In the matter of Wabbits Pty Ltd (No 2)

[2018] NSWSC 641

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Wabbits Pty Ltd (No 2) [2018] NSWSC 641
Hearing dates:	27 April 2018
Decision date:	14 May 2018
Before:	Gleeson JA
Decision:	Defendant to pay the plaintiff’s costs of the proceedings on the ordinary basis.
Catchwords:	COSTS – statutory demand – where demand set aside subject to payment condition – whether costs should be awarded on indemnity or ordinary basis – whether company’s offer more favourable to defendant than result of Court’s order – where company’s offer of compromise open for acceptance for just under two hours – whether unreasonable for defendant not to accept company’s offer
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 98(1) Corporations Act 2001 (Cth), ss 459C, 459M, 459N Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Cases Cited:	Calderbank v Calderbank [1975] 3 WLR 586; [1976] Fam 93 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397 Jones v Bradley (No 2) [2003] NSWCA 258 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Seller v Jones [2014] NSWCA 19 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Windsurfing International Inc v Petit (1987) AIPC 90-441
Category:	Costs
Parties:	Wabbits Pty Ltd ACN 002 967 688 (Plaintiff) Tollaust Pty Limited t/as Transurban Linkt ACN 050 538 693 (Defendant)
Representation:	Counsel: Mr C P O’Neill (Plaintiff) Ms K Paton (Sol) (Defendant)   Solicitors: Bartier Perry (Plaintiff) Milton Graham Lawyers (Defendant)
File Number(s):	2018/95682

Judgment

1. GLEESON JA: On 27 April 2018, the Court made orders in this matter setting aside the statutory demand dated 21 February 2018 on conditions and reserved costs: In the matter of Wabbits Pty Ltd [2018] NSWSC 532. The relevant condition is that, if the defendant (Transurban) commences debt recovery proceedings in a court of competent jurisdiction within 28 days, the plaintiff company is to pay into court an amount of $2,000 to abide the outcome of those proceedings.

2. Transurban says that there should be no order as to costs so that each party bears its own costs. The company says that Transurban should pay the company’s costs on an indemnity basis, or alternatively, on the ordinary basis. In support of an award of indemnity costs the company relied upon an offer of compromise dated 23 March 2018 as a Calderbank offer: Calderbank v Calderbank [1975] 3 WLR 586; [1976] Fam 93.

Relevant principles

3. The court has a wide discretion to award costs under s 98(1) of the Civil Procedure Act 2005 (NSW). Costs can be awarded on the ordinary basis or on an indemnity basis: s 98(1)(c). Section 459N of the Corporations Act 2001 (Cth) is also relevant. It provides that where, on an application under s 459G, the court sets aside a statutory demand, it may order the person who served the demand to pay the company’s costs in relation to the application.

4. The ordinary rule is 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: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. It is generally accepted that the words “follow the event” refers to the event of the claim or counter-claim: Windsurfing International Inc v Petit (1987) AIPC 90-441 at 37,861-37,862 (Waddell J). In the present case, neither party submitted that the relevant “event” was other than the practical result of a particular claim; here the company’s application to set aside the statutory demand.

5. An award of indemnity costs can be made in a variety of circumstances; usually where there has been some relevant delinquency of the part of the unsuccessful party such as unreasonably pursuing or defending proceedings, maintaining a claim for some ulterior purpose or some wilful disregard of known facts or clearly established law: Oshlack v Richmond River Council (1998) 193 CLR 72 at 89; [1998] HCA 11 at [44]; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397 at 401; Seller v Jones [2014] NSWCA 19 at [58] (McColl JA).

Submissions

6. The company submits that Transurban, as the unsuccessful defendant, unreasonably defended the proceedings after its offer of compromise was not accepted. The offer was contained in an email from Mr Frank Kalyk to Ms Rebecca Novak of Transurban’s solicitors dated 23 March 2018 to settle the matter on payment by the company to Transurban of $400 within 28 days “in full settlement of your client’s claims for tolls and other charges, including an unconditional withdrawal of the statutory demand”. The offer was expressed to be open for acceptance “until 2pm today”. At the time of the offer, the matter had not been listed for hearing.

7. In support of its submission that there be no order as to costs, Transurban tendered an email from its solicitor to the solicitor for the company dated 5 April 2018 offering to settle the matter by accepting in satisfaction of the statutory demand payment of $1,928.52 on the basis that the originating process be dismissed with no order as to costs. The amount of that offer was calculated as comprising toll charges of $463.52, a 50 percent discount of administration charges of $1,940 (being $970), and legal costs of issuing a statutory demand of $495.

8. The company responded by emphasising that the toll charges of $463.52 (referred to in Transurban’s settlement offer) comprised a relatively small part of the statutory demand, compared to the administration charges of $1,940. According to the submission, given that the company disputed liability in respect of administration charges, the company’s earlier offer to settle the matter was a genuine offer of compromise.

Decision

9. I do not regard this as an appropriate case for the award of indemnity costs.

10. First, the relevant question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs. That the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure from the ordinary rule as to costs: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] (Giles JA); Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] (Basten JA).

11. Second, although the company succeeded in setting aside the statutory demand, that success was somewhat muted insofar as the Court imposed the payment condition referred to above pursuant to Corporations Act 2001 (Cth), s 459M.

12. Third, I do not regard the company’s offer as being more favourable to Transurban than the result of the Court’s order. While acceptance of the company’s offer would have provided Transurban with the certainty of the receipt of $400, that is not necessarily a better outcome for Transurban than the prospect of recovering the whole or a substantial amount of the debt the subject of the statutory demand in debt recovery proceedings.

13. Fourth, and in any event, given that the company’s offer was sent by email at 12:01:24pm on 23 March 2018, I do not consider that it was unreasonable for Transurban not to accept the offer (assuming in the company’s favour that it was a genuine offer of compromise). Plainly, the period of time allowed to consider the offer of just under two hours, was not a reasonable time for acceptance of the offer, particularly taking into account that the matter had not yet been listed for hearing: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) at [12], citing Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25].

14. I conclude that there is no reason to make a special costs order. Equally, and contrary to Transurban’s submission, there is no reason why costs should not follow the event (assessed on the ordinary basis). Although the company’s success was subject to a payment condition, the proceedings by the company were necessary to avoid the statutory presumption of insolvency (under Corporations Act, s 459C) that would otherwise arise from the failure to comply with the statutory demand.

15. Accordingly, the Court orders that the defendant pay the plaintiff’s costs of the proceedings on the ordinary basis.

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Decision last updated: 14 May 2018