Raashed and Anor v Bangladesh Islamic Centre of NSW Inc

Supreme Court of NSW|2018-11-02|Before: Sackar J, Pembroke J

Solicitors: MIC lawyers (plaintiffs) Executive legal (defendant) File Number(s): 2017/258940

Procedural history

After an adjourned hearing on 6-9 March 2018 I finally heard this matter in May and June 2018, giving judgment in Rashid Raashed v Bangladesh Islamic Centre of New South Wales [2018] NSWSC 1001 on 29 June 2018 (principal judgment).
Due to a series of difficulties with legal representation, it took some time before the parties were heard on the final form of any orders or declarations sought given my judgment and on the question of costs.
On 2 November 2018 I heard both parties on the orders they sought and on the question of costs. In oral argument it became apparent to me that there was in substance no controversy over the appropriate orders to be made in this matter and I made declarations and orders on 2 November 2018 giving effect to my judgment.
This left the issue of costs outstanding, which this judgment addresses.

Parties' submissions

With the above in mind there remains the issue of costs in the proceedings.

Plaintiffs

The Plaintiff's submissions on costs are premised on the assertion that in these proceedings there were two separate "events" which require separate costs considerations.
The first "event" was the proceedings commenced on 25 August 2017 initially before Pembroke J to restrain the Defendant from holding its Annual General Meeting, on the basis that the Plaintiffs had been improperly expelled and membership applications had been improperly rejected. They submit they were wholly successful on this aspect of the case. They submit they were awarded an interim injunction by Pembroke J and successful on this point in the principal judgment, because I found the Plaintiffs were still life members and the twelve deponents' memberships were in abeyance.
The second "event" was the further relief claimed for the appointment of a receiver and manager. The Plaintiffs accept they were unsuccessful on this event.
They therefore submit the costs of these two events should be set off against each other, although with a number of further factors to be considered.
First, they note the Defendant withdrew its instructions on 9 March 2018, causing the abortion of the hearing dates until May 2018. The Plaintiffs contend this resulted in wasted costs in preparing for hearing a second time, and the throwing away of the Defendant's costs incurred in briefing for the first hearing. They state the Defendant should not be entitled to recover these costs as a result of withdrawing instructions part-way through a hearing.
Secondly, the Plaintiffs submit the costs of the contested interlocutory application for injunctive relief, being costs in the cause and upheld before me, should be paid by the Defendant.
Thirdly, the Plaintiffs assert the most substantial issue at hearing was whether the Plaintiffs had been validly expelled from the Defendant, and the related membership issues of the other applicants and deponents.
Weighing these factors into the balance, the Plaintiffs submit the Defendant should be ordered to pay 50% of their costs of the proceedings.

Defendant

The Defendant's submissions on costs rely squarely on the Calderbank letter sent to the Plaintiffs on 15 May 2018.
Contrary to the Plaintiffs' submission, the Defendant contends that the basis of the interlocutory application before Pembroke J was not solely membership disputes, but failures to allow inspection of books and records, failure to appoint an independent auditor, failure to disclose certain debts, and allowing cash donations to be received by Mr Elzamtar.
The Defendant submits that the original Statement of Claim dated 22 September 2017 related entirely, in some way or another, to the appointment of a receiver. It sought four main substantive issues: 1. Contended irregularities in the administration of membership applications and renewals; 2. Contended failure to ensure independence of financial audits and financial reporting; 3. Contended undisclosed debts; and 4. Failure to maintain a bank account and insurance policy.
Shortly thereafter, the Defendant submits the Plaintiffs' filed the majority of their evidence, which made it clear that the Plaintiffs would press all four of the above issues. However, it contends that it was only at the opening of the first hearing in March 2018 that it became apparent that the Plaintiffs would need to re-plead, in order to seek declaratory relief in respect of the Plaintiffs' life membership status.
The Defendant denies costs were "thrown away" by the withdrawal of instructions during the March 2018 hearing, because Executive Legal was later re-appointed as the solicitors of the Defendant and costs of counsel were not entirely "thrown away".
The Defendant contends that whilst the Plaintiffs were successful on the life membership issue (and whether or not Dr Raashed and Mr Mondal received letters) they were unsuccessful on the above four substantive issues. Further, the life membership issue only consumed very little time at the hearing. Even further, the issue of whether or not the Plaintiffs' deponents had or had not received letters rejecting their membership applications turned out to be a useless exercise, as my judgment determined it was not strictly necessary to determine this issue (principal judgment [449], [467]-[469]). It suggests this should factor into my assessment of costs.
In addition, the Defendant submits the central issue before Pembroke J was whether the balance of convenience favoured interim relief staying the Annual General Meeting and election, and as the Defendant has succeeded at trial in respect of the substantive relief sought, costs reserved by Pembroke J should be awarded against the Plaintiffs.
With the above factors in mind, and with reference to the 15 May 2018 Calderbank letter, the Defendant seeks indemnity costs from 15 May 2018 on the basis that the relief obtained by the Plaintiffs placed them in a "worse position" than had they accepted the offer of $30,000.
The Defendant seeks the following orders as to costs: 1. Plaintiffs pay the Defendant's costs of the Notice of Motion filed 24 August 2017; 2. Defendant pay half only of the Plaintiffs' costs of the day of 9 March 2018; and 3. With respect to the remainder of costs, the Plaintiffs pay: 1. 80% of the Defendant's costs up to 15 May 2018; and 2. 90% of the Defendant's costs from 15 May 2018.

Legal principles

Section 98(1)-(4) of the Civil Procedure Act 2005 (NSW) provides: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount.
Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
Rule 42.2 of the UCPR provides: 42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.
Indemnity costs are provided by r 42.5 of the UCPR, as are offers of compromise as defined by the rules determined by rr 42.13-42.17 of the UCPR.
With respect to Calderbank letter of compromise, in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Giles JA said (at [37]): The Council was also entitled to orders that the Third Party Defendants pay its costs unless the court otherwise ordered: Pt 39 r 1A. The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235.
Giles JA's statement above was quoted with approval, for example, by the New South Wales Court of Appeal in Bartlett v Australia & New Zealand Banking Group Ltd (No 2) (2016) 92 NSWLR 670; [2016] NSWCA 142 at [24].

Calderbank letter

As is clear on the authorities with respect to Calderbank letters and indemnity costs, the question is whether the offeree's failure to accept the offer in all the circumstances warrants departure from the ordinary rule as to costs. The touchstone, although not solely definitive, is whether the offeree has ended up worse off in the outcome of the proceedings than if they had accepted the offer contained in the Calderbank letter. Above all, costs are at the discretion of the Court and are to take into account all the circumstances of the case.
In the Calderbank letter of 15 May 2018 sent by the Defendant to the Plaintiffs, the offer amounted to requesting a complete capitulation by the Plaintiffs and payment by them to the Defendant of $30,000.
In my view this was a wholly unreasonable offer in the circumstances of the case, and does not warrant a departure from the ordinary rule as to costs. This is because the Calderbank letter, if accepted, would have meant that the Plaintiffs would have conceded that they were no longer members of the Defendant. This would undoubtedly have been a very serious and unsatisfactory outcome for the Plaintiffs whose interest in their membership in the Defendant was plain to me throughout the proceedings. It must always be borne in mind by practitioners that there is no case that cannot be lost in part or indeed in whole.
In addition, the sum of $30,000 was not provided with any detailed reference to the costs and disbursements of the Defendant to date, save as to state "[t]he sum of $30,000 represents only part of the legal and other costs that the defendant has incurred, to date". No basis for this calculation was provided in the Calderbank letter.
With respect to the touchstone of whether or not the offeree has ended up in a worse or better position at hearing than had they accepted the offer, the outcome of the case was that the Plaintiffs were successful in proving to me that they did not receive the letters purporting to reject them and were still life members of the Defendant (principal judgment [421]-[448]). Whilst this issue emerged out of amended pleadings, this was clearly not a complete loss for the Plaintiffs.
The Plaintiffs also succeeded in the periphery issue of whether their deponents' membership applications were validly rejected, as in the end I held these applicants and deponents simply had their membership held in abeyance (principal judgment [449]-[471]).
The Plaintiffs were not successful in proving to me that somehow the Executive Council had acted capriciously (principal judgment [472]), or that there were symptomatic financial management issues and insurance (principal judgment [473]-[480]). The Plaintiffs did not persuade me a receiver and manager or interim supervisor should be appointed (principal judgment [481]-[486]).
To this end, I do not think that the Plaintiffs are now worse off than had they accepted the Calderbank Offer. Rather than being forced to a complete capitulation, they have won on the important issue of their status as life members. The Calderbank Offer was in my view unreasonable and in all the circumstances does not warrant a departure from the ordinary rule.

General discretion

Applying my general discretion as to costs, in my view the Plaintiffs' membership status and whether or not they received letters occupied a substantial amount of time of the hearing. To this end, the Plaintiffs' credit had to be challenged, which took some time. The Plaintiffs' status as life members was also relevant because they had proposed and/or seconded a number of applications as was clear in their evidence (principal judgment [163], [206]).
In addition other corroborative material needed to be considered at trial, as to the sending of letters by the Defendant to applicants, leading me to conclude there was clearly some issue or problem with the Defendant's sending of letters by post (principal judgment [466]).
I note that in closing there was an argument raised by the Plaintiffs that the letters dated 17 July 2017 addressed to them did not comply with clause 16(a)(i) and (ii) of the Amended Constitution. As a matter of fairness I was of the view it was however too late for them to rely on this line of argument (principal judgment [424]-[426]).
By comparison, the issue as to the appointment of a receiver and manager took little time at hearing. Likewise, the factual matrix surrounding this issue (such as those of insurance and the recording of claims by Mr Elzamtar and Mr Ahmed in the financial statements) comprised a comparatively small portion of the evidence. This is when that issue is compared to the intertwined issues of the Plaintiffs' membership in the Defendant and the various deponents' applications to membership.
In my view, the hearing was broadly taken up with two issues: (a) the Plaintiffs' membership and related disputes; and (b) the largely uncontroversial factual matrix as to the appointment of a receiver and manager. The first of these issues took up a bulk of the time, and the Plaintiffs were largely successful on it.
Although Pembroke J did not provide extensive reasons on the interlocutory application, it seems his approach was pragmatically to maintain the status quo pending the resolution of the dispute, reserving the question of costs, and to that extent it was a victory in one sense. I am therefore of the view the costs of the interlocutory application should flow from my above reasons.
As to the alteration of pleadings and the deferral of hearing due to issues with instructions, this is a reality of litigation and in my view did not lead to any substantial costs thrown away. At no time was the Defendant prepared to concede the Plaintiffs were indeed life members of the organisation. Whilst there might be some criticism of the pleadings, each side's respective arguments in detail only emerged in argument, as I observed in the hearing (principal judgment [421]-[423]). These issues therefore do not factor heavily in my reasoning and discretion as to costs.

Conclusion

Weighing these factors into the balance, in the exercise of my general discretion, the Defendant should be ordered to pay 50% of the Plaintiffs costs of the proceedings, including the costs of the interlocutory application before Pembroke J.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 November 2018

At a glance

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Judgment (11 paragraphs)

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Legislation Cited (2)

Cases Cited (6)