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[2026] NSWSC 119
General information, not legal advice.
Supreme Court of NSW
2026-02-25
Muston J
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: A-Civil Aust Pty Ltd v ADR Practice Pty Ltd t/as M&A Lawyers [2026] NSWSC 119
Hearing dates: 29 January 2026
Date of orders: 25 February 2026
Decision date: 25 February 2026
Jurisdiction: Common Law
Before: Muston J
Decision: (1) Proceedings dismissed.
(2) The plaintiffs are to pay the defendant’s costs of the proceedings, such costs to be payable on the ordinary basis up to the beginning of 25 December 2025 and thereafter on an indemnity basis.
Catchwords: COSTS – where plaintiffs withdrew claim for substantive relief – where plaintiffs’ withdrawal amounts to surrender – where there is no hearing on the merits – Calderbank offer – whether costs should be awarded on an indemnity basis
Legislation Cited: Legal Profession Uniform General Rules 2015
Legal Profession Uniform Law 2014 (NSW)
Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015
Uniform Civil Procedure Rules 2005
Cases Cited: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32
Calderbank v Calderbank [1975] 3 All ER 333
Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274
Joudo v Joudo (No 2) [2024] NSWSC 469
Nadilo v Eagleton [2021] NSWCA 232
One Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548
Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6
Category: Principal judgment
Parties: A-Civil Aust Pty Ltd (First Plaintiff)
Nasser Victor Matta (Second Plaintiff)
Melissa Sandra Smith (Third Plaintiff)
ADR Practice Pty Ltd t/a M&A Lawyers (Defendant)
Representation: Counsel:
Mr P Doyle Gray (Plaintiffs)
Ms E Bishop SC / Mr A Gerard (Defendant)
Solicitors:
Shaba & Thomas Lawyers (Plaintiffs)
Owen Hodge Lawyers (Defendants)
File Number(s): 2024/00473027
These proceedings were commenced by a summons filed 19 December 2024, in which the plaintiffs sought an order pursuant to s 472(1)(b) of the Legal Profession Uniform Law 2014 (LPUL) or the Court's inherent jurisdiction, that the defendant, ADR Practice Pty Ltd (trading as M&A Lawyers), deliver up to the plaintiffs all client documents and files held and retained by that firm in relation to legal services provided on the plaintiffs’ behalf.
Until 10 October 2023, the plaintiffs were clients of the defendant. At that time, the plaintiffs chose to cease instructing that firm and instead engaged their current solicitor, Mr Aydn Shaba of Shaba & Thomas Lawyers. The plaintiffs requested that the defendant transfer to Shaba & Thomas Lawyers all files held in relation to 36 separate matters in which the firm had acted – or were acting – for the plaintiffs. This marked the beginning of what went on to become a lengthy dispute between the defendant and Mr Shaba regarding the production of those files. By December 2024, the dispute had escalated to the point at which these proceedings were commenced.
In circumstances to which I will return, the plaintiffs had, by late January 2026, decided that they no longer required the relief being sought in the proceedings. There was some debate before me as to when the defendant was notified of this decision. The plaintiffs’ position was made plain on 30 January 2026 when they filed and served – by way of an exchange – submissions which addressed only the question of what orders (if any) should be made in relation to the costs of the proceedings.
As a result of the plaintiffs’ decision – and save for any orders made in relation to costs – the proceedings will be dismissed without there having been any substantive hearing on the merits of the claim made in their summons.
Before me, the plaintiffs argued that the defendant should nevertheless be ordered to pay their costs of the proceedings. The defendant adopted the opposite position, arguing that the plaintiffs should be ordered to pay all – or a proportion of – its costs and that they should paid on an indemnity basis from 24 December 2025.
Both parties relied on Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6. Each accused the other of having engaged in unreasonable conduct. In Lai Qin, McHugh J observed (at 624-625):
“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 extracurial 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. … 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. ... 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.”
[Footnotes omitted].
42.19 Proceedings discontinued
(1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1.
(2) 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.
(3) Despite subrule (2), the defendant's costs in an appeal to the District Court under section 91 of the Children and Young Persons (Care and Protection) Act 1998 are not payable by the plaintiff unless the court finds there are special circumstances to justify an order for their payment by the plaintiff.
42.20 Dismissal of proceedings etc
(1) If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.
(2) If the court makes an order striking out a defence, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the defendant must pay the plaintiff's costs of the proceedings in relation to those matters in respect of which the defence has been struck out.
These rules reflect the general principle, referred to by McHugh J in Lai Qin, that a successful party will ordinarily be entitled to their costs. They impose, upon a party seeking to discontinue, an onus to make an application in respect of costs if it does not propose to pay the costs of the other parties and demonstrate why the Court should depart from the ordinary course: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54].
While neither rule creates any presumption regarding the payment of costs in circumstances such as those which have arisen in these proceedings, they, like the other considerations discussed in Lai Qin, remain a relevant, but not determinative, consideration: Fordyce at [84].
In seeking to balance analogous considerations in One Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6], Burchett J observed:
“… it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. In Ex Parte Lai Qin, McHugh J was careful to state (at 624) that the principles with which he was concerned were those that ‘govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means’.”
Burchett J’s observations in One Tel were cited with approval by Brereton JA (with whom Meagher JA agreed) in Nadilo v Eagleton [2021] NSWCA 232 at [12]; they are particularly pertinent to the exercise of the costs discretion in these proceedings.
A central question in these proceedings is which, of the two categories identified by Burchett J, the plaintiffs’ decision not to press for the relief sought in the summons properly falls within.
The plaintiffs effectively contended that their case falls within Burchett J’s second category. They submitted that it was reasonable and necessary for them to have commenced the proceedings because, prior to doing so, they were unable to satisfy themselves that the defendant had delivered up the totality of the files held by that firm in relation to the 36 matters in which they had previously been engaged by the plaintiffs. They further said that it was reasonable for them to have persisted with the claim made in the proceedings until 11 December 2025, when they received an “assurance” from the defendant that:
“despite the disarray and disorder, and despite the documents that had not been produced at all, what had eventually been delivered up was comprehensive and complete”.
The defendant disputed this characterisation of the relevant events and instead submitted that the plaintiffs’ abandonment of their claim for relief “amounts to a late capitulation” on their part. If correct, this places these proceedings squarely within Burchett J’s first category of case.
In support of their position, the plaintiffs relied on several affidavits sworn by Mr Shaba. The defendant relied upon a responsive affidavit sworn by Damian Michael. A vast body of inter partes correspondence was exhibited to their respective affidavits.
A very large amount of information was provided to Mr Shaba by the defendant in numerous tranches over a period of time. This much is accepted by the defendant. It is common ground that, in all, approximately 794 gigabytes of information was ultimately provided to Mr Shaba by the defendant. The defendant approached the task of delivering up the information by seeking to provide, as quickly as practicable, that which had been identified by Mr Shaba as urgent. As a result, the information was delivered to him in tranches.
Information was in part provided in hard copy and in part electronically. Again, this is accepted by the defendant; although, as I note below, the hard copy material provided by the defendant was subsequently resupplied to Mr Shaba in an electronic format. Insofar as the hard copy material produced is concerned, the plaintiffs placed particular emphasis on the following passage in Mr Shaba’s affidavit evidence:
“Around this time, I became aware that M&A Lawyers had arranged for the physical files to be delivered to the wrong address. Despite the fact that my firm requested, in the email sent to M&A Lawyers on 10 October 2023, that the physical files be made ready for collection from M&A Lawyers’ office and despite the email signature in my firm’s emails indicating that all correspondence was to be sent to my firm’s Liverpool address, M&A Lawyers arranged for a courier to deliver the boxes of hard copy material to my firm’s Barangaroo address (which was a serviced office address operated by Servecorp). None of my firm’s staff worked from the Barangaroo address.”
“was in disorder and disarray, for the very simple fact that the address is wrong. If you’re sending documents to the wrong address, that is indicative of an error being made on the part of the defendant, and a very simple error, about the production of documents.”
I do not accept this submission. It is correct for the plaintiffs to have observed that Shaba & Thomas’ initial 10 October 2023 email requested that any physical files “be made ready for collection within seven days”. However, the same email clearly identified an address in Barangaroo as that firm’s “Sydney Address”. While the signature block in the email also included the words “[a]ll correspondence to the Liverpool Address”, I do not accept that the defendant’s decision to have the hard copy documents delivered to Shaba & Thomas’ Barangaroo address can properly be characterised as “a very simple error” or that it provides any support to the plaintiffs’ assertion that the information provided by the defendant “was in disorder and disarray”.
The electronic component of the tranches of documents produced took different forms, including information contained on a portable hard drive and information shared through a secure file sharing platform known as “Hightail”.
By reason of the form in which the information was provided, Mr Shaba had difficulty locating certain classes of document, which he believed ought to have been delivered up to him by the defendant. This led him to believe – or at least suspect – that the defendant had not delivered up to him all of the information or documents in its possession. However, the plaintiffs stopped short of submitting that the defendant had actually failed to deliver up any particular document. Rather, they submitted that it is not possible, on the evidence, to ascertain the actual completeness of the defendant’s production.
The plaintiffs submitted that – whether or not the defendant actually failed to produce any document – I should nevertheless infer from Mr Shaba’s evidence that the form in which the documents were produced did not actually amount to production of documents by the defendant in the sense contemplated by s 472 of the LPUL. This was said by the plaintiffs to flow from:
a requirement that the defendant maintain their client files in a manner that any reasonably competent solicitor would be able to make ready use of them. This requirement was said by the plaintiffs to arise under Legal Profession Uniform General Rules 2015 r 91E and r 93 and the ever-present possibility that a manager or receiver – who would need to make immediate use of that firm’s client files – might be appointed to a legal practice under Chapter 6 of the LPUL;
the consequent requirement that I read the words “client’s documents” in s 472 of the LPUL as referring to documents “ordered in such a way that a reasonably competent solicitor can make immediate use of them”; and
the fact that Mr Shaba – who I do not doubt is a reasonably competent solicitor – was unable to locate certain documents, which, based on his experience, he had expected to find within the files delivered up by the defendant for reasons explained in his evidence.
I do not accept this submission. The rules and statutory provisions relied upon by the plaintiffs do not alone give rise to an obligation that a solicitor maintain their files in any particular form or structure. I was not taken to any other legislation or authority on this issue. More importantly, I am not satisfied that the defendant failed, in any relevant respect, to maintain the files they held in relation to the plaintiffs matters in an orderly manner. The evidence is silent on the form in which those files were maintained by the defendant. Mr Shaba’s evidence does identify the challenges he faced when seeking to navigate the large volume of documents in the form that they were produced to him by the defendant, but this is a slightly different issue.
Though I accept that Mr Shaba experienced difficulties when trying to navigate the documents produced by the defendant, his evidence does not establish that those documents were delivered up to him in a state of “disarray and disorder”.
Given the volume of documents produced – and the fact that Mr Shaba had not been involved in their production and was likely unfamiliar with whatever system for the filing of documents was used by the defendant – it is unsurprising that he experienced difficulties in locating certain documents or categories of documents.
Faced with these difficulties, he did not reach out to anyone working for the defendant and ask for their assistance in navigating those documents. Instead, he repeatedly wrote to the defendant asserting that it had failed to comply with its obligation to produce certain documents. Although the precise language used in its responses to this correspondence varied, the defendant broadly responded by denying that it had failed to deliver up documents in accordance with its obligations and provided a fresh Hightail link through which the particular documents said by Mr Saba to be missing could be viewed.
It is said by the plaintiffs that, had the documents about which complaint was made been produced by the defendant, one might expect for it to have responded to Mr Shaba’s correspondence by identifying where, within the material produced, he could find them. I was invited to infer from the defendant’s failure to do so that the documents identified by Mr Shaba in his letters had either not been produced or could not readily be located by reason of the form in which they had been produced. I do not draw either inference. In my view, the provision of a fresh Hightail link was a logical – and helpful – way for the defendant to have responded to Mr Shaba’s complaints about his inability to locate identified documents. Having responded in this way, it was not necessary for the defendant to go further and explain where, within the material delivered up, Mr Shaba could find the documents which had been resupplied to him through the Hightail links.
By the time the plaintiffs came to commence the proceedings, the defendant had repeatedly asserted that it had complied with its obligations to deliver up its files relating to the plaintiffs matters. Those repeated assertions were made against the backdrop of the defendant’s fundamental duty to be honest and courteous in all dealings in the course of legal practice arising under r 4.1.2 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015.
While Mr Shaba may have continued to doubt the completeness of the defendants’ production of its client files, the evidence does not establish that – as at the commencement of the proceedings – it had failed to deliver up the required material.
Following the commencement of these proceedings, the solicitor then acting for the defendant continued to assert through its correspondence his client’s understanding that all relevant documents had been provided. These statements were usually accompanied by an invitation to Mr Shaba to identify with precision any further documents that he believed might be missing so that instructions could be sought from the defendant on that issue.
The plaintiffs submitted that this invitation continued to cast doubt on the completeness of the defendant’s production of documents and meant that the relevant communications fell short of the “assurance” the defendant was required to provide. I disagree. The repeated assertion by the defendant – and later its solicitor – of its understanding that all relevant documents had been produced, made its position clear. The fact that the defendant was obliged by its professional obligations to act honestly and courteously in their dealings with Mr Shaba means that nothing turns on the fact that none of those assertions was expressly described by the defendant or its solicitor as an “assurance”.
On 28 April 2025, the defendant’s solicitor provided a further external hard drive to Mr Shaba, which contained, in an electronic form, all hard copy and electronic documents which had previously been provided to him by the defendant. Although at least one Hightail link to documents said to have been included amongst those contained on that hard drive was subsequently provided, no additional documents have since been provided by the defendant.
It follows that there has been no fresh material provided by the defendant since these proceedings were commenced by the plaintiffs, and certainly not since 28 April 2025 when the consolidated external hard drive was delivered. The plaintiffs’ decision not to press for any substantive relief in the proceedings was made unilaterally and was not the subject of any agreement between the parties.
Returning to the words used by Burchett J in One Tel, the plaintiffs have not identified any supervening event or settlement that has so removed or modified the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties.
As I have noted above, the plaintiffs rely on what they describe as an “assurance” provided by the defendant on 11 December 2025 as to the completeness of its production. Given its centrality to the plaintiffs’ argument, I set out the relevant passage from the letter sent to Mr Shaba by the defendant’s solicitor on that date:
“To the best of our client’s knowledge, information and belief, the Mills Oakley documents, as identified, were delivered to you and your clients (with the documents retained on file). With the information provided in the past by our previous letters on this Mills Oakley topic and the responses given (including in this paragraph) our client considers that an unequivocal response has been given to you. Your clients have been provided with all identified documents provided by Mills Oakley to our client.”
I do not accept that the 11 December 2025 correspondence marked any sort of a turning point in the underlying subject of the dispute between the parties. First, and as I have made clear above, I am satisfied that prior to and after the commencement of these proceedings, the defendant repeatedly represented to Mr Shaba that it had delivered up all of the relevant documents in its possession. No evidence has been adduced which suggests that it failed to do so.
There is nothing in the words used in the 11 December 2025 correspondence which places it in a materially different category to any of those early representations. Secondly, on its face, the 11 December 2025 correspondence addressed only a small component of the documents which had been produced. It is not clear why any “assurance” which might have been given in relation to this subset of documents can properly be said to have removed or modified the dispute which had emerged regarding the delivery up of the plaintiffs’ client files.
In my view, the plaintiffs’ decision to abandon its claim for substantive relief amounts to an effective surrender and, in those circumstances, it is appropriate that they be ordered to pay the defendant’s costs of the proceedings.
The final matter to be considered is the basis on which those costs should be paid. The defendant identified two bases upon which it claims an entitlement to have part of its costs paid on an indemnity basis.
First, it relied on the fact that, on 4 July 2025, it served a Notice to Admit Facts, inviting the plaintiffs to admit that the defendant had delivered up all of the documents and files referred to in the summons. On 17 July 2025, this fact was formally disputed by the plaintiffs. The defendant submitted that by abandoning their claims for substantive relief the plaintiffs must be taken to have now admitted that disputed fact. Accordingly, so said the defendants, pursuant to UCPR r 42.8(2)(b) it is entitled to recover, assessed on an indemnity basis, costs incurred for the purpose of proving the disputed fact.
Although I have accepted that the plaintiffs’ abandonment of their claim for substantive relief amounted to an effective surrender in the proceedings, it does not follow that they have implicitly admitted that all documents referred to in the summons have in fact been delivered up by the defendant. Nor has that fact been proved in the proceedings. In the circumstances, I am not satisfied that r 42.8(2)(b) has been engaged.
Secondly, the defendant relies on an Offer of Compromise made under UCPR r 20.26 and accompanying offer said to have been made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. Both were served on 24 December 2025 and offered to compromise the proceedings on the basis that:
the hearing on 5 February 2026 be vacated;
the proceedings be dismissed; and
there be no order as to costs with the intention of each party pay their own costs of and incidental to the proceedings.
As the plaintiffs have abandoned their claim for substantive relief, the proceedings must be dismissed. I have determined, for the reasons given above, that the plaintiffs should pay the defendant’s costs of the proceedings. In the event, the outcome of the proceedings is more favourable to the defendant than that contemplated by the terms of its 24 December 2025 offer.
It was not suggested that the Offer of Compromise failed in any relevant way to comply with the technical requirements of UCPR r 20.26. All that was said by the plaintiffs in answer to the claim for indemnity costs which relies on the 24 December 2025 offer is that “it [was] just too late in the day”. I do not consider this to be sufficient reason to depart from the outcome contemplated by r 42.15A(2); namely, that the defendant should recover its costs on indemnity basis from the beginning of 25 December 2025.
Even if there had been a technical problem with the defendant’s Offer of Compromise, I would nevertheless have reached the same view in the exercise of my discretion by reason of the Calderbank letter sent on the same day. The principles to be applied when considering an application for indemnity costs made on this basis are well-settled and were conveniently summarised by Pike J in Joudo v Joudo (No 2) [2024] NSWSC 469 at [12]-[15]. Applying those principles in the context of the present case, I am satisfied that it was unreasonable for the plaintiffs not to have accepted the defendant’s 24 December 2025 offer.
On their own case, by the time they received the defendant’s offer – that is, after they had received the 11 December 2025 “assurance” – the plaintiffs had all the information they needed to decide that they no longer wished to press for the substantive relief being sought in the proceedings. All that remained for them to consider was whether to persevere with the case in the hope that they might secure a more favourable costs outcome than that contemplated by the offer. Recognising that the offer was made on Christmas Eve, it nevertheless remained open until 9 January 2026. In my view, that left the plaintiffs ample time to properly consider and respond to it. Given the likely strength of the defendant’s position, the offer represented a genuine and significant compromise, and it was unreasonable for the plaintiffs not to have accepted it.
I make the following orders:
Proceedings dismissed.
The plaintiffs are to pay the defendant’s costs of the proceedings, such costs to be payable on the ordinary basis up to the beginning of 25 December 2025 and thereafter on an indemnity basis.
**********
Amended coversheet to add third plaintiff.
A-Civil Aust Pty Ltd
ADR Practice Pty Ltd t/as M&A Lawyers [2026] NSWSC 119
(2006) 67 NSWLR 497
(2000) 101 FCR 548
(1997) 186 CLR 622