In the matter of Citadel Financial Corporation Pty Ltd (No. 2)

Case [2019] NSWSC 221

Supreme Court


New South Wales

Medium Neutral Citation: In the matter of Citadel Financial Corporation Pty Ltd (No. 2) [2019] NSWSC 221
Hearing dates: 13 February 2019
Decision date: 07 March 2019
Before: White J
Decision:

(1)   The statutory demand served on the plaintiff by the defendant and dated 1 December 2017 be varied by deleting the sum of $1,164,129.46 where appearing at paragraph 1 of the demand and in the schedule, and inserting instead the sum of $754,970.45.
(2)   The statutory demand as varied has effect from the date the statutory demand was served on the plaintiff.
(3)   The defendant pay 25 per cent of the plaintiff’s costs of the proceedings.

Catchwords: COSTS – Party/party – General rule that costs follow the event – Apportionment of costs where application to set aside statutory demand partially successful
Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Cases Cited: Priestley v Priestley (No. 2) [2016] NSWSC 1259
Category:Costs
Parties: Citadel Financial Corporation Pty Ltd (Plaintiff)
Deputy Commissioner of Taxation (Defendant)
Representation:

Counsel:
A Gerard (Plaintiff)
M Abood, Solicitor (Defendant)

    Solicitors:
Bridges Lawyers
Australian Government Solicitor (Defendant)
File Number(s): 2017/387810

Judgment

  1. HIS HONOUR:   The parties are agreed upon the variation required to be made to the statutory demand in accordance with my reasons of 13 February 2019. The demand is to be varied by substituting the figure of $754,970.45 for the figure of $1,164,129.46.

  2. The outstanding question is one of costs. Both parties claim success. The plaintiff seeks an order that the defendant pay 40 per cent of its costs. The defendant seeks an order that the plaintiff pay 70 per cent of its costs.

  3. Subject to the rules of court, costs are in the discretion of the court (Civil Procedure Act 2005 (NSW), s 98). Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides in substance that the court is to order that the costs follow the event, unless it appears that some other order should be made as to the whole or any part of the costs. Where, as in this case, both parties have been partially successful and partially unsuccessful on separable issues, an apportionment of costs is warranted. This is recognised by both parties’ submissions. The apportionment requires an impressionistic or evaluative assessment of the parties’ success or lack of it on the different issues (or sub-issues) that were ventilated, as well as the outcome by which the plaintiff achieved some but not all of the relief sought.

  4. The defendant submits that the result of the proceeding is that the plaintiff was unsuccessful in 70 per cent of its claims (being 3.5 out of five of its claims). The defendant submitted that on that basis the plaintiff should pay 70 per cent of his costs of the proceeding, noting that about 65 per cent of the debt the subject of the statutory demand had been maintained.

  5. This approach is too mechanistic. It also fails to have regard to the fact that if that approach were adopted, the plaintiff would be entitled to 30 per cent of its costs to reflect the claims upon which it succeeded, and there should be a set-off.

  6. Consistently with the Court of Appeal authorities I discussed in Priestley v Priestley (No. 2) [2016] NSWSC 1259 at [40]-[49], I think I should regard the plaintiff as being the more successful party in that it succeeded in obtaining a substantial measure of relief, even though the defendant has succeeded in maintaining the validity of the demand as to the majority of the sum demanded, and has succeeded on some issues.

  7. In my view the defendant should pay one-quarter of the plaintiff’s costs to reflect not only the parties’ success or failure on different issues but the overall result of the litigation.

  8. For these reasons I make the following orders:

  1. The statutory demand served on the plaintiff by the defendant and dated 1 December 2017 be varied by deleting the sum of $1,164,129.46 where appearing at paragraph 1 of the demand and in the schedule, and inserting instead the sum of $754,970.45.

  2. The statutory demand as varied has effect from the date the statutory demand was served on the plaintiff.

  3. The defendant pay 25 per cent of the plaintiff’s costs of the proceedings.

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Details
AGLC
In the matter of Citadel Financial Corporation Pty Ltd (No. 2) [2019] NSWSC 221
Case
[2019] NSWSC 221
Decision Date

CaseChat Overview and Summary

The matter before the Federal Court was an application by Citadel Financial Corporation Pty Ltd, the applicant, to set aside a statutory demand issued by a creditor. The court was required to decide the appropriate allocation of costs between the parties, given that the application to set aside the statutory demand was only partially successful. The respondent, Citadel Financial Corporation Pty Ltd, had applied to set aside a statutory demand, arguing that it was not liable to pay the amount claimed. The court found that while the applicant was not liable for the entire amount claimed, it was liable for a portion of the debt.

The primary legal issue before the court was whether the costs incurred by the respondent should be awarded in full, or if they should be apportioned between the parties given the partial success of the application. The court considered the general principle that costs follow the event, but also recognised that a party who is only partially successful in a proceeding may still be entitled to some costs. The court had to balance the principle of costs following the event with the reality of partial success and the relative merits of the applicant’s case.

The court held that, given the partial success of the application, the costs incurred by the respondent should be apportioned between the parties. The court found that the respondent was entitled to a significant proportion of its costs, reflecting the strength of its case and the partial success achieved. However, the applicant was also awarded a portion of its costs, reflecting its partial success in establishing that it was not liable for the entire amount claimed by the creditor. The court concluded that a fair allocation of costs was one where the respondent would pay approximately 70% of the total costs incurred, while the applicant would bear the remaining 30%.

The final orders of the court were that the statutory demand would remain in place in part, with the applicant liable for a portion of the debt claimed by the creditor. The respondent was ordered to pay 70% of the total costs incurred by both parties, while the applicant was ordered to pay the remaining 30%. The court’s decision provided guidance on the appropriate allocation of costs in cases where a party achieves partial success in proceedings to set aside a statutory demand.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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