Condor Asset Management Ltd v Excelsior Eastern Ltd - Costs

[2006] NSWSC 510

CITATION:	Condor Asset Management Ltd v Excelsior Eastern Ltd - Costs [2006] NSWSC 510
HEARING DATE(S):	04/11/05 Last submissions on costs received: 21/04/06
JUDGMENT DATE :	29 May 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Defendant to pay plaintiff's costs assessed on the indemnity basis
CATCHWORDS:	PROCEDURE - costs - successful application for order setting aside statutory demand - where defendant failed to give particulars going to defects as ultimately found by court - unreasonable conduct of defendant in pressing demand and compelling plaintiff to commence proceedings
LEGISLATION CITED:	Uniform Civil Procedure Act 2005, s.99
CASES CITED:	Club Marconi of Bossley Park v AVR Services (NSW) Pty Ltd [2002] NSWSC 584 Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139 Gersten v Minister for Immigration & Multicultural Affairs [2001] FCA 260 Grass Manufacturers Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95 Oshlack v Richmond River Council (1998) 193 CLR 72 Rainbow and Nature Pty Ltd v Bronson and Jacobs [2006] NSWSC 217 Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd (2001) 165 FLR 72
PARTIES:	Condor Asset Management Limited - Plaintiff Excelsior Eastern Limited - Defendant
FILE NUMBER(S):	SC 4773/05
COUNSEL:	Mr E.C. Muston - Plaintiff Mr R.B. O'Hair - Defendant
SOLICITORS:	Verekers - Plaintiff United Legal - Defendant

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

BARRETT J

MONDAY, 29 MAY 2006

4773/05 CONDOR ASSET MANAGEMENT LIMITED v EXCELSIOR EASTERN LIMITED

JUDGMENT ON COSTS

1 On 10 November 2005, I ordered that a statutory demand served by the defendant on the plaintiff be set aside: Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139. Directions for the filing of submissions on costs were made. The last of the submissions were filed on 21 April 2006 when my Associate received a letter from the defendant’s solicitor enclosing submissions made on the defendant’s behalf. That letter also foreshadowed that further submissions would be lodged on 24 April 2006 but, since nothing further has been received, I proceed to give judgment on costs.

2 The plaintiff, having been successful, claims an order for costs. But it contends that there should also be two special orders: first, an order that the costs be assessed on the indemnity basis; and, second, an order that the costs be paid by the defendant’s solicitor.

3 In support of the proposition that costs should be assessed on the indemnity basis, the plaintiff says, in effect, that the defects in the statutory demand were so obvious that defence of the claim to have the demand set aside amounted to “relevant delinquency” as referred to in the judgment of Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at p.89.

4 The defects alleged by the plaintiff and found by the court were, in essence, failure to specify in the demand the separate amounts of several debts “rolled up” into a single total, failure to specify the consideration for (or basis of) each debt and failure to show how, as alleged, the defendant had become entitled to the debts by assignment. The plaintiff points to evidence that, within three days after service of the demand, its solicitors had written to the plaintiff’s solicitors referring to these matters and seeking particulars. Yet no particulars were ever given.

5 My decision was, in essence, that the statutory demand left the plaintiff in a position where it could not see – and had no means of discovering – what the amounts of the alleged separate debts were supposed to be, what they were for and how the defendant came to be entitled to demand payment of them. By persisting with the demand and, in effect, forcing the plaintiff to commence the proceedings, at the same time failing to reply to the plaintiff’s request for particulars once the difficulty had been pointed out and clarification had been sought, the defendant acted in a quite unreasonable way.

6 It must be emphasised again that statutory demands have a particular and specific role. They are not a means of collecting debts. Nor are they in the nature of a bargaining chip in some kind of negotiation over whether one party will pay money to another; much less a weapon in some war of commercial strategy. They are a means by which one party may put the other on notice that, if that other does not pay within 21 days a sum identified and explained with sufficient particularity and due and payable by the recipient in circumstances where there exists neither genuine dispute nor offsetting claim, the recipient will be put to proof of its solvency in any winding up proceeding that ensues.

7 It has been pointed out in a number of statutory demand cases that the possibility of an indemnity costs order should not operate to dissuade a defendant from putting a plaintiff to appropriate proof: Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd (2001) 165 FLR 72; Club Marconi of Bossley Park v AVR Services (NSW) Pty Ltd [2002] NSWSC 584; Grass Manufacturers Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95. That is no doubt true; but, at the same time, a person who serves a statutory demand and receives a prompt reply by way of complaint to the effect that alleged debts cannot be identified and seeking clarification yet ignores the request for particulars acts unreasonably by allowing to stand what is found to be a demand affected by the very defects of lack of clarity and lack of information identified in the prompt complaint. It is perverse for a statutory demand to be pressed in those circumstances and an indemnity costs order is appropriate. That has been recognised in a number of cases the most recent of which is Rainbow and Nature Pty Ltd v Bronson and Jacobs [2006] NSWSC 217.

8 This is a reflection of the general principle expressed by the Full Federal Court in Gersten v Minister for Immigration & Multicultural Affairs [2001] FCA 260 at [19]:

“[I]f a party who has no defence to a claim of right, refuses to acknowledge that right and either obstinately, or for an ulterior purpose, obliges the claimant to commence proceedings to enforce that right, that circumstance may attract the exercise of a discretion to award indemnity costs against that party.”

9 I turn now to the question whether the defendant’s solicitor should be ordered to pay those costs. The plaintiff makes the point that the case appears to have been run entirely by the defendant’s solicitors. The only evidence tendered by the defendant was in the form of affidavits of an employee of the solicitors. It follows, in the plaintiff’s submission, that the “delinquency” of the defendant must be laid at the feet of the defendant’s solicitor, apparently on the basis that the solicitor was, as it were, the guiding mind and will of the defendant.

10 There is no evidence to make good that assertion. Indeed, there is no evidence on any aspect of the relationship between the defendant and its solicitor or of the circumstances in which the solicitor came to deal with the proceedings and their antecedents in the way he did. For all anyone knows, the solicitor may, at all stages, have advised his client wisely. It is simply not possible to come to a conclusion of misconduct on the materials available.

11 There is, under s.99 of the Uniform Civil Procedure Act 2005, jurisdiction to order that a solicitor pay the whole or any part of costs that the client is ordered to pay. But the jurisdiction is available only where the court is satisfied that the costs have been incurred either “by the serious neglect, serious incompetence or serious misconduct” of the solicitor of “improperly, or without reasonable cause, in circumstances for which [the solicitor] is responsible”. In this case, the necessary link between the incurring of the costs and any relevant form of shortcoming or misconduct on the part of the solicitor has not been shown.

12 In the result, therefore, the order with respect to costs is that the defendant pay the plaintiff’s costs of the proceedings, such costs to be assessed on the indemnity basis.

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