Hiddlestone Electrics Pty Ltd v Civic Legal Pty Ltd - [2025] WASC 172

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   HIDDLESTONE ELECTRICS PTY LTD -v- CIVIC LEGAL PTY LTD [2025] WASC 172
CORAM:   MASTER RUSSELL
HEARD:   ON THE PAPERS
DELIVERED          :   13 MAY 2025
FILE NO/S:   COR 15 of 2024
BETWEEN:   HIDDLESTONE ELECTRICS PTY LTD
Plaintiff
AND
CIVIC LEGAL PTY LTD
Defendant

Catchwords:

Corporations - Application to set aside statutory demand - Alleged debt for payment of legal costs - Application dismissed by agreement of parties - Costs of application to set aside statutory demand - Turns on own facts

Practice and procedure - Costs - No determination on the merits - Application for indemnity costs - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) s 459C(2)(a), s 459G, s 459H(1)(a), (b), s 459J
Rules of the Supreme Court 1971 (WA) O 66
Supreme Court Act 1935 (WA) s 37

Result:

Defendant to pay plaintiff’s costs on a party and party basis, to be taxed if not agreed

Category: B

Representation:

Counsel:

Plaintiff	:	Ms G B A Visscher
Defendant	:	Ms F Feng

Solicitors:

Plaintiff	:	Robyn Wheatland Lawyers
Defendant	:	Civic Legal

Case(s) referred to in decision(s):

BGC Contracting Pty Ltd v Whitsunday Crushers Pty Ltd [2004] WASC 209
CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306
Hughes v St Barbara Ltd [2011] WASCA 234 (S)
In the matter of Warrego Energy EP469 Pty Limited [2020] NSWSC 980
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] VicRp 61; [1994] 2 VR 290
Molnar v Good Mood Food Pty Ltd [2020] FCA 1242
Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (2018) 97 NSWLR 681
Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Profounder Electrical Pty Ltd v Shutter Guard Group Pty Ltd [2025] WASC 67
Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622
Rectangular Pty Ltd v Mae Cardaci ATF The Marco Cardaci Testamentary Trust [2023] WASC 13(S)
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

MASTER RUSSELL:

Introduction

By originating process filed on 1 February 2024 (Application), the plaintiff, Hiddlestone Electrics Pty Ltd, applied to set aside a statutory demand served on 11 January 2024 by the defendant, Civic Legal Pty Ltd (Demand).
Following communications between the parties, by open letter dated 17 June 2024, the defendant informed the plaintiff's legal representative that it had withdrawn the Demand.
It was agreed between the parties that the Application be dismissed, and orders were made to that effect on 20 June 2024, leaving the issue of costs to be determined on the papers following the parties filing any further affidavits and brief outlines of submissions.
The parties have each filed affidavits and submissions in relation to the costs of the Application.
The plaintiff submits that the defendant should pay its costs of the Application because it has conceded the plaintiff's claim by withdrawing the Demand, which the plaintiff submits was improperly issued by the defendant. The plaintiff seeks an order that its costs of the Application be paid by the defendant on an indemnity basis in circumstances where, the plaintiff submits, the defendant was on notice that there was a dispute in relation to the legal fees claimed in the Demand.
The defendant disputes that it has conceded the plaintiff's claim. The defendant says the plaintiff has not taken appropriate steps to dispute the claim by seeking a costs assessment in relation to the unpaid legal fees the subject of the Demand. The defendant says that it offered to withdraw the Demand before the Application was filed on the understanding the plaintiff would file an application for an extension of time for a costs assessment. It has not done so.
The defendant submits, in the circumstances, the plaintiff should pay its costs of the Application. Alternatively, the defendant submits each party should bear its own costs, the Application having been dismissed without any determination of its merits. The defendant refutes there is any basis upon which the plaintiff is entitled to an order for costs against it on an indemnity basis.
I have considered the affidavits and submissions filed by each of the parties. For the reasons that follow, I have determined that the defendant should pay the plaintiff's costs of the Application on a party and party basis. I am not satisfied that the defendant's conduct is such as to warrant an order for indemnity costs.

The statutory demand and application to set it aside

The Demand is dated 9 January 2024 and demands payment of debts stated to be due and payable by the plaintiff to the defendant in relation to unpaid invoices dated 30 June 2020, 31 August 2020 and 30 September 2020 in the total amount of $61,540.43, as set out in the schedule to the Demand and the accompanying affidavit.
The schedule describes the debts owed in relation to those invoices as being for professional legal work and disbursements in relation to work conducted by the defendant between 27 May 2020 and 29 September 2020, less a payment of $10,000. paid by deduction from the defendant's trust account. The Demand was accompanied by an affidavit sworn by Anthony Cheng Hai Quahe, a director of the defendant verifying the debts claimed and stating his belief there is no genuine dispute about the existence or amount of any of the debts.
The plaintiff applied to set aside the Demand pursuant to s 459G, s 459H(1)(a) and (b) and s 459J of the Corporations Act 2001 (Cth) on the basis that there was a genuine dispute as to the amount of the alleged debts, that the plaintiff had an offsetting claim, and that the issuing of the Demand by the defendant is an abuse of process.
The Application states the Demand was served on the plaintiff on 11 January 2024. The Application was filed and served within 21 days of service, on 1 February 2024, together with an affidavit in support sworn by Natalie Kay Hiddlestone comprising approximately 620 pages.
In general terms, the grounds upon which the plaintiff sought to set aside the Demand, as deposed to by Ms Hiddlestone, are that there is a genuine dispute about the invoices for legal costs the subject of the Demand, which the defendant is aware of, and the issue of the Demand is an abuse of process. The plaintiff also claims to have an offsetting claim for damages for negligence against the defendant.
The Application was listed for a first return on 20 February 2024. That hearing was adjourned by agreement of the parties, as were subsequent directions hearings. The Application first came before the court on 20 June 2024.
At the hearing on 20 June 2024, the parties had each filed minutes of proposed orders seeking an order that the Application be dismissed. There was disagreement between the parties as to which of them should pay the costs of the Application.
The plaintiff sought an order that the defendant pay the plaintiff's costs of the Application, to be assessed if not agreed. The defendant proposed orders programming the matter through to a contested hearing in relation to costs.
The defendant sought the opportunity to put on affidavit evidence as to the circumstances in which it came to withdraw the Demand, which was not before the court. Counsel for the defendant also referred to Calderbank offers having been exchanged, which it said the court should also take into account in determining the appropriate orders as to costs.
Orders were made dismissing the Application by agreement of the parties, together with orders for the filing of any further affidavits and brief outlines of submissions in relation to the issue of the costs of the Application.

The parties' submissions in relation to costs

What follows is a summary of why each party contends the other should pay the costs of the Application.

The plaintiff's position in relation to costs

The plaintiff submits that the defendant should be ordered to pay the plaintiff's costs of the Application on an indemnity basis because it knew there was a genuine dispute regarding the legal fees claimed. It also says that the Demand was defective and improperly issued as the debts claimed were not due and payable, the defendant having failed to provide updated costs disclosure and to have the costs assessed.
Ms Hiddlestone attaches to her affidavits copies of the plaintiff's invoices rendered for legal costs between 30 June 2017 and 30 September 2020 and deposes that, of the total amount invoiced of $172,355.17 including GST, the plaintiff has paid $110,814.74. The plaintiff disputes it is liable to pay the balance of $61,540.43 claimed in the Demand. It says that the defendant knew when it issued the Demand that the legal costs claimed in the invoices were disputed by the plaintiff.
In the costs disclosure provided by the defendant in April 2018, the defendant's estimate of costs was $250,000 to $300,000 to completion of a 10-day trial plus $100,000 for counsel's fees. By October 2020, the defendant had issued invoices in excess of $160,000, had not yet issued proceedings and had not provided any updated costs disclosure.
The plaintiff complained to the defendant about the quality and timeliness of the services provided by the defendant. It says that it made clear in letters sent to the defendant on 23 October 2020 and 1 November 2022 that the plaintiff disputed the defendant's invoices and did not believe it should pay any of them.
The plaintiff also submits that, because the defendant failed to update its costs disclosure as required by s 267 of the Legal Profession Act 2008 (WA) (LPA), the plaintiff need not pay the defendant's costs unless they have been assessed under div 8 (as provided in s 268(1) LPA). Section 268(2) provides that a law practice that does not provide disclosure, as required, may not maintain proceedings against the client for the recovery of legal cost unless they have been assessed under div 8.
It is submitted that the defendant would have known there was a substantial change that required it to update its costs estimate given it had already issued invoices in excess of $160,000, was yet to issue a writ or prepare a statement of claim, and had informed the plaintiff that it had provided 'far more documents than expected'. In a letter from the defendant to the plaintiff dated 8 December 2020, the defendant acknowledged its estimate was affected by the large number of documents the plaintiff had provided.
Ms Hiddlestone deposes that the last communication she received from the defendant before the plaintiff received the Demand in January 2024 was a letter from the defendant dated 14 November 2022. In that letter, the defendant set out why it did not consider there was a genuine dispute about the debts, stated it had deducted the amount of $10,000 from money held on trust and that, if the outstanding amount of $61,540.43 was not paid within 14 days. it would issue a statutory demand.
The Demand was served on 11 January 2024, nearly 2 years later. Following service of the Demand, on 1 March 2024, Pascoe Legal wrote to the defendant on behalf of the plaintiff raising a number of issues in relation to the adequacy of the costs disclosure provided by the defendant to the plaintiff. Pascoe Legal also referred to having undertaken what it describes as a global assessment and stated that it considered the costs charged would likely be reduced by $61,500. It concluded by stating that, in its view, the appropriate pathway was for the defendant to withdraw the Demand, and for the defendant to apply to assess the costs.

The defendant's position in relation to costs

The defendant submits, in essence, that there is no genuine dispute in relation to the debts claimed. It says that, if there was a genuine dispute in relation to its unpaid legal costs as the plaintiff submits, the plaintiff would have taken steps to have the costs assessed or have brought its alleged claim in negligence.
The defendant says that the plaintiff knew, at all times, of the rights available to it under the costs agreement if it was not satisfied with the legal costs charged by the defendant. including to request written reports about the costs incurred, apply for the costs to be assessed or the costs agreement to be set aside, or to request the defendant to have the costs assessed.
The defendant says each of those rights were set out in the costs agreement entered into between the plaintiff and the defendant on 4 May 2018, a copy of which is attached to Mr Quahe's affidavit.
The defendant submits that the plaintiff has had every opportunity to dispute the unpaid legal costs, both before and since the Demand was issued. The defendant refers to its letters to the plaintiff:
(a)dated 8 December 2020 in which the defendant stated the plaintiff had the right to apply to the Supreme Court to set aside the costs agreement and/or to apply for a costs assessment; and
(b)14 November 2022 in which it stated there was no genuine dispute about the debt and, if it was not paid in 14 days, the defendant would issue a statutory demand without further notice to the plaintiff.
Mr Quahe deposes that he was in communication with the Legal Profession Complaints Committee (LPCC) between November 2022 and 1 August 2023 in relation to a complaint made by the plaintiff about the defendant. He states that there was nothing in those communications which led him to believe that the plaintiff was raising a cost dispute. On 1 August 2023, he was informed by the LPCC that it had closed its file in relation to the plaintiff's complaint.
The defendant submits that on 1 February 2024, before the Application was filed, it made an offer to withdraw the Demand to allow time for the plaintiff to apply for an extension of time to have the costs assessed. A copy of the letter dated 1 February 2024 from the defendant to the plaintiff's counsel is attached to Mr Quahe's affidavit.
The defendant disputes that its costs disclosure was inadequate or that it ought to have provided an updated fee estimate to the plaintiff so as to give rise to a requirement on the part of the defendant to assess its costs before being able to take action to recover them. The defendant maintains it is for the plaintiff to apply to have the costs assessed if it disputes them. Despite saying it would apply for an extension of time to do so and the defendant agreeing not to pursue the Demand on that basis, the plaintiff has not done so.
The defendant also makes submissions as to why the defendant does not have a genuine offsetting claim for damages in negligence against the defendant. It notes that the plaintiff has not brought any such claim against it.
It says that notwithstanding the Application has not been determined on its merits, it can readily be seen that the Application was and is without merit.
The defendant rejects the assertion made by the plaintiff that it has conceded the claim. Its offer to withdraw was made on the basis that the plaintiff would apply for an extension of time to have the costs assessed, as outlined.
The defendant submits that the plaintiff should be ordered to pay its costs of the Application. Alternatively, the defendant submits that each party ought to bear its own costs, noting the dismissal of the Application absent a determination on its merits.

Applicable principles as to costs

The principles relating to costs are well established. Under s 37 of the Supreme Court Act 1935 (WA), the court has a wide discretion to award costs. However, the discretion is not unfettered and must be exercised judicially.[1] Costs will usually follow the event so that generally the court will order that the successful party to any action or matter recover their costs.[2]
[1] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [21] - [22], [134] and Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 [24] - [25]; Hughes v St Barbara Ltd [2011] WASCA 234 (S) [5] and Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [48] ‑ [50].
[2] RSC O 66 r 1(1).
As recently observed by Lundberg J in Profounder Electrical Pty Ltd v Shutter Guard Group Pty Ltd,[3] the rationale for the general rule is that where a party has unjustifiably brought another party before the court, that party should be liable to compensate the other in costs.
[3] Profounder Electrical Pty Ltd v Shutter Guard Group Pty Ltd [2025] WASC 67 (Profounder Electrical) [14].
In this case, there has been no hearing on the merits of the Application, the parties having agreed that the Application be dismissed.
As also observed by Lundberg J in Profounder Electrical,[4] where there has been no determination on the merits, the court is not obliged to determine the Application in a hypothetical manner.
[4] Profounder Electrical [22].
In Re Minister for Immigration and Ethnic Affairs: Ex Parte Lai Qin,[5] McHugh J explained the approach generally taken by the courts in determining costs where proceedings have been resolved without a hearing on the merits, stating:
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra‑curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission [Unreported; Federal Court of Australia; 10 February 1989] where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
[5] Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, 624 - 625.
In Nichols v NFS Agribusiness Pty Ltd,[6] Basten JA observed that:
… although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.
[6] Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (2018) 97 NSWLR 681 [8]. See also Molnar v Good Mood Food Pty Ltd [2020] FCA 1242 [19].

While Basten JA's observations were in the context of litigation, as opposed to an application to set aside a statutory demand, they are, in my view, equally applicable.

Determination

In this matter, the plaintiff has filed affidavits in excess of 600 pages, including 36 attachments. The affidavits filed by the parties approach 700 pages in length.
In their respective submissions, whilst acknowledging the Application is not proceeding and there has been no determination on the merits, the parties each seek to address the merits of the Application, and whether there is a genuine dispute as to the plaintiff's liability to pay the defendant's unpaid legal fees.
Much of the 'dispute' between the parties centres around whether the defendant has complied with its obligations of disclosure under the LPA, such that it is entitled to pursue payment, and whether the plaintiff or the defendant should have applied for a costs assessment.
To resolve the question of costs, does not require me to determine whether there was a genuine dispute as to the existence or amount of the debts the subject of the Demand. However, in considering the reasonableness of the conduct of the parties, it is necessary to consider the merits of their respective positions in relation to the issue of the Demand and the Application.
The defendant was on notice from shortly after the invoices making up the debts claimed in the Demand were issued in 2020 that the plaintiff disputed that it was liable to pay the invoices. The plaintiff reiterated its position in its letter dated 1 November 2022. There were no further communications between the parties concerning the defendant's invoices since the defendant's letter dated 14 November 2022.
In that letter, the defendant denied there was a genuine dispute about the invoices and said that if payment was not made in 14 days it would issue a statutory demand. However, it did not do so until approximately 14 months later.
In the interim, the plaintiff made a complaint to the LPCC, which was subsequently closed. The defendant made no further contact with the plaintiff before it issued and served the Demand. There is no evidence to suggest that, at the time the Demand was issued, the defendant had any concerns about the plaintiff's solvency, or why it issued the Demand rather than bringing a debt recovery action in the Magistrates Court.
The issue of a statutory demand is a serious matter. Failure by a company to comply with a statutory demand creates a presumption of insolvency,[7] which a creditor may rely on to support an application for an order to wind up the company in insolvency.
[7] Corporations Act 2001 (Cth) s 459C(2)(a).
Upon being served with the Demand, the plaintiff took steps to bring the Application within the prescribed time frame of 21 days. There was some contact between the parties' lawyers in the intervening period, but other than a late, conditional offer by the defendant to withdraw the Demand, no consensus was reached.
In its letter dated 1 February 2024, the defendant refers to a telephone conversation on 24 January 2024 and an email from the plaintiff's counsel, which is not in evidence. The defendant stated that it disagreed there was a genuine dispute between the parties regarding the plaintiff's liability to pay the legal fees the subject of the Demand, setting out brief reasons as to why. The letter concludes by making an offer to withdraw the Demand on receipt of a client undertaking on behalf of the plaintiff to file an application to extend time to tax the disputed bills within 21 days of withdrawal, and otherwise reserved the defendant's rights.
The defendant's letter of offer was sent to the plaintiff's counsel by email at 3.35 pm on 1 February 2024. The last date for the plaintiff to file its application to set aside the Demand was the following day, 2 February 2024. The plaintiff's solicitors filed the Application and Ms Hiddlestone's affidavit in support on 1 February 2024, and served a copy on the defendant by email at 10.31 pm that day.
As observed by Newnes M (as his Honour then was) in BGC Contracting Pty Ltd v Whitsunday Crushers Pty Ltd:[8]
4… The statutory demand procedure is not intended to be simply a debt recovery process. It enables a creditor to establish the basis for a subsequent application to wind up the debtor in insolvency. …
5… The short, inflexible time limit within which the debtor must respond to a statutory demand, and the fact that any application to set aside a statutory demand must be supported by an affidavit sufficiently deposing to the grounds relied upon, also tends to invoke a sense of urgency, and impose pressures, that conventional debt recovery procedures may lack.
6But a creditor who invokes this procedure takes a risk. The quite stringent obligations that the Act imposes on a debtor which seeks to resist a statutory demand - particularly bearing in mind the severe consequences of any failure to comply strictly with the requirements of the Act - may mean there is little time for discussion or negotiation about the debt which is the subject of the demand. It to be expected that the debtor and the debtor's solicitors will turn their attention foremost to ensuring that they comply with the statutory requirements. A creditor who serves a statutory demand cannot therefore necessarily expect from the debtor communications or courtesies that might be expected in more leisurely circumstances.
[8] BGC Contracting Pty Ltd v Whitsunday Crushers Pty Ltd [2004] WASC 209[4] - [6].
I infer, from the size of the affidavit in support and the number of attachments to it, that the plaintiff would already have prepared the Application by the time the defendant's offer to withdraw the Demand was received. The plaintiff's priority would have been to file and serve the Application, not to consider and respond to the defendant's late offer. In any event, the offer was conditional upon an undertaking being given by the plaintiff that it would apply for an extension of time for it to seek a costs assessment in respect of the invoices.
Although it appears that, at that stage, the plaintiff had indicated it intended to make such an application, it has raised issues as to the adequacy of the costs disclosure provided by the defendant and submits the plaintiff need not pay the costs in the absence of the defendant having them assessed.
Not all of the matters raised on behalf of the plaintiff, including as to the adequacy of the costs disclosure, were raised with the defendant before the Demand was issued.
On issuing the Demand on behalf of the defendant, Mr Quahe deposed that he believed there was no genuine dispute about the debts claimed. Whilst that may be so, given the issues that had been raised and the significant lapse of time since the defendant's letter of 14 November 2022, it would have been prudent for the defendant to at least write to the plaintiff noting it had not taken any steps to have the costs assessed and to allow a further short period of time before proceeding to issue the Demand.
Had it done so, the issues agitated following service of the Demand, would no doubt have been aired and the costs of the Application may have been avoided.
The 'genuine dispute' test for the purpose of an application to set aside a statutory demand is a relatively low threshold. The court's function is not to resolve the dispute. It is to determine whether there is a genuine dispute ‑ one that is not spurious, hypothetical or misconceived. The court is not expected to undertake an extended inquiry or attempt to weigh the merits of the dispute or to balance the strengths of the cases of the respective parties. It is sufficient if there is a plausible contention requiring further investigation.[9]
[9] See CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31 [35]; and authorities referred to: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602 [4], [44] ‑ [46]; Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306 [22]; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452, 464; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] VicRp 61; [1994] 2 VR 290, 295.
Although, I am not required to determine the Application, I am satisfied on the material before the court that there are matters in dispute that would warrant further investigation, including as to the costs disclosure provided, the quantum of the costs charged and claimed and, if a costs assessment is to be sought, whether it should be by the plaintiff or the defendant.
In the circumstances, I have reached the view that the defendant should pay the plaintiff's costs of the Application on a party and party basis. I am not satisfied that the defendant's conduct is such in this case to warrant an order for indemnity costs against it.
The principles that apply to the grant of an order for costs on an indemnity basis are well established. It is not necessary that I repeat them in detail in these reasons. They were set out in Swansdale Pty Ltd v Whitcrest Pty Ltd[10] and have been applied in numerous decisions of this court.
[10] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) (Swansdale) [10] (Pullin JA; Kenneth Martin J).
For present purposes, it is sufficient to note that an award of indemnity costs is a departure from the usual order that costs be awarded on a party and party basis. Although, the categories in which indemnity costs may be awarded are not closed, costs will usually only be awarded on an indemnity basis in exceptional circumstances.[11]
[11] Swansdale [7].
I also refer to and respectfully adopt, without repeating, Lundberg J's recent summary of the relevant authorities relating to the circumstances in which indemnity costs may be awarded, in Rectangular Pty Ltd v ATF The MarcoCardaci Testamentary Trust,[12] including in relation to applications to set aside a statutory demand.[13]
[12] Rectangular Pty Ltd v Mae Cardaci ATF The MarcoCardaci Testamentary Trust [2023] WASC 13(S) (Rectangular) [18] - [21].
[13] See Rectangular [22] - [25].
The plaintiff relies on one of the authorities Lundberg J referred to in Rectangular: In the matter of Warrego Energy EP469 Pty Limited, in which Black J stated:[14]
Where a creditor chooses to pursue a creditor's statutory demand, in the face of clear notice of a dispute about it, then it seems to me that its conduct is sufficiently unreasonable to warrant an order for indemnity costs.
[14] In the matter of Warrego Energy EP469 Pty Limited [2020] NSWSC 980 [35].
This is not a case in which the defendant has pursued its defence of the Application in circumstances where, if properly advised or acting reasonably, it would not have done so. Nor is there evidence that the defendant acted with an ulterior purpose in issuing the demand.
There were a series of adjournments of the first return of the Application, during which time the parties were in discussions. The defendant withdrew the Demand shortly before the first appearance and did not pursue its defence of the Application. Ultimately, the parties agreed that the Application would be dismissed before the Application was programmed to a hearing. No further affidavits or submissions were filed, other than in relation to the costs of the Application.
When the question of costs was first raised, the defendant's counsel referred to Calderbank Offers. Attached to Mr Quahe's affidavit are two letters from the defendant to the plaintiff's counsel dated 28 March 2024 and 5 June 2024, each marked without prejudice save as to costs, in which the defendant makes a Calderbank offer. The defendant does not refer to the letters in its submissions. I infer that the defendant does not seek to rely on the offers made.
The last of the offers of settlement provided for withdrawal of the Demand by the defendant and discontinuance of the Application by the plaintiff with no orders as to costs, but on the basis that the plaintiff pay the defendant an amount in full and final settlement of all disputes between them, including the defendant's unpaid invoices the subject of the Demand.
In my view, given the nature of the offers made, which in each case include an offer of settlement in relation to the legal costs the subject of the Demand, they are not relevant for the purpose of determining the orders to be made as to the costs of the Application.

Conclusion and orders

For these reasons, the defendant should pay the plaintiff's costs of the Application and the costs incurred in relation to the costs of the Application on a party and party basis, to be taxed if not agreed. Orders will be made to that effect.
It perhaps goes without saying that the parties should be encouraged to confer with a view to reaching a resolution in relation to the amount of the plaintiff's costs of the Application and the costs in dispute in respect of which the Demand was issued.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MPS
A/Associate to Master Russell
13 MAY 2025