In the matter of Scahill and Co Pty Limited

Scahill and Co Pty Limited sought to set aside a creditor's statutory demand, which they successfully achieved. As part of their costs recovery, Scahill and Co applied for indemnity costs based on the defendant's rejection of a purported Calderbank letter. The dispute before the court was whether the rejection of the Calderbank letter, which did not specify the basis on which the debt was genuinely disputed, justified an order for indemnity costs.

The court examined the requirements for a valid Calderbank letter, which must specify the basis on which the debt is disputed. The court noted that the letter in question failed to do so, and consequently, Scahill and Co's application for indemnity costs was not supported by the law. The court highlighted that indemnity costs are an exceptional remedy and are only awarded where the opposing party has acted vexatiously, unreasonably, or without merit. The rejection of a Calderbank letter that does not meet the necessary standards does not automatically qualify as such conduct.

Based on its findings, the court concluded that the rejection of the Calderbank letter did not warrant indemnity costs. The court emphasised the importance of the Calderbank letter being properly formulated to justify such an order. Therefore, Scahill and Co's application for indemnity costs was dismissed. The court further clarified that while the rejection of a Calderbank letter might be a factor in determining whether indemnity costs are appropriate, it is not in itself sufficient to justify such an order.