Jade 85 Pty Ltd v Urban Community Group Pty Ltd

[2023] QSC 234

SUPREME COURT OF QUEENSLAND

CITATION:

Jade 85 Pty Ltd v Urban Community Group Pty Ltd [2023] QSC 234

PARTIES:

Jade 85 Pty Ltd ACN 630 664 765

(applicant)

v
Urban Community Group Pty Ltd ACN 114 937 860

(respondent)

FILE NO/S:

BS No 7631 of 2023

DIVISION:

Trial

PROCEEDING:

Application – Costs

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

20 October 2023

DELIVERED AT:

Brisbane

HEARING DATE:

25 August 2023

JUDGE:

Ryan J

ORDER:

The application is dismissed.

The respondent is to pay the applicant’s costs of the application on the indemnity basis.

CATCHWORDS:

PROCEDURE – COSTS – JURISDICTION – GENERAL – COMPROMISE OF PROCEEDINGS – where the respondent withdrew its statutory demand after the applicant put on evidence raising a genuine dispute – where the applicant and the respondent each sought their costs, including on the indemnity basis – where each party alleged the other had behaved unreasonably – where each contended the other had rejected a reasonable settlement offer – where, additionally, the applicant contended that the respondent had engaged in an abuse of process – whether order for indemnity costs appropriate

Corporations Act 2001 (Cth) section 459N

BGC Contracting Pty Ltd v Whitsunday Crushers Pty Ltd [2004] WASC 209, considered
Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 1245, considered

Mackay Computer Services Pty Ltd v Wi-Man Pty Ltd [2008] QSC 221, considered

Re Chameleon Mining NL; Chameleon Mining NL v Atanaskovic Hartness [2009] NSWSC 602, considered

Re Minister for Immigration and Ethnic Affairs and another; ex parte Lai Qin (1997) 186 CLR 622, applied

Speciality Fashion Group Limited v Global Red Australia Pty Ltd [2012] NSWSC 256, considered

COUNSEL:

M A Goldsworthy for the applicant
A C White for the respondent

SOLICITORS:

ACLG Lawyers for the applicant
AXM Law for the respondent

Overview

1. The applicant, Jade 85, was incorporated for the purpose of holding and developing land in a western suburb of Brisbane.  On 16 June 2020, the applicant entered into a Development Services Agreement (DSA) with the respondent, Urban Community Group (UCG), to act as its development manager for a fee.  Under the DSA, Jade 85 was to pay to UCG, “all fees and related expenses as agreed in Item 9 of the Schedule …”.  Item 9 referred to the amount stated in a “Feasibility Analysis” which was attached to the DSA.  The Feasibility Analysis[1] provided for “Management and Completion Costs” of $180,000, which was later increased to $191,000.[2]

   [1]        At page 42 of the exhibits to the affidavit of Alan Rose filed 26 June 2023.

   [2]        Paragraphs [13] and [14] of the affidavit of Alan Rose filed 26 June 2023.

2. The parties are related.  Channing Dirckze was the sole director of Jade 85 and one of the two directors of UCG.  Jade 85 and UCG had the same registered address and the same principal place of business address.

3. The relationship between the applicant and the respondent soured.  On 21 May 2023, the applicant’s shareholders resolved to remove Mr Dirckze as its director.  In the context of several contentious issues between Jade 85 and UCG, UCG served a statutory demand on Jade 85, claiming a debt due for outstanding management fees. 

4. This matter began as an application by Jade 85 to set aside the statutory demand.  However, after an exchange of correspondence and evidence prior to the hearing of the application, the statutory demand was withdrawn.  It was not in dispute between the parties that, in those circumstances, it was appropriate for me to make an order dismissing the application.[3]  The only matter left for me was costs.  Each party sought its costs either wholly, or in part, on an indemnity basis. 

   [3]        See Finkelstein J in KC Parksafe (Vic) Pty Ltd & Ors v Dallbrook Pty Ltd (1998) 87 FCR 509 at 514.

5. The applicant contended it should have its costs on the indemnity basis because:

   (a)the respondent acted unreasonably, relying upon McHugh J in Re Minister for Immigration and Ethic Affairs of the Commonwealth of Australia; ex parte Lai Qin (1997) 186 CLR 622;

   (b)the respondent’s conduct amounted to an abuse of process; or

   (c)even if the respondent acted reasonably, success for the applicant was certain, relying upon McMeekin J in Mackay Computer Services Pty Ltd v Wi-Man Pty Ltd [2008] QSC 221 at [18] and [19].

6. I note that paragraphs [18] and [19] of Mackay support an argument that an applicant to set aside a statutory demand should have its costs when the success of its application was certain – but they do not support an argument that the applicant should have its costs on the indemnity basis. 

7. The respondent argued that it should have its costs, including on the indemnity basis from 16 August 2023, because: (a) the applicant had acted unreasonably, and (b) refused a reasonable offer of settlement which unnecessarily prolonged the proceedings.    

8. For the reasons which follow, I order the respondent to pay the applicant’s costs of the application on the indemnity basis.  It acted unreasonably both in issuing the statutory demand and in refusing the applicant’s reasonable offer to settle the proceedings, including the issue of costs. 

   History of the proceedings

9. My evaluation of the accusations of each party that the other behaved unreasonably required an examination of the history of the proceedings.  Indeed, as demonstrated by this judgment, by refusing to settle on the reasonable terms posed by the applicant on 14 August 2023, the respondent has unreasonably required this court to spend a large amount of time on an argument over modest costs. 

10. On 5 June 2023, after Mr Dirckze’s removal as the applicant’s director, the applicant’s solicitors (ACLG Lawyers) wrote to him, asking him to deliver all of the applicant’s books to its office by no later than 5 pm Friday, 9 June 2023.  That same day, 5 June 2023, the respondent served a statutory demand upon the applicant.  The demand asserted that the applicant owed the respondent $84,000, “being the total of the amounts of the debts described in the Schedule”.  The Schedule attached to the demand is reproduced here:

1. Accompanying the statutory demand was the affidavit of Cory Robb, the second director of the respondent.  In it, he said he was the “person who, on behalf of the creditor, had the dealings with the debtor company that gave rise to the debt”.  His affidavit stated that the debt was due and payable and that he believed there was no genuine dispute about it.[4]

   [4]        One of the arguments made by the applicant was that it had no idea that the statutory demand related to fees payable to the respondent as development manager.  Upon my first consideration of the statutory demand and the schedule attached to it, I said “So it was originally a claim for overdue management fees of $11,000 a month …”  (T 1-3 lines 7-8). The applicant’s counsel maintained that the applicant did not know that the demanded debt concerned management fees, because “Management fees” was stated as a reference only in relation to the payment made on 20 July 2021. 

2. On 6 June 2023, the solicitors for the respondent and Mr Dirckze, Morris and Prove Solicitors (MPS) emailed the applicant’s solicitors, suggesting a meeting between the respondent’s two directors (which would include Mr Dirckze) and persons representing the applicant.  MPS proposed that the meeting be held on a “without prejudice” basis, “to assist the parties work through the myriad of issues as productively as possible”. 

3. At this point in time, the applicant was not aware of the statutory demand.    

4. On the evidence before me, the statutory demand was delivered to the applicant’s registered office (the office of an accounting firm, Fintax Partners) on 5 June 2023 but Fintax Partners did not bring it to the applicant’s attention.  The reason for Fintax Partner’s not bringing the statutory demand to the attention of the applicant, was not explored in the evidence before me.

5. In reply to MPS’s email of 6 June 2023, and on that same day, the applicant’s solicitors indicated that one of the applicant’s directors would meet with the respondent’s directors, on the proviso that neither party brought their legal representatives to the meeting.  The applicant’s solicitors said that, as there was to be a meeting in person between Mr Dirckze and its director, “it would be an opportune time” for Mr Dirckze to hand over the applicant’s books. 

6. The directors met on 8 June 2023.

7. On 15 June 2023, the applicant’s solicitors wrote to MPS, referring to their request of Mr Dirckze that the applicant’s books be delivered to them by 5 pm on 9 June 2023; and the proposal that they be handed over at the meeting of 8 June 2023.  They noted that Mr Dirckze had “failed or refused” to hand over the company’s books.  They said that the failure/refusal was “unacceptable” and “substantially and negatively impacting our client’s ability to attend on urgent matters surrounding” the property under development.  The applicant’s solicitors “demanded” the delivery of the applicant’s “books and records” by no later than 12 noon on 19 June 2023 – or they would take injunctive action.

8. On 16 June 2023, MPS wrote to the applicant’s solicitors.  This letter contained the first mention to the applicant of the existence of the statutory demand.    

9. The letter referred to the meeting attended by the directors on 8 June 2023, at which, they noted, the applicant’s director said that she was representing only herself and not the applicant’s shareholders.  They said their client had “no confidence” that the “purported shareholders of the [applicant] collectively intend honouring the Development Services Agreement (DSA) dated 8 October 2021 with my client,[5] entering into the negotiated building contract, nor the approved construction finance facility for completion of the project following the failures of Hamilton Knight, as the then Investment Manager, to properly fund the project”.  

   [5]        This was a reference to the DSA entered into on 26 June 2000, which, as schedule 9 shows, was amended on 13 September 2023 and 8 October 2021.

10. The letter went on to discuss the matters in contention between the parties and the respondent’s contemplation of an application to the Court to have the applicant placed into administration.  In that context, the letter informed the applicant of the statutory demand.  It also dealt with the status of the applicant’s books and records (my emphasis) –

    You clients’ interference in the management of the project has resulted in quantifiable damages in terms of lost income to my clients, project delays, exposure of the Company and its directors to public liability and greater losses.

    To date, my client’s diligent, bona fide and ongoing efforts to preserve the project and maximise returns to Business Innovation and Investment Fund (BIIF) appear not to have been understood and certainly have not been reciprocated.

    Though my client remains open to a negotiated outcome that allows the project to be completed in the most professional, cost-effective and timely manner available, they now feel it is necessary to both protect and exercise their rights, including, if necessary, applying to the Court for the Company to be placed into Administration.

    In the circumstances my client advises the following –

    1My client is owed accumulated project management fees that are due and payable under the DSA totalling $84,000 to June 2023.  As these fees have not been serviced for seven months and given that the Company has now interfered with the new construction finance being available, my client has issued a Statutory Demand for Payment against the Company which was served on the Company’s registered office on Monday 5 June 2023.

    2The Company is also indebted to my client in the sum of $372,661.83 for loans my client has made to the Company to provide working capital …

    3Your clients provided to the director of the Company, Mr Channing Dirckze, the copy of the resolution dated 21 May 2021 …

    My client does not accept he validity of that resolution or the legitimacy of the purported shareholding …

    …

    My client believes the entire arrangement was a scheme to raise funds for BIIF purposes unrelated to the project and to mislead the Department of Home Affairs [over Business Skills Visas].

    …

    4…

    Your clients’ purported removal of Mr Dirckze as director and apparent refusal to endorse the approved finance and building contract is a clear default under the terms of the DSA and a denial of my client’s entitlements …

    …

    Consequently, my client demands the immediate payment of $400,000 in satisfaction of its interest and all the other monies owed to UCG.

    5…

    6Mr Dirckze is reviewing and collating whatever records he has in his possession for delivery to your office.  However, the timeframe that your client has imposed is unreasonable in the context of a SPV development company that has been operating a single project for in excess of 3 years and where his position was terminated without notice and without cause.

    Ms Nguyen [the applicant’s director, who attended the meeting on 8 June 2023] expressly stated that she was not representing the Company or the other shareholders at the meeting on 8 June.  No other director or shareholder was sufficiently concerned enough to meet with Mr Dirckze.  There was no capacity or any expectation for documents to be delivered at that time.

    Nothing that Mr Dirckze has done or is doing is impacting your client’s ability to attend to any urgent matters.  The development manager has communicated with any information or developments that have arisen since Mr Dirckze’s directorship was terminated.  My clients note that no responses or directions have been provided to date in response to any of the issues that have been raised.

    In any event the limited records in Mr Dirckze’s possession will be delivered to your office as soon as reasonably practicable.

    My client looks forward to receiving the outstanding development fees, the loan funds and the value of its interest that it has been deprived of as demanded and otherwise reserves its right against and in relation to Jade 85 Pty Ltd and its purported shareholders and purported current directors.

11. In my view, the language used in the letter (“my client advises”) suggested that MPS was not itself aware of the statutory demand until the date of its letter.  Further, the letter conveyed that the respondent knew that the applicant was not aware of the issuing of the demand.  Also of significance is the fact that this letter conveyed to the applicant that the statutory demand (which the applicant had yet to see) related to accumulated management fees.

12. On 22 June 2023, MPS sent to the applicant’s solicitors certain documents (set out in a table) which included bank statements from 2020 until 2023; and a link to a Google drive folder, but without the details needed to access that folder. 

13. On 22 June 2023, the solicitors for the applicant emailed MPS and said the applicant had not received the demand at its registered office and urgently asked for a copy of it.  In reply, MPS attached a copy of the demand to an email sent to the solicitors for the applicant the same day.

14. Evidence referred to below explained that one of the directors tried, without success, to obtain a copy of the statutory demand from the applicant’s registered office on 21 June 2023 but did not explain why the applicant waited until that date to ask for it.  Evidence referred to below established that the applicant (via Mr Alan Rose) obtained a copy of the statutory demand from Fintax Partners (he went to their office) on 22 June 2023.    

15. On 26 June 2023, the applicant applied to set aside the respondent’s statutory demand.  The application to set aside the demand was supported by an affidavit of Mr Rose, who described himself as a “corporate advisor”.  The application was to be heard on 4 August 2023. 

16. At about midday on 26 June 2023, email correspondence passed between the solicitors for the applicant and MPS.  MPS indicated that it would accept service of the application to set aside the statutory demand and Mr Rose’s affidavit by email, and such an email was sent to MPS at about 12.58 pm that day.

17. In his affidavit of 26 June 2023, Mr Rose affirmed, inter alia, the following matters:

    (a)He had been involved in the day-to-day running of the applicant’s business since November 2022 and had access to the applicant’s books and records.

    (b)Having reviewed the affidavit in support of the statutory demand, he could not determine what the purported debt related to, or how it was said that the applicant was liable for the debt. 

    (c)The amount of the demand did not appear to relate to the Services Agreement because –

    (i)The total amount due under the Services Agreement was $191,000, but the statutory demand asserted that a total liability of $242,000 had accrued, of which $84,000 was outstanding (the debt);

    (ii)Amounts were payable under the Services Agreement from 15 July 2020, but the liabilities identified in the demand began to accrue from 20 July 2021;

    (iii)The “reference” column in the schedule to the statutory demand appeared to refer to invoices spanning “UCG0023” to “UCG0050” (“invoices #23 to #50”), but payments made for management fees under the Services Agreement were made in respect of invoices with different references.

    (d)The current directors of the applicant were not in possession of invoices #23 to #50.

    (e)If the debt did arise out of the Services Agreement, the applicant –

    (i)disputed that it was liable for it;

    (ii)said that the issue of the statutory demand was in breach of the dispute resolution procedure provided for in the Services Agreement; and

    (iii)in any event, had an off-setting claim well in excess of the amount claimed. 

    (f)The applicant had paid $171,000 of the total amount of $196,000 payable under the Services Agreement, meaning that, at most, there was $15,000 outstanding. 

    (g)There were off-setting claims, relating to the respondent’s failure to properly manage the development of the property, which were set out in some detail. 

18. As to (b): The applicant’s solicitors had been informed about the basis for the demand in the correspondence from MPS of 16 June 2023.  I did not accept Mr Rose’s assertion that he could not determine what the debt related to. 

19. On 21 July 2023, the applicant’s solicitors contacted MPS, noting that: the return date for the application was 4 August 2023; they had not received material from the respondent; and asking when they might receive it.  Having received no response to that email, the applicant’s solicitors informed MPS (by email on 25 July 2023) that they would prepare for the application on the basis that it was unopposed.

20. On 26 July 2023, MPS advised the applicant’s solicitors that it was still obtaining instructions. 

21. On 1 August 2023, the applicant’s solicitors were informed (by email) by AXM Law, that it was acting for the respondent.  The email attached inter alia Mr Dirckze’s affidavit of that date, which was filed on 2 August 2023. 

22. In his 1 August 2023 affidavit, Mr Dirckze said that he had not heard of Mr Rose until he received his affidavit.  He said that Mr Rose was not involved with the applicant while Mr Dirckze was the director of it.

23. He said he was aware that the statutory demand related to invoices issued by the respondent under the Development Services Agreement.  He exhibited to his affidavit the outstanding invoices referred to in the statutory demand.  He said the invoices related to development management fees. 

24. He explained that “Jade 85 would receive the invoices by their being directly uploaded onto its accounting system by [his] office assistant [OA] under [his] supervision and instructions”. He said he and his OA had access to the applicant’s accounting system, Xero. He said Mr Rose had attached to his affidavit a Xero generated schedule of the invoices paid (that is, the document which is copied at [10] above). He noted that the applicant had paid all amounts until November 2022, but had “ceased paying the invoices issued by UCG around the time that Delta Constructions … issued the show cause notice to Jade 85”.[6] 

    Delta Constructions Qld Pty Ltd was the builder engaged by the applicant for the development.  On 29 November 2022, Delta Constructions alleged that the applicant had breached the building contract by failing to provide evidence that it could pay the amounts due/which would become due under it and, in effect, requiring the applicant to show cause as to why Delta Constructions ought not to terminate the contract. 

1. Mr Dirckze said that, while he was the director of the applicant, “there was no dispute about the Development Services Agreement, its validity, and operation”.  He continued: “The first time I became aware that Jade 85 contended that it did not understand how the Invoices related to the Development Services Agreement was when I received Mr Rose’s affidavit”. 

2. He stated that the invoices were issued by the respondent for its remuneration under the Services Agreement and that the $84,000 was due and payable.  

3. Mr Dirckze’s affidavit also dealt with the issues raised by Mr Rose about the applicant’s liability for the debt; the dispute resolution procedure under the Services Agreement; and the off-setting claim, which I need not go into.

4. AXM’s email correspondence asserted that the applicant’s application was “misconceived and doomed to fail”.  It contended that Mr Rose’s evidence was “on its face, plainly unreliable and/or misleading”, including because –

   (a)his authority to swear his affidavit on behalf of the applicant was unclear;

   (b)he had not been involved in the day-to-day running of Jade 85; and

   (c)his first communication on behalf of Jade 85, and the first time matters in dispute were raised, was in his affidavit which was served on the last day before the expiry of the statutory demand. 

5. As to (c), I note that, although the applicant was made aware of the statutory demand on 16 June 2023, it did not take steps to obtain it until 21 June 2023, and did not actually obtain it until 22 June 2023.  Having said that, I acknowledge that the evidence suggests that the respondent was aware that the statutory demand had not been brought to the attention of the applicant until 16 June 2023.     

6. AXM’s correspondence invited the applicant’s lawyer to consider its exposure to a special costs order being made against it because it acted on the authority of Mr Rose.  It invited the applicant’s solicitors and the applicant to discontinue the proceedings, with no order as to costs, “provided this offer is accepted by your written response … by no later than 9.30 am Thursday, 3 August 2023”.  AXM said that if its offer were not accepted, and it successfully resisted the application, then it would seek indemnity costs against the applicant and/or its lawyers.  It noted that counsel’s costs to date were $6000 and that further costs would be incurred up until the hearing.

7. On 2 August 2023, AMX Law informed the applicant’s solicitors (by email) that Mr Rose was required for cross-examination.

8. In reply, the applicant’s solicitors said that –

   (a)despite their requests for the respondent’s material, unsealed material was received by them at 7.50 pm on 1 August 2023; and

   (b)the applicant intended to put on material in reply and would require an adjournment to do so.

9. The applicant sought the respondent’s consent to such an adjournment.  It said the material in reply might alleviate the need for cross-examination of Mr Rose.      

10. On 3 August 2023, the respondent’s solicitors informed the applicant’s solicitors that it would oppose any application for an adjournment of the hearing – stating that it was unclear why the additional evidence had not already been marshalled.

11. On that same date, the respondent served a copy of its written submissions on the applicant.  Those submissions were not in evidence before me.  However, according to a letter from the applicant’s solicitors to the respondent’s solicitors, dated 14 August 2023, the submissions contained the following concession about the substantial dispute:[7]

    14UCG accepts for the purposes of this application that the Rose Affidavit – which articulated the basis of the dispute for the very first time – has met the low evidentiary bar to establish a genuine dispute in relation to the quantum of some of the Debts.

    15This is not the end of the matter.  There is no dispute that Jade 85 is required to pay UCG $15,000 for project management fees under the DSA.  The undisputed amount is greater than the “statutory minimum”… Section 459H(4) of the Act provides the Court with power to make an order varying the Statutory Demand to the amount not in dispute and to declare that the Statutory Demand has effect as varied from the date of service.  UCG submits that it would be appropriate for the Court to exercise that power in the present circumstances.

    [7]        Although the extract of the submissions in the letter included footnote numbers, the footnotes       themselves were not included.

12. On 4 August 2023, the hearing of the application was adjourned, until 25 August 2023, with directions about the filing of additional material.

13. Mr Rose’s second affidavit was filed on 11 August 2023.  He admitted in his second affidavit that the paragraph of his first affidavit, in which he asserted that he had been involved in the running of the applicant since 22 November, was “not accurate” because it had been prepared in a rush.  He explained that he had been engaged by the applicant’s shareholders, to review the day-today running of the applicant’s business, its general affairs, and the conduct of its director, Mr Dirckze, since 22 November 2022.  The shareholders were concerned inter alia that the development, which had been due for completion in June 2022, was far from completion; the building contract had been terminated; the builder had registered a mortgage over the business; there had been cost overruns; and the director was not keeping them relevantly informed.  Mr Rose explained that the shareholders did not inform Mr Dirckze about his “investigation”.  He said that, in May 2023, the shareholders formed a view that Mr Dirckze’s role as director was untenable.  On 21 May 2023, the applicant’s shareholders passed a resolution to remove him as director and secretary and a resolution appointing three other directors.

14. He said that since deposing to the fact that the applicant had paid $176,000 of the total of $191,000 owing, the applicant had identified additional payments.  He said that while Mr Dirckze was the director of the applicant and the respondent, the applicant paid to the respondent $323,000 – an overpayment of $132,000 (assuming a total liability of $191,000).  He relied upon bank statements, exhibited to his affidavit, as evidence of payment of some of the invoices.  To the extent that other of the invoices were not supported by bank statements, he noted that the respondent conceded that it had been paid in relation to them.

15. Mr Rose said that, after Mr Dirckze’s removal as director of the applicant, the applicant’s solicitors sought to obtain the applicant’s books and records from Mr Dirckze (as revealed in the correspondence I have referred to above).  He noted that Mr Dirckze provided a link to a Google drive folder containing various books and records on 22 June 2023 and that hard copies of some of those documents were provided on 24 June 2023.  However, the books and records produced by Mr Dirckze –

    (a)omitted copies of the allegedly outstanding invoices;

    (b)did not include the username and password necessary to access the Xero account; and

    (c)did not include any written agreement, by which the amount payable by Jade 85 to UCG was increased from $191,000.

16. The first time the applicant’s solicitors received copies of the invoices in dispute was when they received Mr Dirckze’s affidavit.  Also, as at 11 August 2023, Mr Rose was still unable to obtain access to the applicant’s XERO despite demands. 

17. On 14 August 2023, the applicant’s lawyers invited the respondent to withdraw its statutory demand; consent to the discontinuance of the proceedings, and pay its client’s costs, given the evidence deposed to in Mr Rose’s second affidavit.  They said that Mr Rose’s second affidavit adduced evidence of further payments which exceeded the sum due under the Services Agreement and suggested that the respondent would now properly concede that the low evidentiary bar for a genuine dispute had been met for the whole debt.   

18. On 15 August 2023, the respondent solicitors rejected the offer to discontinue proposed by the applicant.  Instead, the respondent offered to consent to the discontinuance or proceedings, and withdraw its statutory demand, if the applicant paid its client’s costs fixed in the sum of $9000.  It justified its entitlement to costs on the following bases –

    (a)The proceedings were commenced without notice and belatedly, on 26 June 2023, the last day before the expiry of the statutory demand.  Had the grounds been identified sooner, the proceedings could have been avoided altogether.

    (b)Mr Rose’s first affidavit did not disclose a genuine dispute or an off-setting claim.  If there had been no consent to the adjournment, then, at best for the applicant, the statutory demand would have been varied (to $15,000) and not set aside.

    (c)… It was “clearly” only after considering the respondent’s counsel’s written submissions, dated 3 August 2023, prepared at considerable cost to the respondent, that Mr Rose “belatedly mustered new evidence which could arguably meet the minimum threshold for setting aside a statutory demand”.

    (d)Mr Rose’s new evidence was substantially different to that in the first affidavit, which did not disclose a basis for setting aside the statutory demand.  The affidavit focused on off-setting claims – about which no further evidence was provided.

    (e)Mr Rose’s first affidavit included false and/or misleading evidence about the extent of his knowledge and/or involvement in the day-to-day management of the applicant’s affairs since November 2022.  The respondent had been put to the trouble of rebutting that evidence.  Mr Rose admitted that his first affidavit was incorrect and made excuses for himself.  His conduct was embarrassing and by itself warranted costs orders against it.    

19. The letter noted that the respondent had incurred, to date, $14,000 in legal fees (including $8000 in counsel’s fees) defending the “belated” application.  It estimated that, on the standard basis they would be assessed at approximately $11,000.  Therefore. the offer to fix costs at $9000 was reasonable.  The offer remained open for acceptance until 5 pm on Friday 18 August 2023.

20. In reply to that letter, the applicant’s solicitors described the complaints about the delay as “comical” because the applicant’s former accountant did not bring the statutory demand to its attention, and it only received a copy of the demand on 22 June 2023.  It had two days to respond to it and not enough time to properly investigate it.  Even if it wanted to investigate, it could not do so, because Mr Dirckze “withheld” the invoices which prevented the applicant from understanding what the demand related to..

21. On 17 August 2023, noting the applicant’s rejection of the respondent’s “generous settlement offer”, the respondent gave notice of the immediate withdrawal of the statutory demand and advised that it would consent to the proceedings being discontinued.  It said that its counsel would appear at the hearing to argue for costs on the standard basis until 14 August 2023, and on the indemnity basis thereafter. 

22. Alexander Moriarty of AXM Law, filed an affidavit on 18 August 2023.  His affidavit explained that the hearing of the application to set aside the statutory demand was adjourned by consent on 4 August 2023, until 25 August 2023.  At paragraphs 4 and 5 of his affidavit, Mr Moriarty explained the reason why the respondent withdrew its statutory demand.  He said (my underlining) –

    UCG maintains that the debts the subject of its statutory demand remain due and payable but, noting the matters now raised in Mr Rose’s second affidavit affirmed and served on 11 August 2023 …, concedes that there may be a genuine dispute over the debts.  The first time the basis for that dispute was fully articulated was in Mr Rose’s second affidavit, served on me on 11 August 2023.

    In those circumstances, on 17 August 2023, UCG unequivocally withdrew its statutory demand by my email to the applicant’s legal representatives …     

23. Mr Rose’s third affidavit was filed on 22 August 2023.  In it, he said that –

    (a)the first time the applicant became aware of the statutory demand was on 16 June 2023.

    (b)On 21 June 2023, one of the applicant’s directors wrote to Fintax Partners requesting a copy of the statutory demand.  Fintax Partners did not reply. 

    (c)On 22 June 2023, Mr Rose travelled to Fintax Partners and demanded a copy of the statutory demand which was provided to him without an explanation as to why neither the applicant nor its directors were advised of it or given a copy of it.

24. Also, this affidavit exhibited correspondence between the solicitors for the parties between 14 August 2023 and 17 August 2023.

25. The respondent objected to the admission of this affidavit because it was served outside the time limits set for the filing and serving of material.  It also objected to the paragraphs of it which were not responsive to the respondent’s material.

26. In response to the objection, counsel for the applicant submitted, in effect, that the third affidavit was relevant to the reasonableness of the respondent’s conduct which was relevant to the costs issue.  He said, if there had been a hearing on the merits, the accountant would have been cross-examined about the matters covered in paragraphs 6 and 11.

27. I will deal with the admissibility of this affidavit now. 

28. Paragraphs 6 – 8, and 10 of the affidavit contain little which was not already apparent from the evidence tendered.  The evidence tendered established that the applicant did not become aware of the statutory demand until it was advised about it on 16 June 2023.  And, in addition to Mr Rose obtaining a copy of the demand from Fintax Partners on 22 June 2023, the applicant’s solicitors were sent a copy of it, by email, on that same date. 

29. Paragraphs 9 and 11 provided “new” information.  However, in my view, the information provided did not favour the applicant in the sense that it did not explain why the director waited until 21 June 2023 to ask Fintax Partners for a copy of the statutory demand; or why Mr Rose waited until 22 June 2023 to obtain a copy of it for himself.

30. The correspondence exhibited to the affidavit is relevant to the costs’ argument. 

31. I rule against the objection to Mr Rose’s third affidavit.  It contained evidence relevant to the costs’ argument, as well as evidence of matters already known on the material.

    Submissions

32. The applicant submitted that the respondent had acted unreasonably because:

    (a)Only Mr Dirckze was in a position to know that there was either no amount due under the Services Agreement or at least a substantial dispute about it.

    (b)He frustrated the applicant’s ability to understand the demand.

    (c)He had not explained his conduct.

33. Expanding on the above, the applicant said –

    (a)Mr Dirckze was a director of both the applicant and the respondent when the applicant overpaid the respondent $132,000 in management fees. 

    (b)Notwithstanding the overpayment, he caused the respondent to issue the statutory demand after he was removed as director.

    (c)The statutory demand did not identify the basis upon which the applicant was said to be liable for the invoices set out in it; nor did it attach the invoices, which had been sent, in effect, by Mr Dirckze to himself.

    (d)The applicant’s inability to understand the statutory demand was compounded by Mr Dirckze’s actively withholding the books and records of the company from the directors who replaced him.

    (e)It was not until 22 June 2023 – one day before the expiry of the demand – that Mr Dirckze delivered up some of the books and records to the applicant.

    (f)The books and records did not contain a copy of the statutory demand; a copy of the invoices sought in the demand; nor the information necessary to access the Xero account.

    (g)The first time the invoices were provided was on 1 August 2023 (exhibited to Mr Dirckze’s affidavit).

    (h)Mr Dirckze still had not provided the details which would enable the applicant to access the Xero account.

34. As to (c), my interpretation of the statutory demand, upon seeing it for the first time, without background information, was that it concerned what were said to be outstanding management fees.  Also, the applicant had been informed of the basis for the demand by MPS’s letter of 16 June 2023 before it saw the demand.  Nevertheless, the applicant’s counsel maintained that the applicant did not know exactly what the invoices related to because its sole director was Mr Dirckze who issued the invoices (as director of the applicant) “to himself” (as one of the two directors of the respondent).  Although Mr Rose was aware of the Services Agreement, and only that agreement, he could not reconcile the invoices because the agreement of which he was aware began in July 2020, but the demand referred to debts incurred from July 2021. 

35. The applicant submitted that it would have succeeded in establishing a genuine dispute had the matter been heard on its merits.  In other words, its contentions would not be found “devoid of substance” (referring to Solarite Airconditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23]). This provided a reason why it should have its costs in any event.

36. A basis for awarding the applicant its costs on the indemnity basis was the respondent’s abuse of process.  Mr Dirckze issued the statutory demand as soon as he was removed as a director: “any fair-minded person” would know that would be problematic.  The demand was issued when Mr Dirckze was clearly aware that the debt would be disputed.  He frustrated the applicant’s attempts to understand the demand.  And it was withdrawn only after the applicant had incurred significant costs in applying to set the demand aside.  Further, the court’s discretion to order costs on the indemnity basis was enlivened by reason of the respondent’s unwillingness to settle on the terms nominated by the applicant.

37. The respondent contended that it ought to succeed in its application for costs because the applicant had been unreasonable in initially conceding that $15,000 of the debt was not disputed when the facts which ultimately led to the concession being withdrawn were known to the applicant prior to the service of UCG’s evidence and submissions.  Also, the applicant had refused an offer of settlement which unnecessarily prolonged the proceedings.

38. The respondent submitted that –

    (a)UCG’s submissions, served on 3 August 2023, proceeded on the basis that $15,000 was not in dispute – and because of that concession, UCG’s material focused on the off-setting claim arguments made by the applicant.

    (b)Mr Rose’s second affidavit “departed dramatically” from his first and included a concession that his first affidavit was inaccurate.

    (c)Since 26 June 2023, the applicant had the information which gave rise to the dispute over the whole of the debt.

    (d)Mr Rose did not provide any further evidence about the off-setting claims.

39. The “dramatic shift” in the applicant’s grounds was, the respondent alleged, the product of the applicant’s “forensic decisions”.  Referring to statements of Brereton J in Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 1245 at [12], the respondent submitted, in effect, that an applicant which “kept its powder dry” or “kept the creditor in the dark as to why it was not being paid” did so at its own risk as to costs. Jade 85 had kept its powder dry – by conceding then withdrawing the concession about the $15,000. The concession affected the respondent’s focus. Conversely, the respondent acted reasonably and promptly withdrew the demand once the applicant finally articulated a genuine dispute over the debt.

40. When I asked the respondent’s counsel what benefit the applicant would gain from keeping its powder dry, he told me that that was a “good question”, and he did not have an answer to it for me (T 1-8 line 7 – 8; and T 1-9 lines 3 – 12).

1. The respondent contended that the applicant had all the information necessary to formulate its position in response to the demand since 22 June 2023.  It was for the applicant to raise a genuine dispute and instead it initially conceded that an amount of $15,000 was owing.  The applicant should have at least sent a letter to the respondent stating that its concession was not maintained (once it reached that point).  But that was not apparent until Mr Rose’s second affidavit.  The respondent ought to be compensated for preparing an application on a ground which was not pursued.  Also, Mr Rose was vague about when the applicant’s investigations were completed.  The respondent contended it was open to me to infer that there was vagueness because precision would not have helped the applicant.  I was not prepared to draw that inference.[8] 

   [8]        I suspect, but do not need to make a finding about it, that Mr Rose’s affidavit was prepared on the basis     of the material available to him on 21 May 2023 (see paragraph 10(d) of his second affidavit.)

2. As to the alleged overpayment of management fees, the respondent’s counsel referred to “circumstances where irrespective of the terms of an agreement, the parties conduct can mean that they … [were] otherwise bound … In those circumstances it’s entirely plausible that … the respondent thought that these debts [were] due and payable”.  But there was no statement explicitly to that effect in Mr Dirckze’s affidavit. 

3. Counsel for the respondent submitted that Mr Dirckze had not had a chance to respond to the submission that he had engaged in an abuse of process, because the first time such a submission was made was in Mr Rose’s third affidavit in the context of an argument about costs.  Had this been a hearing on the merits, it could not have been raised in accordance with the principle in Greywinter. 

4. Further, the applicant had imprudently refused the respondent’s offer to settle for $9000 – which caused the parties to incur further costs.

   Consideration

5. I began with a consideration of the relevant authorities

   Authorities

   Re Minister for Immigration and Ethnic Affairs and another; ex parte Lai Qin

6. In this case, McHugh J stated the principles which govern an application for costs when a party elects not to pursue an action because they have achieved the relief sought by extra-curial means at pages 3 and 4, as follows (footnotes omitted):

   In most jurisdictions today, the power to order costs is a discretionary power.  Ordinarily the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to its costs.  Success in the action or on particular issues is the fact that usually controls the exercise of the discretion.  A successful party is prima facie entitled to a costs order.  When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

   In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed on the action.  The court cannot try a hypothetical action between the parties.  To do so would burden the parties with the costs of a litigated action which by settlement of extra-curial action they had avoided.  In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.  In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation …

   Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried …

   If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the costs of the proceeding. 

   Mackay Computer Services Pty Ltd v Wi-Man Pty Ltd

7. In this case, the respondent served a statutory demand which concerned a debt over which its director said he believed there was no genuine dispute.  The applicant applied to set the demand aside.  The next day, the respondent withdrew the demand.  The applicant sought its costs – including the costs of arguing costs – on the indemnity basis, relying on 459N of the Corporations Act 2001 and rule 681(1) of the Uniform Civil Procedure Rules which provides, in effect, that costs are to follow the event, unless the court orders otherwise.  The applicant argued that there was never any basis for the debt claimed – as the respondent, by its officers, well knew.  They knew there would be a substantial dispute about the claim.  Thus, the service of the demand amounted to an abuse of process.  The respondent submitted that it was entitled to its costs, arguing certain technical points and additionally, that it had acted reasonably in issuing the statutory demand because the applicant admitted that a debt in excess of the statutory minimum was owing – although it claimed a set-off in substantial excess of it.  Further, it acted entirely reasonably once alerted to the applicant’s case.

8. In ordering the respondent to pay the applicant’s costs on the standard basis, McMeekin J discussed first the court’s power to award costs.  Of that power, his Honour said inter alia –

   (a)The court’s proceedings would be open to an abuse of process if the court’s power to award costs was thwarted by a party withdrawing an unmeritorious demand prior to the hearing. 

   (b)He would be slow to interpret section 459N of the Corporations Act as depriving the court of the very useful power of indemnifying partially or wholly a party wrongly subject to the court’s processes.

   (c)Where neither party to litigation wishes to pursue it, and both have acted reasonably in commencing and defending proceedings and conducting themselves until settlement, the proper exercise of the court’s discretion as to costs will usually lead to an order that there be no order as to costs (referring to Lai Qin).

   (d)McHugh J in Lai Qin recognised two circumstances in which costs might be awarded despite a compromise of the action and no curial determination of the issues – namely, (i) the unreasonableness of commencing or defending proceedings; or (ii) certainty of success for one side.

   (e)In the case before McMeekin J, the question of reasonableness in issuing the demand turned on what the respondent knew about the existence of the dispute and the claimed set off. 

   (f)Where a party institutes proceedings they know are foredoomed to fail, then the proceedings will constitute an abuse of process – regardless of the propriety of the purpose of the person responsible for the their institution and maintenance (referring to Walton v Gardiner (1993) 177 CLR 378).

9. The respondent submitted that it had acted reasonably, by seeking a short period of time to consider the request to withdraw the demand and then withdrawing it within hours of service of the application.  McMeekin J rejected that that submission for various reasons, including, relevantly for my purposes, because there was no obligation on a company served with a demand to afford any latitude to the creditor.  The legislation demands a response within a very short time and the effect of failing to comply is quite dire for the debtor.  The debtor company is entitled to think that the demand would not have been issued without careful consideration of its position by the creditor.

10. His Honour concluded that if the application had proceeded to judgment, the applicant would have certainly succeeded.  His Honour found that the respondent well knew when it issued the demand that there was a genuine dispute existing concerning the claimed debt, and a set-off in excess of the claimed amount.  That justified a costs order in the applicant’s favour.  However, because it might turn out that substantial monies were owed by the applicant, his Honour was not prepared to order costs on an indemnity basis.   

    Speciality Fashion Group Limited v Global Red Australia Pty Ltd [2012] NSWSC 256

11. In this case, Black J ordered the defendant to pay the plaintiff’s costs of and incidental to its application to set aside the statutory demand, and of the costs hearing.  The application to set aside the demand did not proceed to a hearing.  But had it done so, Black J was almost certain that the demand would have been set aside.   

12. In the course of his reasons, His Honour considered relevant statements of principle from decisions of courts in New South Wales and the Australian Capital Territory, including the following –

    (a)“Creditors have to realise that if they invoke winding up provision by issuing a statutory demand they run the risk that if the debtor establishes that the amount claimed is subject to a genuine dispute, the debtor will get an order for costs, as s 459N expressly contemplates”: per Heerey J in Felkro Nominees Pty Ltd v Austissue Pty Ltd [1993] FCA 455.

    (b)“… the focus is on the reasonableness of the decision to issue [the statutory demand].  Whether on the material known to the creditor before the notice issued, it should have been apparent that there was a dispute which, viewed objectively, was ‘genuine’, that is, warranting further inquiry.  If so, the creditor must expect to pay costs in any event once the notice is set aside”: per Higgins J in Ayrton Investments Pty Ltd v Andrlik [2000] ACTSC 55.

    (c)Given how low the bar is to have a statutory demand set aide, “creditors persisting with the defence of such applications need to consider carefully, against the possibility of an order for indemnity costs, whether there are valid grounds for their taking up court time and putting the company to expense by doing so”: per Barret J (referring to warnings given by Santow J in several judgments) in CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] NSWSC 728.

    (d)“A person claiming to be a creditor who uses the procedure for service of a statutory demand under s 459E to seek to force a payment of a genuinely disputed debt risks an order for indemnity costs … Because the threshold for establishing a genuine dispute is low, creditors are often ill-advised to proceed with a statutory demand once plausible grounds for a dispute are asserted.  They risk an order for indemnity costs if they do so …”: per White J in Soudan Lane Pty Ltd v Glen Bradshaw t/a Pacific Coast Digital [2007] NSWSC 772.

13. His Honour also referred to the decision of Austin J in Re Chameleon Mining NL; Chameleon Mining NL v Atanaskovic Hartness [2009] NSWSC 602, at [72], in which the defendant was ordered to pay the costs of the proceeding to set aside a statutory demand, although the demand was issued in circumstances in which the defendant was not aware of any dispute having been previously raised as to the amount in issue, where it “adopted the unreasonable position that it would consent to the setting aside of the statutory demand only if each party paid their own costs” after being advised of that dispute (my emphasis).

14. One of the arguments made by the defendant to resist the costs order was that the plaintiff’s solicitors did not contact its solicitors between service of the demand and the filing of the application to set aside the demand.  The defendant submitted that had there been that contact, its solicitors would have advised it that there was a genuine dispute and would have advised it to consider voluntarily withdrawing its demand.  (Black J observed that the defendant did not say it would have withdrawn its demand had it been given that advice.) 

15. Black J rejected that argument, referring to the observations of Newnes M in BGC Contracting Pty Ltd v Whitsunday Crushers Pty Ltd [2004] WASC 209 at [6]- [7] in support of the proposition that there was no obligation on the plaintiff or its solicitors to contact the defendant. Newnes J said (my emphasis) –

    [6]… the quite stringent obligations that the Act imposes on a debtor which seeks to resist a statutory demand – particularly bearing in mind the severe consequences of any failure to comply strictly with the requirements of the Act – may mean that there is little time for discussion or negotiation about the debt which is the subject of the demand.  It is to be expected that the debtor and the debtor’s solicitors will turn their attention foremost to ensuring that they comply with the statutory requirements.  A creditor who serves a statutory demand cannot therefore necessarily expect from the debtor communications or courtesies that might be expected in more leisurely circumstances.

    [7]In my view, in circumstances such as the present it will rarely be the case that a creditor will be entitled to complain, as the defendant seeks to complain in this case, that the debtor did not put it on notice of the nature and quantum of any offsetting claims, or the nature of any dispute, after service of the statutory demand but before the debtor went to the cost of putting on the application and supporting affidavit.      

16. His Honour found that the defendant acted unreasonably in serving the demand, given that the application to set it aside was almost certain to have succeeded, and in not unconditionally agreeing to its withdrawal.  His Honour ordered the defendant to pay the applicant’s costs, but not on an indemnity basis because the defendant consented to the orders recording the withdrawal of the demand. 

    The present matter

17. I found that the respondent behaved unreasonably in issuing the statutory demand and in refusing the applicant’s offer to settle.  It must pay the applicant’s costs on the indemnity basis.

18. As the director of both Jade 85 and UCG, Mr Dirckze knew, or ought to have known, before the statutory demand was issued, that Jade 85’s maximum liability for UCG’s management fees under the DSA was $191,000.  Indeed, he did not challenge Mr Rose’s assertion of that maximum liability.

19. As the director of both Jade 85 and UCG, and the person in possession of Jade 85’s relevant books and records, Mr Dirckze knew, or ought to have known, before the statutory demand was issued, the amount paid by Jade 85 to UCG for management fees.  He knew, or should have known, that those payments were well in excess of $191,000.

20. Mr Dirckze knew that the statutory demand had been served upon the applicant by its delivery to the applicant’s registered office on 5 June 2023.  Even though the affidavit accompanying the demand was signed by Cory Robb as the director of the creditor, Mr Dirckze was well aware of it – as reflected in the correspondence from MPS to the applicant’s solicitors of 16 June 2023.

21. Mr Dirckze knew that it had not been brought to the applicant’s attention by Fintax Partners.  Neither he, nor Mr Robb, took any steps to bring the statutory demand to the applicant’s attention before, on, or soon after, it was delivered to the applicant’s registered office.

22. Mr Dirckze failed to provide the applicant with the books and records it asked for on 5 June 2023, knowing that UCG had issued the statutory demand and that the applicant did not know about the demand.  He knew, or ought to have known, that once Jade 85’s new directors were in a position to consider Jade 85’s books and records, there would be a substantial dispute over the debt of $84,000 claimed.

23. In asserting in his first affidavit that the applicant had paid $176,000 of its total liability of $191,000 under the DSA, Mr Rose referred to, and exhibited, a document entitled “Project Management Payments – Jade”, which contained a table listing 16 payments to UCG of $11,000 (that is, a total of $176,000) and the dates of those payments. 

24. Mr Rose’s second affidavit suggests (at paragraph 10(d)) that his first affidavit was based on records provided to him between November 2022 and 21 May 2023.  However, there is nothing in it which explicitly explains why Mr Rose did not refer in his first affidavit to the records provided to him on 22 June 2023.  

25. Had he done so, he would have been aware of at least an additional $77,000 paid by the applicant to the respondent in management fees based on the evidence of payment alone.  Mr Rose explained in his second affidavit that not all of the invoices provided to him on 22 June 2023 were supported by bank statements to prove that they had been paid, but he drew on other information to reach the conclusion that the applicant had overpaid the respondent by $132,000.

26. Nothing before me explained why Mr Rose did not perform the exercise he undertook in preparing his second affidavit in the preparation of his first.  But the respondent knew, or ought to have known, that the position taken in Mr Rose’s first affidavit, that at most the applicant owed another $15,000 in management fees to the respondent, was incorrect.  And even if there was some fault on the applicant’s part in not examining the books and records provided on 22 June 2023 before Mr Rose’s first affidavit was filed and served, that does not change the fact that the respondent acted unreasonably in issuing the statutory demand because it should have been apparent to it that there was a genuine dispute about the debt. 

27. I found the respondent’s contention that it had somehow been distracted by the concession in Mr Rose’s first affidavit that the applicant owed at most $15,000 to the respondent hollow.  It knew, or ought to have known it was incorrect.  Also hollow was its submission that the applicant was “keeping its powder dry”. 

28. As to which of the parties ought to have raised or appreciate the genuine dispute about the debt – clearly that responsibility lies primarily with the creditor (see Speciality Fashion and the authorities referred to therein).

29. The respondent had notice of the strength of the applicant’s position, and the genuineness of the dispute raised, and the applicant’s virtual certainty of success by the time Mr Rose’s second affidavit was served upon it (11 August 2023).  Yet it rejected the applicant’s reasonable offer to settle this matter on 14 August 2023.

30. The respondent’s counter proposal – that the applicant ought to pay its costs – was untenable.  The proposition that the application to set aside the demand had been commenced “belatedly” was, as the applicant submitted, “comical” because, to the knowledge of the respondent, the applicant did not know that the demand had been issued on 5 June 2023 and it did not receive a copy of it until 22 June 2022. 

31. As above, the suggestion that the respondent was distracted by the applicant’s initial position was a hollow one.  I acknowledge that Mr Rose’s first affidavit contained inaccurate information about his role – but the critical issue was not his relationship with the applicant but the position he took, on behalf of the applicant, in response to the statutory demand.

32. The proposition that the first time the basis of the dispute over the debt was “fully articulated” was 11 August 2023 (to explain why the concession that there was a genuine dispute was not made until 15 (or perhaps 17) August 2023) ignores the reality that the applicant needed the books and records of the applicant to properly investigate the debt and those books and records were withheld by Mr Dirckze.

33. In summary: The respondent acted unreasonably in issuing the demand.  It should have been apparent to it that there was a genuine dispute about the debt.  Indeed, prior to the issuing of the demand, only the respondent was in a position to know about the basis for a dispute and its genuineness.  Additionally, the respondent behaved unreasonably in rejecting the offer to settle proposed by the applicant on 14 August 2023.  And it was unreasonable in pursuing an application for costs in its favour, including on the indemnity basis, given that the statutory demand ought never to have been issued in the first place.