Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (Costs Ruling)

[2015] VSC 569

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S CI 2015 1815

MALEC HOLDINGS PTY LTD (ACN 077 896 201)	Plaintiff
v
SCOTTS AGENCIES PTY LTD (in liquidation) (ACN 007 592 261)	Defendant

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JUDGE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	6 October 2015
DATE OF RULING:	15 October 2015
CASE MAY BE CITED AS:	Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (Costs Ruling)
MEDIUM NEUTRAL CITATION:	[2015] VSC 569

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RULING

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CORPORATIONS — Application to set aside statutory demand —Orders made varying this demand to be an effective demand for 80 per cent of the original amount claimed — costs — Plaintiff ordered to pay defendants costs — No reduction made in costs despite variation of demand.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M A Black	Marshalls & Dent
For the Defendant	Mr N P De Young	Maddocks (as agents for Finlaysons, solicitors Adelaide, South Australia)

HIS HONOUR:

1. On 21 April 2015, the plaintiff, Malec Holdings Pty Ltd (‘Malec’) made application to set aside a statutory demand dated 31 March 2015 which had been served on it by the defendant, Scotts Agencies Pty Ltd (‘Scotts’). 

1. The demand claimed the sum of $603,367.94. 

1. On 6 October 2015, I made orders pursuant to s 459H of the Corporations Act 2001 (Cth) (‘the Act’) varying the demand so that it was an effective demand for $474,370.71. I published my reasons for doing so on that date. As my reasons reveal, I considered that Malec had established an offsetting claim in respect of fuel alleged to have been delivered by Scotts on 1 April 2012 and 1 September 2012. It was characterised as an offsetting claim because it did not relate to the invoices the subject of the demand, which were for fuel and other products delivered from March 2014 to 2 June 2014. The deliveries the subject of the offsetting claim were paid for previously by Malec and amounted to $128,997.23. This resulted in a reduction in the amount of the demand of approximately 20 per cent.

1. Mr Black, counsel for Malec, submitted that was a significant amount and that it was effectively a different demand.  He contended that Malec was forced to resort to the application to reduce the demand and that Scotts was placed on notice about what he described as inconsistencies that gave rise to the claim prior to commencement of the proceeding. 

1. Mr De Young, counsel for Scotts, contended that in substance the application to set aside the demand had not been successful and that the costs should follow the event.  He stated that while costs are in the discretion of the Court, the amount by which the demand had been varied was not of such an amount so as to give rise to special circumstances warranting a departure from the principle that costs follow the event. 

1. In addition, Mr De Young stated that the history of correspondence which was referred to in the judgment, where the debt the subject of the demand was admitted by Ms Malec, was a factor which should influence the Court in the exercise of its discretion to award Scotts all its costs of the proceeding.  He contended it was only after the application was commenced that the claim concerning the two days in question came to light when Scotts was put to proof about delivery of the fuel which, save for the two days in question, it did to the required standard.

1. In Statutory Demands and Winding Up in Insolvency,[1] the author states:

Where the amount claimed in the demand is varied by the court, the appropriate costs order will, again, turn upon the relevant facts of each case.  One significant factor that the court will take into account is the relative measure of success of the parties.  Hence in Australian Cinemas Pty Ltd v Kodak (A’sia) Pty Ltd, a creditor issued a statutory demand for payment of $301,840.  Prior to the hearing, the company capitulated and consented to the statutory demand being varied to an amount of [$299,117.50].  Emmett J of the Federal Court found that the result was very much in favour of the creditor and accordingly ordered that the company pay the creditor’s costs. 

In some cases, no order as to costs will be appropriate.  In Moving Tactics Pty Ltd v IPMG Digital Pty Ltd, a creditor issued a statutory demand for an amount of $49,218.75.  The company’s application to set aside the statutory demand failed; however, the court varied the amount claimed in the demand to $32,943.57.  In the circumstances of the case, White J of the Supreme Court of New South Wales ordered that each party should bear their own costs. 

(citations omitted)

[1]2^nd ed Farrid Assaf, Lexus Next Butterworths at paragraph 8.16.

1. Malec based its attack on the demand on several grounds which are referred to in the reasons for judgment.  The first related to the absence of evidence of delivery of the fuel; the second contended that there was no agreement in respect of interest accruing on the amounts outstanding; third there was a contention that there was an offsetting claim in the sum of $415,063.00 arising by reason of overcharging for deliveries of fuel.  Malec also sought to mount a claim in its third affidavit based on the contention that, by reason of the difference in its tankard reports (which revealed the amount of fuel being drawn from the tankard) compared with the amount delivered by Scotts over the same period amounting to 2,518,908 litres of fuel gave rise to an offsetting claim well in excess of the amount claimed in the demand.  I rejected the reception of evidence of that alleged offsetting claim by reason of the Graywinter principle. 

1. Save for the variation arising from the establishment of the offsetting claim, Malec did not succeed on any of these grounds.

1. In the circumstances, I consider it is appropriate that Scotts be awarded its costs of the proceeding, including reserved costs, despite the variation in the demand.  At first blush, it might be thought appropriate to reduce the amount of Scotts’ costs by 20 per cent, but I think that is adopting an overly simplistic approach.  A closer analysis of the facts and the way the proceeding was agitated do not to my mind warrant such a reduction.

1. To my mind, a number of factors come into play in exercising the discretion as to costs.  True it is that Malec had achieved a relatively substantial reduction in the amount of the demand, 20 per cent of the original amount demanded.  On the other hand, I consider that in substance Scotts has had an overwhelming success in the proceeding.   It saw off all the attacks made on the demand save for the two days in question and in order to do so filed a substantial amount of evidence in order to overwhelm Malec’s various grounds of attack on the demand.  The amount of actual court time and evidence directed to achieving the reduction in the demand was relatively minimal.  The reduction in the amount of the demand arose from deliveries in April 2012 and September 2012 and had not been raised until the current proceeding was foreshadowed. 

1. I will order that Malec pay Scotts’ costs of the proceeding including reserved costs.

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