more favourably for IPPL than the seven-day period allowed by the April offer. By November 2023, the parties had also progressed further in preparing their respective cases. The offer proposed a substantial monetary compromise and expressly foreshadowed the application for indemnity costs on which IPPL now relies.

132    The central problems affecting the April offer nevertheless remained. The November offer was addressed jointly to parties with competing interests. Neither Great Lands nor the Hu Parties could accept it independently of the other. The offer required them to agree whether to accept it, select between the alternatives, and allocate between themselves the resulting financial and security obligations.

133    Once more, the proposed deed of settlement and release was not supplied. The scope and operation of the contemplated releases were therefore not fully stated. The deferred alternative again depended on security arrangements whose essential commercial terms were not identified. The longer acceptance period provided additional time but did not render the offer self-contained or remove the need for coordination and substantive further negotiation.

134    The November offer must also be evaluated in the context of the proceeding as it then stood. The hearing was approaching, but the issues remained commercially and legally complex. The parties continued to dispute the character of IPPL’s payments, the existence and extent of its proprietary and subrogated rights, the competing claims to the Surplus Funds, and the priority or postponement of any interests established. The principal judgment ultimately resolved those issues in IPPL’s favour to a substantial extent. However, that result does not establish that, when the offer was made, the Hu Parties acted unreasonably in assessing the issues as remaining unresolved.

135    The absence of complete settlement terms is particularly important where an indemnity costs order is sought on the basis that non-acceptance was unreasonable. An offeree need not establish that the offer was legally incapable of producing any agreement. The question is whether, in all the circumstances, the offeree acted unreasonably by not accepting what was actually offered. Where material terms remained to be supplied or agreed between parties with competing interests, the Court should be slow to characterise non-acceptance as unreasonable. The authorities relied on by the Hu Parties support the need to consider the certainty, completeness and capacity for acceptance of the offer as framed: Vieira v O’Shea (No 2) [2012] NSWCA 121 at [10] (Basten and Meagher JJA and Handley AJA); Walsh v Umoona Tjutagku Health Service Aboriginal Corporation (No 3) [2017] FCA 1203 at [41] (Charlesworth J); Wieland v Texxcon Pty Ltd [2014] VSCA 199; 313 ALR 724 at [132] (Nettle, Hansen and Beach JJA).

136    IPPL has not established that the Hu Parties acted unreasonably in declining to accept the November 2023 offer. It follows that the offer does not justify an order that the Hu Parties’ share of IPPL’s costs be assessed on an indemnity basis from 14 December 2023.

Conclusion

137    The Hu Parties are to pay 50% of IPPL’s costs of the proceeding on the ordinary basis. That apportionment reflects IPPL’s substantive success in respect of the claims opposed by the Hu Parties, while recognising the broader multiparty character of the proceeding, including the existence of other claims and parties.

138    IPPL has not established that the Hu Parties acted unreasonably in declining to accept the offers dated 15 September 2022, 20 April 2023, and 22 November 2023. IPPL’s application for an order that the Hu Parties’ 50% share of its costs be assessed on an indemnity basis is dismissed. Accordingly, the Hu Parties’ liability for that share remains on the ordinary basis throughout.

CONCLUSION

139    The parties are to confer and provide proposed joint short minutes of order giving effect to these reasons. If agreement cannot be reached, they are to provide proposed orders identifying precisely any matters that remain in dispute.

Associate:

Dated:    3 September 2026

SCHEDULE OF PARTIES