Challenger Managed Investments Limited v Owners Corporation SP66609

[2010] NSWSC 157

CITATION:	Challenger Managed Investments Limited v Owners Corporation SP66609 [2010] NSWSC 157
HEARING DATE(S):	1 March 2010
JUDGMENT DATE :	1 March 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	1 March 2010
DECISION:	Defendant to pay Plaintiff’s costs on the indemnity basis.
CATCHWORDS:	CORPORATIONS – COSTS – Application to set aside Statutory Demand – whether Defendant creditor should bear costs on the indemnity basis when put on notice of fatal flaw in creditor’s Statutory Demand.
LEGISLATION CITED:	Strata Schemes Management Act 1996 (NSW)
CATEGORY:	Procedural and other rulings
PARTIES:	Challenger Managed Investments Limited (Plaintiff) Owners Corporation of Strata Plan 66609 (Defendant)
FILE NUMBER(S):	SC 2009/00291725
COUNSEL:	D.L. Cook (Plaintiff) M.W. Sneddon (Defendant)
SOLICITORS:	Norton Rose (Plaintiff) Macpherson Greenleaf (Defendant)

2009/00291725 Challenger Managed Investments Limited v
Owners Corporation SP66609

JUDGMENT – Ex tempore

1 March, 2010

1 The Defendants in these proceedings served a Statutory Demand upon the Plaintiff on 23 November 2009. The demand was for outstanding levies due under the Strata Schemes Management Act 1996 (NSW). The basis of the claim was that the Plaintiff was a mortgagee in possession of the subject premises and, therefore, liable for the levies.

2 On 3 December 2009, the Plaintiff's solicitors wrote to the Defendant's solicitors saying that they acted for two mortgagees, namely, Challenger Managed Investments Limited and Perpetual Nominees. The letter pointed out it was Perpetual and not Challenger which was the mortgagee in possession of the relevant property, and it was Perpetual and not Challenger which was liable for the outstanding levies. The letter said that the solicitors were instructed to admit liability for the levies on behalf of Perpetual and advised that its client would discharge this liability upon being provided with particulars as to the quantification of the liability. The letter concluded with the request that the Statutory Demand served on Challenger be withdrawn by 5pm on 4 December 2009.

3 That deadline brought no response from the Defendant. However, on 8 December 2009 the Defendant's solicitors wrote to the Plaintiff's solicitors referring to the letter of 3 December 2009. All that that letter said was that an admission had been made that Perpetual Trustee Company Limited was in possession as mortgagee and that, therefore, that company was liable to pay the outstanding levies. The letter concluded: "Please observe the terms of the demand". There was no reference to the Demand which had been served upon Challenger.

4 Some confusion may have arisen because, unknown to Challenger’s solicitors, a Statutory Demand had also been served upon Perpetual. Nevertheless the fact is between 3 December 2009 and 8 December 2009 the Defendant had the opportunity of consulting its legal advisers as to an appropriate response to the letter of 3 December. The only response which was forthcoming was that Perpetual should pay the debt outstanding. There was no reference whatsoever to withdrawing the Statutory Demand which had been served upon the Challenger.

5 In those circumstances, Challenger and its solicitors were perfectly justified in understanding that the Defendant intended to persevere with the Statutory Demand served upon Challenger. Challenger, therefore, commenced these proceedings by Originating Process filed 11 December 2009. It so happened that on that very day, late in the afternoon and after the Originating Process had been filed, the Defendant's solicitors notified the Plaintiff's solicitors that the Defendant withdrew the Demand served upon Challenger. What is now in contention is the Plaintiff's costs of these proceedings.

6 It seems to me the appropriate order is that the Defendant pay the Plaintiff's costs on the indemnity basis. This is a classic example of a case in which a defendant is notified after it has served a Statutory Demand that there is a fatal flaw in the Demand, invited to withdraw the Demand and yet persists, requiring a plaintiff to file an Originating Process. Here, the Defendant declined to respond appropriately to the letter of 3 December. The consequences must have been known to the Defendant and its advisers, namely, that proceedings would be commenced to set aside the Statutory Demand. The Defendant delayed, for whatever reason, until the Plaintiff, acting appropriately, commenced its proceedings. In those circumstances it seems to me the proper exercise of discretion requires that the Defendant pay the Plaintiff’s costs of commencing the proceedings, on the indemnity basis.

– oOo –