J Hutchinson Pty Ltd v Contractors Inc Pty Ltd

[1995] FCA 677

CATCHWORDS

PRACTICE AND PROCEDURE - Costs - application for indemnity costs after statutory demand set aside under s.459G of the Corporations Law.

Corporations Law ss.459G, 459H

Minahcroft Pty. Ltd. v. Allan Richard Taylor (Unreported, Cooper J, 11 April 1994) - Foll.

J Hutchinson Pty. Ltd. v. Contractors Incorporated Pty. Ltd.
No. QG3010 of 1995
Cooper J., Brisbane, 23 August 1995

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
  No. QG3010 of 1995

BETWEEN:

J HUTCHINSON PTY LTD

ACN 009 778 330

Applicant

AND:

CONTRACTORS INCORPORATED PTY LTD

ACN 010 908 059

Respondent

JUDGE MAKING ORDER:           Cooper J.

WHERE MADE:  Brisbane

DATE OF ORDER:  23 August 1995

MINUTES OF ORDER

THE COURT ORDERS THAT:

The application for indemnity costs be dismissed.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
  No. QG3010 of 1995

BETWEEN:

J HUTCHINSON PTY LTD

ACN 009 778 330

Applicant

AND:

CONTRACTORS INCORPORATED PTY LTD

ACN 010 908 059

Respondent

CORAM:  Cooper J.

PLACE:  Brisbane

DATE:  23 August 1995

REASONS FOR JUDGMENT

After I gave judgment in this matter setting aside a statutory demand issued by the respondent, an application was made for indemnity costs.  I have been referred to a decision of Heerey J in Felkro Nominees Pty. Ltd. v. Autissue Pty. Ltd. (1993) 11 ACLC 1142 which confirms the jurisdiction to award costs where a notice has been successfully set aside. I have also been referred to a decision of Hoffman J in the Chancery Division (Companies Court) in Re A Company [1992] 2 All E.R. 797 which, according to the headnote, held that :-

"It is an abuse of process to present a winding up petition against a solvent company as a means to putting pressure on it to pay money which is bona fide disputed, instead of applying for summary judgment ...  and the court will in those circumstances issue an injunction restraining presentation of the petition and may penalise the petitioner in costs."

In respect of the granting of an order for indemnity costs where a statutory demand was set aside under the Corporations Law, I was referred to an unreported decision of Shepherdson J of the Supreme Court of Queensland in Re James Markus Holdings Pty
Ltd given on 16 August 1993.  In that case his Honour uses the wrongful issuing and serving of a winding up petition as analogous to the wrongful issuing and serving of a statutory demand under the provisions of the Corporations Act 1989 as the basis for the granting of indemnity costs.

I am not immediately persuaded that the reasoning applicable to the presentation of a petition to wind up a company as an abuse of process is necessarily transferable to the issuing of a statutory demand under the new provisions of the Corporations Law as they relate to the issuing of statutory demands.

In this case the statutory demand was issued on 23 June 1995.  One of the major components of the debt claimed relates to retention money.  Whether or not there was a dispute in relation to the proper construction of at least the written contract became irrelevant in the circumstances of this case because of a meeting which occurred on 20 July 1995 after the issue and service of the statutory demand.  At that meeting it is alleged that there was a without prejudice agreement made as to payment of retention money in exchange for a bank guarantee.  It was the compromise in relation to the issue of retention money which ultimately I found to be a matter of bona fide dispute between the parties and it was on that basis that no monies became payable under the statutory demand on account of retention money.  That money composed a substantial part of the demand. 

So far as the other items are concerned, $989.44 was admitted but not paid and has remained payable throughout.  The other item which was in issue was the balance due on the re-measurement under the Schedule of Rates of items involving a sum of around $19,000.00.  On my findings, that claim was first advanced on or about 21 June 1995 immediately before the issue of the statutory demand.  It had not been considered and rejected at the time of the issue of the demand.

Section 459H of the Corporations Law makes provision for amendment of the statutory demand to reflect the substantiated amount of a debt or debts.  It contemplates that there will be disputes as to the whole or part of the debt alleged to underlie any statutory demand and that those will be litigated in accordance with the criteria set out in the Corporations Law and the cases I referred to in my earlier reasons.  In those circumstances I see nothing in this case which would take it out of the ordinary range of cases which will come up for decision before the court.  There is nothing in the circumstances which would otherwise suggest that the circumstances justifying the award of indemnity costs arise.  In Minahcroft Pty. Ltd. v. Allan Richard Taylor (Unreported, Cooper J, 11 April 1994) I said (at p.2 of my reasons) :-

"The relevant principles for the awarding of indemnity costs are set out in the judgment of Woodward J in Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. (1988) 81 ALR 397, and in the judgment of Rogers J in Singleton v. Macquarie Broadcasting Holdings (1991) 24 NSWLR 103.  In my view the mere bringing of proceedings which fail or are doomed to failure does not of itself constitute the special circumstances referred to by Woodward J at page 401 of the report.  When one reads what he says there in context, it is the ignoring of proper advice that the action had no chance of success which gives rise to a presumption that the proceedings were commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts, or the clearly established law.  As Woodward J says:  `Such cases are fortunately rare'.  Earlier in his judgment (at 400) his Honour refers to his decision in Australian Transport Insurance Pty. Ltd. v. Graeme Phillips Road Transport Insurance Pty. Ltd. (1986) 71 ALR 287 at 288, where he makes clear that before an order will be made on an indemnity basis, there has to be some special or unusual feature to justify the court in exercising its discretion in that way, and cites, for example, cases of fraud being made
and not sustained."

In the exercise of my discretion I do not propose to award indemnity costs.

THE COURT ORDERS THAT:

The application for indemnity costs be dismissed.

I certify that this and the preceding three (3) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.

Date:23 August 1995

Associate

Counsel for the Applicant:              Mr. P. Freeburn

Solicitors for the Applicant:            Phillips Fox

Counsel for the Respondent:  Mr. D.R.M. Murphy

Solicitors for the Respondent:  Bain Gasteen

Date of Hearing:  23 August 1995

Place of Hearing:  Brisbane

Date of Judgment:  23 August 1995