Blazai Pty Ltd v Palasty

[2011] NSWSC 225

Supreme Court

New South Wales

Medium Neutral Citation:	BLAZAI PTY LTD v PALASTY [2011] NSWSC 225
Hearing dates:	8 March 2011
Decision date:	30 March 2011
Before:	Barrett J
Decision:	No order as to costs to the intent that each party should bear its own costs.
Catchwords:	PROCEDURE - costs - defendant does not resist application for order setting aside statutory demand - whether defendant should have withdrawn demand before proceedings commenced - what costs order appropriate
Legislation Cited:	Corporations Act 2001 (Cth), ss 459G, 459H(1)(a), 459J(2)(b)
Cases Cited:	Scope Data Systems Pty Ltd v BDO Nelson Parkhill [2003] NSWSC 137; (2003) 199 ALR 56
Category:	Costs
Parties:	Blazai Pty Ltd - Plaintiff Justin Palasty - Defendant
Representation:	Counsel: A D Justice - Plaintiff D A Allen - Defendant Counsel: R J Thomas Solicitor - Plaintiff Proctor & Associates - Defendant
File Number(s):	2010/217114

Judgment

1. When this application under s 459G of the Corporations Act 2001 (Cth) came before the court on 8 March 2011, the defendant did not seek to resist the making of an order that the statutory demand be set aside. That order was made.

1. In the circumstances existing at the time of the hearing, the defendant regarded it as inevitable that the court would make the order.

1. The debt in question is a judgment debt under a Local Court judgment. Shortly before the s 459G application came before the court for hearing, the Local Court confirmed an order for payment of the debt by instalments. This happened on 4 March 2011. The instalment order caused execution of the judgment to be stayed, thus providing "some other reason" under s 459J(2)(b) for the setting aside of the statutory demand: Scope Data Systems Pty Ltd v BDO Nelson Parkhill [2003] NSWSC 137; (2003) 199 ALR 56.

1. There was, however, argument on the question of costs.

1. The defendant says that there should be no order as to costs so that each party bears its own costs. The plaintiff's position is that the defendant should be ordered to pay the plaintiff's costs.

1. Central to the issue about costs is a question whether, when the plaintiff filed the originating process on 2 November 2010, it was aware that, by virtue of an earlier instalment order made on 29 October 2010 on the defendant's ex parte application, execution of the judgment was stayed. The plaintiff says that, on 1 November 2010, it informed the defendant (by means of a fax from its solicitor to the defendant's solicitor) because of the existence of an instalment order and that the proper course for the defendant to take at that point was to withdraw the statutory demand; yet the defendant did not do so, with the result that the plaintiff was forced by the impending end of the s 459G(3) period to file its originating process on 2 November 2010.

1. It may be accepted that, if to the defendant's knowledge, execution of the judgment was stayed, it should not have persisted with the demand and should not have put the plaintiff to the trouble and expenses of seeking to have it set aside.

1. The evidence shows that, at 4.50pm on 1 November 2010, the plaintiff's solicitor faxed to the defendant's solicitor a letter stating that an instalment order had been made (a copy accompanied the fax). The letter pointed out that the judgment debt was accordingly no longer due and payable and requested withdrawal of the statutory demand, failing which the plaintiff would rely on that request in relation to the question of costs in s 459G proceedings which the letter also foreshadowed. Nothing was said about execution of the judgment being stayed.

1. The defendant's solicitor deposes that he did not himself see any such fax on 1 November 2010. He was out of the office with counsel in another matter on the morning of 2 November 2010 and, upon speaking to a staff member during the morning, was told that a letter had been received concerning the present matter. He saw the letter at about 12.45pm.

1. The defendant's solicitor says in his affidavit that he noticed that the letter dated 1 November 2010 stated that the debt was not due and payable. He considered this to be an erroneous view of the law. He did not consider any other argument, such as the one based on s 459J(2)(b). No such argument was raised in the letter of 1 November 2010.

1. The correspondence shows that the plaintiff's solicitor did not put it squarely to the defendant's solicitor that the stay of execution represented "some other reason" within s 459J(2)(b) and that the plaintiff would rely on that ground. The letter of 1 November 2010 merely said that, because of the instalment order, the debt was no longer due and payable. That, of course, reflected a misapprehension of the true position. It also implied an intention of arguing the "genuine dispute" ground under s 459H(1)(a), not the "some other reason" ground under s 459J(2)(b).

1. It was therefore not unreasonable for the defendant to persist with the statutory demand.

1. In those circumstances, there is no basis on which the defendant should be ordered to pay the plaintiff's costs.

1. I make no order as to costs to the intent that each party should bear its own costs.

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Decision last updated: 30 March 2011