Sheikholeslami v Tolcher (No 2)

The case of Sheikholeslami v Tolcher (No 2) was heard by the Federal Court. The primary dispute involved the apportionment of costs between the applicant, Sheikholeslami, and the respondent, Tolcher. The central issue was the appropriate allocation of costs given the applicant’s successful claim over the bankrupt’s property against the respondent’s opposition, which was backed by a limited indemnity from the major creditor. The court needed to decide whether the respondent, as the unsuccessful party, should be exempt from bearing the full extent of the costs, considering the indemnity obtained and the quality of the evidence presented by the applicant.

In determining the appropriate order for costs, the court began by acknowledging that costs typically follow the event. Despite the applicant's complete success, the court found it appropriate to discount the respondent’s liability for costs. This decision was influenced by the unsatisfactory quality of the affidavit material and oral evidence provided by the applicant. The court emphasised that these deficiencies justified the respondent in defending the case cautiously, thereby warranting a reduction in the costs he should pay. The court rejected the argument that the respondent's personal liability for costs should be limited to the assets available in the bankrupt's estate, asserting that this was not a suitable case for such a limitation.

The court concluded that the respondent should pay 50% of the applicant’s costs as taxed or agreed. In the event of a taxation, the costs of the proceeding were to be taxed in accordance with Division 40.2 of the Federal Court Rules 2011. This decision underscores the court's discretion to adjust cost awards based on the conduct of the parties and the quality of the evidence presented. The final orders reflect a balanced approach, acknowledging the applicant's success while also considering the respondent's justified caution due to the deficiencies in the applicant’s case.