In the matter of Malosi Group Pty Ltd

[2021] NSWSC 801

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Malosi Group Pty Ltd [2021] NSWSC 801

Hearing dates:

1 June 2021

Date of orders:

1 July 2021

Decision date:

01 July 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Creditor’s statutory demand varied pursuant to s 459H of the Corporations Act 2001 (Cth). Plaintiff ordered to pay Defendant’s costs on the ordinary basis.

Catchwords:

COSTS — Party/Party — General rule that costs follow the event — Application of the rule and discretion — Where contractual clauses relied on to seek costs on indemnity basis

Cases Cited:

-Kerslake Superannuation Pty Ltd v C&L Building Pty Ltd [2010] NSWSC 424

-Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87

-Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139

-MIS Funding No 1 Pty Limited v N W Truskett (No 2); In the matter of Willmott Forests Limited (No 2) [2017] NSWSC 1157

- Re Powerpark Systems Pty Ltd [2018] NSWSC 793

Westpac Banking Corporation v Mason [2011] NSWSC 1241

Category:

Procedural rulings

Parties:

Malosi Group Pty Ltd (Plaintiff)
Sherrin Rentals Pty Ltd (Defendant)

Representation:

Counsel:
A Rizk (Plaintiff)
N Ferrett QC (Defendant)

Solicitors:
Darby Jones Lawyers (Plaintiff)
Archibald & Brown Lawyers (Defendant)

File Number(s):

2021/80305

Judgment

1. By my judgment delivered on 4 June 2021 ([2021] NSWSC 633), I ordered that a creditor’s statutory demand dated 25 February 2021 (“Demand”) in the amount of $63,966.34, issued by Sherrin Rentals Pty Ltd (“Sherrin”) to Malosi Group Pty Ltd (“Malosi”) be reduced by the amount of $12,920.40 and directed the parties to bring in Short Minutes of Order giving effect to the judgment, and as to costs, within 7 days and, if there was no agreement between them, their respective draft orders and submissions not exceeding 5 pages as to the differences between them. The parties reached agreement as to the principal order that should be made, but differed as to costs.

2. As the parties recognised in submissions, r 42.1 of the Uniform Civil Procedure Rules recognises the ordinary principle that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. Sherrin submitted that, where the Demand was reduced by approximately 20% in circumstances that Malosi had contended it should be set aside in its entirety, Sherrin should be regarded as the successful party and should be entitled to its costs. Mr Ferrett, who appears for Sherrin, submits that the event in this application was directed to the question whether the Demand should be set aside and that Malosi failed in that attempt. He also pointed out that the evidence on which Malosi had relied to achieve a reduction in the Demand was only served in reply, although Sherrin had not objected to the evidence being read on that basis, and also pointed to several contentions advanced by Malosi which were unsuccessful, including an unsuccessful claim that the issue of the Demand involved an abuse of process and an unsuccessful attempt to establish an offsetting claim.

3. Malosi in turn submits that Sherrin should pay its costs as agreed or as assessed, up to 23 March 2021, and that there should be no order as to costs from 23 March 2021. Mr Rizk, who appears for Malosi, contends for that result on the basis that Malosi was partially successful in the proceedings so far as the Demand was varied by about 20% of the amount claimed by Sherrin, and relies on several settlement offers that Malosi had made by reference to an affidavit dated 10 June 2021 of Malosi’s solicitor, Mr Khanji, which identified the offers exchanged between the parties. Mr Rizk submits the final hearing was largely confined to a dispute about repair charges as to which it had a degree of success. Mr Rizk submits that each of the offers that Malosi made were reasonable and should have been accepted by Sherrin. He also refers to offers made by Sherrin, but it is not necessary to address those where Sherrin does not rely on them to submit a claim for indemnity costs. Mr Rizk also recognises that Malosi did not achieve a better result in the proceedings than contemplated by its offers, so far as those offers were for an amount less than the varied amount of the Demand. I am not persuaded that those offers support an order for costs in favour of Malosi, to the date proposed or at all, where Sherrin was successful in upholding the Demand in substantial part.

4. Mr Rizk alternatively submits that the Court should make an order that each party bear their own costs, and refers to Kerslake Superannuation Pty Ltd v C&L Building Pty Ltd [2010] NSWSC 424, where an offsetting claim reduced a demand from $254,064.18 to $ 8,214.18 and Re Power Park Systems Pty Ltd [2018] NSWSC 793, where the amount of the demand was also substantially reduced. In the latter case, Gleeson JA observed that:

“Powerpark has succeeded in obtaining a substantial reduction in the amount of the demand. On the other hand, Shoemark has succeeded in keeping the demand alive for future use as may be thought fit. In the circumstances, the appropriate outcome seems to me to be that each party should bear its own costs: Kerslake Superannuation Pty Ltd v C&L Building Pty Ltd [2010] NSWSC 424 at [20].”

5. I am not persuaded that such an order is appropriate here, where there has been only a modest reduction to the Demand where Malosi sought to set aside in its entirety, and, conversely, Sherrin has here largely upheld the Demand. It seems to me that Sherrin was substantially successful in the hearing and, to put it another way, Malosi was unsuccessful so far as it sought but failed to set aside the Demand in its entirety. For these reasons, I am satisfied that Malosi should pay Sherrin’s costs of the proceedings.

6. Sherrin also contended that its costs order should be made on an indemnity basis, and relies on cll 4.6(b) and (d) of its terms of hire, which includes an indemnity against costs (including legal fees on an indemnity basis) arising from matters relating to the hired equipment, and arising out of or in connection with the rent and use of the equipment. Mr Rizk responds that that principle applies only where a term in a contract providing for indemnity costs is plainly and unambiguously expressed, and that the clauses on which Sherrin relies are not unambiguous, so far as they would, on the face of it, allow Sherrin its costs on an indemnity basis, irrespective of the result of the proceedings. It seems to me that the intent of the clause is clear enough, although a Court would likely not have applied it had Malosi succeeded in its application to set aside the Demand.

7. I accept that, in an appropriate case, a provision of this kind may support a claim for indemnity costs, although the Court retains a discretion in that regard: Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [12]-[13]; and see also Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 at [22], [39]; Westpac Banking Corporation v Mason [2011] NSWSC 1241 at [38]; MIS Funding No 1 Pty Limited v N W Truskett (No 2); In the matter of Willmott Forests Limited (No 2) [2017] NSWSC 1157 at [5]. I am conscious that the creditor’s statutory demand regime is not a substitute for a claim to recover a debt as between the parties and has the public purpose of establishing a presumption of insolvency, when an undisputed debt is not paid following the demand. On balance, I am not persuaded that clause should be applied to order indemnity costs in respect of an application to set aside the Demand.

8. Accordingly, I make the following orders:

1. The creditor’s statutory demand dated 25 February 2021 (“Demand”) be varied pursuant to section 459H of the Corporations Act 2001 by reducing the amount of the Demand from $63,966.34 to $51,045.94.

2. The Plaintiff pay the Defendant’s costs of the proceedings, on the ordinary basis, as agreed or as assessed.

**********

Decision last updated: 04 July 2021