Profounder Electrical Pty Ltd v Shutter Guard Group Pty Ltd
[2025] WASC 67
•6 MARCH 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PROFOUNDER ELECTRICAL PTY LTD -v- SHUTTER GUARD GROUP PTY LTD [2025] WASC 67
CORAM: LUNDBERG J
HEARD: ON THE PAPERS
DELIVERED : 6 MARCH 2025
FILE NO/S: COR 101 of 2024
BETWEEN: PROFOUNDER ELECTRICAL PTY LTD
Plaintiff
AND
SHUTTER GUARD GROUP PTY LTD
Defendant
Catchwords:
Costs - Application by plaintiff to wind up the defendant company based on failure to comply with a statutory demand - Application ultimately withdrawn with the leave of the Court following several steps in the proceedings - Whether plaintiff should pay the costs of the application - No explanation on affidavit for the withdrawal of the application - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 459P, s 459S
Rules of the Supreme Court 1971 (WA), O 66 r 1
Supreme Court Act 1935 (WA), s 37
Result:
The plaintiff is to pay the defendant's costs of the proceeding, including the costs of the defendant's interlocutory process dated 30 August 2024, to be assessed on a party/party basis, if not agreed, such amount to be reduced by the sum of $506 being the amount of the costs order made in favour of the plaintiff on 20 August 2024.
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | CX Law |
| Defendant | : | Solomon Brothers |
Case(s) referred to in decision(s):
Auto Control Systems Pty Ltd v WA Glass Pty Ltd [2024] WASC 160
Frigger v Lean [2012] WASCA 66
O’Neill v Mann [2000] FCA 1680
Re Kirman and Brauer as joint and several administrators of Tiger Resources Ltd (Subject to deed of company arrangement) [2021] WASC 273
Rhodium Australia Pty Ltd v Deputy Commissioner of Taxation [2012] FCAFC 17
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
LUNDBERG J:
A. Introduction
These reasons concern the costs orders which should be made following the withdrawal by the plaintiff of its application to wind up the defendant in insolvency.
The application itself was brought by originating process dated 27 June 2024 (the Application), filed pursuant to s 459P of the Corporations Act 2001 (Cth) (the Corporations Act). The Application was based on the defendant's failure to comply with the statutory demand which had been served on the defendant on 4 April 2024 (the Statutory Demand).
The Statutory Demand sought payment of the amount of $93,209.50. The Statutory Demand was not based upon a judgment debt. Rather, it was supported by an affidavit which asserted the existence of a debt owed to the plaintiff, based upon twenty individual invoices issued by the plaintiff, dated between 23 October 2023 and 23 February 2024.
The schedule to the Statutory Demand described the debt in rather general terms, being for the 'provision of goods and services'. The supporting affidavit descended no further into the detail, describing the debt as relating to 'work undertaken and goods supplied'.
B. Procedural history
By way of a brief summary of the procedural history, the following matters should be noted:
(a)the Statutory Demand was served on 4 April 2024;
(b)on 24 April 2024, the sole director of the defendant, Mr Andrew Donnelly, emailed the plaintiff's solicitors indicating that the debt claimed in the Statutory Demand was disputed and sought a breakdown of the debt claimed;
(c)the Application to wind up the defendant was filed on 27 June 2024;
(d)the first return of the Application was held on 13 August 2024 before the Master and, although there was no appearance by the defendant, orders were made to require the defendant to file a notice of appearance and an affidavit by 16 August 2024;
(e)on 16 August 2024, the defendant filed an appearance and an affidavit from his solicitor deposing that the defendant contended it was solvent and the debt was disputed;
(f)on 20 August 2024, a further hearing before the Master took place at which time the plaintiff moved for orders to wind up the defendant, but orders were instead made to permit an application under s 459S of the Corporations Act to be filed by the defendant, together with supporting documents;
(g)on 30 August 2024, the defendant filed its interlocutory process pursuant to s 459S of the Corporations Act, with a supporting affidavit, requesting leave to oppose the plaintiff's winding up application on a ground that it could have relied upon for the purposes of setting aside the Statutory Demand;
(h)the defendant filed submissions in support of the application under s 459S on 5 September 2024, but the plaintiff filed no submissions in relation to that interlocutory process at that time;
(i)there was a further hearing on 9 September 2024 and orders were made to regularise the defendant's late filing of documents and allow further materials to be filed, including by the plaintiff;
(j)on 11 September 2024, the defendant filed a supplementary affidavit;
(k)on 24 September 2024, the plaintiff filed an outline of submissions indicating it had no submissions to make in respect of the s 459S application;
(l)on 6 October 2024, following a query from my chambers, the plaintiff confirmed it did not oppose the s 459S application;
(m)the Application was brought on for hearing on 7 October 2024, at which time the plaintiff applied for leave to withdraw the Application, which the defendant did not oppose; and
(n)on 7 October 2024, I granted leave to the plaintiff to withdraw the Application.
The parties were not able to agree the costs orders which should be made, consequent upon the withdrawal.
Directions were then made to allow the parties an opportunity to file submissions on the costs issues, which would be determined on the papers. I refer to the plaintiff's outline of submissions dated 15 October 2024 (PS) and also to the defendant's outline of submissions dated 30 October 2024 (DS), both of which were concise and of assistance to the determination of these issues.
Neither party filed any affidavit evidence specifically in relation to the costs of the Application.
C. Competing orders sought by the parties
The plaintiff seeks the following orders:
(a)there ought to be no order as to costs and, on that basis the plaintiff would also agree that the extant costs order be vacated;[1] or
(b)if the Court is minded to award costs in favour of the defendant, the Court should also order that the extant costs order in favour of the plaintiff be set off against any future costs awarded in favour of the defendant.
[1] The only extant costs order apparent from the Court file is the order made by the Master in favour of the plaintiff on 20 August 2024, which was fixed in the sum of $506.
For its part, the defendant submits that the plaintiff ought not be relieved from the ordinary outcome that the plaintiff ought pay the defendant's costs of the proceeding. The defendant emphasises that the plaintiff filed a winding up application based upon a debt which it knew to be disputed, and which thereby put the defendant to the expense of opposing the winding up application. The defendant then stresses that the plaintiff unilaterally elected to withdraw the winding up application, without proffering an explanation on affidavit for that decision.
D. The Court's power to award costs and relevant principles
The power of the Court to award costs, and the principles to be applied by the Court in resolving the present costs dispute, are not in dispute.
First, the Court has a wide discretion to award costs, pursuant to the power in s 37 of the Supreme Court Act 1935 (WA). The discretion regarding costs has been described as 'absolute, unconfined or unfettered although a discretion that must be exercised judicially, not arbitrarily or capriciously, or on grounds unconnected with the litigation'.[2]
[2] Frigger v Lean [2012] WASCA 66 [53] (Allanson J, with whom Murphy and Newnes JJA agreed).
Second, several general rules as to costs are described in O 66 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC). The first rule, in rule 1(1), states that 'the Court will generally order that the successful party to any action or matter recover his costs', which is subject to any express provisions in any statute or in the Rules, and of course does not limit the Court's general discretion. This is typically the starting point for most analyses of costs outcomes.[3]
[3] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [49] (Murphy, Mitchell and Pritchard JJA) (Strzelecki Holdings).
The rationale for the general rule is that where a party has unjustifiably brought another party before the court, that party should be liable to compensate the other in costs. It is therefore incumbent on an unsuccessful party to satisfy the court that there are good reasons it should not pay the successful party's costs.
Third, and allied to the point just made, where an application has been withdrawn or discontinued, the underlying policy of the Court's rules is that the discontinuing party should be liable for the other party's costs unless the Court orders otherwise. Further, the conduct of the parties and the reasons for discontinuing the application can bear heavily on the exercise of the discretion. I refer to the relevant principles summarised by Hill J in Re Kirman and Brauer as joint and several administrators of Tiger Resources Ltd (Subject to deed of company arrangement),[4] which I respectfully adopt.
[4] Re Kirman and Brauer as joint and several administrators of Tiger Resources Ltd (Subject to deed of company arrangement) [2021] WASC 273 [30] (Tiger Resources Ltd). See also the application of those principles, in a similar context to the present, by Cobby J in Auto Control Systems Pty Ltd v WA Glass Pty Ltd [2024] WASC 160 [4].
Fourth, where the discontinuance can be said to be an acknowledgement by an applicant of likely defeat or where no objective circumstance provides reasons for the discontinuance, a costs order in favour of the other party will ordinarily be made.[5]
[5] Tiger Resources Ltd [30(e)] (Hill J), citing O’Neill v Mann [2000] FCA 1680 [13] (Finn J).
By way of example of the application of these principles, I refer to the decision of the Full Federal Court in Rhodium Australia Pty Ltd v Deputy Commissioner of Taxation,[6] in which a winding up application was withdrawn in light of new circumstances brought about by the defendant.
[6] Rhodium Australia Pty Ltd v Deputy Commissioner of Taxation [2012] FCAFC 17 (Rhodium Australia).
The defendant taxpayer in that case had filed affidavit evidence in the proceedings at first instance, which the Deputy Commissioner took to represent an application to revoke the tax estimate which underpinned the statutory demand issued by the Deputy Commissioner (and accordingly thereafter withdrew the proceedings).
The primary judge regarded the proceedings as having been reasonably brought by the Deputy Commissioner, and considered it was reasonable for the application to have been maintained until the defendant's basis for disputing the taxation debt was verified by affidavit filed in the proceeding.[7] In the circumstances, the primary judge made a costs order in favour of the plaintiff Deputy Commissioner, even though the proceedings were withdrawn.
[7] Rhodium Australia [15] – [22] (Marshall, Edmonds and Greenwood JJ).
However, the primary judge rejected a submission by the Deputy Commissioner that a costs order should be made against the defendant taxpayer in respect of the entire proceedings, and determined that the Deputy Commissioner should not have its costs incurred after 8 August 2011, the date on which it received the defendant's affidavits. On appeal, the Full Court found there was no basis to interfere with the exercise of the primary judge's discretion.[8]
[8] Rhodium Australia [24] (Marshall, Edmonds and Greenwood JJ).
The decision in Rhodium Australia provides an example of a case in which a withdrawing plaintiff may nonetheless be entitled to the costs of the proceeding, or some of those costs. The case may be distinguished from the present in that the relevant event in Rhodium Australia which provided the catalyst for the withdrawal was a new circumstance, not previously apparent to the plaintiff, and which provided a reasonable and cogent explanation for the plaintiff's change in course.
E. Disposition
In the present case, there has been no hearing on the merits of the plaintiff's Application pursuant to s 459P, nor of the defendant's interlocutory process filed under s 459S (although I note that interlocutory application was not opposed). The Court is, of course, not obliged to try the applications in a hypothetical manner. It would be impractical to assess the eventual prospects of success of the proceedings in order to determine the question as to the liability for costs.
Notwithstanding the absence of any final determination, the defendant nonetheless asserts it is the successful party in the proceedings, given the plaintiff unilaterally withdrew the Application. Indeed, it seems to me quite clear that the defendant would ordinarily be entitled to its costs of the proceedings, given the principles identified above, unless I am satisfied there is good reason from departing from that position.
To justify an order denying the defendant its costs, the plaintiff draws attention to the course the proceedings took between August and October 2024. The plaintiff says that it did not concede that there was an issue regarding the basis for the debt. The plaintiff submits that, rather than expose the parties to more time and expense, and burden the Court with a further hearing, it acted to avoid the final hearing and says it acted reasonably in doing so.
The plaintiff submits that the defendant had only belatedly set out its position in the matter, which it could have done much earlier. The plaintiff says the first time the defendant revealed its position was through the filing of the submissions on 5 September 2024 and there is no proper or cogent explanation as to why it failed to do so earlier. The plaintiff also criticises the approach of Mr Donnelly in dealing with the Statutory Demand itself, in concentrating on erroneous issues, in failing to address the core issues in his initial affidavit, and in failing to engage solicitors earlier, among other matters.
A significant weakness in the force of these assertions is that the plaintiff has not filed any affidavit evidence which provides an explanation as to the plaintiff's decision to withdraw the Application. Further, the plaintiff has not deposed to whether the evidence which emerged in the affidavit of Mr Donnelly was 'new' or came as a surprise to the plaintiff. An affidavit will not always be required to explain such matters, or to resist a costs order when sought by the non-discontinuing party, but the present case is a circumstance in which the absence of a verified explanation is significant.
The Court is thus left to analyse the matter by reference to the objective circumstances apparent from the materials filed by the parties prior to the withdrawal of the Application, and from the procedural history of the proceedings.
When the course of the proceedings is analysed, and the material filed by the parties is examined, I do not accept (and cannot reasonably infer) that the conduct of the defendant was unreasonable or can be relied upon by the plaintiff to explain the withdrawal decision. On the material available, it is apparent the defendant had filed a solicitor's affidavit on 16 August 2024 (on information and belief) and an affidavit from its sole director on 30 August 2024, both of which indicated the Application would be resisted and identified a dispute as to the defendant's liability to pay the debt. As at the time of the hearing on 9 September 2024, all indications were that the plaintiff would be maintaining its Application and resisting the defendant's interlocutory process.
Thereafter, something changed in the plaintiff's calculus, but it would simply be conjecture on my part to conclude that the substance of any of the documents filed by the defendant provided the catalyst for that change. This is particularly the case when it is appreciated the communication of the decision to withdraw the Application was not proximate in time to the filing by the defendant of its affidavits and submissions.
It is equally open to conclude that the plaintiff simply re-assessed the prospects of success of its Application and elected to withdraw.
In this respect, it is relevant to note that the debt upon which the plaintiff based its Statutory Demand was not a judgment debt but a claim for payment for goods and services provided. The Application to wind up the defendant was thus always at risk of being resisted by the defendant on the basis the defendant might assert the existence of a genuine dispute, which could be achieved by seeking leave through the mechanism in s 459S even where the Statutory Demand had not been directly challenged by an application under s 459G.
That is precisely what transpired, and indeed the plaintiff ultimately indicated it would not oppose the grant of leave under s 459S.
There is some criticism levelled at the defendant for failing to confer ahead of the filing of its interlocutory process. I do not accept this criticism. Even if I accept the conferral requirement has direct application in the context of a proceeding such as this, orders had been made requiring the defendant to file the interlocutory process, against a backdrop in which the plaintiff was maintaining its position, and there was only a limited window of opportunity for any conferral to occur, in any event. It is also apparent from the course of events after 30 August 2024 that the filing of the interlocutory process did not immediately prompt a change of approach by the plaintiff.
On the available materials, as I have noted above, I conclude that the defendant should be characterised as the successful party in the proceedings. So understood, the defendant would ordinarily be entitled to the costs of the winding up Application given it was put to the cost of defending the Application, which was subsequently withdrawn by the plaintiff. On the materials before the Court, and in the absence of any verified explanation from the plaintiff, I am not satisfied there is a reasonable basis to conclude that the defendant should be denied those costs.
F. Conclusion and orders
I will order that:
1.The plaintiff is to pay the defendant's costs of the proceeding, including the costs of the defendant's interlocutory process dated 30 August 2024, to be assessed on a party/party basis, if not agreed.
2.The amount assessed or agreed in order 1, is to be reduced by the sum of $506, being the amount of the costs order made in favour of the plaintiff on 20 August 2024.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IR
Associate to the Hon Justice Lundberg
6 MARCH 2025
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