Supreme Court New South Wales Medium Neutral Citation: In the matter of Medical Training and Development Pty Ltd [2021] NSWSC 1113 Hearing dates: Submissions as to costs 25 August 2021 Decision date: 01 September 2021 Jurisdiction: Equity - Corporations List Before: Black J Decision: There be no order as to costs of the proceedings as between the Plaintiff and the First, Third, Fifth, Sixth and Seventh Defendants. Catchwords: COSTS — Party/Party — Exceptions to general rule that costs follow the event — Whether to depart from ordinary position — Where the active defendants relied upon a fabricated document. Cases Cited: - Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 123 - Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 Category: Costs Parties: Rashid Iqbal (Plaintiff) Medical Training and Development Pty Ltd (First Defendant) Samina Tamsin (Second Defendant) AN Hussain Ahmed (Third Defendant) Rajaul Mallick (Fourth Defendant) Rehana Ahmed (Fifth Defendant) Arafat Hussaini (Sixth Defendant) Assif Hussaini (Seventh Defendant) Representation: Counsel: J T Johnson (Plaintiff) E White (First, Third, Fifth, Sixth, Seventh Defendants) Solicitors: DC Balog & Associates (Plaintiff) Adams Wilson Lawyers (First, Third, Fifth, Sixth, Seventh Defendants) File Number(s): 2020/346794 Judgment 1. By Originating Process filed on 7 December 2020, the Plaintiff, Dr Iqbal, sought a range of relief in respect of the affairs of Medical Training and Development Pty Ltd ("MTD") which was opposed by the First, Third, Fifth, Sixth and Seventh Defendants ("Active Defendants"). I summarised the outcome of the proceedings in paragraph 33 of my judgment delivered on 6 August 2021 as follows: "In summary, Dr Iqbal has succeeded in establishing that the [General Shareholders Agreement] GSA does not document the relationship between the parties and that no effective corporate step was taken to transfer any shares that he held in MTD. He has not established the basis for any other relief that he sought, although I will reserve liberty for him to apply within 7 days to seek an order under s 1322 of the Act that a share register for MTD be brought into existence and that he be recorded as a shareholder in MTD, or that ASIC's records be rectified to record him as a shareholder in MTD, on terms that he pay the amount that he contracted to pay the initial capital in consideration of his acquisition of the shares in MTD. If Dr Iqbal does not exercise that liberty to apply within seven days, then the proceedings should be dismissed without any relief being ordered in his favour. My preliminary view is that, in that case, there should be no order as to the costs of the proceedings, where relief sought and the result of the proceedings will not resolve any wider issues as to the future conduct of MTD's affairs. In those circumstances, it does not seem to me that it could be fairly said that either party had been successful in the outcome of the proceedings." 1. Following the delivery of that judgment, Dr Iqbal filed an interlocutory application which sought the orders to which I referred in that paragraph, and an order that he pay or otherwise satisfy the amount of $100,000 in satisfaction of his obligations as to initial capital in consideration of his acquisition of the shares in MTD. When that Interlocutory Process was returnable in the Corporations Motions List on 23 August 2021, Mr Johnson, who appears for Dr Iqbal, advised that it would no longer be pursued and I accordingly made orders that the proceedings be dismissed. Mr White, who appears for the Active Defendants, then indicated that they would seek an order as to the costs of the substantive proceedings, and I ordered that the parties submit their draft orders and short submissions as to any difference between them, on the agreed basis that the costs of the proceedings would be determined in Chambers. 2. I will first address the relevant legal principles, which are not controversial. Mr Johnson, who appears for the Plaintiff, accepts that costs would normally follow the event, unless some reason is shown to the contrary and refers to my summary of the applicable principles in Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 123 at [2]-[5] as follows: "The principle that costs will generally follow the event is, of course, well-established. Section 98 of the Civil Procedure Act 2005 (NSW) confers a discretionary power to determine costs on the Court ("UCPR"). Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) in turn provides that: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." A successful party has a "reasonable expectation" of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [22], [134]. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that: "… underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs." That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98]. In Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [7] –[9], McColl JA in turn observed that: "Section 98 of the Civil Procedure Act 2005 (NSW) confers a wide discretion on the court with respect to costs. The general rule is that court costs follow the event unless the court makes some other order pursuant to the discretion conferred by Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1. As Beazley JA explained in Baker v Towle [ [2008] NSWCA 73; (2008) 39 Fam LR 323 at [11] (Mathews AJA agreeing)], in most litigation, UCPR r 42.1 "operates in a straightforward way, 'the event' being readily identifiable as a judgment for the plaintiff or the defendant on the claim. In that sense, 'the event' to which the rule refers is the result of the proceedings, so that the party who succeeds on the claim before the court is awarded costs, unless the court, pursuant to the discretion conferred by r 42.1, makes 'some other order'". Underlying both the general rule that costs follow the event, and qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs." [footnotes omitted] I have here drawn on my summary of the applicable principles in a somewhat similar context in Re ICB Medical Distributors Pty Ltd and The International College of Biomechanics Pty Ltd; ICB Gait and Posture Clinic Pty Ltd; Foot Steps Orthotics Pty Limited [2019] NSWSC 174 at [5] ff and Re Bicher & Son Pty Ltd [2020] NSWSC 878 for the summary that appears above." 1. Mr White in turn refers to the Court of Appeal's decision in Valmont Interiors Pty Ltd v Giorgio Armani (Australia) Pty Ltd (No 3) [2021] NSWCA 160 at [20]-[25], where the Court of Appeal observed that: "Costs are in the broad discretion of the Court with the general rule being that they should follow the event or result (Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1) and that, unless the Court orders "otherwise", those costs are to be assessed on the "ordinary basis" (UCPR r 42.2). As explained in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [14] (Leichhardt), the rationale underlying Calderbank offers is to: …facilitate the public policy objective of providing an incentive for the disputants to end their litigation as soon as possible. Furthermore … it can be seen as also influenced by the related public policy of discouraging wasteful and unreasonable behaviour by litigants. The Court (comprised of Meagher and Brereton JJA, and Simpson AJA) noted in Hunter v Roberts (No 2) [2019] NSWCA 235 at [6] (Hunter) that: "The making of an offer of compromise in the form of a Calderbank letter may justify a departure from the ordinary basis on which costs are awarded and assessed and, as Giles JA observed in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], the ultimate 'question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule'." In Byrmount Pty Ltd t/a Watson Toyota (ACN 003 200 459) v Cummins [2005] NSWCA 69 , Beazley JA (as her Honour then was, and with whom Ipp and McColl JJA agreed) outlined that there were two competing views as to how the Court exercised its discretion where there had been a Calderbank offer. Her Honour noted (at [12]) that one view was that taken in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, namely that a Calderbank offer "gives rise to a prima facie presumption that the party who rejects the offer should pay the other party's costs on an indemnity basis should the former receive a less favourable result than the offer of compromise". However, the alternative view, and the one consistently endorsed by this Court, is that the rejection of (what ultimately transpires to be) a more favourable offer is not decisive as to the awarding of costs on an indemnity basis: see Jones v Bradley (No 2) [2003] NSWCA 258 at [6] –[9]; Leichhardt at [19]; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] (SMEC); Ambulance Service of New South Wales v Worley (No 2) (2006) 67 NSWLR 719; [2006] NSWCA 236 at [18]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] (Miwa); Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124; Perisher Blue at [14]; and Ku-ring-gai Council v Chan (No 2) [2018] NSWCA 73 at [6] . A corollary of this is that, as Gleeson JA (with whom Meagher and McCallum JJA) noted in Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 at [68] : "There is no presumption that an offeree who does not accept an offer, and does not obtain a more favourable judgment, will necessarily pay indemnity costs from the date of the offer: Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [9]; Miwa Pty Ltd v Siatan Properties Pty Ltd (No 2) [2011] NSWCA 344 (Miwa) at [8]; Jones v Bradley (No 2) [2003] NSWCA 258 at [6] –[9] ." In Miwa at [12], citing the Victorian Court of Appeal's decision in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, Basten JA (with whom McColl and Campbell JJA agreed) identified the following considerations as being relevant to the determination of whether the refusal to accept a Calderbank offer was unreasonable, including: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it." 1. The Active Defendants sought orders that the Originating Process be dismissed, which were not necessary where the proceedings had already been dismissed on 23 August 2021, and that Dr Iqbal pay their costs on the indemnity basis or alternatively on the ordinary basis, as agreed or as assessed. Mr White submitted that the Active Defendants had opposed the orders sought by Dr Iqbal on the ground that he had failed to pay his contribution of the initial capital to MTD under the agreement on which he relied, the General Partnership Agreement ("GPA") and he pointed to the absence of any evidence led by Dr Iqbal of any contribution of initial capital and to the Active Defendants' evidence that such contribution had not been made. Mr White also points to the nature of the affidavit evidence led by Dr Iqbal in support of his interlocutory application, which was not read. They submit that, where Dr Iqbal has now not sought to proceed with the Interlocutory Process or to make the contribution necessary to be issued the relevant shares, and the proceedings have been dismissed, he has been wholly unsuccessful in the proceedings. Mr White also refers to a letter from the Active Defendants' solicitors to Dr Iqbal's solicitors which had previously pointed to their contention that Dr Iqbal had not paid the money that was required to be paid under the GSA or GPA, and had referred to a claim for indemnity costs if proceedings were commenced. Mr White submits that that letter amounts to a Calderbank offer, although it is not apparent that it had any element of compromise about it. Alternatively, Mr White submits that the Active Defendants are entitled to their costs on the usual basis that costs follow the event. 2. Mr Johnson in turn refers to other matters which had been in issue in the proceedings, including my finding that a document on which the Active Defendants relied had been fabricated, and submits that that is sufficient reason to depart from the ordinary rule. In my view, the reliance on a fabricated document as a significant aspect of the Active Defendants' case is sufficient reason not to order indemnity costs in their favour and also sufficient reason to depart from the ordinary rule as to costs. For these reasons, I maintain the preliminary view that I expressed in the substantive judgment, albeit on a somewhat different basis from that which I had there indicated. 3. I make the following orders, substantially in the form proposed by Mr Johnson, in addition to those which I made on 23 August 2021: 1 As between the Plaintiff and the First, Third, Fifth, Sixth and Seventh Defendants, there be no order as to the costs of the proceedings, other than for the costs of the Interlocutory Process as ordered on 23 August 2021. 2 There otherwise be no order as to costs as between the Plaintiffs and those Defendants who had filed submitting appearances. 3 There be no order as to costs in relation to the issues as to costs after 23 August 2021. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 September 2021