Federal Court of Australia

Nitin Pandey Pty Ltd v Curtin Chambers Pty Ltd, in the matter of Curtin Chambers Pty Ltd (No 2) [2023] FCA 1286

ORDERS

THE COURT ORDERS THAT:

1.    Subject to order 3, the plaintiffs pay the fourth and fifth defendants’ costs of the proceeding, as agreed or taxed.

2.    The fourth and fifth defendants’ application concerning costs is otherwise dismissed.

3.    The fourth and fifth defendants pay the plaintiffs’ costs of that application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GOODMAN J

A.    Introduction

1    These reasons concern an application by the fourth and fifth defendants (Tam parties) for the following orders:

(1)    the plaintiffs pay the Tam parties’ costs of the proceeding up to 17 March 2023 as agreed or taxed;

(2)    the plaintiffs pay the Tam parties’ costs of the proceeding from 18 March 2023 onwards on an indemnity basis; and

(3)    in the alternative, the plaintiffs pay the Tam parties’ costs of the proceeding as agreed or taxed.

2    For the reasons which follow that application should be dismissed.

B.    Background

3    The first defendant (Company) is a corporate vehicle by which the plaintiffs on the one hand, and Dr Pradeepa Pathmaperuma and his company (Pathmaperuma parties) and the Tam parties on the other, conduct a dentistry practice in Curtin in the Australian Capital Territory.

4    The plaintiffs commenced the proceeding by Originating Process and on an urgent basis on 18 November 2020. The final relief sought by the plaintiffs in their Originating Process was:

13.    An order pursuant s 233(1)(a), or alternatively pursuant to ss 461(1)(e), (f), (g) or (k), of the Act that the first defendant be wound up and a liquidator be appointed (Liquidator).

14.    The Liquidator be appointed as receiver of the assets of the Curtin Chambers Service Trust.

15.    In acting in the capacity as receiver of the Curtin Chambers Service Trust, the Liquidator is to have such powers pursuant to ss 420 and/or 477 of the Act or otherwise as the Court considers appropriate as if the Curtin Chambers Service Trust were a corporation.

16.    Costs.

17.    Such further or other order as the Court considers appropriate.

(emphasis in original)

5    On 24 November 2020, Jagot J made orders restraining: Dr Pathmaperuma and his company from taking any further steps pursuant to a notice of dispute and notice of termination. Her Honour also restrained the plaintiffs, the Tam parties and the Pathmaperuma parties from conducting the affairs of the Company other than in the usual course of business and – excluding any employment contract to fill any vacancy or vacancy which arises in the normal course of business – from: (1) entering into any material contract, commitment or liability (including any lease arrangement) if the obligations of any party to the agreement extended more than one month after the agreement; or (2) rendering the Company liable actually or contingently for an amount in excess of $10,000.

6    On 16 March 2022, I made an order by consent, the effect of which was to vary the orders made by Jagot J on 24 November 2020 so that the Company could enter into a lease.

7    In May 2022, I set the proceeding down for hearing to commence on 20 March 2023, with an estimate of five days.

8    In their written submissions filed in early February 2023 in advance of the hearing, the plaintiffs indicated that the final relief they sought was to have “a liquidator appointed pursuant to s 233, or alternatively s 461 of the Corporations Act 2001 (Cth)”.

9    On 14 March 2023, the Tam parties made two offers. It is necessary to set those offers out in full.

10    The first offer was an open offer in the following terms (as written):

We refer to the above proceedings, which are listed for hearing commencing on 20 March 2023.

We write this as an open letter, and reserve the right to rely upon it in support of our clients’ application for relief in the proceedings.

We are instructed that our client will agree to settle the proceedings on the following terms:

1.    Dr Nitin Pandey (Dr Pandey) is to leave Curtin Chambers Pty Ltd (the Company) and Curtin Dental (the Practice) with effect from 30 September 2023.

2.    Dr Pandey is to resign as a director of the Company with effect from 30 September 2023. He will relinquish his role in operational and strategic decisions from 30 June to 30 September 2023.

3.    Dr Pandey will remove from the Premises all equipment and software that he or Nitin Pandey Pty Ltd owns, including the OPG machine. Dr Pandey will attend to any make good necessitated by the removal of such items by 30 September 2023.

4.    Dr Pathmaperuma and Dr Tam are to take all reasonable steps to have Dr Pandey’s personal guarantee in respect of the lease of the Premises discharged with effect from 30 September 2023. From 30 September 2023 until such guarantee is discharged, Dr Pathmaperuma and Dr Tam indemnify Dr Pandey and Nitin Pandey Pty Ltd against any liability pursuant to that guarantee.

5.    Subject to paragraph [6] below, Dr Pandey will not be subject to a geographical restraint to practice as a dentist in exchange for:

(a)    Dr Pandey agreeing not to call on any amounts payable to him either as a shareholder in the Company or as a unit holder in the Unit Trust. In this regard, the Trust’s financial statements indicate that that Dr Pandey’s trust is presently entitled to $107,608.32, and Dr Pandey Pty Ltd is entitled to repayment of a loan valued at $26,647.09;

(b)    Dr Pandey agreeing not to call on any amounts payable to him (or Nitin Pandey Pty Ltd) under the provisions of the Service Agreement and the 2008 Deed, including an amount for unpaid consumables which are presently owing and exceed the sum of $80,000;

(c)    Dr Pandey agreeing to transfer:

i)    his shares in the Company to Dr Tam and Dr Pathmaperuma for the sum of $2.00 on 30 September 2023; and

ii)    his units in the Unit Trust to Dr Tam and Dr Pathmaperuma for the sum of $20.00 on 30 September 2023.

At this juncture, we are instructed to remind your clients that in 2017, the Company’s goodwill alone was valued by Clearcorp at $466,742.

(d)    In relation to Dr Pandey’s patients and his own goodwill in the Practice (which he purchased from Dr Lymn for approximately $870,000 in 2015 and which has significantly increased in value since that time):

i)    Dr Pandey agreeing to leave all patient records and patient contact information at the Practice;

ii)    Dr Pandey agreeing to delete and destroy all patient information in his possession (including patient contact information) prior to his departure from the Practice; and

iii)    Dr Pandey agreeing not to approach, or directly market any dental services to, any patients that he has routinely treated at the Practice for a period of twelve months with effect from 30 September 2023.

(e)    For a period of twelve months from 30 September 2023, Dr Pandey will not approach, or directly market any dental services to, any patients routinely treated by Dr Tam, Dr Pathmaperuma and the associate dentists at the Practice.

Note: A patient is considered ‘routinely treated’ by a dentist if:

i)    they have only been treated by that dentist in the past 5 years;

ii)    they have specifically requested that dentist;

iii)    if in the past 5 years they have been treated by more than one dentist, but by that dentist on all of the last 3 occasions; or

iv)    if none of the above applies, the dentist they have most been treated by in the past 5 years.

6.    Notwithstanding paragraph 5 above, Dr Pandey agrees not to practice as a dentist at 5/44 Curtin Place, Curtin ACT 2605 for a period of 24 months from 30 September 2023.

7.    For the avoidance of doubt, paragraphs [5] and [6] above are the only applicable restraints and the parties agree that obligations under the 2008 Deed (including clause 10 of the 2008 Deed) are not to apply to Dr Pandey and/or Nitin Pandey Pty Ltd.

8.    With effect from 30 September 2023, Dr Pandey is to relinquish and not use:

a)    the domain name www.curtindental.com and associated email addresses;

b)    the following domain names: curtinfamilydentist.com.au, curtinfamilydentist.online, curtinfamilydental.com, curtinfamilydentist.com, curtindentistry.com, curtindetnistry.com.au, curtinfamilydentistyr.com.au, curtinfamilydentsitry.com, dentistcuritn.com. and dentistincurtin.com.au; and

c)    the following business names: Curtin Family Dentist, Curtin Dentistry, Curtin Family Dentistry, Curtin Smiles and Curtin Family Dental.

9.    Dr Pandey is not to use the phrase ‘Curtin Dental’ or any part or derivative thereof. From 1 July 2023 onwards, Dr Pandey is not to represent any association with Curtin Dental, or do anything that would give the reasonable impression to third parties of a connection with Curtin Dental.

10.    Dr Pandey is relieved of all liabilities of the Company and the Unit Trust with effect from 30 September 2023.

11.    Dr Pandey (on the one hand) and Dr Tam, Dr Pathmaperuma and the Company (on the other) each agree to indemnity each other with respect to any future claims of professional negligence arising from their respective conduct during the period 27 November 2015 to 30 September 2023. This indemnity includes each Dentists’ related-company, to the extent applicable to any such claims.

12.    The parties are to be subject to ongoing non-disparagement obligations.

13.    The parties are to do all things necessary to give effect to the agreement.

14.    The parties agree that the terms of this agreement are immediately binding, although the agreement is to be more fully documented by way of a Deed of Settlement.

15.    The proceedings are to be dismissed, with no order as to costs.

16.    Order 1 of the second orders made by Justice Jagot on 24 November 2020 (substituting Order 2 of the first orders made by Justice Jagot on 24 November 2020) and all associated orders are to be discharged.

This offer is made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333. In light of the proximity to the trial, this offer is open for acceptance for a period of seven days from the date hereof. If this offer is not accepted and your clients obtain a judgment that is the same or worse than this offer of settlement, this letter will be relied upon in support of an application for indemnity costs against your clients from the date of expiration of this offer.

(emphasis in original)

11    The second offer was a without prejudice offer in the following terms (as written):

We refer to your clients’ open letters of offer dated 28 February 2023 and 6 March 2023 and our open letter of offer dated 14 March 2023 (Open Offer).

On a without prejudice basis, and as an alternative to the Open Offer, Drs Tiffany Tam (Dr Tam) and Niran Pathmaperuma (Dr Pathmaperuma) offer to settle your clients’ claim (WP Offer) on the same terms and conditions as set out in the Open Offer, save for paragraph 6 of the Open Offer being amended as follows:

6.    Notwithstanding paragraph 5 above, Dr Pandey agrees not to:

(a)    practise as a dentist;

(b)    be engaged in a dental practice; or

(c)    be engaged in any capacity, including through an agent, employee, related party or any other associated entity in any business which engages with, or is in any way involved in the practice of dentistry or dental surgery,

within the shopping precinct known as ‘Curtin Shops’ (bounded by Carruthers Street, Theodore Street and Strangways Street, including any tenancy located at 44 Curtin Place, Curtin ACT 2605 for a period of 12 months from 30 June 2023.

6.     Dr Tam and Dr Pathmaperuma agree to release Dr Pandey (and any of his agents, employees, related parties and other associated entities) from any geographical restraint of trade as well as all claims arising from a breach of fiduciary duties (including in relation to any tenancy located at 44 Curtin Place, Curtin ACT 2605), in exchange for the payment by Dr Pandey to Dr Tam and Dr Pathmaperuma of $650,000. For the avoidance of doubt, the remaining restraints in paragraphs 5, 11 and 12 of the Offer will continue to apply.

The WP Offer is open for acceptance in writing until 5pm on Friday 17 March 2023, after which time it will lapse.

In the event that the WP Offer is not accepted, the Proceeding goes to final hearing and Drs Tam and Pathmaperuma obtain a judgment that is equal to or no less favourable than the WP Offer, we put your clients on notice that they will rely on this letter to seek an order that they pay their respective costs of the Proceeding on an indemnity basis from the date of expiry of the WP Offer.

(emphasis in original)

12    Neither offer was accepted.

13    On 20 March 2023, the hearing commenced. Dr Pandey was called and was cross-examined over the course of 20, 21, 22 and 23 March 2023. At the conclusion of Dr Pandey’s cross-examination on 23 March 2023, I acceded to an application made by Senior Counsel for the plaintiffs to adjourn the hearing. I made orders, inter alia, for the proceeding to be adjourned for further hearing on 7 to 11 August 2023.

14    On 25 July 2023, the plaintiffs filed a Notice of Termination of Lawyer’s Retainer, pursuant to r 4.04(2) of the Federal Court Rules 2011 (Cth). On 28 July 2023, I refused the plaintiffs’ application for an adjournment of the hearing: Nitin Pandey Pty Ltd v Curtin Chambers Pty Ltd, in the matter of Curtin Chambers Pty Ltd [2023] FCA 883.

15    On 3 August 2023, I ordered, by consent, that the proceeding be dismissed and that the plaintiffs pay the Pathmaperuma parties’ costs of the proceeding as agreed or taxed. I also made orders for the exchange of evidence and submissions in relation to the present application by the Tam parties.

16    The Tam parties’ primary position – as reflected in the orders they seek and which are set out at [1(1) and (2)] above – is that the plaintiffs should pay their costs up to 17 March 2023 on a party and party basis and thereafter on an indemnity basis.

17    The plaintiffs’ position is the same as the Tam parties’ alternative position (see [1(3)] above) that they should be ordered to pay the Tam parties’ costs on the usual party and party basis for the entire proceeding and that there should be no order requiring the plaintiffs to pay indemnity costs.

C.    Consideration

18    Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs in a proceeding, including that costs be assessed on an indemnity basis.

19    The non-acceptance of an offer made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93 may provide a basis for the making of an order that costs be assessed on an indemnity basis, where the conduct of the offeree in failing to accept the offer was unreasonable: Black v Lipovac [1998] FCA 699; (1998) 217 ALR 386 at 432 [217] (Miles, Heerey and Madgwick JJ); CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75] (Moore, Finn and Jessup JJ). The conduct of the offeree is assessed by reference to the circumstances which existed at the time at which the offer was capable of acceptance: Black at 432 [218]; CGU at [75]. Such circumstances include the status of the proceeding and the relative strengths and weaknesses of the parties’ positions. The circumstances may also include the extent to which the offeror has explained why the offer is a result that the offeree will not likely better at trial, however, there is no inflexible rule that such an explanation must be given: Hardingham v RP Data Pty Ltd (No 2) [2021] FCAFC 175 at [22] (Greenwood, Rares and Jackson JJ).

20    The Full Court of this Court has described the ultimate question in respect of an application for indemnity costs following the non-acceptance of a Calderbank offer to be whether the failure to accept the offer in all of the circumstances warrants departure from the ordinary rules as to costs: Willis v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43 at [22] (Logan, Griffiths and Perry JJ). The question of whether the refusal of an offer was “unreasonable” when viewed in light of the circumstances existing at the time the offer was rejected has been identified as “key” to the analysis of the consequences of a party’s failure to accept a Calderbank offer: Hood v Down Under Enterprises International Pty Limited (No 2) [2022] FCAFC 106 at [24] (Yates, Moshinsky and Rofe JJ). See also Anchorage Capital Partners Pty Limited v ACPA Pty Limited (No 2) [2018] FCAFC 112 at [5] to [8] (Nicholas, Yates and Beach JJ).

21    In considering whether a party acted unreasonably in not accepting a Calderbank offer it is relevant to compare: (1) the position of the offeree if the offer had been accepted; and (2) the potential outcomes that were available to be achieved in the proceeding: see Centor Australia Pty Ltd v RMD Industries Pty Ltd (No 2) [2013] FCA 1407 at [9] (Dowsett J); Merial, Inc v Intervet International BV (No 4) [2017] FCA 223; (2017) 124 IPR 1 at 20 [54] (Moshinsky J); Energy Beverages LLC v Cantarella Bros Pty Ltd (No 2) [2022] FCA 394 at [55] to [56] (Halley J); Firstmac Ltd v Zip Co Ltd (No 2) [2023] FCA 1074 at [39] to [40] (Markovic J).

22    The task of assessing whether the non-acceptance of a Calderbank offer amounted to unreasonable conduct by an offeree is considerably easier where the subject matter of the unaccepted offer and the outcomes available in the proceeding are largely commensurate. To take a simple example, where the relief sought is payment of damages and the unaccepted offer is to pay a particular amount of money to the offeree, an assessment of the reasonableness of the offeree in not accepting that offer is likely to be relatively straightforward. In contrast, where the unaccepted offer bears little correspondence to the relief available in the proceeding the task of assessing whether the non-acceptance of the offer was unreasonable may be “difficult, if not impossible” (to adopt the expression used by Moshinsky J in Merial at 20 [54]).

23    Centor, Merial and Firstmac are examples of cases in which an application for indemnity costs failed because the divergence between the offer and the potentially available outcomes rendered difficult, if not impossible, the task of assessing whether a failure to accept a Calderbank offer was unreasonable.

24    I have come to the view that the Tam parties have not established that the failure of the plaintiffs to accept either offer was unreasonable. This is principally because the divergence between the terms of those particular offers and the potentially available outcomes in the proceeding at the time the offer was not accepted means that I am unable to form the view that the plaintiffs’ non-acceptance of the offers was unreasonable.

25    As is apparent from the terms of the offers (see [10] and [11] above) they address a range of matters, including: the terms and manner of separation of the practices of the plaintiffs on the one hand and the active defendants on the other; the terms of any geographical restraint upon Dr Pandey’s practice; the use of domain names and business names; and the provision of indemnities with respect to professional negligence claims. In contrast, the only relief expressly sought in the proceeding was that sought by the plaintiffs by way of an order winding up the Company (see [4] and [8] above).

26    Whilst the Tam parties placed reliance upon the width of the plaintiffs’ claim for “such further or other orders as the Court considers appropriate” and upon an exchange between the Court and Senior Counsel for the plaintiffs in which the latter suggested that a buyout order between shareholders might be an available form of relief, the fact remains that the offers proposed a range of matters beyond what was attainable in a contested proceeding. The extent to which the term of the offers diverged from the relief sought was considerable (cf. Energy Beverages at [98], where Halley J noted that an offer may include terms that go beyond the relief sought provided that such terms are closely related to such relief).

27    The offers were part of commercial negotiations between the plaintiffs and the Tam parties, which addressed the proceeding, but also included commercial outcomes unachievable as part of the proceeding. Such negotiations are commonplace and are not to be discouraged. However, where the offers made during such negotiations are subsequently relied upon to found an indemnity costs order, the width of such offers may have consequences in the consideration of costs. In this regard I respectfully agree with the following observations of Markovic J in Firstmac at [45] to [46]:

45.    Unsurprisingly in making an offer to settle a proceeding a party will often incorporate terms that are not achievable in the proceeding. A negotiation will often ensue by which those terms are accepted or rejected and new proposed terms are introduced. Whether the proceeding is resolved is a matter for the parties and whether they can reach a mutually agreeable and tolerable outcome.

46.    But where an offer to settle is made, the rejection of which will ground an application for indemnity costs, the Court is bound to consider the offer and its rejection in light of the developed principles. The Zip Companies submit that an unduly rigid approach by the Court to its analysis of a comparison of the terms of an offer to the relief that could be obtained in the proceeding would impede the ability to use offers made pursuant to the principles in Calderbank v Calderbank in a constructive way in commercial disputes. I do not agree. The principles as they have developed to date and their application simply impose on an offeror the need to take a considered and careful approach to the terms of an offer.

D.    Conclusion

28    For the reasons set out above, the application by the Tam parties should be dismissed to the extent that it seeks an indemnity costs order, and the plaintiffs should pay the costs of the Tam parties on a party and party basis, with the exception of the costs of the present application which should be borne by the Tam parties. I will make orders accordingly.

Associate:    

Dated:    27 October 2023

SCHEDULE OF PARTIES