Milne Agrigroup Pty Ltd v Inghams Enterprises PTY. Limited - [2024] WASC 23

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   MILNE AGRIGROUP PTY LTD -v- INGHAMS ENTERPRISES PTY. LIMITED [2024] WASC 23
CORAM:   FORRESTER J
HEARD:   6 DECEMBER 2023
DELIVERED          :   22 FEBRUARY 2024
FILE NO/S:   COR 101 of 2023
BETWEEN:   MILNE AGRIGROUP PTY LTD
Plaintiff
AND
INGHAMS ENTERPRISES PTY. LIMITED
Defendant

Catchwords:

Practice and procedure - Costs - Application to set aside statutory demand - Application for costs on an indemnity basis - Whether indemnity costs should be awarded

Legislation:

Corporations Act 2001 (Cth)

Result:

Defendant to pay the plaintiff's reasonably incurred costs on a party‑party basis until and including date defendant clearly put on notice of plaintiff's case

Thereafter defendant to pay the plaintiff's reasonably incurred costs on an indemnity basis

Category: B

Representation:

Counsel:

Plaintiff	:	Ms S B Nadilo
Defendant	:	Mr T J Porter

Solicitors:

Plaintiff	:	Herbert Smith Freehills
Defendant	:	King & Wood Mallesons

Cases referred to in decision:

CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31
Carinda Homes Pty Ltd v Highlands Austral Pty Ltd [2003] FCA 275
CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100
Club Marconi of Bossley Park v AVR Services (NSW) Pty Ltd [2002] NSWSC 584
David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265; 131 ALR 353; 18 ACSR 225
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397
Galaxy Resources Ltd v Arrinooka Pty Ltd [2002] WASC 70
Grass Manufacturers Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95
Hampic Pty Ltd v Cyndan Properties Pty Ltd [2013] NSWSC 1903
Huntingdale Village Pty Ltd v Korda [2015] WASCA 101 (S)
In the matter of Warrego Energy EP469 Pty Ltd [2020] NSWSC 980
One-Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548
Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Rectangular Pty Ltd v Atf The Marco Cardaci Testamentary Trust [2023] WASC 13 (S)
Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd [2001] NSWSC 867; (2001) 165 FLR 72
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196; (2002) 172 FLR 35
Yara Australia Pty Ltd v Oswal [2012] WASCA 264

FORRESTER J:

Introduction

On 28 June 2023, the plaintiff filed an application to set aside a statutory demand issued by the defendant. On 7 September 2023, after receiving the plaintiff's written submissions on the application, the defendant informed the plaintiff that the statutory demand would be withdrawn.
The plaintiff seeks indemnity costs or, in the alternative, costs, to be ordered against the defendant in relation to the plaintiff's application.
For the reasons which follow, the defendant is ordered to pay the plaintiff's reasonably incurred costs on a party‑party basis until and including 7 August 2023, and thereafter the plaintiff's reasonably incurred costs on an indemnity basis.

Background

Evidence relied upon by the plaintiff

The plaintiff relies upon the affidavit of Adam Shaul Spencer-Laitt (Mr Laitt) sworn on 28 June 2023, and the affidavits of Ante Golem sworn on 30 October 2023 and 4 December 2023. The latter affidavit annexes a letter which was mistakenly omitted from the affidavit sworn 30 October 2023.
Mr Laitt is the General Manager of Business Development at the plaintiff company (Milne) and has essentially been in that role since September 2013.
Milne is an agribusiness group which, as part of its operations, farms free range chicken and pork. Since 2012, it had sourced its animal feed from the defendant (Inghams).
On 6 March 2012, Milne and Inghams entered into a Feed Supply Agreement (FSA) which set out the formula on which Inghams would set the price to charge Milne for animal feed. As part of that agreement, the price to be paid by Milne was the cost of raw materials used in production of the feed, plus a milling fee, set for the first 12 months at $40 per metric tonne, to be renegotiated after 12 months.[1]
[1] Affidavit of Adam Shaul Spencer‑Laitt sworn 28 June 2023, 72, clause 4.4(b) (AL‑3) (Laitt Affidavit).
The agreement provided that it expired on 31 December 2014, unless terminated earlier (which it was not). The milling fee does not appear to have been specifically renegotiated at any time.
After the FSA expired, neither Milne nor Inghams sought to re‑negotiate the FSA, and there is no evidence of any discussion as to the manner in which Inghams would thereafter charge Milne for the animal feed it supplied. Mr Laitt claimed that Inghams continued to invoice Milne in exactly the same manner it had during the term of the FSA. In support of this claim, annexed to Mr Laitt's affidavit are copies of letters from Inghams dated 28 January 2013 and 30 April 2014,[2] which are relevantly in identical terms to letters dated 2 October 2015 and 4 January 2016.[3]
[2] Laitt Affidavit, 86 ‑ 88 (AL‑4).
[3] Laitt Affidavit, 89 ‑ 92 (AL‑5).
Mr Laitt also deposed that employees of Milne raised questions with Inghams regarding pricing in June 2017, December 2020, March 2021, August 2021, December 2021, March 2022, May 2022 and September 2022, and on each occasion, Inghams confirmed the pricing in a way which indicated to Mr Laitt that prices were still being calculated in accordance with the formula set out in the FSA.[4] The defendant objected to the admissibility of this evidence of Mr Laitt on the basis that the meaning of the documents was a matter for the court.[5]
[4] Laitt Affidavit [35] ‑ [56].
[5] ts 13 ‑ 15.
However, Mr Laitt also deposed that between July 2022 and April 2023, he and another employee of Milne each had at least five discussions with employees of Inghams in which they said words to the effect that the prices set by Inghams did not appear to be in accordance with the formula set out in the FSA. Mr Laitt deposed that at no point did anyone from Inghams explain how it was pricing its feed. However, at that stage Milne had no alternative suppliers and thus continued to use Inghams.[6] It was only in April 2023 that Milne found an alternative feed supplier and ceased using Inghams.[7]
[6] Laitt Affidavit [62] ‑ [64].
[7] Laitt Affidavit [73].
Mr Laitt deposed that, until the week ending 23 April 2023, Milne made its 'usual weekly payment' to Inghams.[8] No detail has been provided as to what the amount of that payment was.
[8] Laitt Affidavit [74].
On 26 and 27 April 2023, Mr Laitt sought further information from Inghams as to the amount it had been charging Milne but received no response.[9] He was therefore only able to estimate what he considered to be overcharging of Milne by Inghams, determining that it was 'at least $1.8m of the total invoiced amount, and probably more'.[10]
[9] Laitt Affidavit [76] ‑ [78].
[10] Laitt Affidavit [86].
On 11 May 2023, Milne's lawyers, Herbert Smith Freehills (HSF) sent a letter to Inghams querying the basis on which Inghams was charging Milne.[11] On 30 May 2023, Inghams' lawyers, King & Wood Mallesons (KWM) replied, asserting that the basis on which Inghams was charging Milne was in accordance with its Limited Terms and Conditions of Sale (Terms of Sale) together with the Terms and Conditions of Credit Trading, which it claimed was set out in Pricing Letters dated between 24 June 2022 and 28 April 2023.[12]
[11] Laitt Affidavit, 120 - 121 (AL-19).
[12] Laitt Affidavit, 122 - 134 (AL-20).
Only one such Pricing Letter, dated 17 February 2023, is annexed to Mr Laitt's affidavit.[13] That letter states that the 'Updated Inghams Standard Terms and Conditions of Business as attached to this letter apply to all feed supplied to the Purchaser'. However, no such document is attached to the letter annexed. Mr Laitt deposed to the fact that he has no recall of ever seeing such a document prior to 30 May 2023, and that a search of Milne's systems has not located any record of such a document having been provided to Milne.[14]
[13] Laitt Affidavit, 133 (AL-20).
[14] Laitt Affidavit [94] - [97].
As with the letters from 2013 ‑ 2016 referred to at [9] above, the letter dated 17 February 2023 sets out a cost per product, inclusive of the milling fee.
KWM's letter dated 30 May 2023 notified HSF that Milne's credit facility had been withdrawn, and that all outstanding amounts were immediately due and payable. In the letter, KWM asserted that Milne had failed to pay a number of invoices (which were summarised in a table). The claim is, on its face, difficult to entirely reconcile with Mr Laitt's claim that, until the week ending 23 April 2023, Milne paid its regular weekly payment to Inghams.
KWM's letter stated that the amount of $2,332,781.93 was outstanding and payable within seven days, failing which it would serve a statutory demand without further notice and, if necessary, proceed to make a winding up application.[15]
[15] Laitt Affidavit, 123 (AL-20).
HSF responded by letter dated 2 June 2023 disputing the assertions made by KWM and, in particular, the contractual terms that applied to the supply of feed by Inghams to Milne, the pricing mechanism to be used, and the amount owing by Milne to Inghams. HSF's letter stated:
In the circumstances, there is no basis for your client to foreshadow that it will issue a statutory demand. As you both are well aware, any such statutory demand would be set aside given that there is a genuine dispute between the parties.
As a general comment, the statutory demand process is a wholly inappropriate vehicle for the resolution of this dispute between the parties. What is appropriate, as a first step, is for your client to provide Milne with the information it has repeatedly requested (most recently by email to Messrs Kinkade and Harmes on 26 and 27 April 2023) and in our letter to Inghams dated 11 May 2023.[16]
[16] Laitt Affidavit, 135 (AL-21).
HSF's letter dated 2 June 2023 also informed KWM that, in the event that a statutory demand were issued, an application would be made to set it aside, and an indemnity costs order would be sought against Inghams.[17]
[17] Laitt Affidavit, 136 (AL-21).
On 5 June 2023, KWM responded, challenging Milne's reliance on an agreement that, on its face, expired in December 2014, and asserting that the Terms of Sale were included with every Pricing Letter. KWM also denied any obligation to provide Milne with information about the calculation of its prices. KWM rejected the proposition that Milne could demonstrate a real and genuine dispute about the terms of the supply of feed to Milne and labelled any dispute about the amount owing as 'spurious and misconceived'. KWM reiterated an intention to issue a statutory demand unless the outstanding sum was paid by 5.00 pm the following day.[18]
[18] Laitt Affidavit, 153 (AL-22).
The statutory demand was issued on 7 June 2023. As is required, it was accompanied by an affidavit sworn by Gary James Mallett, a director of Inghams and its Chief Financial Officer, on 7 June 2023, in which Mr Mallett deposed as to his belief that there was no genuine dispute about the existence or amount of any of the debts.[19]
[19] Laitt Affidavit, 69 (AL-2).
By letter dated 26 June 2023, HSF invited KWM to withdraw the statutory demand on the basis that there was a genuine dispute between the parties as to the alleged debt and indicated that, in the event the statutory demand was not withdrawn, proceedings would be commenced to set it aside.[20]
[20] Laitt Affidavit, 154 (AL-23).
By email dated 27 June 2023, KWM wrote that any application to set aside the statutory demand would be 'vigorously opposed'. KWM challenged Milne's reliance on the FSA and claimed that Milne had failed to substantiate its claims by particularising correspondence on which it relied. KWM claimed that HSF had failed to engage in meaningful conferral.[21]
[21] Laitt Affidavit, 168 (AL-25).
In a responsive letter dated 27 June 2023, HSF disputed that Milne had not made any attempt to properly articulate a basis on which the statutory demand ought to be set aside and pointed to correspondence and telephone conferral. Notwithstanding this, HSF sought to further particularise the basis for the dispute, and again claimed there was a dispute as to the amount of the debt.[22]
[22] Laitt Affidavit, 170 - 173 (AL-26).
The plaintiff filed and served its application to set aside the statutory demand on 28 June 2023, together with the affidavit of Mr Laitt.
On 30 June 2023, KWM sent a letter to HSF in which it claimed that the affidavit of Mr Laitt did not reference the FSA or the pricing formula under the FSA in correspondence with Inghams. KWM denied there was a relevant dispute regarding the applicable terms on which feed was supplied to Milne. KWM claimed that Milne was informed of the price of feed prior to supply (and acceptance) of the feed in the usual way.[23]
[23] Affidavit of Ante Golem sworn 30 October 2023, 11 - 12 (AG-3) (Golem Affidavit).
On 25 July 2023, KWM wrote to HSF disputing that there was a genuine dispute between the parties and noting that any offsetting claim would have to exceed the amount of the debt demanded. KWM disputed the admissibility of Mr Laitt's affidavit (without specifying the basis for doing so) but claimed in any event that the amount of the disputed debt was $1,816.190. Accordingly, it was suggested that the demand be varied to the amount not in dispute - a sum of approximately $516,000 and the application otherwise be dismissed with no order as to costs.[24]
[24] Golem Affidavit, 21 - 22 (AG-8).
On 25 July 2023, KWM emailed HSF proposing programming orders which did not involve any affidavit evidence being filed on behalf of Inghams.[25]
[25] Golem Affidavit, 23 (AG-9).
On 26 July 2023, HSF rejected the proposal to vary the debt claimed in the statutory demand.[26] The programming orders were consented to and forwarded to the court. However, when the court asked KWM to confirm that Inghams did not propose to file any affidavits, KWM advised HSF:
Our client will not be in a position to properly consider the Court's request until we have clarity on what your client says about the issues to be determined at hearing, in particular what basis there is for the statutory demand to be set aside rather than varied given your client's evidence of quantum.[27]
[26] Golem Affidavit, 31 (AG-11).
[27] Golem Affidavit, 48 (AG-14).
HSF responded by email on 31 July 2023 that it maintained its application to set aside the statutory demand in its entirety and invited Inghams to substantiate the amount of the debt promptly.[28]
[28] Golem Affidavit, 52 (AG-15).
On 4 August 2023, KWM emailed HSF, claiming that Mr Laitt's evidence stated a basis for a claim on Milne's part of about $1.8m but provided no explanation as to the basis on which it contended it had a claim for more than the amount of the statutory demand. KWM wrote:
We do not presently understand the basis on which your client seeks to set aside the whole amount of statutory demand, as opposed to it being varied to reflect the amount of your claim. But given your client's refusal to provide any clarification, we will need to wait until your client's submissions are filed to understand the position. If your client's submissions raise a matter that requires some evidentiary response, we will raise it with you, and the Court, at that time.

Presently, the evidentiary issues that exist are matters for your client. On this basis, we will confirm to the Court that we do not propose to file any further evidence, and we will await your submissions.[29]
[29] Golem Affidavit, 61 (AG-16).

By email dated 7 August 2023, HSF responded that there was a genuine dispute as to both the existence and amount of the debt the subject of the statutory demand. HSF stated that Milne did not assert that it had an offsetting claim; it asserted that Inghams had not provided proof of the debt. HSF disputed any entitlement on the part of Inghams to wait until after the plaintiff's submissions were received before finally deciding whether to seek to adduce evidence.[30]
[30] Golem Affidavit, 71 - 72 (AG-19).
On 8 August 2023, KWM confirmed it did not seek to file any affidavits in opposition to the application to set aside the statutory demand.[31]
[31] Golem Affidavit, 86 (AG-21).
The plaintiff filed written submissions on 18 August 2023. The defendant failed to file its responsive written submissions by 1 September 2023, as ordered.
On 7 September 2023, KWM wrote to HSF, stating (without prejudice save as to costs):
Inghams has considered Milne's Submissions and, in light of the additional arguments raised, acting reasonably and without admission, intends to withdraw the Statutory Demand the subject of the Application.
Inghams is prepared to agree a minute of order (sic) to this effect that also provides for the proceeding to be discontinued with no order as to costs.[32]
[32] Golem Affidavit, 113 (AG-26).
On the same date, Inghams issued proceedings in the Supreme Court of New South Wales seeking recovery of the outstanding debt.[33]
[33] Golem Affidavit, 114 - 125 (AG-27).
On 11 September 2023, HSF wrote to KWM declining to accept its offer and offering to resolve the matter on the basis that the statutory demand be withdrawn and Inghams pay Milne's costs in the sum of $170,000.[34]
[34] Golem Affidavit , 126 - 127 (AG-28).
On 20 September 2023, KWM wrote to HSF rejecting its offer, and asserting that the first time that the plaintiff's claim was properly articulated was in its written submissions, which KWM claimed materially departed from the evidence originally filed in support of the application. KWM further asserted that on 18 August 2023, the plaintiff for the first time invoked s 459H(3) and s 459J(1)(b) of the Corporations Act 2001 (Cth) (the Act) as further or alternative grounds on which the statutory demand should be set aside.[35]
[35] Golem Affidavit, 128 - 130 (AG-29).
The court was informed on 5 October 2023 that the defendant intended to withdraw the statutory demand but that an argument remained to be resolved as to costs.[36] Orders were made as to the filing of submissions as to costs.

Evidence relied upon by the defendant

[36] Golem Affidavit, 193 (AG-34).

On 21 November 2023, an affidavit of Suzanne Katherine Madar affirmed on 21 November 2023 was filed. Ms Madar deposed as to the terms and conditions for the supply of feed by Inghams to Milne and annexes the invoices the subject of the statutory demand. The invoices had not been filed in the proceedings prior to that point.
The letter annexed as SKM-1 does not include as an attachment the 'Updated Inghams Standard Terms and Conditions of Business', referred to therein and said to be attached.[37]
[37] Affidavit of Suzanne Katherine Madar sworn 21 November 2023, 4 - 5 (SKM-1).
To Ms Madar's affidavit is also annexed a Bank Deposit Listing Report (BDLR) which lists invoices issued by Inghams and amounts paid by Milne since 2002. However, the BDLR omits any reference to the invoices the subject of the statutory demand.[38]
[38] Affidavit of Suzanne Katherine Madar sworn 21 November 2023, 76 - 268 (SKM-4).
Ms Madar also deposes that on 17 November 2023 she caused a letter to be sent to the plaintiff's solicitors confirming the statutory demand had been withdrawn.[39]
[39] Affidavit of Suzanne Katherine Madar sworn 21 November 2023, [5], 75 (SKM-3).

Legal principles

Indemnity costs

The principles relevant to the grant of costs on an indemnity basis are well established and were outlined in Swansdale Pty Ltd v Whitcrest Pty Ltd,[40] Yara Australia Pty Ltd v Oswal[41] and Huntingdale Village Pty Ltd v Korda.[42] Most recently, they were summarised by Lundberg J in Rectangular Pty Ltd v Atf The Marco Cardaci Testamentary Trust.[43]
[40] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10].
[41] Yara Australia Pty Ltd v Oswal [2012] WASCA 264 [33].
[42] Huntingdale Village Pty Ltd v Korda [2015] WASCA 101 (S) [11] ‑ [17].
[43] Rectangular Pty Ltd v Atf The Marco Cardaci Testamentary Trust [2023] WASC 13 (S) [18] ‑ [24].

In Rectangular, Lundberg J considered a number of cases which involved contests over statutory demands and referred to CGI Information Systems v APRA Consulting Pty Ltd,[44] in which Barrett J expressed the following views as to the imposition of indemnity costs in the context of cases involving statutory demands:
[20] Indemnity costs have been awarded in some s 459G cases. In Galaxy Resources Ltd v Arrinooka Pty Ltd,[45] an order of that kind was made where the statutory demand asserted debts said to come from an oral agreement, where the supposed conversation was denied by one of its supposed parties and the plaintiff offered to withdraw its application and bear its own costs on the basis that the defendant withdrew its statutory demand, an offer that Master Bredmeyer said should have been accepted. In Wildtown Holdings Pty Ltd v Rural Traders Co Ltd,[46] the Full Court of the Supreme Court of Western Australia found that the statutory demand was grossly defective and its accompanying affidavit was obviously inadequate, yet the defendant persisted in resisting an application to have the demand set aside. The court saw the case as involving 'shortcomings ... sufficiently serious ... to warrant the conclusion that the respondent's defence of its position was an abuse of the court's process, arguably justifying an award of indemnity costs'. In Carinda Homes Pty Ltd v Highlands Austral Pty Ltd,[47] Lindgren J ordered costs on the indemnity basis where the evidence made it plain that the time limit fixed by s 459G(2) and (3) (which is immutable: David Grant & Co Pty Ltd v Westpac Banking Corp)[48] had not been met, so that, as his Honour put it, 'the proceeding was doomed to fail' and it was 'quite unreasonable for it to be pursued once 25 February 2003 had passed without service having been effected'.
[21]At the same time, it is important to remember that the party by whom a statutory demand is served is entitled not only to test the recipient company's claim that the alleged debt is genuinely disputed but also to see the evidence the plaintiff is able to marshal in support of the claim of genuine dispute. That principle has been stated on several occasions by Palmer J in sounding a note of caution about the award of indemnity costs in this type of case: see Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd;[49] Club Marconi of Bossley Park v AVR Services (NSW) Pty Ltd;[50] Grass Manufacturers Pty Ltd v Sraennik Pty Ltd.[51]
[22] I accept that the possibility of an order for indemnity costs should not be allowed to deter a party by whom a statutory demand has been served from putting the company to appropriate proof of the genuine dispute it asserts. But that principle has a limit to it. As Galaxy Resources, Wildtown Holdings and Carinda Homes show, there are cases in which attempts to resist the setting aside of the demand are, even on the interpretation of the facts most favourable to the defendant, so devoid of prospects of success as to be perverse. The opportunity to put the company to proof of the asserted genuine dispute is something to which the defendant should not be regarded as entitled in such obvious cases. A defendant, on having an obvious and irremediable weakness in its position pointed out, ought to withdraw the statutory demand. If, in such circumstances, such a defendant does not do so, it may well be appropriate for the court to award costs to the plaintiff on the indemnity basis.
[44] CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100 [18] ‑ [22].
[45] Galaxy Resources Ltd v Arrinooka Pty Ltd [2002] WASC 70.
[46] Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196; (2002) 172 FLR 35.
[47] Carinda Homes Pty Ltd v Highlands Austral Pty Ltd [2003] FCA 275.
[48] David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265; 131 ALR 353; 18 ACSR 225.
[49] Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd [2001] NSWSC 867; (2001) 165 FLR 72.
[50] Club Marconi of Bossley Park v AVR Services (NSW) Pty Ltd [2002] NSWSC 584.
[51] Grass Manufacturers Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95.
Lundberg J also referred to In the matter of Warrego Energy EP469 Pty Ltd,[52] in which Black J warned that:
Where a creditor chooses to pursue a creditor's statutory demand, in the face of clear notice of a dispute about it, then it seems to me that its conduct is sufficiently unreasonable to warrant an order for indemnity costs.[53]

Genuine dispute

[52] In the matter of Warrego Energy EP469 Pty Ltd [2020] NSWSC 980.

[53] Warrego [35].

In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd,[54] the Federal Court held that 'a genuine dispute' must be bona fide and truly exist in fact, and the grounds for alleging the existence of that dispute must be real and not spurious, hypothetical, illusory, or misconceived.
[54] Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452, 464.
In CGI, Barrett J said of the scope of the 'genuine dispute' ground:
… the task faced by the company challenging a statutory demand on the genuine dispute grounds is by no means at all a difficult or demanding one. The company will fail in that task only if it is found, upon the hearing of its s.459G application, that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that on rational grounds indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.[55]
[55] CGI [16].
On an application under s 459G, the court's function is to determine whether there is a genuine dispute; the court is not expected to undertake an extended inquiry or attempt to weigh the merits of the dispute. It is not part of the court's function to resolve the dispute.[56] However, the court is also not required to uncritically accept every statement in an affidavit.[57]
[56] CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31 [35].
[57] Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787.

Preliminary Issue

Relying on Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin[58] and Hampic Pty Ltd v Cyndan Properties Pty Ltd[59] the defendant submitted that, for the purposes of the plaintiff's application, it was neither necessary nor appropriate for the court to resolve the issue of whether there was a genuine dispute as to the amount the subject of the statutory demand.
[58] Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 ‑ 625.
[59] Hampic Pty Ltd v Cyndan Properties Pty Ltd [2013] NSWSC 1903 [30] ‑ [34].
In response, the plaintiff relied upon the following observations of Burchett J in One‑Tel Ltd v Commissioner of Taxation:
It is accepted that, in a case which terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial … But this does not mean that the Court can never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or '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' …
…
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.[60]
[60] One-Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 [5] ‑ [6].
This proceeding does not require me to determine whether there was a genuine dispute as to the amount the subject of the statutory demand. However, in considering the reasonableness of the conduct of the parties it is necessary to consider the merits of their respective positions.

Disposition

The present dispute appears to have crystallised in mid‑2022, when Milne more frequently challenged the amount Inghams was charging for feed and specifically queried the basis on which the charges were calculated.
However, as Mr Laitt deposed, issues with the amount Inghams was charging Milne had arisen on a number of occasions, increasing in frequency, from June 2017.
On the evidence available, even during the term of the FSA, the Pricing Letters sent by Inghams to Milne did not set out prices which were in accordance with the formula contained in the FSA. Instead, costs were quoted inclusive of the milling fee, which was not individually specified, even after the first 12 months of the FSA.[61] Pricing Letters sent after the expiration of the FSA were in the same form.
[61] Laitt Affidavit, 86 - 88 (AL-4).
Notwithstanding this, Mr Laitt characterised the correspondence which was exchanged between Inghams and Milne on the occasions leading up to mid‑2022 as demonstrating that the price Inghams was charging Milne was calculated in accordance with the pricing formula set under the FSA.[62]
[62] Laitt Affidavit [35] - [56].
It is unclear on what basis Mr Laitt made such a characterisation, other than his estimate, from time to time, as to the costs of raw materials. At no stage does the written correspondence refer to any particular pricing formula or the FSA. Milne did not assert in any written correspondence that such a formula applied. Further, while the written correspondence does indicate that Inghams' prices varied due to market fluctuations in the price of feed, there was no assertion on Milne's part, nor acknowledgment on Inghams' part, that Inghams was only contractually permitted to charge the cost of the raw materials or ingredients, or what the milling fee actually was.
In May 2022, Milne started to seek further information as to the manner in which Inghams was pricing its feed. On 2 May 2022, Milne asked Inghams what was driving a price increase across the board, when grain had been secured at a constant price.[63] In response, on 30 May 2022 Inghams gave an assurance that it was 'only passing on rising raw material costs'.[64] However, this exchange falls well short of establishing that there was a mutual agreement as to the manner in which Inghams was obliged to set its prices.
[63] Laitt Affidavit, 109 (AL-13).
[64] Laitt Affidavit, 108 (AL-13).
There is uncontradicted evidence that Mr Laitt and another employee of Milne had, in multiple telephone conversations with representatives of Inghams from July 2022, complained that prices charged were not in accordance with the pricing formula under the FSA.[65] However, in response, no explanation was given by Inghams as to how the price was actually calculated.
[65] Laitt Affidavit [62] - [63].
It was not until 26 April 2023 that Milne first asserted in writing to Inghams that the contractual basis for calculating the price of feed was the cost of raw materials and a milling fee.[66] Even then, Milne did not refer to the FSA, or assert there was any agreement as to the amount of the milling fee or whether it was subject to change.
[66] Laitt Affidavit, 116 - 117 (AL-17).
In turn, Inghams did not respond to that correspondence or provide any information as to the manner in which the prices were being calculated.
On 11 May 2023, HSF first wrote to Inghams seeking information as to the basis of the price increases, and asserting a 'long‑standing agreement' between Milne and Inghams as to the manner in which the costs were determined.[67]
[67] Laitt Affidavit, 120 - 121 (AL-19).
No response was received until 30 May 2023, when KWM responded by letter, disputing the matters raised in the letter from HSF dated 11 May 2023, and threatening to serve a statutory demand within seven days unless payment was received.[68]
[68] Laitt Affidavit, 122 - 123 (AL-20).
On 2 June 2023, HSF advised KWM that there were a number of disputes as to the terms of the contractual arrangements between the parties and the actual amount due and payable, and asserting that the statutory demand process was a wholly inappropriate vehicle as a means for resolving the dispute. It sought further information from Inghams as a first step. HSF also put Inghams on notice that Milne would seek indemnity costs in the event of it needing to make an application to set aside a statutory demand.[69]
[69] Laitt Affidavit, 135 - 136 (AL-21).
KWM refuted HSF's claims in its letter dated 5 June 2023 and rejected any proposition of a genuine dispute.[70]
[70] Laitt Affidavit, 153 (AL-22).
A review of the correspondence to this point reveals that, while holding the view that their own position was unassailable, each party appears to have lacked a genuine understanding as to the reasons why the other took the position it did. At times the written correspondence did not enhance the prospects of such an understanding being achieved, and there is no suggestion that verbal conferral was any more productive.
The mere fact that Milne had a particular understanding as to the terms of its contractual arrangement with Inghams has very limited, if any, weight in determining whether there was actually a genuine dispute as to the terms of that contractual arrangement. Further, in circumstances in which Inghams regularly specified the prices for its products in advance of Milne taking delivery of them, there was much to be said for Inghams' position. However, the manner in which the matter proceeded, and the pace at which it proceeded, allowed little room for genuine conferral.
As unfortunate as such a situation was, I am unable to find that, in issuing the statutory demand, Inghams was acting unreasonably in seeking to test Milne's claim that the alleged debt was genuinely disputed and to see the evidence Milne was able to adduce in support of that claim.
The statutory demand was issued on 7 June 2023. It was accompanied by Mr Mallett's affidavit, in which he deposed as to his belief that there was no genuine dispute as to the existence or amount of the debt. In light of the correspondence which had then passed between the parties, such a statement might be regarded as incautious. It is one thing to firmly believe in the correctness of one's position; it is quite another to reject the possibility that there might be a genuine dispute, as that term is to be understood in this context, particularly having regard to the limited information exchanged between the parties at that point.
HSF sent a letter to KWM dated 27 June 2023, setting out the particular correspondence relied upon for its position, and its argument.[71] The affidavit of Mr Laitt was filed on 28 June 2023.
[71] Laitt Affidavit, 170 - 173 (AL-26).
On 30 June 2023, KWM wrote to HSF setting out why, in its view, the plaintiff's evidence did not give rise to a genuine dispute, and in particular, why it was not plausible that the pricing formula set out in the FSA still applied.[72]
[72] Golem Affidavit, 11 - 12 (AG-3).
Further, on 25 July 2023 KWM wrote to HSF, seemingly under the impression that Milne had made an offsetting claim, stating:
Even if there was a genuine dispute about the amount of the debt on the basis of an offsetting claim, in order to obtain orders to set aside a statutory demand, an applicant must establish a plausible basis for asserting a claim to a sum that exceeds the amount of the debt demanded.[73]
[73] Golem Affidavit, 21 (AG-8).
KWM asserted that the evidence of Mr Laitt was inadmissible, and failed to establish a genuine dispute, but even taking the plaintiff's case at its highest, there was, in effect, an admitted debt of more than $500,000.[74]
[74] Golem Affidavit, 21 (AG-8).
In my view, KWM's assertion as to there being an admitted debt in any amount, was, at best, a misunderstanding of Mr Laitt's evidence. The evidence of Mr Laitt was clearly that, based on the information he had at hand, his estimate was that Milne had been overcharged at least $1.8m, and 'probably more'.[75] In no way was the amount limited to $1.8m.
[75] Laitt Affidavit [86].
KWM concluded its letter in the following terms:
In the event that your client maintains its application to set the demand aside in its entirety, please explain the basis for that position by reference to evidence that has been filed.[76]
[76] Golem Affidavit, 21 (AG-8).
At this stage, the issue arose as to whether any affidavit evidence was to be filed on behalf of Inghams. HSF again denied that a debt in any amount was admitted.[77] On 4 August 2023, KWM again claimed not to understand Milne's position, but confirmed it would not seek to rely on any evidence.[78]
[77] Golem Affidavit, 52 (AG-15).
[78] Golem Affidavit, 61 (AG-16).
On 7 August 2023, HSF wrote to KWM and, in effect, outlined the submissions it would make, including foreshadowing reliance on s 459H(3) of the Act and eschewing any reliance on an offsetting claim.[79] Its submissions dated 18 August 2023 were in substantially similar terms, with the addition of reference to s 459J.[80]
[79] Golem Affidavit, 71 - 72 (AG-19).
[80] Plaintiff's Outline of Submissions in Support of Application to Set Aside Statutory Demand filed 18 August 2023 [30] - [33].
Three weeks after the plaintiff's submissions were filed, the defendant indicated it would withdraw the statutory demand.[81] There is no evidence as to why it took this course. However, Inghams had by this time commenced proceedings in the Supreme Court of New South Wales for recovery of the outstanding debt.
[81] Golem Affidavit, 113 (AG-26).
On behalf of Inghams, it was submitted that it was only when the plaintiff's submissions were filed on 18 August 2023 that it determined it was appropriate to withdraw its defence of the application. It was submitted that it was only then that the plaintiff indicated reliance on s 459H(3) and s 459J(1)(b).[82]
[82] Defendant's Outline of Submissions in Opposition to Costs Orders filed 20 November 2023 [15]; see also Golem Affidavit, 129 (AG-29).
I am unable to accept that the late amendment of the application (if it was an amendment) materially altered the position of the plaintiff. Apart from the fact that s 459H(3) was referred to by HSF in the correspondence of 7 August 2023, that provision is not a separate basis on which to set aside a statutory demand; it simply makes clear that, if the court is satisfied that there is a genuine dispute as to the existence of the debt, the statutory demand must be set aside.
As to the plaintiff's reliance on s 459J(1)(b), the plaintiff had always asserted that the use of the statutory demand process in this case was inappropriate. The plaintiff's invocation of s 459J in this case cannot have been a surprise of such a nature as to wholly alter the defendant's position on the application. Indeed, when pressed, the defendant was unable to articulate why it would have been such a surprise.
In the course of the hearing, it was submitted on behalf of the defendant that it had understood, even after the plaintiff's written submissions were filed, that the plaintiff raised an offsetting claim. While it might be accepted that there was initial confusion as to whether that was so following the filing of Mr Laitt's affidavit, by 7 August 2023 at the latest the plaintiff unequivocally ruled out reliance on any offsetting claim. Any contention that the plaintiff's written submissions did not do the same cannot be accepted.

It was submitted that the withdrawal of the statutory demand was a recognition on the part of Inghams that it was no longer 'efficient' to proceed in this matter.[83] However, there was no evidence to that effect, and I do not take it into account.
[83] Defendant's Outline of Submissions in Opposition to Costs Orders filed 20 November 2023 [16].
Ultimately, the state of the evidence does not allow me to make a finding as to the reason for the decision to withdraw the statutory demand and its timing. In particular, I am unable to infer from that decision an implicit acknowledgment on the defendant's part at that point that its resistance to the plaintiff's application was hopeless.
That is not, however, the end of the matter. The defendant was on notice from 7 August 2023 as to the plaintiff's position, in clear and unequivocal terms. By that date, the defendant had also determined that it did not propose to file any evidence in the proceeding. Accordingly, it was in a position to make a decision as to whether to continue to resist the plaintiff's application. However, it failed to do so, leaving the plaintiff to file written submissions and then follow up the defendant's written submissions. It was not until 7 September 2023 that the plaintiff was informed that the defendant intended to withdraw the statutory demand. The court was not informed of this decision until 5 October 2023, and the formal withdrawal was not confirmed by the defendant until 17 November 2023.
The 'genuine dispute' test is a relatively low threshold. While it requires more than mere assertion, and the court is not required to uncritically accept assertions made in seeking to establish a genuine dispute, if even one issue is shown to have a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. It is not a matter of balancing the strengths of the cases of the respective parties.
In my view, the defendant's decision to continue the matter after 7 August 2023 was unreasonable.
While the defendant at all material times prior to 7 September 2023 indicated an intention to vigorously oppose the application, refuting any possibility that a genuine dispute existed, at no point did the defendant actually take any steps to defend the proceedings, other than filing an appearance. It declined to adduce any evidence. It was of course entitled to rely on the evidence lodged by the plaintiff, much of which was relevant to the defendant's case. However, even in circumstances in which the plaintiff made it abundantly clear that there was no amount of debt which was admitted, the defendant filed no evidence in support of its claim. It did not file any evidence of the invoices upon which the debt was said to be due and payable, any evidence that those invoices were raised consistently with what it claimed was the contractual agreement between the parties, or evidence which contradicted Milne's claim to having paid some amounts during the relevant period.
Ultimately, as counsel for the defendant acknowledged, there were many aspects of the dispute between the parties which were not clear. Many of those were factual in nature. Those matters could only have been resolved by a full hearing of the evidence, followed by a determination of the true terms of the contractual arrangements between the parties.
In my view, on the basis of the available evidence, it was inevitable that Milne would be able to demonstrate that there was a genuine dispute warranting the setting aside of the statutory demand. I find that this should have been apparent to Inghams at the latest by 7 August 2023, when it had been clearly advised of the case Milne intended to present.
On 21 November 2023, a 297‑page affidavit was filed on behalf of the defendant, annexing the relevant invoices, but still providing no evidence demonstrating the failure on the part of Milne to pay those invoices in full. The affidavit left uncontradicted the evidence that, until the week ending 23 April 2023, Milne made its usual weekly payments to Inghams, although it might raise an issue as to whether there was such a thing as a 'usual weekly payment'.
It was submitted that the purpose of filing the affidavit was to counteract any contention made by the plaintiff that it would have inevitably established that there was a genuine dispute.[84] However, in my view the evidence is not relevant to the issue of costs. It goes only to the issue of whether there is a genuine dispute, a matter on which it was not appropriate to seek to adduce further evidence at the time of the hearing. The affidavit does not assist in establishing that the defendant's conduct at the time of the proceedings was reasonable. Indeed, it could only highlight the failure of the defendant to adduce relevant evidence in the substantive proceedings. Accordingly, I decline to take it into account.
[84] ts 8.
Having found that, after 7 August 2023, it was inevitable that Milne would have been able to demonstrate a genuine dispute, the action 'must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law',[85] bringing it into a category which makes it appropriate to award costs on an indemnity basis.
[85] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 401.
Accordingly, I propose to order that the defendant pay the plaintiff's reasonably incurred costs on an indemnity basis from (and including) 8 August 2023.
I have already determined that, while potentially hasty, it was not unreasonable for the defendant to issue the statutory demand in light of the information which was available to it at the time. However, once a statutory demand has been served, the company on which it is served is obliged to respond by making an application to set it aside, unless it is willing to suffer the consequences of failing to do so. In issuing the statutory demand, the defendant was on notice of Milne's case, and must be taken to have been willing to assume the risk that Milne would be able to make it out. Accordingly, in my view, it is appropriate in the circumstances that the defendant pay the plaintiff's costs up until and including 7 August 2023 on a party‑party basis.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SI
Associate to the Honourable Justice Forrester
22 FEBRUARY 2024