Alliance Accounting & Business Consultants Pty Ltd v Australian Property Investment & Development Pty Ltd

[2007] NSWSC 775

CITATION:	Alliance Accounting & Business Consultants Pty Ltd v Australian Property Investment & Development Pty Ltd [2007] NSWSC 775
HEARING DATE(S):	18/06/07
JUDGMENT DATE :	19 June 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	19 June 2007
DECISION:	1. Order that the statutory demand dated 11 April 2007 served by the defendant on the plaintiff be set aside; 2. order that the defendant pay the plaintiff's costs of the proceedings; 3. order that the costs of 18 June 2007 be paid on an indemnity basis.
CATCHWORDS:	CORPORATIONS – Winding up – Statutory demand – Application for order setting aside under s 459G of the Corporations Act 2001 (Cth) – Where there is a genuine dispute about the existence of debt – Offsetting claim – Demand issued for arrears of rent due to defendant where plaintiff has seriously arguable claim against defendant for breach of lease covenants, damages for which would exceed admitted total – Order that statutory demand be set aside. - PROCEDURE – Costs – Departing from the general rule – Order for costs on indemnity basis – Where defendant unreasonably persisted in claim – Where it ought to have been apparent that there was a genuine dispute as to the debts claimed – Order that defendant pay costs of hearing on indemnity basis.
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Duke of Westminster v Guild [1985] QB 688 Carbure Pty Ltd v Brile Pty Ltd [2002] ANZ ConvR 548; [2002] VSC 272 Carrathool Hotel Pty Ltd v Scutti [2005] ANZ Conv R 471; [2005] NSWSC 401 Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 Di Francesca Holdings Pty Ltd v Hatziplis Holdings Pty Ltd [2005] NSWSC 169 Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347 Dawson v Dyer (1833) 5 B & Ad 584; 110 ER 906 Edge v Boileau (1885) 16 QBD 117 Taylor v Webb [1937] 2 KB 283 Dowse v Wynyard Holdings Limited [1962] NSWR 252 Hawkesbury Nominees Pty Ltd v Battik [2000] FCA 185 Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 Elm Financial Services v MacDougall [2004] NSWSC 560 Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529 Austrac Rail Pty Ltd v Hunter Premium Funding Pty Ltd [2001] NSWSC 654 CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] 47 ACSR 100 Professional Advantage Pty Ltd v Australian Broadcasting Commission [2007] NSWSC 607
PARTIES:	Alliance Accounting & Business Consultants Pty Ltd v Australian Property Investment & Development Pty Ltd
FILE NUMBER(S):	SC 2534/07
COUNSEL:	Plaintiff: J Young Defendant: N Allan
SOLICITORS:	Plaintiff: Marsdens Solicitors Defendant: N/A

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

WHITE J

Tuesday, 19 June 2007

2534/07 Alliance Accounting & Business Consultants Pty Ltd v Australian Property Investment & Development Pty Ltd

JUDGMENT

1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 11 April 2007.

2 The demand was for $6,587.88 being arrears of rent payable by the plaintiff for the months of March and April 2007 in respect of premises at Suite 2, Level 3, Hunter Street, Parramatta. The plaintiff has paid $1,000 of the rent demanded. There is no dispute as to the existence or amount of the balance of the debt of $5,587.88.

3 The plaintiff contends it has an offsetting claim for damages for breach of the lease which exceeds the admitted debt.

4 It relies on s 459H of the Corporations Act. That section provides:

“ 459H Determination of application where there is a dispute or offsetting claim
(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
(2) The Court must calculate the substantiated amount of the demand in accordance with the formula:

where:
admitted total means:
(a) the admitted amount of the debt; or
(b) the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
offsetting total means:
(a) if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or
(b) if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or
(c) otherwise—a nil amount.

(3) If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4) If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a) varying the demand as specified in the order; and
(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5) In this section:
admitted amount , in relation to a debt, means:
(a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or
(b) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c) otherwise—the amount of the debt.
offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
respondent means the person who served the demand on the company.
(6) This section has effect subject to section 459J. ”

5 The plaintiff entered into a lease of premises from a predecessor to the defendant. The lease was for a period of three years from 1 October 2003 to 30 September 2006 with a three-year option of renewal. The option was not exercised.

6 From 1 October 2006, the plaintiff held over on a tenancy from month to month.

7 The lease provided that the plaintiff should pay the specified rent without abatement. The plaintiff accepts that the matters about which it complains, and for which it says it has a genuine claim for damages, do not give rise to an abatement of rent. Nor did the plaintiff assert an equitable set-off.

8 The lease contained no express covenant for repair.

9 Clause 7.8 of the lease provides:

“ 7.8 Occupation at Lessee’s Risk
The Lessee agrees to occupy and use the Premises at the risk of the Lessee and hereby releases to the full extent permitted by law the Lessor and its servants, agents and contractors in the absence of any personal negligence on their respective parts from all claims and demands of every kind resulting from any accident loss damage death or injury occurring upon or near the Premises. ”

10 Clause 8 provided for the lessee to indemnify the lessor against certain claims. I will consider that clause in more detail later in these reasons.

11 Clause 9.1 provided that:

“ 9.1 On the Lessee paying the rent hereby received and duly and punctually observing and performing the covenants, obligations and provisions in this Lease on the part of the Lessee to be observed and performed the Lessee shall and may peaceably possess and enjoy the Premises during the term of this Lease without any interruption or disturbance from the Lessor or any other person or persons lawfully claiming by form or under the Lease provided however that if this remains unregistered the foregoing covenant for quiet enjoyment shall not extend to any interruption or disturbance by anyone who becomes registered as the proprietor of the Premises as transferee from the Lessor and the Lessor shall not be liable for any interruption or disturbance of the Lessee by any such transferee. ”

12 The plaintiff occupied an office on the third floor of the building. The permitted use of the premises was as a commercial office. The plaintiff conducted an accountancy practice on the premises. The leased premises included two car parking spaces.

13 There is ample evidence of there being a serious question to be investigated as to whether the defendant did not provide the plaintiff with quiet enjoyment of the premises, did not provide adequate cleaning and maintenance services, and did not allow the plaintiff exclusive use of the car parking spaces provided for by the lease. That evidence includes evidence of the following:

(a) that from about May 2005 there was a roof leak above the entrance to the plaintiff's office;
(b) that in the last twelve months of the lease, the defendant carried out construction works which resulted in noise and damage to roof tiles;
(c) that as a result of the damage to the tiles, when it rained the plaintiff had to place six to eight buckets around the premises to collect dripping water;
(d) that the work which led to the ingress of water caused damage to the plaintiff's records, fans, computers and furniture;
(e) that the defendant's construction works created such a level of noise that the plaintiff's professional staff were unable to work during parts of the days when construction work was being carried on and had instead to work late into the evening up to midnight;
(f) that the sanitary bins in the toilet, in particular the ladies toilet, were not changed for such lengthy periods that the ladies toilet became unusable and created a health and safety issue, including an infestation of small biting insects;
(g) that the lifts were not maintained and, on some occasions, the plaintiff's employees were unable to gain access to the leased premises because the locks on the fire stairs had been changed so that they were locked out. On other occasions, the plaintiff's staff and clients had to walk up three flights of stairs to the plaintiff's offices;
(h) that the defendant's manager and his staff parked in plaintiff's car spaces such that, on occasions, the plaintiff's director had to cancel client appointments because her car could not be moved;
(i) that the air-conditioning units for the building malfunctioned such that on some days during the last two years of the lease, the plaintiff lost working time because it was too hot for its staff to work and in winter the premises were very cold; and
(j) that there were infestations of cockroaches in the kitchen and blood flies in the kitchen, toilet and adjacent areas.

14 The defendant says that these complaints are exaggerated. However, there is corroborative evidence not only from the various employees of the plaintiff who have given evidence of the conditions, but also from contemporaneous records of the managing agent for the building. It is clear that the claims are genuine and warrant investigation.

15 The plaintiff contends that these matters give rise to an offsetting claim for damages for breach of the lease. Principally, it submits that the defendant was in breach of its covenant for quiet enjoyment and an implied covenant not to derogate from its grant. The plaintiff also contends that it is arguable that the defendant was in breach of an implied covenant to effect repairs.

16 It is far from clear that there is an implied covenant of repair by the lessor (Duke of Westminster v Guild [1985] QB 688 at 697; Carbure Pty Ltd v Brile Pty Ltd [2002] ANZ ConvR 548; [2002] VSC 272, and cases there cited; Carrathool Hotel Pty Ltd v Scutti [2005] ANZ Conv R 471; [2005] NSWSC 401 at [40]-[43].) However, I would not say the question was unarguable.

17 The plaintiff principally rested its claim for damages on an alleged breach of the covenant for quiet enjoyment. If the covenant is unqualified, it is seriously arguable that the defendant has breached the covenant, or the implied covenant that it not derogate from its grant.

18 If the plaintiff's evidence were accepted at a hearing for damages for breach of the lease, the plaintiff would establish that, at least from time to time, and through the acts and omission of the lessor, the premises were rendered unfit for the purpose for which they were intended to be used, and thereby the plaintiff's enjoyment of the premises was substantially interfered with (Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 at [41]).

19 This is not a trial of the plaintiff's claim for damages for breach of the covenant of quiet enjoyment.

20 I repeat my citation of authority in Di Francesca Holdings Pty Ltd v Hatziplis Holdings Pty Ltd [2005] NSWSC 169 (at [10]-[15]):

“10 The principles upon which the present application is to be determined are not in doubt. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 12 ACLC 669, McLelland CJ in Eq considered the expression “genuine dispute” where it occurs in s 459H. His Honour said:

‘In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit, “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” … or “a patently feeble legal argument or an assertion of facts unsupported by evidence”…
But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, the merits of, or resolving, such a dispute.’


11 See also Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605.

12 In Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411, Barrett J said [at 23] that:

‘… the task faced by a company challenging a statutory demand on the ‘genuine dispute’ ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. ‘


13 Whether the plaintiff has an ‘offsetting claim’ is determined by asking whether it has a genuine claim against the respondent by way of counter claim, set-off, or cross demand, even if it does not arise out of the same transaction or circumstance as the debt to which the demand relates.

14 In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, Palmer J said (at [18]) that for such a claim to be a genuine one, it must be advanced in good faith for an amount claimed in good faith. In this context, his Honour said, that:

‘"Good faith” means arguable on the basis of facts asserted, with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith, unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is clearly lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of section 459H(1)(2)’.

15 This matter was taken further by Barrett J in Elm Financial Services v MacDougall [2004] NSWSC 560. After observing that s 459H contemplates that an offsetting claim must be capable of being quantified in monetary terms, his Honour said (at [19]):

‘Despite this clear need, according to the terms of the legislation, to quantify an offsetting claim in money terms, it is not necessary that the party seeking to have the statutory demand set aside should particularise the amount of the claim to the last dollar and cent. There may be various ways of approaching the issue of assessment at this early stage. It is sufficient that there be, on the evidence, a plausible and coherent basis for asserting a claim to a sum which, despite elements of uncertainty, can be seen to be, in any event, greater than the amount of the debt the subject of the statutory demand. Of course, the narrower the margin between the alleged debt and the plaintiff's estimate or initial quantification, the greater will be the need for particularity in assessing the amount of the offsetting claim.’”

21 Mr Allan of counsel for the defendant, referred to Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347 at 353 which is to the same effect. There Lindgren J said (at 353):

“ ‘... On the other hand the court must be careful, because if all an applicant has to do is to assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime.’
Paragraph (a) of s 459H(1) and the definition of ‘admitted amount’ in s 459H(5) both refer to the existence of a ‘genuine dispute’, and the definition of ‘off setting claim’ in s 459H(5) refers to the existence of a ‘genuine claim’. Plainly, the intention is to refer to something more than the mere ‘raising’ of a dispute and the mere ‘making’ of a claim. The provisions assume that the dispute and offsetting claim have an ‘objective’ existence the genuineness of which is capable of being assessed. The word ‘genuine’ is included to sound a note of warning that the propounding of spurious disputes and claims is to be expected but must be excluded from consideration. ”

22 The evidence, including evidence of contemporaneous complaint, establishes that the plaintiff's claim for breach of the covenant for quiet enjoyment is genuine and not spurious, assuming that the claim is not otherwise excluded by the terms of the lease.

23 It was submitted by counsel for the defendant that because of various provisions of the lease, the plaintiff could not maintain such a claim.

24 First, counsel submitted that the covenant for quiet enjoyment was given by the lessor only if, and where, the lessee paid the rent and duly observed the covenants to be observed on its part. By reference to a rental schedule of the defendant's managing agent, counsel submitted that there were extensive periods for which the plaintiff had not paid its rent on time. According to the agent's records, the last time the plaintiff was up to date in rent was on 29 August 2006. There were periods prior to then when the plaintiff was in arrears.

25 There is a long line of authority that, even though a covenant for quiet enjoyment is expressed to be conditional upon a lessee duly paying rent and observing the covenants to be performed on the part of the lessee, nonetheless, the lessor's covenant to afford quiet enjoyment is independent of the lessee's covenants to pay rent and observe the terms of the lease (Dawson v Dyer (1833) 5 B & Ad 584; 110 ER 906; Edge v Boileau (1885) 16 QBD 117 at 120; Taylor v Webb [1937] 2 KB 283 at 292; Dowse v Wynyard Holdings Limited [1962] NSWR 252 per Jacobs J at 263; Hawkesbury Nominees Pty Ltd v Battik [2000] FCA 185 at [50].)

26 Counsel for the defendant did not attempt to distinguish or explain or, indeed, even refer to, these authorities. I was referred this morning to a decision of the Court of Appeal in Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207, in particular, to the judgment of Kirby P at 218, where His Honour observed that it is well established that the parties can, by specific arrangement, modify or vary covenants in a lease that will otherwise be implied. I was not taken to anything in that judgment which in any way qualifies or even comments upon the principle in the cases to which I have referred.

27 To say the least, it is seriously arguable that the defendant's claim for damages for breach of the covenant for quiet enjoyment would not be defeated if it were proved that for certain periods the plaintiff was behind in its rent.

28 Secondly, it was submitted that the lessee was not entitled to expect any better premises than those it got. This was said to follow from the fact that the lease provided that the lessee’s contribution to rates, taxes and outgoings, including the costs of caretaking, management, air conditioning and cleaning, was nil. It was submitted that as the lessee was not required to contribute to these costs, it could not complain if, for example, the air conditioning habitually failed, or the toilets were not cleaned.

29 I do not accept that the fact that the lessee was not obliged to contribute to such costs means that it was not entitled to the services referred to. It can be presumed that the fact that the lessee was not liable to contribute to such costs was reflected in the amount of rent it was liable to pay. Rather, the lease implies that the lessor would provide the services referred to. Nor does the fact that the lessee was not liable to contribute to such costs qualify the covenant for quiet enjoyment.

30 Thirdly, reliance was also placed on clause 7.8 of the lease. That clause also does not qualify the covenant for quiet enjoyment. Clause 7.8 is concerned with the lessor's liability for accident, loss, damage, death or injury occurring on or near the premises. It is not a release of any claim for damages for economic loss suffered by the lessee by reason of its peaceable enjoyment of the premises being interrupted. Such loss is not suffered on or near the premises.

31 In any event, the release is inapplicable if the lessor is negligent. If it were relevant, which I do not think it is, there would in any event be a serious question to be tried as to whether the conditions about which the plaintiff complains were caused by the negligence of the defendant or its agents or contractors.

32 The defendant also placed reliance upon clause 8. The effect of clause 8.1 is that the lessee is to have the same responsibility for the premises as if it were the owner. Clause 8.1 then provided for the lessee to indemnify the lessor against all actions, claims, demands, notices, losses, damages, costs and expenses to which the lessor is or may become liable in respect of, inter alia, any loss or damage to property, death or injury caused or contributed to by the use or occupation of the premises. Clause 8.2 provided that the lessee would indemnify the lessor against all such claims, et cetera, for which the lessor may become liable in respect of or arising from, inter alia, any overflow or leakage of water into or from the premises caused or contributed to by any act or omission on the part of the lessee.

33 Clause 8 is irrelevant to the present issues. Clause 8 does not qualify the covenant for quiet enjoyment. There is no issue raised in the evidence of the lessee being required to indemnify the lessor against any liability of the lessor to any third party.

34 So far as damage from the leakage of water is concerned, clause 8.2 is irrelevant as there is no question of any damage having been caused by any act or omission of the plaintiff.

35 As the judgments of Palmer J in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 and of Barrett J in Elm Financial Services v MacDougall [2004] NSWSC 560 quoted earlier in these reasons make clear, it is not sufficient for the plaintiff to demonstrate a genuine claim that the defendant breached the lease. To be entitled to have the demand set aside, the plaintiff must be able to show that its claim is for an amount which arguably exceeds the debt claimed in the statutory demand, or at least when deducted from the admitted debt, would reduce the balance below the statutory minimum. The plaintiff has so quantified its claim. There is evidence from the plaintiff that its claim for damages exceeds the outstanding rent.

36 First, there is evidence that as a result of the leaking roof the plaintiff has had to replace computers, fans, and a kettle, and also to carry out repairs to electrical wiring. The cost of those items came to $3,172.70.

37 The plaintiff also quantified a claim for wages paid whilst employees were unable to work in a sum of $15,360 or, alternatively, a claim for loss of productivity on the basis of lost time in the sum of $48,720. Whilst there would be questions as to whether the lost productivity was made up, it is clear that the claim for expenses incurred and for wages paid where the employees could not work or, alternatively, for lost productivity comfortably exceeds the demand for outstanding rent of $5,587.88.

38 There is also evidence that the rental value of the premises in the condition they were in, as alleged by the plaintiff, for the year preceding the termination of the lease, was more than $5,587.88 less than the rent payable under the lease.

39 Accordingly, the plaintiff has satisfied the onus of showing that it has a genuine claim for damages for loss exceeding the amount of rent admittedly outstanding.

40 The defendant submitted that the plaintiff had failed to adduce evidence of its solvency. Of course, such evidence has no direct relevance to an application under s 459G. As I understood the way the point was ultimately put, it was that it could be inferred that the reason the plaintiff was late in paying rent during 2005 and 2006 was because it was insolvent, and that in the absence of evidence from the plaintiff as to its solvency, the Court should not accept that the asserted offsetting claims were genuine. Rather, it should be inferred that they were raised to provide an excuse for non-payment where the real reason was that the plaintiff was unable to pay. I do not accept that submission. The evidence as to the condition of the premises plainly establishes a genuine offsetting claim. I do not infer that the reason the plaintiff was in arrears from time to time during 2005 and 2006 in paying rent was due to its financial position. Its being in arrears may well have been in relation to disputes regarding the condition of the building. In any event, the genuineness of its claim is attested by the contemporaneous evidence of complaints to the managing agent. Moreover, on 2 April 2007, the plaintiff advised the defendant that it would be vacating the premises. It gave as its reasons for vacating the premises the various complaints which it makes on this application regarding the condition of the premises. The statutory demand was served after the delivery of that letter of complaint.

41 For these reasons, it follows that the substantiated amount of the demand within the meaning of s 459H is less than the statutory minimum. Indeed, the "offsetting total" exceeds the "admitted total".

42 For these reasons, I order that the statutory demand dated 11 April 2007 served by the defendant on the plaintiff be set aside. I will hear the parties on costs.

[Discussion ensued as to costs.]

43 In Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529, Santow J (as His Honour then was) said (at 536):

“ Sooner or later, courts will have to consider whether indemnity costs should be awarded against the unsuccessful user of a statutory notice to force payment of a genuinely contested debt, simply because those taking out such statutory demands are disregarding that basic principle. Mini-trials of such disputes simply add to costs, more especially as the relevant tests do not ordinarily permit more than a relatively superficial probing.

That said, it is of course not to be suggested that all such cases fit into that category. Nor can statistics be any substitute for a trial of proper cases on their merits. But what such statistics do show, is that there is either an insufficient appreciation of the relevant principles, which publicising their results should dispel, or even in some cases a knowing use of the statutory demand to pressure payment where that payment is genuinely disputed, risking indemnity cost orders in appropriate instances. "

(See Austrac Rail Pty Ltd v Hunter Premium Funding Pty Ltd [2001] NSWSC 654 at [23]; CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] 47 ACSR 100 at 104-105 [19]-[22]; Professional Advantage Pty Ltd v Australian Broadcasting Commission [2007] NSWSC 607.)

44 The observations of Santow J are applicable to this case. This case involves a dispute which ought to have been dealt with, and may still need to be dealt with, in the Local Court. It should have been evident to the defendant from the terms of the plaintiff's letter of 2 April 2007, and the defendant's own knowledge of the state of the premises and the complaints made to its managing agent, that there was an issue to be investigated as to whether the defendant was in breach of the covenant for quiet enjoyment.

45 For the defendant to persist with its statutory demand once the plaintiff had shown that it could quantify its claim in amounts which arguably exceeded the outstanding rent was unreasonable. It amounted to a relevant delinquency which justifies an order for indemnity costs.

46 Evidence of the quantification of the claim was not served until the evening of 15 June 2007. Rather than oppose the plaintiff's application yesterday, the defendant ought (at least then) to have consented to the orders sought. Indeed, I think it ought always to have been obvious to the defendant that having regard to the small amount claimed in the statutory demand there was every likelihood that the plaintiff could establish an arguable offsetting claim for an amount which exceeded the outstanding rent.

47 I order that the defendant pay the plaintiff's costs of the proceedings. I order that the costs of 18 June 2007 be paid on an indemnity basis.

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