In the matter of 146 Tunstall Avenue Pty Limited

[2015] NSWSC 1436

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of 146 Tunstall Avenue Pty Limited [2015] NSWSC 1436
Hearing dates:	18 May 2015
Date of orders:	18 May 2015
Decision date:	18 May 2015
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Defendant to pay plaintiff’s costs of the proceedings.
Catchwords:	PROCEDURE – costs – general rule costs follow the event – whether settlement of dispute warrants departure from general rule – where proceedings setting aside statutory demand resolved by consent in plaintiff’s favour – whether reasonableness of issuing demand relevant – where plaintiff required to approach Court for relief – held, plaintiff entitled to costs.
Legislation Cited:	(NSW) Contracts Review Act 1980 (Cth) Corporations Act 2001, s 459E, s 459G, s 459J
Category:	Costs
Parties:	146 Tunstall Avenue Pty Ltd (receivers and managers appointed) ACN 144 471 009 (plaintiff) Anthony Espero Kassis (defendant)
Representation:	Counsel: M Popplewell (plaintiff) S Docker (defendant)   Solicitors: Bransgroves Lawyers (plaintiff) Kemp Strang (defendant)
File Number(s):	2015/69515

Judgment (ex tempore)

1. HIS HONOUR: On 12 February 2015, the defendant Anthony Espero Kassis issued and caused to be served on the plaintiff company 146 Tunstall Avenue Pty Limited a creditor's statutory demand under (Cth) Corporations Act 2001, s 459E, demanding payment of an amount of $1.1 million described in the schedule to the demand as “Principal owing pursuant to the loan deed executed by the creditor and the company dated 5 June 2013 pursuant to which the company guaranteed the payment of the principal amount to the creditor on the terms set out in the loan deed”. The demand was accompanied by the requisite affidavit accompanying statutory demand which, save for deposing that the debt was due and payable and that the deponent believed there was no genuine dispute about its existence or amount, elaborated the amount matter no further.

2. The demand was issued in circumstances where, on 26 September 2014, solicitors for the company had written to solicitors for the defendant stating, inter alia, "Our client 146 Tunstall Avenue Pty Ltd does not accept any liability to your client as guarantor or otherwise." The letter then specified a number of grounds on which that assertion was advanced. It may well be that, on close scrutiny, not all of those grounds are meritorious, but that is not a matter which has to be explored on the present application.

3. As well as that letter, the defendant had sued one of the principal debtors in respect of which the company had given the guarantee referred to in the statutory demand in proceedings in equity, and those proceedings were being defended by that principal debtor, Mr Paterson, on the grounds that, inter alia, the loan deed was a sham, that no loan had been made, that liability was denied and an account sought, and that the loan deed was signed under duress or was unconscionable or was unjust in the circumstances in which it was made for the purposes of the (NSW) Contracts Review Act 1980.

4. So far as the evidence goes, there was no further correspondence between the defendant or his solicitors on the one hand, and the plaintiff or its solicitors on the other, after the letter of 26 September 2014 until the issue of the demand.

5. By originating process filed on 6 March 2015, the plaintiff applied, pursuant to Corporations Act, s 459G, for an order setting aside the demand. The relief specifically claimed in the application invoked s 459J, but a perusal of the supporting s 459G affidavit makes clear that the gravamen of the application was that there was a dispute as to the debt, rather than a defect in the demand. The originating process was returnable before the Court on 27 March 2015, on which date, by consent, the Court made an order that the demand be set aside. Costs were reserved, and it is the question of costs that is now to be determined by the court.

6. It is not desirable that, where questions of costs in respect of applications to set aside statutory demands arise, the Court adopt an approach that effectively requires trying the issue that would have had to have been tried on the s 459G application. I do not accept that it is necessary, in order to attract an order for costs, that it be demonstrated that the demand was issued unreasonably, nor do I accept it is a defence to such an application to show that the demand was issued reasonably. If the matter goes to a hearing and the defendant is unsuccessful, then almost always, regardless of whether it was reasonable to issue the demand, an order will be made that the defendant pay the plaintiff's costs. If the matter is settled on terms that the demand be set aside, it is ordinarily not appropriate to inquire into or go behind that prima facie outcome.

7. The Court cannot know for certain, at least in the absence of evidence that has not been adduced here, whether the settlement represented a capitulation to the inevitable, or was a course adopted on a commercial assessment of how the defendant's interests would be best served. But as it seems to me, what has happened here, in short, was that the defendant was told in September 2014 that the debt was disputed, disregarded this by issuing a creditor's statutory demand, and as soon as an application was made to set aside that statutory demand, it capitulated.

8. In those circumstances, I see no reason why the plaintiff should not have its costs of the application to set aside the demand. It had to approach the Court to obtain the relief it sought, and it had given due warning that the debt was disputed before the demand was issued.

9. The court orders that the defendant pay the plaintiff's costs of the proceedings.

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Decision last updated: 29 September 2015