Concrete Menders Pty Ltd v Ghiasvand & Ghiasvand; Ghiasvand & Ghiasvand v Flexible Constructions Pty Ltd (No 3)

[2025] ACTMC 6

COSTS - application by plaintiff and third party for indemnity costs - defence case said to have been based upon a falsehood - defendants' case more nuanced - aspects of defendants' conduct also taken into account on earlier occasion - offer of compromise - defendants' rejection of offer said to have been unreasonable - case run by plaintiff and third party at trial different - application for indemnity costs order refused.

Civil Law (Wrongs) Act 2002 (ACT), Part 2.5

Court Procedures Rules 2006 (ACT), rr 1002, 1010

Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189

Pham v Enterprise ICT Pty Ltd (No 2) [2017] NSWSC 583

Concrete Menders Pty Ltd v Ghiasvand [2024] ACTSC 23

Concrete Menders Pty Ltd v Ghiasvand (No 2) [2024] ACTSC 25

Calderbank v Calderbank [1976] Fam 93

Fowdh v Fowdh [1993] NSWCA 100

1. Pursuant to paragraph 5 of the orders made by me in these proceedings on 10 October 2024, on 17 October 2024 the solicitor for the plaintiff and third party advised that the plaintiff would seek a special costs order. On that basis, I formally vacated the ordinary costs order made on 10 October 2024 and set a timetable for the filing of submissions and evidence by the plaintiff and defendants, on the basis that the plaintiff's application would be determined on the papers.
2. In submissions received on 31 October 2024, the 'plaintiff and third party' outlined a basis on which they submitted the court should make an order that the defendants pay their costs (i.e., the costs of the plaintiff and of the third party) of the whole of the proceedings on an indemnity basis. Briefly, the basis was that defendants' case 'was based upon a falsehood' which the defendants knew 'to be false and yet persisted in maintaining it for the entire case'.
3. The plaintiff and third party articulated an alternative position, which was that the defendants should pay their respective costs, on an indemnity basis, from 14 February 2024 onwards, that being the date that an offer of settlement was communicated to the defendants' legal representatives which the defendants then unreasonably failed to accept.
4. The plaintiff's and third party's submissions were supported by an affidavit of Ms Jaleh Johannessen, solicitor, affirmed on 31 October 2024. Ms Johannessen deposed that she has daily carriage 'of the matter of the plaintiff' in these proceedings. No reference was made to third party. Nonetheless, it appears that from about 21 September 2023 onwards, Ms Johannessen also had carriage of the proceedings for the third party. The plaintiff and third party were represented by the same solicitor and barrister at the hearing.
5. The defendants provided submissions dated 25 November 2024, proposing amongst other things that the application for a special costs order 'by the plaintiff and third party' be dismissed (although at various points the submissions also referred only to the application brought by 'the plaintiff'). The defendants' submissions were supported by an affidavit of Kunal Agrawal, solicitor, affirmed on 25 November 2024.
6. Some short written submissions in reply dated 6 December 2024 were made on behalf of the plaintiff and third party.

First preliminary issue: who applied for the special costs order?

1. As will be apparent from what I have set out above, there is a lack of clarity as to whether the application for a special costs order was being agitated on behalf of the plaintiff alone, or on behalf of both the plaintiff and the third party. Initially, the court was notified that the application was made by 'the plaintiff'. Scheduling orders were drafted and made on the assumption that the plaintiff, only, was seeking a special costs order.
2. Thereafter, the legal representatives for all the parties appear to have approached the matter, at least at times, on the basis that the application had been made jointly by the plaintiff and third party.
3. Arguably, the positions of the plaintiff and third party are not the same. For example, whilst the defendants' alleged liability to the plaintiffs had a clear legal foundation and necessitated an evaluative assessment of the evidence relied upon by those parties, that was not the case in respect of the defendants' claim 'for contribution' from the third party. Ultimately, I found that that the contribution claim could never have succeeded because it was based on a misconception as to the breadth of Part 2.5 of the Civil Law (Wrongs) Act 2002 (ACT). In these circumstances, one might think there was a stronger starting point for an indemnity costs order in favour of the third party.
4. Ultimately, at the substantive hearing itself, the plaintiff and third party chose to rely on the same evidence and submissions in respect of their application for a special costs order. I will adopt the same approach as the parties. The application either succeeds or fails in relation to both.

Second preliminary issue: is it too soon for the Court to determine the special costs order application?

1. The defendants' submissions argue that it is premature for the Court to determine the special costs order application. The premise is that the defendants have appealed the primary decision in this matter to the Supreme Court, and on 5 November 2024 were successful in obtaining a stay of the primary orders. The stay order was refined by McWilliam J in the Supreme Court on 23 December 2024, with Her Honour ordering that it was conditional upon the payment into Court, by the defendants, of the sum of $40,000 by way of security for the judgment obtained in favour of the plaintiff and third party in this Court.
2. I do not know whether the defendants have paid the above sum into Court. As a result, I do not know whether the stay ordered by McWilliam J on 5 November 2024 has come into effect.
3. The defendants argue, amongst other things, that a determination by me of the special costs application may, if their appeal is successful, end up as a pointless exercise. They argue that application for a special costs order should be dismissed or alternatively its determination should await resolution of the appeal.
4. Although I was initially of the same view, ultimately, I disagree. Deferral of determination of the application will result in an undesirable fragmentation of the proceedings and may in due course require consideration of the relevant issues when they are no longer fresh in my nor the parties' minds.
5. In addition, the parties have now fully argued the question of whether any special costs order should be made (even though the defendants only did so 'protectively' and in the alternative). There is accordingly no reason not to proceed.

First proposed basis for special costs order - defendants' case based on a known falsehood

1. The primary position of the plaintiff and third party is that the defendants should pay their costs of the whole of the proceedings on an indemnity basis because the defence relied upon was 'based upon a falsehood, being that there was no contract between the [p]laintiff and the [d]efendants for the provision of concreting services at their property', a position which the defendants 'knew ... to be false, and yet persisted in maintaining ... for the entire case'.
2. Numerous authorities support the proposition that indemnity costs orders may be appropriate if a defendant engages in a deliberate attempt to frustrate proceedings by fraud or deception (see e.g. Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 per Harper J at [12]) and/or whose dishonesty gives rise to litigation which should never have occurred (see e.g. Pham v Enterprise ICT Pty Ltd (No 2) [2017] NSWSC 583 per Pembroke J at [9]).
3. There is an argument the above principles should be applied here. As I noted in my previous judgments in these proceedings, the involvement of Mr Ali Masoumi in the defendants' case was particularly troubling. In my assessment, Mr Masoumi fabricated a "quote" supposedly sent by him on behalf of the plaintiff to the third party, and contrived evidence of a supposed confession of a secret cash payment from the third party to the plaintiff: see Concrete Menders Pty Ltd v Ghiasvand [2024] ACTSC 23 ('Principal Judgment') at [172]-[184]. At least at the start of the trial, the defendants initially sought to rely on these aspects of Mr Masoumi's proposed evidence.
4. Further with respect to Mr Masoumi, Ms Johannessen deposes that his witness statement was served on her on 8 December 2023 and with its exhibit ran to some 565 pages. Her affidavit was to the effect that extensive time and resources were expended considering and responding to the foreshadowed evidence of Mr Masoumi.
5. That is no doubt true. Ultimately, however, and notwithstanding this, in my view it is an over-simplification to say that the defendants' case was 'based on a knowingly false position' maintained 'for the entire proceedings'.
6. First, it can be noted that at the same time as resisting the plaintiff's claim, the defendants pursued, in the alternative, a claim for contribution from the third party. This necessarily involved an acceptance by the defendants, at least in the alternative, that the plaintiff's claim against them might succeed. At least to this extent, the defendants simply deny the existence of a contract between themselves and the plaintiff.
7. Secondly, as recounted in my decision on the defendants' application for a special costs order, there were aspects of the case foreshadowed by them (through service of witness statements) which were not ultimately asserted at the hearing, were initially asserted but then abandoned, or were inconsistent with the case actually run by the defendants at the hearing: see Concrete Menders Pty Ltd v Ghiasvand (No 2) [2024] ACTSC 25 (First Costs Judgment) at [13]-[20]. There was, to some extent, a gradual tactical retreat from some of the more patently dubious aspects of the case posited in the defendants' witness statements.
8. Thirdly, putting to one side the defendants' response to the case of the plaintiff, the assertion which formed the basis for the third party claim - that the defendants had paid the third party for the work carried out by the plaintiff - was not without at least some evidentiary foundation. As noted in the Principal Judgment, at one point the defendants made a bank transfer of $10,000 from to the third party accompanied by the narration 'slab stage': Principal Judgment, [55]. Although this was the only payment made by the defendants which referred expressly to concreting work, and the basis for the payment, conspicuously, was not explored by any party at the hearing, it provides a basis for saying the defendants' case may have been based on a germ of truth.
9. Lastly, I must bear in mind that I have already taken into account some of the dubious aspects of the defendants' case, including the role of Mr Masoumi, as a factor which in part justified the dismissal of the defendants' application for an indemnity costs order connected to the vacation of the original hearing dates. I need to be careful not to

"double count", against the defendants, this consideration.

1. On balance, notwithstanding that I hold grave concerns about the integrity with which the defendants approached some aspects of the conduct of their case (a comment directed solely towards the defendants themselves and not their legal representatives), in my assessment there is insufficient justification for an award of indemnity costs of the whole of the proceedings in favour of the defendants.

Second proposed basis for special costs order - unreasonable rejection of offer of compromise

1. The second limb of the plaintiff and third party's application, relating to costs incurred from 14 February 2024, is what they assert was the defendants' unreasonable rejection of a settlement offer made on that date. The plaintiff and third party contend that, having regard to the principles espoused in Calderbank v Calderbank [1976] Fam 93 ('Calderbank'), indemnity costs should be paid by the defendants from the date on which the offer was communicated.
2. The background is that, by letter dated 14 February 2024, expressed to be 'Without Prejudice Save as to Costs', the solicitor for the plaintiff and third party proposed that the proceedings be resolved by a payment by the defendants of '$55,000 plus costs as agreed or assessed', to be paid within 7 days of execution of a deed of settlement and release ('settlement letter').
3. Although Ms Johannessen was solicitor for both the plaintiff and the third party at the relevant time, and parts of the settlement letter referred to 'our clients', the letter requested that the sum of $55,000 be paid to 'our client' (singular - presumably a reference to the plaintiff only). The settlement letter made no reference to the defendants' third party claim, nor did it propose any particular resolution of the proceedings as they related to the third party.
4. Otherwise, the settlement letter noted, entirely appropriately, that:
   1. The proposed payment of $55,000 represented a compromise on the amount claimed in the plaintiff's Statement of Claim, being $78,988.79;
   2. Significant and disproportionate costs would be incurred if the matter did not resolve by settlement (Ms Johannessen noted that her 'clients' legal costs' at the time were in the vicinity of $35,000, but anticipated that if the matter continued those costs could rise to as much as $100,000 'for our client' - a prediction which no doubt turned out to be correct); and
   3. The settlement offer was open for acceptance for a period of 28 days.
5. At least in so far as it related to the plaintiff, on the face of it the settlement offer was reasonable. Parties should be encouraged to compromise and to resolve matters, where possible, at an early stage, even more so where the quantum in dispute is relatively low as in the present matter.
6. A problem for the plaintiff, however, is that at the time the settlement offer was made, and throughout the period when it was available for acceptance, the plaintiff's Statement of Claim contended that its contract with the defendants arose from an approach by 'the First and Second Defendant' [sic] which took place '[o]n or around September 2021'. Although witness statements of Mr Kehrig (the sole director of the plaintiff company) had been served which referred to communications with the defendants in the first half of 2021, including a meeting with the second defendant (only) in March 2021, one of Mr Kehrig's witness statements referred to the whole of the concreting work having 'commenced and concluded in November 2021', while a witness statement of Mr Shahbaz (the sole director of the third party company) asserted that he had met Mr Kehrig for the first time 'in any capacity' shortly after November 2021. These assertions are inconsistent with the case run by the plaintiff and third party at trial and inconsistent with the findings made by me at its conclusion (in fact, for example, the bulk of the concreting work was done in July 2021 and only some rectification work was done in November 2021).
7. There appears to have been no communication from the plaintiff foreshadowing an intention to amend its Statement of Claim (the amendment was not ultimately sought until July 2024) and no clarification of which of the inconsistent details contained in the witness statements served on behalf of the plaintiff and third party were correct. It can legitimately be said that aspects of the case of the plaintiff and third party, at this stage, were chaotic.
8. What the plaintiff and third party were truly contending was not readily apparent until the final batch of witness statements - including further statements from Mr Kehrig and Mr Shahbaz, as well as statements from other employees of the plaintiff - was served by on the defendants in late March 2024. By that stage the settlement offer had expired. (It would of course have been open and sensible to renew a settlement offer at this stage, but that did not occur.)
9. In Fowdh v Fowdh [1993] NSWCA 100 at p 10, Mahoney JA observed:

It is one thing for a plaintiff to present her evidence, make an offer of compromise, and to succeed at the trial on that evidence. In such a case, indemnity costs may be warranted. It is another thing for the plaintiff to present a case and make an offer of settlement, and then to succeed at the trial upon a relevant different case. A plaintiff who has done that may not readily receive indemnity costs.

1. The above observations are apposite in the present case. At the time the settlement offer was available for acceptance, regardless of the merit of the plaintiff's underlying claim, it was legitimate for the defendants (and even more so for those advising them) to consider that the plaintiff and third party had not advanced a coherent set of contentions.
2. In the circumstances, the plaintiff and third party have not shown that the defendants' rejection of the settlement offer was reasonable. Accordingly, there is insufficient justification for ordering the defendants to pay the costs of the plaintiff and third party on an indemnity basis from the date of the settlement offer.
3. As a final matter, I note that the settlement letter stated that, in addition to relying on Calderbank principles, the offer which it contained was made pursuant to Part 2.10 of the Court Procedure Rules 2006 (ACT) ('Rules').
4. None of the parties addressed the question of whether the indemnity costs order sought by the plaintiff and third party could be made pursuant to the provisions of Part 2.10 of the Rules.
5. Rule 1010 provides that, in circumstances where an offer of compromise complying with the rules has been made by the plaintiff but not accepted by the defendant, and the plaintiff ultimately obtains a 'no less favourable' judgment, the plaintiff is entitled to an order for costs assessed on a solicitor and client basis from the day the period for acceptance of the offer ended '[u]nless the court otherwise orders'.
6. In the present case, assuming the settlement offer complied with the requirements set out in r 1002 (which I do not need to decide), in the circumstances which I have described above, this is a case where it is appropriate to order otherwise than that the plaintiff is entitled to an order for costs assessed on the basis set out in r 1010.

Who should pay the costs of the application for a special costs order?

1. The defendants submitted that, in the event that I dismissed the application for a special costs order, 'no costs should be allowed for the application for indemnity costs being made'.
2. The defendants have been successful in resisting the application for a special costs order. On the other hand, there was a proper basis for the application to have been brought. In the circumstances, the appropriate order is that the parties each bear their own costs of the application for a special costs order.

(1) The application by the plaintiff and third party for an order requiring the defendants to pay their costs on an indemnity basis is dismissed.

(2) Save as indicated by order 3, the defendants are to pay the costs of the proceedings of the plaintiff and third party as agreed or assessed on an ordinary basis.

(3) Each party is to pay its own costs incurred in connection with the application referred to in order 1 above.

(4) Orders 1 to 3 above are stayed, subject to the same condition as the order made by McWilliam J in Supreme Court proceedings SCA 55 of 2024 on 23 December 2024 and for as long as that order remains in force.

I certify that the preceding [43] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Special Magistrate Hassall.