In the matter of Ahmed & Associates (Aust) Pty Ltd

[2021] NSWSC 631

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Ahmed & Associates (Aust) Pty Ltd [2021] NSWSC 631

Hearing dates:

27 and 28 April 2021

Decision date:

03 June 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Proceedings dismissed. Costs awarded on indemnity basis.

Catchwords:

COSTS – Party/Party – Exceptions to general rule that costs follow the event – Offers of compromise/Calderbank offers – Whether unreasonable not to have accepted Calderbank offer.

COSTS – Party/Party – Exceptions to general rule that costs follow the event – Where claim was without substance.

Cases Cited:

- Balderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12

- Calderbank v Calderbank [1975] 3 All ER 333

- Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816

- Ofria v Cameron (No 2) [2008] NSWCA 242

- Re Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liq) [2016] NSWSC 575

Category:

Costs

Parties:

Riad Tayeh and Suelen McCallum in their capacity as joint and several liquidators of Ahmed & Associates (Aust.) Pty Ltd (in liq) (First Plaintiff)
Ahmed & Associates (Aust.) Pty Ltd (in liq) (Second Plaintiff)
Ingleburn Medicos Pty Ltd (First Defendant)
Irfan Rasul Malik (Second Defendant)
Mamoona Irfan (Third Defendant)

Representation:

Counsel:
Mr D K Ratnam (Plaintiffs)
Mr A Moutasallem (Defendants)

Solicitors:
Coleman Greig (Plaintiffs)
Dot Legal (Defendants)

File Number(s):

2020/182584

Judgment

1. By my judgment delivered on 10 May 2021 ([2021] NSWSC 499) I held that proceedings by which the Plaintiffs, Mr Tayeh and Ms McCallum (“Liquidators”), in their capacity as joint and several liquidators of Ahmed & Associates (Aust) Pty Ltd (in liq) (“AAA”) and AAA, sought relief in respect of dealings with fittings in a medical practice should be dismissed. That result largely reflected my finding that AAA had never acquired the plant and equipment which was the subject of the relevant dealings. I expressed a preliminary view (at [48]) that the Plaintiffs must pay the Defendants’ costs of the proceedings, where they had failed in their claims against two Defendants, Dr Malik and Ingleburn Medicos Pty Ltd, and would have failed in their claim against the Third Defendant, Ms Irfan, had they not abandoned it in the course of the hearing. I allowed the parties an opportunity to make short submissions as to costs.

2. By their submissions dated 23 May 2021, the Defendants sought an order for costs on an indemnity basis. First, the Defendants contended that the Plaintiffs had rejected offers of settlement which they failed to better at the hearing. The Defendants relied on three offers of settlement, which they characterised as “Calderbank” offers, dated 25 March 2019, 26 July 2019 and 16 November 2020, each of which made significant offers of a payment to resolve the dispute. The principles in Calderbank v Calderbank [1975] 3 All ER 333 were summarised by Ward J (as her Honour then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]–[15] and I summarised those principles in Re Alsafe Security Products Pty Ltd atf Alsafe Trust (in liq) [2016] NSWSC 575 at [8], as follows:

“[T]he fact that a party ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [above] at [9]–[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14], [16]. In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J observed that:

“If a Calderbank offer is made, but not accepted, the court’s discretion to make a special order is enlivened. The court’s discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7]–[8].””

3. The Defendants accept that the first two of those letters were sent prior to the commencement of the proceedings, but that does not prevent their being taken into account in respect of the question of costs: Ofria v Cameron (No 2) [2008] NSWCA 242 at [27]. The Defendants also accept that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Ofria v Cameron (No 2) above at [20]. The Defendants submit that the Plaintiffs’ rejection of the offers they had was unreasonable because, inter alia, AAA’s basis for claiming that it was the owner of the plant and equipment was weak; and the Liquidators were aware, before the litigation commenced, that AAA was not the named party to the agreement on which they relied to establish ownership of the plant and equipment; that agreement had been executed before AAA’s incorporation; and that agreement arguably evidenced the fact that another company had owned that plant and equipment.

4. The Plaintiffs respond that costs should be payable on an ordinary basis and submit, as the case law establishes, that the question whether they acted unreasonably in rejecting the offer should be determined without hindsight, but prospectively at the time of the offers made by the Defendants. They submit that it was not unreasonable to reject the first offer made by the Defendants where they had not been served all relevant evidence and the letter did not provide evidence to assist in determining whether the offer was reasonable or should be accepted and allowed only a short period or acceptance. That does not seem to me to answer the difficulty that, unless the Liquidators could establish that AAA owned the plant and equipment, their claim would fail and any offer to compromise it would reasonably have been accepted.

5. The Plaintiffs also point out that the Defendants’ second offer dated 26 July 2019 included conditions as to warranty repairs by a third party, which it would not have been open to the Liquidators to accept, and I accept that offer does not support an order for indemnity costs. A third offer contemplated mutual releases, but the Plaintiffs submit that it was unclear what the releases would relate to and that 14 days was not a sufficient period for acceptance. I do not accept that submission, since they could readily have accepted that offer on the basis that any releases would not extend beyond the claims and, as I noted above, unless the Liquidators could establish that AAA owned the plant and equipment, their claim would fail and any offer to compromise it would reasonably have been accepted.

6. Second, the Defendants sought an order for costs on an indemnity basis by reason that the Plaintiffs’ case against them had been “without substance”, “groundless” or “fanciful or hopeless” or so weak as to be futile, within the language of Balderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4]. They rely on the issue as to AAA’s ownership of the plant and equipment also to submit that the Plaintiffs’ case against them was without substance, and point to the fact that the Liquidators could not articulate how AAA could have acquired the plant and equipment under a contract signed before it existed, without relying on the provision dealing with pre-incorporation contracts in s 131 of the Corporations Act 2001 (Cth), on which they ultimately did not rely.

7. It seems to me that an order for indemnity costs is warranted, both on the basis that the Plaintiffs’ rejection of the first offer made by the Defendants was unreasonable where AAA could not then (or ever) have established its ownership of the plant and equipment; and on the basis that the Plaintiffs’ case was so weak as to be futile, where it could only succeed if AAA owned the plant and equipment, and the contract to acquire that plant and equipment had been executed in the name of a different entity, at a time that AAA did not exist; and it is not apparent how the Plaintiffs could have established the matters necessary to rely on that contract as a pre-incorporation contract, even if they had sought to do so.

8. For these reasons, I make the following orders:

1. The proceedings be dismissed.

2. The Plaintiffs pay the Defendants’ costs of the proceedings, including the costs of this costs application, on an indemnity basis.

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Decision last updated: 04 June 2021