ZACD Group Limited v Bao (Costs)

This Federal Court decision is not the main trial judgment. It is a later ruling on interest and costs after ZACD Group Limited and ZACD (Development4) Ltd had already succeeded against Richard Bao on claims that included misleading and deceptive conduct and negligent misstatement.

The Court made clear that the full background sits in the earlier principal judgment, ZACD Group Limited v Bao [2025] FCA 1500. This matters because readers looking for the detailed commercial story, the alleged representations, and the full liability reasoning will not find all of that here. What this judgment does provide is a clear picture of the financial consequences that followed once the plaintiffs had won.

The earlier judgment had awarded ZACD $4.7 million, described here as the unrecovered balance of the $37.5 million paid into the trust account. It had also awarded $610,327.67 for unrecovered legal costs incurred in the Landerer proceeding, which the Court treated as reasonable mitigation costs. The remaining questions were how interest should be calculated on those amounts, and what costs order should follow in light of an earlier settlement offer.

There were two interest issues. First, should pre-judgment interest on the main damages be calculated on the whole $37.5 million that ZACD had paid into the trust account, or only on the $4.7 million that the Court had actually awarded against Mr Bao? Secondly, for the $610,327.67 mitigation costs, should interest run from when the relevant invoices fell due or from when the payments were actually made?

There was also a costs issue about a settlement offer made on 18 July 2023. ZACD had made an offer in Form 45 proposing judgment against Mr Bao for $500,000 and that the proceeding otherwise be dismissed. The problem was technical but important. Rule 25.02 required the notice containing the offer to be signed by the offeror, and this notice was unsigned.

ZACD asked the Court to dispense with that non-compliance under rule 1.34. If the Court did that, the offer could still operate as a formal offer to compromise under the Rules and trigger the costs consequences in rule 25.14. That would mean standard costs up to a certain point and indemnity costs after that point, provided the trial outcome was more favourable to ZACD than the offer.

On the first interest issue, the Court accepted Mr Bao's position. It said the primary purpose of pre-judgment interest under section 51A of the Federal Court of Australia Act is to compensate a successful plaintiff for the loss suffered by being kept out of its money. In the principal judgment, the Court had found it was a just outcome that Mr Bao be responsible for 12.5% of ZACD's $37.5 million loss, which came to $4.7 million. The Court also noted that ZACD's pleading had sought interest on $4.7 million, not on $37.5 million. For those reasons, interest was calculated by reference to the $4.7 million damages award, not the whole underlying loss.

That produced pre-judgment interest of $1,669,008.63 on the $4.7 million damages amount.

On the second interest issue, the Court said interest accrues from the point at which the loss is actually incurred, meaning the date the relevant payments were made, not when the debts were first incurred. There was no evidence of the precise date each invoice had actually been paid, so the Court proceeded on the basis that each invoice was paid on its due date. Using that approach, the Court awarded a further $193,761.98 in pre-judgment interest on the $610,327.67 mitigation costs.

The total pre-judgment interest ordered was therefore $1,862,770.61.

On costs, the Court dispensed with compliance with rule 25.02 even though the Form 45 notice was unsigned. The Court considered that the offer had been made in Form 45, attached to a signed covering letter, clearly identified as an offer under the Federal Court Rules, open for 14 days as required, and otherwise compliant. In those circumstances, the Court treated the offer as effective for costs purposes.

Because the offer was not accepted and the trial outcome was more favourable to ZACD, the Court ordered that Mr Bao pay the plaintiffs' costs on the standard basis up until 11.00 am on 20 July 2023 and on an indemnity basis after that time. The Court also said that whether Mr Bao had acted unreasonably in failing to accept the offer had no relevance in that context.

One of the most useful parts of this judgment for business readers is the Court's treatment of the defective settlement offer. The offer was not perfect. The notice itself was unsigned, which meant it did not strictly comply with rule 25.02. But the Court looked at the surrounding documents and the practical reality of what had been sent.

The offer was in the correct Form 45. It was attached to a signed covering letter. The covering letter made it plain that the offer was being made under the Federal Court Rules. The offer was open for 14 days, which matched the Rules. The Court also noted that the offer was otherwise compliant and that the defendant did not submit to the contrary.

The practical effect is significant. The Court was prepared to cure the technical defect and give the offer full procedural force. For businesses, that means two things. First, if you are making a formal offer, you should still aim for strict compliance because it reduces argument and risk. Secondly, if you are receiving an offer, do not assume a technical defect makes it commercially safe to ignore. A court may decide the defect should be dispensed with, especially where the offer's purpose and content were clear.

This part of the judgment also shows the difference between a formal offer to compromise and a Calderbank offer. The Court noted there was already no dispute that ZACD was entitled to indemnity costs following rejection of a Calderbank offer on 3 September 2025. The issue here was whether ZACD should also get indemnity costs by reason of the earlier 18 July 2023 Form 45 offer. Once the Court treated that offer as effective under the Rules, the formal costs consequence followed.

This case is a strong reminder that the commercial risk of litigation is broader than the pleaded damages figure. A business can lose on liability, then face a substantial additional amount for pre-judgment interest, and then face an even larger costs burden if it rejected a settlement offer that turned out to be better than the trial result.

The interest ruling is also commercially important. The Court did not simply apply interest to the largest historical amount in the story. It focused on the amount for which the defendant had actually been held responsible. That is a useful reminder that interest analysis depends on the legal basis of the award, the findings in the principal judgment, and the way the claim was framed.

The costs ruling is the sharper practical lesson. If your business receives a formal settlement offer in Federal Court proceedings, you should assess it promptly against the likely trial outcome and the possible costs consequences. A minor defect may not save you. If your business is making an offer, make sure the form, timing and accompanying documents are handled carefully because a valid offer can materially improve your costs position later.

Businesses should also keep records that may matter to interest calculations. In this case, the Court had no evidence of the exact dates on which invoices had been paid, so it proceeded on the basis that each invoice was paid on its due date. Better records can reduce uncertainty and may affect the final amount awarded.

The judgment was delivered on 16 December 2025 by Downes J in the Federal Court of Australia. It was determined on the papers after the principal judgment had been delivered on 3 December 2025. The Court's orders dealt with three things: dispensing with compliance for the unsigned Form 45 offer, awarding total pre-judgment interest of $1,862,770.61, and ordering standard costs up to 11.00 am on 20 July 2023 and indemnity costs after that time.

This page should be read as a case note on costs and interest only. The underlying misleading and deceptive conduct findings, and the fuller commercial narrative behind the dispute, sit in the principal judgment referred to by the Court.

This note is based on the Federal Court judgment ZACD Group Limited v Bao (Costs) [2025] FCA 1601. The Court expressly referred to ZACD Group Limited v Bao [2025] FCA 1500 for the relevant background and the main outcome on liability and damages.

Because this judgment does not reproduce the full factual findings from the principal case, the discussion here is intentionally focused on pre-judgment interest, offers to compromise, Calderbank offers and costs consequences. Readers wanting the full misleading conduct story should consult the principal judgment as well.