ACN 072 358 831 Pty Ltd v Arnott; Market Intelligence Strategy Centre v Arnott

[2007] VSC 349

IN THE SUPREME COURT
OF VICTORIA
COMMERCIAL AND EQUITY DIVISION

No. 6492 of 2007
           No. 6493 of 2007

ACN 072 358 831 PTY LTD

Plaintiff

v

ARNOTT

Respondent

MARKET INTELLIGENCE STRATEGY CENTRE

Plaintiff

v

ARNOTT

Respondent

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JUDGES:	WARREN CJ
WHERE HELD:	MELBOURNE
DATE OF HEARING:	7 September 2007
DATE OF JUDGMENT:	18 September 2007
MEDIUM NEUTRAL CITATION:	[2007] VSC 349

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STATUTORY DEMAND – variation – costs – no order as to costs – leave to appeal order – s 17A (2)(b) Supreme Court Act 1986 – Rule 77.05 (2) Rules of the Supreme Court – discretion – application refused.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	Mr M Pirrie	Ewan McLean & Associates
For the respondent	Mr T J McLean	Mason Sier Turnball

WARREN CJ:

1. The applicants each apply for leave to appeal a costs order of a Master on ordering the variation of a debt claimed under a statutory demand.  The parties to both applications agreed that the circumstances of each application were so similar that the same outcome would apply in each matter.

1. I will deal first with the application involving ACN072 358 831 Pty Ltd (“the company”). 

1. The respondent to the application,  John Arnott, served a creditor’s statutory demand for payment of a debt under the Corporations Act 2001 for $93,688.47.   The Company applied to a Master to set aside the demand on the basis that there was a genuine dispute and offsetting claim in relation to the amount of the demand.  Hence, the Company disputed the whole of the sum of $93,688.47.

1. The debt, the subject of the statutory demand, included an amount ordered against the Company in proceedings in the County Court (“the County Court proceeding”). In the course of the County Court proceeding, orders were appealed to the Supreme Court and set aside in part by the Court of Appeal.  An order was made on the appeal that Mr Arnott pay the costs incurred by the Company in the Court of Appeal.  The costs of the appeal were taxed in the sum of $13,500.00.  The Taxing Master of the Supreme Court ordered a stay on payment of $13,500 pending completion of a certificate granted to Mr Arnott under the Appeal Costs Act 1998. In the proceeding before the Master, the applicant claimed that those costs were not taken into account in the statutory demand and claimed they should be deducted from the debt. In the proceeding before the Master, a submission to that effect was rejected. The final order made by the Master recites (in “other matters):

“The order of the Taxing Master states that the order is stayed pending affidavit by the defendant pursuant to a certificate under Appeal Costs Act.  It is clear the order means at least pending application pursuant certificate under Appeal Costs Act.  There has been no application made by the defendant to amend the order. The defendant, his cost consultant and solicitor state that the appeal costs were settled on the basis that there be a stay on payment until the application had been completed and monies were recovered.  That agreement is now denied by the plaintiff.  A cheque in the sum of $13,500 payable to the plaintiff has been received by the defendant’s solicitors.  The plaintiff’s solicitors, when requested to pay the amount, declined to do so.  The amount of $13,500 is now due to the plaintiff and is therefore an offsetting claim.  Had the amount been paid the amount would not have been reduced.  I will not allow interest as payment of the sum was forwarded to the defendant’s solicitor in July and any interest would be de minimus.  The Court on the evidence before it can also not be certain as to what date the stay reflected.”

1. Thus, the Master deducted the amount of $13,500 from the statutory demand. 

1. Further in the County Court proceeding, a subsequent costs order was made against Mr Arnott in the sum of $5,125.20.  The amount was also claimed as a set off by the Company against Mr Arnott with respect to the statutory demand.  In the proceeding before the Master, the order recorded:

“The sum of $5,125.20 that was taxed on 22 November 2007 pursuant to an order of the County Court of 17 November 2006.  The defendant concedes that this sum is owed.  The defendant is owed three additional sums other than the amount claimed in the statutory demand.  It relies on three costs orders made in April 2007 in the sum of $350, $1,574 and $3,296 making a total of $5,220 and seeks to vary the demand by increasing the amount payable by $94.80.  Although it would be practical to do so there is no basis at law for the amount claimed to be increased.

The defendant swears that it was agreed that the three costs orders referred to would be set off against the costs order owed to the plaintiff.  The plaintiff denies such an agreement took place.  There is no documentary evidence of an agreement before the Court.  The demand will be varied by the sum of $5,125.20.  The plaintiff will also be entitled to interest on this sum as it is a judgment debt. “

1. Thus, the Master deducted the amount of $5215.20 from the amount of the statutory demand together with interest in the sum of $109.85. 

1. In the proceeding before the Master the Company also challenged the amount in the statutory demand on the basis that an amount identified as being for the payment of taxation to the Australian Taxation Office was not identified.  Accordingly, it was argued before the Master that the sum of $46,716.05 should be taken into account in determining that a genuine dispute and an offsetting claim existed against the amount claimed in the statutory demand. 

1. In relation to the matter of taxation the order of the Master recorded:

“The plaintiff claims two payments of $4,034.20 have been made and that the sum of $8,068.40 should be deducted from the amount claimed.  The plaintiff’s solicitor denies that it received those payments.  There is no evidence of any cheque being presented for payment and therefore will be no variation in the demand relating to the payments. 

The tax payable by the plaintiff is $48,725.33 and not $46,715.05.  that has been accepted by the parties.”

1. Thus, before the Master, the identification of the amount payable to the Australian Taxation Office having initially being claimed as constituting part of the genuine dispute and offsetting claim was agreed in an amount before the Master and the debt the subject of the statutory demand was varied accordingly.

1. Ultimately, allowing for the deduction of these three amounts, the Master ordered that the demand be varied (from $93,688.47) to claim $72,943.14. 

1. On the day before the first return of the proceeding before the Master Mr Arnott served an affidavit on the Company indicating his preparedness to consent to the amount of the debt being reduced by the two costs amounts (of $13,500 and $5,125.20).  Affidavits were filed by both parties before the Master, in particular, Mr Brent Hughes, a director of the Company and Ms Manisha Blencowe, a lawyer acting for Mr Arnott.  On the application for leave before me, I received written submissions by Counsel both for the Company and Mr Arnott.  It is apparent from the affidavits and the written and oral submissions before me that the proceedings and the amount of the demand were strongly contested before the Master.  Whilst there was some resolution between the parties during the period between the first return date of the proceeding and the date of the final orders made by the Master, the Company challenged the amount of the statutory demand.  Ultimately, the Master varied the amount of the statutory demand and also determined to make no order as to costs.  It is the order concerning costs that is the subject of the application now before the Court.

1. The discretion exercised by a judge or master when determining costs is wide, see s.24 (1) Supreme Court Act and see Taylor v Pace Developments Pty Ltd.[1], Mitchison v. Bullock.[2]  A court would not interfere unless the Master failed to exercise the discretion or did so erroneously.  As a general statement of principle, an order for costs is made where it is just and reasonable that one party who causes the incurring of costs by another party should reimburse the party for the costs incurred: see Latoudis v. Casey.[3]  In this instance, the Master was in the advantageous position of considering the evidence and submissions of the parties on the original return date and subsequent date before him.  The written and oral submissions before me were argumentative as to what transpired before the Master.  I do not have the benefit of a transcript or, for that matter, an affidavit from one or other or both of the parties as to what transpired before the Master.  I only have the Order of the Master with the recital under “Other Matters” that assists me in the consideration in the application for leave to appeal.

   [1][1996] BCC 406,408.

   [2](1886) 12 VLR 512.520.

   [3](1990) 170 CLR 534, 566 – 7.

1. The application for leave under Rule 77.05 (2) is governed by s.17A (2) (b) of the Supreme Court Act. It is not dissimilar in application of legal principles from s.17A (1) of the Act. It is an appeal as to order and practice made in the exercise of discretion and it is generally difficult to show that the discretion has been wrongly exercised, see Transport Accident Commission v O’Reilly.[4]  There needs to be some good reason for interfering with the order below.  Those principles are not satisfied on the material before me.  The Company brought proceedings to set aside a statutory demand in its entirety.  It succeeded in having the demand varied.  The fact of the variation by a Master does not automatically entitle the Company to an order for costs.  Rather, it is a matter of the exercise of the discretion by the Master in all the circumstances.  Generally there is nothing special or unusual about an application to set aside or vary a statutory demand under the Corporations Act.  The same principles apply with respect to the costs discretion as to other proceedings.  The complete setting aside of the statutory demand appears to have been the primary goal of the Company and it was unsuccessful.  It may, in all the circumstances, have been open to the Master to order costs in part against one party against the other.  Clearly, the Master determined that the appropriate exercise of the discretion in all the circumstances of the matter before him was to make no order as to costs.  Nothing has been made out or demonstrated before me to satisfy the tests in accordance with the authorities. There is nothing to demonstrate that the discretion was wrongly exercised.  It was open to the Master to take account of the circumstances of the proceeding as it occurred before him.

   [4][1999] 2 VR 436, 457.

1. It follows that the application for leave to appeal the order of the Master is dismissed.

1. I turn then to the other application concerning Market Intelligence Strategy Centre Pty Ltd.  The parties agreed to submit the same outcome as in the proceeding concerning the Company.  It follows that the same result applies.

1. Both applications will be dismissed.