Supreme Court New South Wales Medium Neutral Citation: Angela Campbell Pty Ltd as Trustee of the Halina Superannuation Fund v Hengrove Hall Pty Ltd [2016] NSWSC 1219 Hearing dates: 6 June 2016 Date of orders: 31 August 2016 Decision date: 31 August 2016 Jurisdiction: Equity Before: Robb J Decision: (1) Order that the first plaintiff pay the defendant's costs of the first plaintiff's notice of motion filed on 30 May 2016. (2) Order that all of the parties bear their own costs of the balance of the proceedings. (3) Order that any documents produced on subpoena or notice to produce, as well as the exhibits, may be returned forthwith in accordance with the Rules. Catchwords: COSTS – discontinuance of proceedings – application for alternative costs order made by plaintiffs under UCPR r 42.19(2) – first plaintiff further seeks indemnity costs following Calderbank offer – consideration of circumstances of discontinuance – held first plaintiff achieved substantial success – held unreasonable conduct by defendant – held entitlement to an alternative costs order made out – whether Calderbank offer was valid – held there was no genuine offer of compromise – held Calderbank offer was not a valid basis for ordering indemnity costs as the court has not decided the issues in dispute – held entitlement to indemnity costs not made out – held parties to bear their own costs of the proceedings other than in respect of the first plaintiff's interlocutory notice of motion – first plaintiff should bear the costs of the interlocutory notice of motion as the court declined to grant interlocutory relief and ordered that the costs of the notice of motion be the defendant's costs in the cause Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 Calderbank v Calderbank [1975] 3 All ER 333 Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 Fordyce v Fordham [2006] NSWCA 274; 67 NSWLR 497 In the Matter of Hengrove Hall Pty Ltd [2015] NSWSC 1632 Leichhardt Municipal Council v Green [2004] NSWCA 341 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 Oshlack v Richmond River Council (1998) 193 CLR 72 Category: Costs Parties: Angela Campbell Pty Ltd (ACN 094 067 437) As Trustee For The Halina Superannuation Fund (first plaintiff) Angela Katarina Campbell (second plaintiff) Hengrove Hall Pty Ltd (defendant) Representation: Counsel: B Oliak (plaintiff) J T Johnson (defendant) Solicitors: Hudson Law (plaintiff) Hall Partners (defendant) File Number(s): 2015/293400 Publication restriction: None Judgment 1. The issue before the court is whether the court should 'order otherwise' for the purposes of Uniform Civil Procedure Rules 2005 (NSW) r 42.19(2), following the plaintiffs discontinuing these proceedings by orders made on 6 June 2016. 2. Rule 42.19(2) provides: Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. 1. The plaintiffs' position is that the court should make an order that the defendant pay their costs of the proceedings on the ordinary basis up to the date the plaintiffs served a Calderbank offer on 20 November 2015, and thereafter on the indemnity basis. The plaintiffs delivered detailed written submissions on the issue of costs dated 17 June 2016. 2. The defendant, by detailed written submissions dated 27 June 2016, submits that the court should not 'order otherwise', so the result should be that r 42.19(2) will be left to operate in accordance with its terms, and the plaintiffs will be required to pay the defendant's costs of the proceedings on the ordinary basis. 3. The following principles govern the question of when it is appropriate for the court to 'order otherwise' for the purposes of r 42.19(2). 4. A plaintiff who discontinues proceedings must ordinarily pay the costs of the party against which the discontinued claim was brought, unless the court otherwise orders: UCPR r 42.19(2). This would mean that the first plaintiff would pay the costs of the defendant. The rule falls short of a presumption that costs will be ordered against the discontinuing party: Fordyce v Fordham [2006] NSWCA 274; 67 NSWLR 497. However, it does create a starting point by requiring the plaintiff to pay the defendant's costs of the proceedings unless that outcome is displaced by a discretionary decision. 5. The effect of r 42.19 is that if some other order is to be made, the discontinuing party will have to show some proper justification for a different costs consequence: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 and Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365. 6. The circumstances on which a discontinuing plaintiff may rely to persuade the court that an alternative costs order is appropriate are varied. The mere fact that the discontinuing plaintiff may have achieved some practical success, such as achieving the result it sought in the proceedings, does not by itself and without some extra circumstance, ordinarily justify the awarding of costs in favour of the discontinuing plaintiff: Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424. The extra circumstance needed is frequently found in the unreasonableness of the conduct of the defendant: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 and One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548. The unreasonableness in the conduct of the defendant may be prior to the commencement of the proceedings, where such conduct may have precipitated the litigation, or in the defence of the proceedings. 7. Although the present proceedings were discontinued by the plaintiffs, the order for discontinuance was made after the defendant had complied with some of the plaintiffs' claim for relief, and at the same time as a number of orders were made by consent in favour of the plaintiffs. The final orders will be set out below. It will therefore not be correct to consider the cost implications of the plaintiffs' conduct as if they had simply discontinued the proceedings. They discontinued the proceedings in part because they had received substantially what they sought to gain by commencing the proceedings, and in a minor part because the further prosecution of the claim would be futile (the second plaintiff sought the return of her brass nameplate, which has apparently been lost). 8. It will therefore be appropriate to consider the principles that apply to cases where proceedings are settled or discontinued in circumstances where there is utility in the proceedings being continued, either because one party has substantially succeeded, or because the further continuation of the proceedings would be futile. 9. It will be sufficient for the purpose of the determination of this costs dispute to set out the following extract from the judgment of McHugh J in Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624 and 625, where his Honour said (footnotes omitted): In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80% of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 1. In addition to the principles set out above, as the present cost dispute raises a question as to whether the Calderbank offer made on 20 November 2015 was effective, it will be appropriate to set out the following principles that govern the effectiveness of such offers; particularly when the issue is whether the letter offers a genuine compromise of the dispute. While the general rule is that costs are payable on a party/party basis, and a court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is plainly unreasonable, it may be appropriate for the court, pursuant to s 98(1)(c) of the Civil Procedure Act 2005 (NSW), to make a special cost order, for example, pursuant to the principles established in Calderbank v Calderbank [1975] 3 All ER 333. Ultimately, any order as to costs remains a matter in the court's discretion and will be awarded as the court sees fit: Oshlack v Richmond River Council (1998) 193 CLR 72. 2. In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA, with whom Bryson JA and Stein AJA concurred, confirmed that the costs consequences attendant under the general law upon an offer of compromise made in a Calderbank letter are in the court's discretion, to be exercised having regard to all of the relevant circumstances of the case. First, there is not a prima facie presumption in favour of an award for indemnity costs if the Calderbank offer is not accepted and is not bettered; secondly, a Calderbank offer that has no real element of compromise in it, which is designed merely to trigger costs sanctions, will not be treated as a genuine offer of compromise; thirdly, there is no rule that an optimistic offer is not a genuine offer. Whether or not it was reasonable to reject an offer is a question that may figure in the discretionary balance, but it is not a question which affects the genuineness of the offer. Fourthly, an applicant for an order for indemnity costs consequent upon an unaccepted Calderbank offer must show that the rejection of the offer was unreasonable. 3. Therefore, the questions for the court are whether the offer was a genuine offer of compromise, and whether it was unreasonable for the recipient of the offer not to accept the offer: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344. The onus is on the first plaintiff, being the party making a Calderbank offer, to satisfy the court that it should exercise the costs discretion in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61. 4. The parties are not in significant dispute concerning the relevant facts. They are set out in considerable detail in the parties' written submissions, and I will only refer to the facts insofar as it may be necessary to support the conclusions that I have reached concerning the cost order that the court should make in this matter. 5. The defendant is the owner of a company title building located at 193 Macquarie Street, Sydney, which is used for the purposes of professional rooms and offices. Members of the company are entitled under its constitution to a licence to occupy a particular suite in order to conduct a professional practice. 6. Initially, the second plaintiff, then known as Dr Angela Campbell, owned 3,268 shares, which are associated with Suite 23, in the defendant. She held the shares as trustee for the Halina Superannuation Fund (the Fund). She had a licence to carry on her medical practice in Suite 23 from at least December 2010 until February 2013. Dr Campbell then suffered from a diagnosed mental illness, and ceased to practice medicine in around late February 2013. 7. On 27 March 2013, the defendant gave written notice to Dr Campbell of alleged breaches of the licence agreement, and gave her 14 days to respond to the allegations. On 16 April 2013, Dr Campbell denied the breaches, said she had no present intention of continuing to occupy Suite 23, and that she intended to find and grant an exclusive licence to a suitable person to use Suite 23. In April 2013, the defendant disabled Dr Campbell's swipe card, changed the lock to Suite 23, and placed a sign on the door indicating that it had taken possession of the suite on 15 April 2013. 8. On 20 February 2014, the first plaintiff replaced Dr Campbell as the trustee of the Fund. Dr Campbell, who had ceased practice and was no longer registered as a medical practitioner, was made bankrupt on 8 October 2015. 9. On around 20 February 2014, the first plaintiff asked the defendant to approve it as a holder of the shares that were registered in the name of Dr Campbell. In around October 2014, the Board of Directors of the defendant (the Board) had a meeting with the children of Dr Campbell, who had become directors of the first plaintiff. The issue discussed was whether the Board would, under the constitution of the defendant, approve the first plaintiff as being the new shareholder in respect of the shares. Dr Campbell's children advised the Board that the first plaintiff intended to sub-license Suite 23 to a suitable person, and the Board advised the children that they would soon hear from the board regarding its determination. The Board did not provide the response that it agreed to provide before these proceedings were commenced. The Board did, however, in about October 2014, make available a key to Suite 23 to the children, and gave advice as to the arrangements that could be made for after-hours access to the building. 10. The first plaintiff commenced these proceedings by summons filed in court on 8 October 2015. Dr Campbell was not yet joined as a plaintiff at that stage. The first plaintiff also filed a notice of motion seeking interlocutory orders in terms of the relief sought in the summons. The first plaintiff sought an order requiring the defendant to provide a swipe card giving after-hours access to Suite 23; an order restraining the defendant from preventing or impeding access to Suite 23; an order requiring the defendant to provide the electricity meter identifier number for Suite 23; an order preventing the defendant from interfering with the quiet enjoyment of Suite 23 by the first plaintiff; and an order that any claim for damages was to be heard separately from the claims for injunctive relief. 11. By judgment given on 13 October 2015, White J declined to grant the interlocutory relief sought by the first plaintiff: In the Matter of Hengrove Hall Pty Ltd [2015] NSWSC 1632. His Honour commented on the substantial delay in the first plaintiff making its application for relief. That was a subsidiary reason for his Honour's decision to decline to grant the interlocutory relief sought. His Honour noted that the defendant had provided the electricity meter number on the date of the hearing. The primary reason for White J refusing relief was that the first plaintiff was not a member of the defendant company, and it was Dr Campbell, who was not a party at that stage, who was the party to the licence. His Honour therefore concluded that the first plaintiff lacked standing to claim the relief that it sought. White J also found, that on the proper construction of the constitution of the defendant, a shareholder was not automatically entitled to unrestricted 24 hour access, so that a shareholder could demand to be provided with a swipe card that allowed that access. 12. Relevantly, White J ordered that the costs of the notice of motion should be the defendant's costs of the proceedings. 13. In my view, it will not be appropriate for the court now to 'otherwise order', if such an order would have the effect of requiring the defendant to pay the costs of the first plaintiff's application for interlocutory relief. That claim failed. One consequence of the plaintiffs having discontinued the proceedings is that the defendant has been deprived of the opportunity to succeed on its defence on the merits. It has thereby been precluded from having the opportunity to establish its entitlement to the costs of the notice of motion. 14. Accordingly, r 42.19(2) should be allowed to take effect concerning the costs of the notice of motion, with the result that the first plaintiff should be required to pay the defendant's cost of the notice of motion. 15. White J also made an order that the proceeding should continue on pleadings. 16. Before the plaintiffs filed their statement of claim on 14 December 2015, a Calderbank offer dated 20 November 2015 was sent to the defendant in the following terms: 1. Hengrove Hall Pty Ltd is to register the transfer of shares (the Shares) relating to suite 23 of Hengrove Hall Pty Ltd from Angela Campbell to Angela Campbell Ply Ltd; 2. Hengrove Hall Pty Ltd is to enter the name of Angela Campbell Pty Ltd on the register of members and lodge the appropriate change of company details form regarding the registration to the Australian Securities & Investments Commission; 3. Hengrove Hall Pty Ltd and Angela Campbell Pty Ltd will execute a License Agreement in the form provided by the First Schedule to the Articles of Association of Hengrove Hall Pty Ltd and Hengrove Hall Pty Ltd shall give possession of suite 23 of Hengrove Hall Pty Ltd to Angela Campbell Pty Ltd; 4. Hengrove Hall Pty Ltd will not execute any purported right to sell the Shares; 5. Hengrove Hall Pty Ltd will waive any penally and/or Interest or other charges currently alleged to be owing by Angela Campbell Pty Ltd and/or Angela Campbell; 6. Hengrove Hall Pty Ltd acknowledges that Angela Campbell Pty Ltd has a right to sublicense Suite 23 pursuant to clause 12 of the licence Agreement and that it must not unreasonably withhold consent to a proposed licensee; 7. Hengrove Hall Pty Ltd will make available 2 keys and 2 swipe cards for any approved licensee and will provide up to 2 replacement keys and up to 2 replacement swipe cards when necessary on 24 hours' notice; 8. The proceedings will be dismissed with the parties to pay their own costs, subject to completion of the items set out in paragraphs (a), (b), (c) and (g) above; 9. The parties will mutually release one another from any further claims or liabilities arising from or related to the present dispute; and 10. That Hengrove Hall Pty Ltd return to Angela Campbell the brass nameplate that related to Suite 23 of Hengrove Hall Pty Ltd during the period when Angela Campbell had possession of Suite 23 of Hengrove Hall Pty Ltd, together with any other property owned by Angela Campbell or Angela Campbell Pty limited that is in Hengrove Hall Pty Ltd's possession or control. This offer is open for acceptance for a period of 14 days from the date of this letter after which time it will lapse and no longer be capable of acceptance. … 1. As I have said, the Calderbank offer was served before the plaintiffs defined their claims for relief, and the factual basis for those claims, in their statement of claim. At the point when the Calderbank offer was served, the only claims made were those set out in the summons. The effect of White J's judgment was that at least some aspects of the claims made were questionable, although White J made some observations in his judgment that suggested that aspects of the claims were arguable. His Honour said, however, that it was not seriously arguable that the licence provided for in the constitution of the defendant required 24 hour access. 2. The only areas of compromise offered in the Calderbank offer were; first, that any claim for damages to Suite 23 after Dr Campbell had vacated the premises would be abandoned; and secondly, the parties would pay their own costs. 3. The court has no evidence before it that would support a conclusion that the abandonment of any claim for damages that the plaintiffs may have had was valuable. 4. Accordingly, the effect of the Calderbank offer was substantially that the defendant would give the plaintiffs all that they asked for, and the plaintiffs would walk away on the basis that they would pay their own costs. Part of what was asked for was also the provision of two swipe cards. White J had held that the first plaintiff had no arguable claim for that relief, so the plaintiffs in part were demanding more relief than the court was likely to grant them. As the proceedings have been discontinued, the issue of whether, contrary to the interlocutory view expressed by White J, the plaintiffs were entitled to swipe cards has not been determined. 5. I will return to the issue of whether or not the Calderbank offer was effective below. 6. On 11 December 2015, a transfer as required by the constitution was provided by the plaintiffs to the defendant, and a demand was made for the registration of the first plaintiff as the shareholder of the shares. Under the constitution, the defendant was required to register the transfer unless it did not approve of the transferee. Further, the defendant had two months, pursuant to s 1071E of the Corporations Act 2001 (Cth) as provided for under the constitution of the defendant, in which to respond. The defendant had to act reasonably in making its decision. 7. The plaintiffs filed their statement of claim on 14 December 2015, several days after the transfer was delivered to the defendant. 8. By the claims for relief in the statement of claim, the plaintiffs sought to establish the following: registration of the shares in the name of the first plaintiff; the first plaintiff be given possession of Suite 23; the defendant be prevented from selling the shares; the first plaintiff would have a right to sub-license Suite 23; the first plaintiff was entitled to a licence of Suite 23; the first plaintiff be given to keys and two swipe cards; the defendant return Dr Campbell's brass nameplate; and that the defendant was not entitled to charge penalty interest on any levies payable in respect of the shares. 9. The defendant filed its defence on 29 January 2016. It admitted a substantial proportion of the allegations made in the statement of claim. One significant allegation made in par 16 was that, as at 29 January 2016, there was an amount of $2,244.10 outstanding in respect of levies payable under the constitution concerning the shares in the company. The defendant set out detailed particulars, showing payments that had been made on certain dates, and how those payments had been appropriated to various levy notices. 10. The purpose of this allegation was to rely on a provision in the constitution of the defendant, which gave the right not to register a transfer of shares in cases where the transferor was in default of its obligation to pay levies. 11. The plaintiffs assert that the defendant had not previously given the alleged outstanding levies as a ground for declining to register the transfer of the shares to the first plaintiff. 12. The plaintiffs' primary affidavits were served on about 2 February 2016. 13. On or about 2 February 2016, the plaintiffs' solicitor paid to the defendant the amount of the outstanding levies of $2,244.10 under protest. 14. As a result of the discontinuance of the proceedings, the court has not determined the issue of whether or not the defendant was entitled to decline to register the transfer because Dr Campbell was not, to use the common term, a financial member of the defendant. 15. On about 16 February 2016, the defendant issued a new share certificate for the shares to the first plaintiff, and registered the first plaintiff as the holder of those shares in its register of members, in exchange for the return of the share certificate in the name of Dr Campbell. 16. The chairman of the Board served an affidavit on behalf of the defendant on about 25 May 2016. 17. Among other things, that affidavit annexed correspondence that disclosed that, or about 24 February 2016, the defendant had made an offer, on a without admissions basis to the first plaintiff, to provide a swipe card to enable 24 hour access to the building on provision of an executed agency agreement between the first plaintiff and an agent for the purpose of finding an appropriate sub-licensee of Suite 23. It is not clear what happened in respect of that offer. 18. On 25 February 2016, the matter was set down for hearing for two days commencing on 6 June 2016 before me. 19. It appears that the defendant took the stance that it was not obliged to grant a licence to the first plaintiff, because it was not capable of occupying Suite 23 for the purpose of conducting a professional practice. Accordingly, the defendant said, the first plaintiff had to first find a suitable sub-licensee, and when that happened, the defendant would grant a licence to the first plaintiff so that it could be sub-licensed to that suitable person. 20. The position taken by the plaintiffs was that it was not commercially realistic for them to look for an appropriate sub-licensee until they were first in a position to be able to demonstrate that the first plaintiff actually had a licence that could be sub-licensed. 21. The plaintiffs served affidavits in reply on or about 31 May 2016 and 1 June 2016. 22. When the matter came on for hearing on 6 June 2016, counsel for the plaintiffs advised the court that, on the previous Friday, the defendant had granted to the first plaintiff a licence of Suite 23. After a short adjournment, the court was invited by the parties by consent to make the following orders: The defendant to provide a key for Suite 23 and a swipe card to the building to any real estate agent nominated by Angela Campbell Pty Limited (and any subsequently nominated real estate agents) for the purpose of allowing such agent to show Suite 23 to suitable prospective sub-licensees. Once a sub-licensee is appointed by the fist plaintiff and approved by the defendant, the defendant to provide a sub-licensee with two keys for Suite 23 and two swipe cards for the building. The defendant to deliver up to the second plaintiff any property owned by Angela Katarina Campbell and/or Angela Campbell Pty Ltd that is within the defendant's possession or control within 7 days of these orders. The proceedings are discontinued. 1. It therefore appears that, at the last minute, the defendant decided to concede most of the remaining claims made by the plaintiffs; although while two keys and two swipe cards were sought by the plaintiffs, the agreement was that only one of each would be provided initially. Two of each would be provided to any sub-licensee. 2. It also appears that the defendant abandoned its position that it was not obliged to actually grant a licence to the first plaintiff, until the first plaintiff had found a sub-licensee who was suitable to the defendant. 3. It can therefore be said that the plaintiffs achieved a substantial measure of success in relation to the relief sought in the statement of claim. 4. However, it remains the case that the court has not decided whether the defendant was entitled to decline to register the first plaintiff as the holder of the shares in the defendant, and to issue a new share certificate to the first plaintiff, until after the outstanding levies that were claimed by the defendant had been paid. 5. Furthermore, the court has not decided whether the first plaintiff was in fact entitled to be granted a licence of Suite 23, when it was not qualified to occupy that property. The plaintiffs did not allege that the first plaintiff was automatically entitled to be given a licence to occupy Suite 23 under the constitution of the defendant because it had been recorded as a member of the defendant in its register of members. As the first plaintiff was a trustee company, and did not conduct any profession or business, it could not be issued a licence by the defendant that could provide for it to carry on in Suite 23, a business or profession, as contemplated by cl 1 of the form of licence agreement in the first schedule to the constitution. The statement of claim, instead, pleaded in par 32 that a new licence had already been granted by the defendant to the first plaintiff by its conduct; or alternatively, the defendant was estopped from relying upon its purported termination of Dr Campbell's licence. Thus, there were significant issues to be tried as to whether the plaintiffs were entitled to the licence that they pleaded, and the plaintiffs' claim had to overcome potential difficulties in demonstrating how a member of the defendant that was not capable of conducting a profession or business was nonetheless entitled to be given a licence. The defendant apparently decided not to make an issue of these difficulties, and ultimately granted the first plaintiff a licence. However, as the proceedings have been discontinued, the court has not been required to decide these questions. 6. The court has not decided whether the first plaintiff was, in the circumstances, entitled to be provided with a swipe card, contrary to the interlocutory view taken by White J. 7. In these circumstances, I have come to the conclusion that, putting aside the costs of the first plaintiff's interlocutory notice of motion, which I have dealt with above, that it is appropriate in the present case to 'order otherwise' for the purpose of UCPR r 42.19(2). The order should be that the parties pay their own costs of the proceedings other than in respect of the first plaintiff's interlocutory notice of motion. 8. In my view, the plaintiffs acted reasonably in seeking the relief that they sought in the statement of claim. It is clear from the evidence that the amounts of outstanding levies that were in issue were at all times small; and if the defendant had advised the plaintiffs at an earlier time that it was the outstanding levies that was the justification for the defendant declining to register the first plaintiff as the holder of the shares, the first plaintiff would have paid the outstanding claims promptly, even if it disputed the defendant's entitlement to that money. That is precisely what happened. Equally, the course that the defendant ultimately took in granting a new licence to the first plaintiff, without insisting on the first plaintiff having an available, satisfactory sub-licensee, demonstrates in my view that reasonable conduct on the part of the defendant would have led to the defendant granting the licence much earlier. In regards to the issue of the keys and the swipe cards, those are matters that should have been dealt with by the defendant in a common sense and reasonable way; and as the owner of the building, it should have acted to facilitate the ability of the first plaintiff to take proper commercial advantage of its ownership of the shares in the defendant. 9. However, as the legal issues in dispute between the parties have not been decided, it would not be appropriate for the court to order the defendant to pay the plaintiff's costs of the proceedings. It is not appropriate for the court to embark upon a consideration of what the likely outcome of that dispute would have been, for the purpose only of deciding the costs dispute. 10. For the purpose of the principles considered by McHugh J in Lai Qin, I am not satisfied that the legal points propounded by the defendant were without merit, or that it was so unreasonable for the defendant to rely upon them that the defendant should be ordered to pay the plaintiffs' costs, notwithstanding that the court has not determined the case. The defendant's conduct does, however, justify it being required to pay its own costs. 11. Finally, I have come to the conclusion that the Calderbank offer served by the plaintiffs before they filed their statement of claim should not lead the court to make any costs order different to those that have been indicated above. In my view, the Calderbank offer did not offer a genuine compromise, and it was made before the plaintiffs filed their statement of claim. 12. More significantly, as the plaintiffs' claim has been discontinued, the court has not made any finding as to the relief to which the plaintiffs were actually entitled. It is true that, by way of compromise, the defendant has at the end of the day agreed to give the plaintiffs most of the relief that they sought. However, the court has not found that the plaintiffs were entitled to relief that is substantially more advantageous to the plaintiffs than the outcome that they offered to accept in their Calderbank offer. The Calderbank offer process cannot usually work in practical terms in a case where a defendant voluntarily gives to the plaintiff most of what is claimed, by means of a compromise that involves the discontinuation of the proceedings, without the issues in dispute being determined by the court. 13. I will therefore make the following orders: 1. Order that the first plaintiff pay the defendant's costs of the first plaintiff's notice of motion filed on 30 May 2016. 2. Order that all of the parties bear their own costs of the balance of the proceedings. 3. Order that any documents produced on subpoena or notice to produce, as well as the exhibits, may be returned forthwith in accordance with the Rules. ********** 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: 08 September 2016