Australiawide Airlines Ltd v Aspirion Pty Ltd

Australiawide Airlines Ltd (REX) and Aspirion Pty Ltd (IAS) were involved in a dispute concerning the amount payable under a contract for IAS to reduce REX's airline charges. While communications occurred between directors of both companies regarding potential liability, IAS also issued a letter of demand and a statutory demand to REX. REX did not respond to the statutory demand, leading IAS to commence winding-up proceedings. REX subsequently applied for leave to oppose the winding-up proceedings, providing accountancy evidence of its solvency. IAS consented to the dismissal of the winding-up proceedings, and the matter proceeded to determine costs before McLaughlin AsJ.

The primary legal issue before the Court of Appeal was whether the costs order made by McLaughlin AsJ was correct, particularly in light of the operation of rule 42.20 of the Uniform Civil Procedure Rules (UCPR) and observations made by McHugh J in *Ex parte Lai Qin*. The court was required to determine the appropriate allocation of costs given that the winding-up proceedings were dismissed by consent after REX provided evidence of solvency, and the initial costs order had been set aside on appeal due to misdirection.

The Court of Appeal found that McLaughlin AsJ had misdirected himself regarding UCPR 42.20 and made other errors in his costs determination. The court noted that when ruling on costs without a trial on the merits, it is inappropriate to conduct a trial of the underlying dispute. Applying the principles from *Ex parte Lai Qin*, the Court of Appeal re-exercised its discretion regarding costs.

On appeal, the Court of Appeal allowed REX's appeal, set aside the costs order made by McLaughlin AsJ, and ordered that IAS pay REX's costs of the proceedings, including the costs of the interlocutory process.