Camilla West Pty Ltd v Hay
[2021] WASC 252
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CAMILLA WEST PTY LTD -v- HAY [2021] WASC 252
CORAM: ACTING MASTER STRK
HEARD: 24 JUNE 2021
DELIVERED : 23 JULY 2021
FILE NO/S: COR 52 of 2021
MATTER: Sections 459G, 459H, 459J and 459N of the Corporations Act 2001 (Cth)
BETWEEN: CAMILLA WEST PTY LTD
Plaintiff
AND
AUBIN JOHN HAY
Defendant
Catchwords:
Corporations - Costs - Application to set aside a statutory demand - Appropriate costs order when defendant indicates at the hearing that it does not oppose the application - Application by plaintiff for indemnity costs - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
The defendant pay the plaintiff's costs of the application to and including 26 March 2021 on a party/party basis, to be taxed if not agreed, and thereafter on an indemnity basis
Category: B
Representation:
Counsel:
| Plaintiff | : | J Solliss |
| Defendant | : | D Chandler |
Solicitors:
| Plaintiff | : | Hager Grubb & Partners Lawyers |
| Defendant | : | Graeme A Ryan & Associates |
Case(s) referred to in decision(s):
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Kimberley Oil NL v Geological & Corporate Management Pty Ltd [2000] WASC 294
Latoudis v Casey (1990) 170 CLR 534
Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179
Northern Territory v Sangare [2019] HCA 25
Ohn v Walton (1995) 36 NSWLR 77
Strzelecki Holdings v Jorgensen [2019] WASCA 96
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
WA Welder Repairs Pty Ltd v Shropshall [2009] WASC 172
Westworth v Attorney-General (NSW) (1984) 154 CLR 518
Wheatley v Bower [2001] WASCA 293
ACTING MASTER STRK:
On 24 June 2021, the plaintiff's application to set aside a statutory demand dated 4 March 2021 made pursuant to the Corporations Act 2001 (Cth) ss 459G, 459H, 459J and 459N, was listed for hearing at a special appointment. At the commencement of the hearing the court was informed by counsel that the defendant intended to and would withdraw the statutory demand.
As the defendant did not intend to oppose the plaintiff's application and I was satisfied that there was a genuine dispute in relation to the matter, I ordered that the statutory demand issued by the defendant to the plaintiff dated 4 March 2021 be set aside. Counsel for the defendant did not resist the making of the order.[1]
[1] ts 3 (24 June 2021).
There remained a contest as to how the costs of the action should be borne. Counsel for the plaintiff sought to have the plaintiff's costs paid on a full indemnity basis. Counsel for the defendant in effect conceded that a costs order in favour of the plaintiff was appropriate, but submitted that the circumstances did not warrant the making of an indemnity costs order.
At the conclusion of the hearing I indicated that I would consider the submissions made by counsel concerning costs having regard to the procedural history of the matter, and I would make a costs order and publish my reasons for decision in relation to the same on a later date. These are my reasons.
Procedural history and background
On 26 March 2021, the plaintiff filed an originating process to set aside a statutory demand issued by the defendant. The application was supported by an affidavit sworn by Alfonsas Baltinas, the sole director of the plaintiff, on the same date.
The statutory demand
A copy of the statutory demand the subject of the application was annexed to Mr Baltinas' affidavit as attachment 'ABB-4'. The statutory demand the subject of the plaintiff's application was the second issued by the defendant to the plaintiff, the first having been withdrawn by the defendant.
The amount of debt claimed by the defendant from the plaintiff in the statutory demand was $136,850, which debt was described as follows:
The balance of a percentage amount agreed between the Creditor and the Debtor to be paid to the Creditor by the Debtor for procuring a loan for the Debtor with payment due upon settlement of the said loan.
The affidavit accompanying the statutory demand sworn by the defendant was also annexed to Mr Baltinas' affidavit at 'ABB-4'.
The defendant deposed to having entered into two agreements with Mr Baltinas on behalf of the plaintiff. The first agreement was said to concern the sale of 37 Mount Street, West Perth by the then owner to the plaintiff. The defendant says that for payment of a fee (being 1% of the purchase price plus GST upon settlement of the sale), the defendant would negotiate the sale of the property to the plaintiff.
The defendant deposed to having successfully negotiated the sale of the property to the plaintiff for a purchase price of $4,600,000.
The second agreement was said to concern the raising of capital to facilitate the plaintiff's completion of its purchase of 37 Mount Street, West Perth. The defendant says that an agreement was reached as between the plaintiff and the defendant to pay to the defendant on settlement 6% plus GST of whatever amount the defendant raised.
The defendant deposed to having raised $3 million.
The defendant deposed that settlement of the sale of the property occurred on 14 December 2015. He also deposed that on 2 July 2015, pursuant to the second agreement, he rendered an invoice for $180,000 plus GST. The defendant deposed that the total amount invoiced by the defendant to the plaintiff pursuant to the terms of the second agreement was $198,000.
The defendant deposed to the circumstances in which an instalment plan was entered into in or about late June 2015. He also deposed to the payments received, albeit not in accordance with the instalment plan.
The defendant deposed that he received payment from the plaintiff of moneys which together totalled $62,250 (inclusive of GST) and that the amount of $136,850 (inclusive of GST) remained outstanding and due and payable by the plaintiff to the defendant.
In the affidavit accompanying the statutory demand, the defendant deposed to his belief that there was no genuine dispute as to the existence or amount of the debt.
Mr Baltinas' affidavit
In his first affidavit, Mr Baltinas deposed to his belief as to there being a genuine dispute as to the existence and/or quantum of the debt the subject of the defendant's statutory demand.
Mr Baltinas deposed that at no stage did the plaintiff ever enter into any final agreement with the defendant to pay him a 'balance of a percentage amount' for 'procuring a loan' on behalf of the plaintiff with payment due to the defendant on settlement of the loan, in the manner deposed to by the defendant in his affidavit or at all.
As to the second agreement, Mr Baltinas deposed that there was never a concluded binding agreement as between the plaintiff and the defendant. While Mr Baltinas said that a short term loan agreement for $3 million was entered into between the plaintiff and a third party, Mr Baltinas denied that there was a concluded second agreement or a conversation as deposed to by the defendant as between Mr Baltinas and the defendant. In his affidavit, Mr Baltinas addressed and took issue with the evidence of the defendant, addressing each paragraph in turn.
Appearance by the defendant and programming to a substantive hearing
On 8 April 2021, an appearance was filed on behalf of the defendant in the proceeding. The defendant is represented in the proceeding. An affidavit affirmed by the defendant in response to the application was also filed on the same date. In his affidavit, the defendant took issue with much of Mr Baltinas' affidavit.
On 12 April 2021, orders were made by the consent of the parties to program the plaintiff's application to a substantive hearing on 24 June 2021. The orders included an order which allowed the plaintiff to file any further responsive affidavit by 26 April 2021, and for the parties to file notice of any objections to the affidavits by 3 May 2021.
A further affidavit made by Mr Baltinas was filed on 27 April 2021, and on 3 May 2021 the plaintiff filed notice of its objections to the affidavits of the defendant.[2] On 18 June 2021 the plaintiff filed a written outline of submissions in support of the application and list of authorities.
[2] The plaintiff gave notice that it intended to object to parts of the affidavit made by the defendant which accompanied the statutory demand, in addition to the defendant's affidavit made on 8 April 2021 in response to the application.
Following the defendant's affidavit of 8 April 2021, no further documents were filed in the proceeding on behalf of the defendant. For civil interlocutory hearings in the General Division, an outline of submissions is to be filed and served not less than four clear working days before the hearing in accordance with the Rules of the Supreme Court 1971 (WA) (RSC) O 67A.[3] As at the date of the hearing, the defendant had filed no written submissions.
[3] Consolidated Practice Directions PD 2.1 par 21.
It was not until the hearing on 24 June 2021 that the court was informed that there would be no contest to the plaintiff's application. I understand from counsel's submissions that the plaintiff was informed of the defendant's position on 22 June 2021.[4]
[4] ts 4 (24 June 2021).
Applicable principles
Where costs should fall is at the discretion of the court.[5] The discretion to order costs under the Supreme Court Act 1935 (WA) s 37 and the RSC O 66 r 1 is very wide.[6] The only restrictions are those provided elsewhere in the Supreme Court Act and the RSC, or in any other Act; and the fact that the discretion must be exercised judicially, in accordance with established principles and factors directly connected with the litigation.[7] The discretion must be exercised so as to achieve what is fair and just between the parties according to the circumstances of the particular case.[8]
[5] Supreme Court Act 1935 (WA) s 37.
[6] Lexis Nexis, Civil Procedure Western Australia, vol 1, (185-11-19) [66.1.2] citing Westworth v Attorney-General (NSW) (1984) 154 CLR 518, 528; Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179 [39].
[7] Lexis Nexis, Civil Procedure Western Australia, vol 1, (185-11-19) [66.1.2] citing Naidoo v Williamson [39], [42]; Strzelecki Holdings v Jorgensen [2019] WASCA 96 [48] ‑ [50].
[8] Lexis Nexis, Civil Procedure Western Australia, vol 1, (185-11-19) [66.1.2] citing Latoudis v Casey (1990) 170 CLR 534, 558.
The general rule when exercising discretion to order costs under the Supreme Court Act and the RSC O 66 r 1 is that a successful party to an action recovers its costs. An order for the payment of costs by one party is compensatory in nature; it is not for the purpose of punishment. Costs generally follow the event because such an order is intended, at least to the extent that the costs incurred were not unreasonable or unreasonably incurred, as compensation (and vindication) for the successful action or application.[9]
Indemnity costs orders
[9] Lexis Nexis, Civil Procedure Western Australia, vol 1, (185-11-19) [66.1.2] citing Latoudis v Casey; Northern Territory v Sangare [2019] HCA 25 [30] ‑ [31]; and Ohn v Walton (1995) 36 NSWLR 77.
A court may order that costs be payable on an indemnity basis by a party. An indemnity costs order would make the paying party liable to pay all costs that the other party has incurred except insofar as the costs are of an unreasonable amount or have been unreasonably incurred.[10] Consistent with the default position, the usual order is for the costs to be assessed on a party/party basis.[11] The principles applicable to the making of indemnity costs orders were set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd[12] and those are the principles that I apply.
[10] Lexis Nexis, Civil Procedure Western Australia, vol 1, (185-11-19) [66.1.14] citing Wheatley v Bower [2001] WASCA 293 [106].
[11] Lexis Nexis, Civil Procedure Western Australia, vol 1, (185-11-19) [66.1.2] citing Swansdale Pty Ltd v Whitcrest Pty Ltd[2010] WASCA 129 (S) [10].
[12] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [10].
In support of the plaintiff's application for indemnity costs, counsel for the plaintiff referred to what was said by Martin CJ in Createc Pty Ltd v Design Signs Pty Ltd.[13] Counsel also referred to the decisions of Sanderson M in WA Welder Repairs Pty Ltd v Shropshall[14] and in Kimberley Oil NL v Geological & Corporate Management Pty Ltd,[15] where the learned Master made indemnity cost orders against defendants having found that they should have realised there was a genuine dispute and failed to promptly concede the same.
[13] Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85.
[14] WA Welder Repairs Pty Ltd v Shropshall [2009] WASC 172.
[15] Kimberley Oil NL v Geological & Corporate Management Pty Ltd [2000] WASC 294.
The disposition of Sanderson M in relation to costs in WA Welder Repairs Pty Ltd v Shropshallat [11] - [13] is reproduced below:
11.In support of his application for indemnity costs, counsel for the plaintiff referred to what was said by Martin CJ in the recent decision of Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85. His Honour there made some comments about circumstances when it would be appropriate to award indemnity costs. In my view, taking into account what his Honour said and applying the general principles in relation to indemnity costs, this was a case which justified such an order.
12.In my view, from the moment the plaintiff's affidavit in support of its application was received by the defendants, the defendants' solicitor should have realised there was a genuine dispute in relation to this matter. It was entirely inappropriate to prepare and file an affidavit which did nothing to advance the defendants' case relying as it did on the subjective views of the first-named defendant. The very act of preparing that affidavit should further have alerted the defendants' solicitors to the fact that their opposition to the application was hopeless. The clear and cogently expressed submissions filed on behalf of the plaintiff, should have sealed the matter.
13.On top of all of that, the defendants' solicitors did not themselves provide submissions in accordance with the programming orders. There is no reason why they should not have done so. In fact, had they taken the step of drafting the submissions, it would have become plain that the defendants' position was hopeless and that the plaintiff's application should not be opposed. So at four separate points along the way, the warning bells should have rung. The fact that the bells did not ring or were ignored by the defendants' solicitors led to a situation where in my view indemnity costs were warranted.
Competing positions of the parties
The plaintiff's position
The plaintiff submits that it is entitled to recover its costs on an indemnity basis by reason of the defendant's conduct. In summary, the plaintiff says that the defendant was on notice of there being a genuine dispute as to the existence of the debt well before the statutory demand was issued, making it inappropriate for the defendant to have issued the statutory demand and to have maintained his opposition to the application for as long as he had.
The plaintiff submits that as early as February 2017, and expressly contrary to par 14 of the defendant's affidavit affirmed on 8 April 2021, the plaintiff (through Mr Baltinas) told the defendant the invoices he was sending the plaintiff for capital raising fees of 6% were disputed, and that no concluded agreement existed between the parties.[16] The plaintiff says that this evidence was unchallenged by the defendant.
[16] Plaintiff's outline of submissions filed 18 June 2021 par 17.1; the affidavit of A B Baltinas sworn 26 March 2021 par 8.7(c).
The plaintiff further says, irrespective of the above, there remained a serious question to be tried in respect to whether:[17]
(a) a concluded second agreement ever formed between the parties, in the terms as alleged by the defendant, or at all;
(b) as a matter of fact and/or construction, the alleged second agreement contained agreed terms as to timing of repayment and/or repayment of interest at 6%, or at all, and whether the defendant's invoices were expressly for 'RE - Capital raising for Camilla West Pty Ltd';
(c) consideration had already passed in respect to the alleged second agreement in circumstances where the defendant deposed and admitted a final agreement to perform a capital raising of $3 million for the plaintiff arose in or about December 2015, and that 'No interest terms were discussed' as a term of the alleged second agreement; and
(d) the defendant was unlawfully raising capital under the alleged second agreement contrary to statute and relevantly s 92, s 700, s 703 and s 708 of the Corporations Act 2001, such that a genuine dispute now arises as to whether (even on basis the court determines an agreement does exist, which is denied), the alleged second agreement remains otherwise unenforceable at law. The plaintiff says that the defendant's belated assertion the initial capital raising was for a lesser amount $2 million (and so not captured as a proscribed breach of the Corporations Act), is expressly inconsistent with his initial affidavit and the invoices rendered.
The defendant's position
[17] Plaintiff's outline of submissions filed 18 June 2021 par 17.2.
The defendant strongly disputes the evidence of Mr Baltinas, going so far as to depose to his belief that Mr Baltinas' account was fabrication.[18]
[18] Affidavit of A J Hay affirmed on 8 April 2021 par 34.
On behalf of the defendant, it was submitted that it was apparent only after reading the affidavit evidence filed in support of the application that the defendant reluctantly accepted that for the purpose of the plaintiff's application, there could be seen to be a genuine dispute.[19] The concession as to there being a genuine dispute was made in relation to whether a concluded second agreement ever formed between the parties in the terms as alleged by the defendant or at all. The concession was not made as to the allegation by the plaintiff that the defendant unlawfully raised capital contrary to statute such that the second agreement is unenforceable by the defendant.
[19] ts 2 - 3, 6 (24 June 2021).
Counsel for the defendant sought to refute the submission that the defendant was on notice of the genuine dispute as early as 2015 by reference to the documentary evidence and the inference that might be drawn from the same.
In this regard, counsel for the defendant noted that the payment of 23 December 2015 by the plaintiff to the defendant in the amount of $24,750 was described upon electronic transfer by the plaintiff to the defendant as an 'equity raising fee'.[20]
[20] ts 8 (24 June 2021), referring to the affidavit of the defendant in support of the statutory demand at par 9; the affidavit of A B Baltinas sworn 26 March 2021 at par 8.8(c), third bullet point; and the defendant's affidavit affirmed on 8 April 2021 'AJH-7' page 58.
Disposition concerning costs
I do not understand there to have been any dispute as between the parties as to the test to be applied in the determination of the plaintiff's application to set aside the statutory demand.
In effect, the defendant conceded that upon review of the affidavit of Mr Baltinas, a plausible contention which required investigation was revealed, raising 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.[21] I understand the plausible contention reluctantly conceded by the defendant was whether a concluded second agreement was ever formed between the parties in the terms as alleged by the defendant or at all. The defendant properly conceded the application, albeit he did not accept that a plausible contention was revealed in relation to all of the matters raised by the plaintiff.
[21] Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787; and see Createc Pty Ltd v Design Signs Pty Ltd [44].
Upon having been served with the first affidavit of Mr Baltinas, and consideration of the various contentions he raised, it would have been appropriate for the defendant to have then withdrawn the statutory demand. The maintenance by the defendant of his opposition to the application after receipt of Mr Balintas' first affidavit caused unnecessary costs to be incurred. The preparation and filing of the defendant's affidavit could not answer the plausible contention which was ultimately conceded by the defendant, that is, whether a concluded second agreement was ever formed between the parties.
The plaintiff's costs, after the filing of the originating process and supporting affidavit, were unnecessarily incurred. The defendant's maintenance of his objection to the application caused the solicitors for the plaintiff to file and serve an affidavit responding to that filed by the defendant on 8 April 2021, written submissions in support of its application and objections to the defendant's evidence.
The discretion to award indemnity costs was enlivened in this proceeding when the defendant persisted in opposition in what should on proper consideration have been seen to be a hopeless case. As was the case in WA Welder Repairs Pty Ltd v Shropshall, the submissions filed on behalf of the plaintiff on 18 June 2021 should have sealed the matter.
The defendant did not file submissions in opposition to the application as he was obliged to do. Again, as was the case in WA Welder Repairs Pty Ltd v Shropshall, there was no reason why he should not have done so. Had his solicitors done so, it would have become plain that the plaintiff's application should not be opposed.
However, on the materials before me, there is no basis to find that the issue of the demand was unreasonable. While some of the grounds for resisting the statutory demand were raised in the email communications from the solicitor for the plaintiff to the solicitor for the defendant,[22] the communications did not include such particulars as would support a finding that the issue of the demand was not appropriate. While an indemnity cost order is appropriate, it is only appropriate in relation to the costs incurred after service of the first affidavit of Mr Baltinas.
[22] Affidavit of A B Baltinas sworn on 26 March 2021 'ABB-3'.
Conclusion and order
In all of the circumstances, I find that it is fair and just between the parties to make an order that the defendant pay the plaintiff's costs of the originating process and affidavit of Mr Baltinas sworn on 26 March 2021 on a party/party basis to be taxed if not agreed, and thereafter on an indemnity basis. Subject to either party giving notice within seven days of the publication of these reasons that they wish to be heard as to the precise form of order, I propose to make an order in the following terms:
1.The defendant do pay the plaintiff's costs of the application to and including 26 March 2021, to be taxed if not agreed (which shall include the costs of the affidavit of Mr Baltinas sworn on 26 March 2021), and thereafter on an indemnity basis, save insofar as the costs of the plaintiff were unreasonably incurred.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
EH
Associate to Justice Strk
23 JULY 2021
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