Kaur v Sikh Gurdwara Perth (Inc) [No 2]
[2018] WASC 99
•11 APRIL 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: KAUR -v- SIKH GURDWARA PERTH (INC) [No 2] [2018] WASC 99
CORAM: LE MIERE J
HEARD: 12 JANUARY 2018
DELIVERED : 11 APRIL 2018
FILE NO/S: CIV 2632 of 2015
BETWEEN: KARAMJIT KAUR
First Plaintiff
LAKHBIR SINGH SIDHU
Second Plaintiff
AMRIT PAL SINGH
Third Plaintiff
AND
SIKH GURDWARA PERTH (INC)
Defendant
Catchwords:
Costs - Non-party costs order - When non-party costs order is appropriate
Costs - Indemnity costs - Calderbank offer - Where rejection of Calderbank offer is reasonable
Legislation:
Rules of the Supreme Court 1971 (WA), O 9A
Result:
Non-party costs order not made
Indemnity costs not awarded
The plaintiffs to pay the defendant's costs on a party and party basis
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr I R Freeman |
| Second Plaintiff | : | Mr I R Freeman |
| Third Plaintiff | : | Mr I R Freeman |
| Defendant | : | Mr M W Fatharly & Ms A L Spencer |
Solicitors:
| First Plaintiff | : | Lavan Legal |
| Second Plaintiff | : | Lavan Legal |
| Third Plaintiff | : | Lavan Legal |
| Defendant | : | Kott Gunning |
Case(s) referred to in decision(s):
Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406
Bischof v Adams [1992] 2 VR 198
Calderbank v Calderbank [1975] 3 All ER 333
Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) (2012) 200 FCR 154
Duskwood Pty Ltd v Bellara Willows Pty Ltd [2001] WASC 281
Dymocks Franchise Systems (NSW) Pty v Todd [2004] 1 WLR 2807
Flinn v Flinn [1999] 3 VR 712
Ford Motor Company of Australia Ltd v Lo Presti (2009) 41 WAR 1
Fried v National Australia Bank Ltd [2001] FCA 1280
Hamilton v Al Fayed (No 2) [2003] QB 1175
Kaur v Sikh Gurdwara Perth (Inc) [2017] WASC 270
Knight v FP Special Assets Ltd (1992) 174 CLR 178
Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189 (S)
McClelland v Burning Palms Surf Lifesaving Club (2002) 191 ALR 759
Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Ltd (No 2) [1999] 1 Qd R 518
Oz B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128
Peet Ltd v Richmond [2010] VSCA 71
Pourzand v Telstra Corp Ltd [2012] WASC 210 (S)
Re Bonlac Foods Ltd (2001) 37 ACSR 457
Re Foster; Ex parte Foster v Duus (1994) 121 ALR 494
Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2005] NSWSC 481
Sakari Resources Ltd v Purvis [2016] WASCA 24 (S)
Symphony Group plc v Hodgson [1994] QB 179
Systemcare (UK) Ltd v Services Design Technology Ltd [2011] 4 Costs LR 666
Vestris v Cashman (1998) 72 SASR 449
Wentworth v Wentworth; Estate of Wentworth (1999) 46 NSWLR 300
Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685
LE MIERE J:
Summary
The defendant is a voluntary association incorporated under the Associations Incorporation Act 1987 (WA). Each of the plaintiffs is a Sikh who has sought and been refused membership of the defendant. The plaintiffs sought a declaration that the defendant failed to assess the plaintiffs' applications in accordance with the defendant's rules. After a four day trial I dismissed the plaintiffs' action: Kaur v Sikh Gurdwara Perth (Inc) [2017] WASC 270.
The defendant has applied for the following costs orders:
The plaintiffs, together with the interested non‑parties Aminder Pal Singh and Harbhajan Kaur pay the defendant's costs, to be taxed if not agreed:
(a)for the period up to and including 26 April 2016 on a party and party basis; and
(b)from 27 April 2016, including the reserved costs of 30 June 2016, on an indemnity basis, save for any costs that are assessed by a taxing officer to be of an unreasonable amount, or which were unreasonably incurred.
The defendant seeks an order that Aminder Pal Singh and Harbhajhan Kaur (the Interested Non‑Parties) pay the defendant's costs on the basis that the Interested Non‑Parties provided funding or other financial assistance to the plaintiffs and exercised direct or indirect control or influence over the way in which the plaintiffs conducted the case. The defendant seeks an order for indemnity costs on the basis the plaintiffs unreasonably refused to accept the defendant's settlement offer in its Calderbank letter of 27 April 2016.
For the reasons which follow the plaintiffs should pay the defendant's costs on a party and party basis.
The Interested Non‑Parties
Order 9A r 2(1) of the Rules of the Supreme Court 1971 (WA) (RSC) requires a party to a case to notify the Principal Registrar and each other party of the identity of any person who is an 'interested non-party' in relation to the party to the case. An interested non-party means a person, other than a practitioner for the party, who provides funding or other financial assistance to the party for the purposes of conducting the case and exercises direct or indirect control or influence over the way in which the party conducts the case: O 9A r 1 RSC.
By letter dated 14 October 2015, the plaintiffs' solicitors notified the Principal Registrar that Dr Aminder Pal Singh and Ms Harbhajan Kaur were interested non-parties. The defendant seeks an order that the Interested Non‑Parties be ordered jointly and severally to pay the defendant's costs.
The jurisdiction to order costs against non-parties
Section 37 of the Supreme Court Act 1935 (WA) empowers this Court to determine by whom costs are to be paid. It provides jurisdiction to the Court to make costs orders against non‑parties: Duskwood Pty Ltd v Bellara Willows Pty Ltd [2001] WASC 281 [12] (Steytler J); see also Knight v FP Special Assets Ltd (1992) 174 CLR 178 (Knight), 185, 190 (Mason CJ & Deane J), 203 (Dawson J), 205 (Gaudron J) (interpreting O 91 r 1 of the Rules of the Supreme Court of Queensland).
The discretion to order costs against non‑parties
The exercise of the discretion to make non‑party costs orders is to be exercised 'judicially and in accordance with general legal principles pertaining to the law of costs': Knight (192) (Mason CJ & Deane J).
The court will only make a non‑party costs order where the interests of justice justify a departure from the general rule that only parties to proceedings may be subject to costs orders: Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Ltd (No 2) [1999] 1 Qd R 518 (Naomi Marble), 544 (Shepherdson J), that is, where, in the circumstances of the case it is just and equitable for the interested non‑parties to pay the defendant's costs: see Vestris v Cashman (1998) 72 SASR 449; (Vestris) 468 (Lander J).
Generally costs orders against non‑parties should be granted 'sparingly', and only when 'exceptional circumstances make such an order reasonable and just': Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, 413 (Callinan J); Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184, 189 (Gaudron J); Flinn v Flinn [1999] 3 VR 712, 760 (per curiam). However, 'exceptional' means no more than 'outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense': Dymocks Franchise Systems (NSW) Pty v Todd [2004] 1 WLR 2807 (Dymocks) [25] (Lord Brown).
There are no closed categories of cases where the costs discretion may or should be exercised against a non‑party. Whether costs should be awarded against a non‑party is a fact specific inquiry informed by various relevant considerations. Two factors that are highly relevant to the exercise of the discretion are the non‑party's connection with the proceedings and the incurrence of costs: see Bischof v Adams [1992] 2 VR 198 (Bischof), 205 (Gobbo J); Wentworth v Wentworth; Estate of Wentworth (1999) 46 NSWLR 300 (Wentworth), 310 (Santow J); Re Bonlac Foods Ltd (2001) 37 ACSR 457 [26] (Warren J).
It is relevant whether the proceedings are initiated and controlled by a person who, though not a party, has a direct personal financial interest in, or derives a potential benefit from, the result: Vestris (468) (Lander J); Symphony Group plc v Hodgson [1994] QB 179, 192 ‑ 193 (Balcombe LJ). Merely funding litigation is not ordinarily sufficient to justify a costs order against a non‑party but an order against a non‑party may be justified if the funder is supporting the litigation to promote its own interest or to secure its own benefit: Oz B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128; Re Foster; Ex parte Foster v Duus (1994) 121 ALR 494; Hamilton v Al Fayed (No 2) [2003] QB 1175 [57] (Simon Brown LJ), [71] (Chadwick LJ), [86] (Hale LJ). Where the non‑party is the 'real party' ‑ playing an active part in the conduct of the litigation and / or with an interest in the subject of the litigation ‑ a non‑party costs order is much more likely: Knight (193) (Mason CJ & Deane J).
As to the connection between the non‑party and the incurrence of costs, the authorities establish that there must be a causal link: if the costs would have been incurred even without the non‑party's involvement the non‑party should not ordinarily be made liable for them: Dymocks [20] (Lord Brown). This causal link must be real and direct: Bischof (205) (Gobbo J).
Another factor considered in a number of cases concerning non‑party costs orders is the financial state of the unsuccessful party. It is not a precondition to the exercise of jurisdiction to award costs against a non‑party that the unsuccessful party be impecunious: Systemcare (UK) Ltd v Services Design Technology Ltd [2011] 4 Costs LR 666 (Systemcare), [43] (Lewison J), [60] (Lloyd LJ); Dunghutti Elders Council (Aboriginal Corporation)RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) (2012) 200 FCR 154 [87] ‑ [91] (per curiam). However, whether the person who would otherwise be liable for costs can meet a costs order (and if not, the reason why they cannot) is a relevant factor. It is also relevant whether the successful party applied for security for costs. The failure to seek an otherwise potentially available order for security may weaken the prospect of a subsequent costs order against a non‑party: Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685, 695. In the Law of Costs (3rd ed, 2013) Professor Dal Pont at [22.28] says that one of the roles of an application for security for costs in this context is to give notice to the other party and thereby the backer of that party that the moving party is keen to be protected against a failure by that other party to be able to meet costs.
A further relevant factor is whether the applicant for a costs order warned the non‑party that an application for costs against it would be made. Dal Pont at [22.24] says that the relevance of a notice or warning to a non‑party is grounded in natural justice, for upon being notified, the non‑party could have applied to be joined and thereby have the capacity to influence the proceedings or could have protected itself by making an offer of compromise or could have taken other steps to end the proceedings.
Non‑party costs order not appropriate in this case
The Order 9A notice given by the plaintiffs on 14 October 2015 does not render the Interested Non-Parties liable for costs. The service of the notice informs the other party that the non‑party is providing funding or other financial assistance and exercising direct or indirect control or influence over the way in which the party conducts the case and thereby an opportunity to apply for security for costs, to warn the non‑party that the other party will, if successful, apply for a non‑party costs order and to make such an application if the party is successful. The applicant for a non‑party costs order must still discharge the onus of establishing that it is just for the interested non‑parties to pay the applicant's costs.
The defendant has not advanced any reason why the Interested Non‑Parties should pay its costs beyond the facts established by the Order 9A notice, that is the Interested Non‑Parties provided funding or other financial assistance to the plaintiffs for the conduct of the case and exercised direct or indirect control or influence over the way in which the plaintiffs conducted the case. The defendant submitted that it may reasonably be inferred from the notice that but for the funding from the Interested Non‑Parties the plaintiffs did not have the financial resources themselves to conduct the case through solicitors and the plaintiffs will not be able to pay an adverse costs order against them for the costs of the action. I am unable to draw those inferences from the mere fact of the Order 9A notice.
There are two further factors which weigh in the exercise of my discretion against making a non‑party costs order. First, the defendant gave no notice or warning to the Interested Non‑Parties that, if successful, it would apply for a non‑party costs order. Secondly, the defendant did not apply for security for costs against the plaintiffs. If the defendant considered from the fact of the Order 9A notice that the plaintiffs would not be able to meet an adverse costs order then it should have applied for security for costs or warned the Interested Non‑Parties that, if successful, it would seek a non‑party costs order. Those factors are not in themselves determinative. However, in the absence of any evidence about the financial position of the plaintiffs and the interest, if any, of the Interested Non‑Parties in the litigation, they weigh against the exercise of the discretion in favour of the defendant.
In conclusion, it is not appropriate to exercise my discretion in favour of making a costs order against the Interested Non‑Parties.
Indemnity costs against the Interested Non‑Parties
I make the following observations on the award of indemnity costs against the Interested Non‑Parties. First, whilst non‑party costs orders are usually made on a party and party basis, an award of indemnity costs against a non‑party is possible and is governed by the same principles that govern the award of indemnity costs against an unsuccessful party. Second, where indemnity costs are sought against a non-party, 'the circumstances of a case justifying the making of such an order must be stronger or more compelling than the circumstances applying when a party and party costs order is made against a non-party': Naomi Marble (544) (Shepherdson J). In view of my decision not to make a non‑party costs order it is not necessary to consider those matters further.
Defendant's case for indemnity costs order
As I have said, the defendant's case for an indemnity costs order rests on the plaintiffs' failure to accept the defendant's settlement offer in its letter of 27 April 2016. I will now turn my attention to that letter.
The Calderbank letter
These proceedings were commenced by writ of summons filed 14 October 2015. There was an unsuccessful mediation conference on 30 March 2016. On 27 April 2016, in a letter headed 'Without Prejudice Save As To Costs' sent from the defendant's solicitors to the plaintiffs' solicitors, the defendant made the following offers of settlement.
First Plaintiff
Our client encourages the first plaintiff to provide service at the Bennett Springs Gurdwara and offers to reconsider her application for membership in a manner that is not unfair, biased or capricious at the meeting of the Committee of Management on Sunday, 3 July 2016. This date is well in advance of a date which this matter may be listed for trial.
For the sake of clarity, our client does not offer the first plaintiff any sum in respect of her costs. Once the first plaintiff's application has been reconsidered and she has been advised of the outcome, the first plaintiff's claim against our client should be dismissed by consent with no order as to costs.
This offer is made:
1.in accordance with the principles of Calderbank v Calderbank [1975] 3 All ER 333 and will be relied on for the question of costs should this matter proceed to trial and will be open for acceptance until 4:00 pm on Friday, 20 May 2016; and
2.without admission of the first plaintiff's claim that our client's original decision was unfair, biased or capricious.
Second and Third Plaintiffs
In accordance with Rule 21.1(b) of our client's Rules, the Committee of Management offers to convene a Special General Meeting for the purpose of reconsidering the second and third plaintiffs' applications for membership. Prior to the Special General Meeting, the Committee of Management will circulate a notice to its members which will detail:
1.the meeting's purpose as a reconsideration of the second and third plaintiffs' applications for membership; and
2.the proposed resolution (which must be passed by ordinary resolution) with a copy of the second and third plaintiffs' applications for membership.
The second and third plaintiffs would also be given an opportunity to address those at the meeting before the resolution is put to a vote.
In accordance with Rule 21.5 the required notice period for a Special General Meeting is 14 days. Our client proposes that the Special General Meeting be held before the end of July 2016 and so we require details of your client's availability as soon as possible so that the requisite notice can be circulated to our client's members.
For the sake of clarity we advise that our client makes no offer in respect of the second and third plaintiffs' costs. Once the Special General Meeting has been held and the proposed resolution considered by the members of our client, the second and third plaintiffs' claim against our client should be dismissed with no order as to costs.
This offer is:
1.made in accordance with the principles of Calderbank v Calderbank [1975] 3 All ER 333 and will be relied on for the question of costs should this matter proceed to trial and will be open for acceptance until 4:00 pm on Friday, 20 May 2016; and
2.without admission of the second and third plaintiffs' claims that our client's original decision was unfair, biased or capricious.
The letter invited the plaintiffs to make a counterproposal in the event that the offer was not acceptable to them.
The plaintiffs' solicitors responded to the offers on 27 May 2016, after the offers had expired, choosing to shortly summarise the terms of the offers, noting that the offers had been put to their clients and stating that they had been instructed to reject the offers.
The appropriateness of an award of indemnity costs from the date of the offer letter on 27 April 2016 involves an assessment of the reasonableness or otherwise of the plaintiffs' rejection of the offers.
Principles in relation to Calderbank offers
Each of the two offers is expressly made in accordance with the principles of Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank). It is appropriate to set out some of the fundamental principles relating to Calderbank offers and the circumstances in which it is appropriate to allow an offeror their costs quantified on an indemnity basis, as opposed to the usual party and party basis.
In Ford Motor Company of Australia Ltd v Lo Presti (2009) 41 WAR 1 (Ford), Buss JA (Wheeler JA agreeing) summarised the applicable principles as follows [16] ‑ [19] (citations omitted in select passages):
A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable.
All of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable.
The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable.
As the Court of Appeal of Victoria noted in Hazeldene's Chicken Farm, deciding whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression (at [24]). Although it is neither possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, the Court of Appeal said that, ordinarily, regard should be had to, at least, the following (at [25]):
(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.
The party who makes a Calderbank offer that is rejected bears the onus of satisfying the Court that it should make an award of indemnity costs in his or her favour: Ford [21].
These principles were recently applied by the Court of Appeal in Sakari Resources Ltd v Purvis [2016] WASCA 24 (S) [12] ‑ [14] (per curiam).
A seventh consideration discussed in cases decided after Ford is whether the Calderbank proposal gave fair warning to the offeree of the substance or merits of the case that was going to be advanced against the offeree at the trial: Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189 (S) [27] (Kenneth Martin J) citing Peet Ltd v Richmond [2010] VSCA 71 [31] ‑ [34] (per curiam).
Factors relevant to reasonableness of the plaintiffs' rejection of the Calderbank letter
In accordance with the above principles, an assessment of the reasonableness of the plaintiffs' rejection requires an assessment and a weighing of a number of factors. The test I must employ in the exercise of my discretion is whether the plaintiffs' rejection of the Calderbank offer was unreasonable in the circumstances: Ford [23]. Whether it is reasonable to reject an offer is determined on the facts as they were known at the time: Fried v National Australia Bank Ltd [2001] FCA 1280 [17] (Gray J).
I have considered the factors outlined in Ford as well as other relevant circumstances and will consider each of the recognised factors discretely, to the extent that this is possible.
Stage at which offers made
The offers were made after an unsuccessful mediation on 30 March 2016 and at a relatively advanced point of the action. In the period to 27 April 2016, the pleadings amounted to a statement of claim, defence, request for further and better particulars of defence, a reply by the plaintiffs, the defendant's request for further and better particulars of the statement of claim, the plaintiffs' answers to the defendant's request for further and better particulars of the plaintiffs' statement of claim and the defendant's answers to the plaintiffs' request for further and better particulars of defence. On 26 November 2015 Registrar Whitbread had made orders including that the solicitors for each of the parties give their clients a memorandum setting out the costs and disbursements to date and the estimated future costs and disbursements up to and including mediation, and up to and including trial. The plaintiffs were well positioned to make an informed assessment of the strength of their case at the point of the Calderbank offer.
Duration of offer
The offers were open for approximately three and a half weeks. This is an appropriate period for the offers to remain open.
Offerees' prospects of success
As I have said, the onus is on the defendant to show that the plaintiffs' prospects of success were low enough to make their refusal of the offer unreasonable. At the time of the offer the plaintiffs were seeking three 'declarations' additional to the declaration sought at trial. Two of those 'declarations' were really more in the nature of mandatory injunctions. None of these three additional 'declarations' were pressed at trial. At the time of the offer it should have been clear to the plaintiffs that there is a body of authority which stands for the proposition that absent certain factors (see [76] of the primary decision), which were not present in this case, a non-member of a voluntary association does not have standing to pursue their claim. Nevertheless, the plaintiffs' case was not manifestly unarguable. The plaintiff relied upon dicta of Campbell J in McClelland v Burning Palms Surf Lifesaving Club (2002) 191 ALR 759 that:
If a decision is arrived at by a private body which, contrary to its own rules, does not accord procedural fairness to a non‑member who is affected, it is in theory possible that there may be circumstances where the courts will recognise such a person as having standing to apply for a declaration of the invalidity of the decision … It would be for the courts to develop, on a case‑by‑case basis, the circumstances in which such standing should be recognised. Even though the legal basis of the body's right to make a decision is contained in the constitutive documents of the body itself, there is no necessary reason why it should be only members of the body, or people with the benefit of a contractual promise that the body will follow its own required procedures, who can assert the invalidity of the decision. It is a fact of life that a decision of a private tribunal can affect people who are not members, or people who are not bound by contract to observe the decision ‑ and the existence of the private body and of the decisions of its tribunal is a reality which affects people other than by force of a contract with the body. If the body has practical power to affect a plaintiff in a sufficiently serious way, it would be for the courts to recognise in which situations the nature of affectation of the interests of the plaintiff is sufficient to confer standing [113].
On this basis I find that on 27 April 2016 the plaintiffs' case was weak, but not hopeless.
Extent of compromise offered
There is an inverse relationship between the strength of a party's case and the expectation of their willingness to come to a genuine compromise. This factor is particularly problematic for the defendant and is inextricably related to issues around the clarity of the expression of the offers. Whilst the clarity of the offer is sometimes considered discretely, it is appropriate in this case to consider this factor together with an assessment of the extent of the compromise offered.
In respect of the first plaintiff, the defendant's offer does not accept the first plaintiff's claim that the original membership application decision-making process was unfair, biased or capricious, but offers reconsideration in a manner that 'is not unfair, biased or capricious'. In its costs submissions the plaintiffs correctly identify the problem with such an offer: without such a concession there is no reason to assume that the defendant would, of its own volition, act any differently than it had on the first occasion that it considered the application, or that there was a prospect of a different outcome. The only basis upon which the prospect of a different outcome could be asserted is if the first plaintiff followed the defendant's encouragement to 'provide service at the … Gurdwara' and if this resulted in the Committee of Management (Committee) approving the first plaintiff's application. The terms of the offer to the first plaintiff required her to discontinue her claim once she has been advised of the outcome of the reconsideration ‑ a reconsideration that there was no clear ground for believing would be decided differently. It was a course open to the defendant to elaborate upon the criteria by which they would reconsider the first plaintiff's application, but they did not do so. I find that this offer lacked clarity and an element of genuine compromise.
The offer to the second and third plaintiffs is similarly problematic. The offer to these plaintiffs was to conduct a Special General Meeting (SGM) at which the members would reconsider the second and third plaintiffs' membership applications. Such a course is not provided for in the defendant's rules ('Sikh Gurdwara, Perth (Inc) Rules' (Rules)). According to the Rules, applications for membership are submitted to the General Sewadar (r 7.1). It is clear from r 7.3 that it is the Committee which decides whether to accept or reject the applications because of the provision that '[t]he Committee reserves the right to deny membership'. This is consistent with the fact that the Committee appoints honorary members (r 7.2) and sets subscription fees for other members (r 7.4 and 7.5) and with the Committee minutes of meeting which clearly demonstrate a practice of assessing and approving membership applications.
Whilst it is true that the Committee has the power to convene an SGM (r 21.1(b)), that notice must be given to members specifying when and where the SGM will be held (r 21.6(a)), that members must be given 14 days' notice of the meeting and any motions to be moved (r 21.5), and that members may pass ordinary and special resolutions at general meetings (r 22.3), it is clear that the Rules do not contemplate membership rejections being considered at an SGM.
First, whereas there are certain limitations on the Committee doing specific acts without approval from 70% (r 5.6, r 5.7) or the majority (r 5.5(f)) of members present at a general meeting, there is no equivalent limitation in relation to the Committee's power under r 7.3 to approve or reject membership applications, suggesting that it is not contemplated that the assessment of membership applications be made subject to the will of the defendant's members at a General Meeting. The hierarchy of decision-making disclosed by the Rules is one in which the ordinary running of the defendant is left to the Committee (r 11.1, see also 5.4 and 5.5), under the supervision of the Board of Trustees (r 11.5), with the Committee subject to the ultimate approval of the defendant's members in relation to the exercise of certain powers (r 5.5 ‑ r 5.7). The matters upon which the Committee requires the approval of at least the majority of members are investment, the acquisition and disposition of real and personal property, borrowing and entering into contracts, giving security for the discharge of liabilities (r 5.6) as well as incurring expenditure exceeding the limits (r 5.5(f)). That is, the exercise of the powers of the defendant that owe to its status as an incorporated association: s 14(1) Associations Incorporation Act 2015 (WA). The acceptance or rejection of members is not something that an association must be incorporated in order to do. It is not a power of the same character as those which are subject to the ultimate approval of the defendant's members.
Second, whilst there is an appeals process by which an existing member can have their expulsion considered by the vote of a simple majority of members present at an Extraordinary General Meeting (EGM) (r 10.8), there is no provision for membership applications to be considered by anybody other than the Committee. I infer from this fact that no such procedure is intended. Relatedly, there is provision for disputes about the appropriate interpretation of the Sikh Rehat Maryada to be ultimately subject to the decision of a majority of members present at an EGM (5.3). Provision for EGMs to occur in relation to these two matters in the absence of provision for the assessment of membership applications at EGMs leads to the inference that such a procedure was not intended. I note that there is no apparent distinction in the Rules between EGMs and SGMs in terms of the quorum of members and the necessary majority for decision‑making. Whereas SGMs can be convened by the committee at will (subject to procedural and notice requirements) or upon the request of a third of the defendant's members, EGMs are referred to only in relation to the challenge of interpretations of the Sikh Rehat Maryada and the appeals process arising from the dispute of the expulsion of an existing member.
Third, there is nothing in the evidence tendered by either party which would establish that such a course has ever been attempted.
Fourth, given that any resolution put to the defendant's members at an SGM is competent to be considered at one of the defendant's AGMs, it is telling that sch III of the Rules, which provides each of the matters which would ordinarily be transacted at an AGM (see r 21.7) does not include specific reference to the appeal or reconsideration of membership applications.
Conversely, it does not mean that such a course is not possible. There is nothing in the Associations Incorporation Act 2015 (WA) that either supports or detracts from a suggestion that membership applications can be determined by an SGM of the defendant's members.
On balance I find that, given it does not seem that the consideration of membership applications at an SGM is contemplated by the Rules, the offer lacked clarity, and that the offer did not offer genuine compromise.
Foreshadowing an application for indemnity costs
The defendant did not explicitly foreshadow any intention to seek indemnity costs in the event that the offer was rejected and that rejection proved to be unreasonable. However, the offer notes only that it is 'made in accordance with the principles of Calderbank'. That is a sufficient foreshadowing of the defendant's intention to seek indemnity costs if the offer was not accepted and the plaintiffs were unsuccessful in the action.
Foreshadowing of the substance of the case to be advanced
The defendant's offer does not foreshadow the argument that the defendant was to advance at trial, which was, broadly speaking, that the plaintiffs lacked standing to challenge the defendant's decision. I give little weight to this consideration in light of the advanced state of the pleaded case at the time of the offer. In particular, at [61] of its defence the defendant 'denies that the [p]laintiffs are entitled to relief against the [d]efendant whether as alleged or at all'.
Reasons for rejection
The plaintiffs gave no reasons for rejection. There is some authority that such a response to an offer can support a finding of unreasonableness: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2005] NSWSC 481 [30] (McDougall J).
Comparison with the ultimate result
Whilst I am conscious that the fact that a Calderbank offer is bettered on judgment does not give rise to any presumption that the offeror is entitled to an award of indemnity costs from the date of the offer, (Ford [31] (Buss JA, Wheeler JA agreeing)), such a factor is nonetheless relevant to an assessment of the reasonableness of the plaintiffs' refusal of the offers made to them (see for example in Pourzand v Telstra Corp Ltd [2012] WASC 210 (S) Edelman J said 'I accept that the quantum of the offer, in light of prospects of success, is a very significant factor' [35]).
Such a comparison is difficult where the offer is not quantifiable or certain. The first plaintiff was offered an opportunity to provide service at the Bennett Springs Gurdwara and to make a further application. As already discussed, there is no reason to believe that the Committee would reconsider her application in any different way. The second and third plaintiffs were offered an opportunity to have their membership applications reconsidered at an SGM convened for that purpose where there is a reasonable basis for substantial uncertainty as to whether this is permissible under the Rules.
Ultimately, the plaintiffs' claim was entirely dismissed. Whilst the plaintiffs would have been better off having a chance that their applications could be decided differently, the mere fact that the plaintiffs are ultimately worse off does not mean that their rejection of the offer was unreasonable.
The plaintiffs' rejection of the defendant's offer was not unreasonable
In light of the factors I have considered I find that on balance the plaintiffs' rejection of the defendant's Calderbank offer was not unreasonable. The defendant will be entitled to party and party costs, not indemnity costs.
Conclusion
The plaintiffs will pay the defendant's costs of the action on a party and party basis.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RK
ASSOCIATE TO LE MIERE J11 APRIL 2018
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