Re Life Springs Pty Ltd (No 2) (Costs)
[2022] VSC 477
•19 August 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 02643
IN THE MATTER of LIFE SPRINGS PTY LTD (ACN 164 473 670)
BETWEEN:
| LIFE SPRINGS PTY LTD (ACN 164 473 670) | Plaintiff |
| v | |
| IDEVELOPMENT GROUP PTY LTD (ACN 134 745 716) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Written submissions filed by the plaintiff on 22 July 2022 and by the defendant on 29 July 2022 |
DATE OF JUDGMENT: | 19 August 2022 |
CASE MAY BE CITED AS: | Re Life Springs Pty Ltd (No 2) (Costs) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 477 |
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CORPORATIONS – Application to set aside statutory demand – Unsuccessful defendant had previously obtained an order for indemnity costs against the plaintiff as a result of application for adjournment – Question of whether director of plaintiff should be the subject of an order for costs at adjournment reserved until conclusion of trial of proceeding – Defendant ordered to pay plaintiff’s costs of the proceeding – No order made against director of plaintiff in respect of the adjournment.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Fry of counsel | Koya & Co |
| For the Defendant | Mr L Wirth of counsel | WBM Lawyers |
HIS HONOUR:
This was an application by the plaintiff, Life Springs Pty Ltd (ACN 164 473 670) (‘Life Springs’), to set aside a statutory demand dated 7 July 2021 which was served on it by the defendant, iDevelopment Group Pty Ltd (ACN 134 745 716) (‘iDevelopment’).
By reasons for judgment delivered 19 July 2022,[1] I stated that I would be setting aside the demand for ‘some other reason’ under s 459J(1)(b) of the Corporations Act 2001 (Cth) (‘Act’). At the conclusion of my reasons I indicated that before formally pronouncing such orders I would allow the parties to make submissions as to costs. Both parties have now filed written submissions.
[1]Re Life Springs Pty Ltd [2022] VSC 406.
It is necessary to set out a brief procedural history on this matter.
On 12 October 2021, I brought the matter on for mention as Life Springs had failed to comply with orders made by me on 18 August 2021 in respect of the filing of further affidavit evidence and submissions.
At the hearing on 12 October 2021, Mr Fry of counsel appeared on behalf of Life Springs and sought an adjournment for the purpose of putting on further evidence. I acceded to the application for adjournment and adjourned the trial of the application to 29 October 2021. I ordered that Life Springs was to pay iDevelopment’s costs thrown away by reason of the adjournment on an indemnity basis.
In my orders, I also observed in the ‘Other Matters’ segment of the order as follows:
The question of whether the Plaintiff’s director, Alan Maxwell Thompson is to pay the Defendant’s costs thrown away by reason of the adjournment on an indemnity basis will be subject to reservation. Parties are to make written submissions for the Court’s consideration.
In their submissions filed for consideration at the final hearing of this matter, both parties addressed the issue of the costs order against Mr Thompson, the ‘directing mind’ of Life Springs.
On 12 October 2021, Life Springs’ counsel had advanced as a reason for non‑compliance with the orders that Mr Thompson had contracted COVID-19 and was unable to participate in the preparation of the affidavit material ordered to be filed by Life Springs. As I observed on that occasion, Life Springs had been in default of the orders made by me on 18 August 2021 for quite some time prior to Mr Thompson contracting COVID‑19.
In his written submissions, Mr Fry, counsel for Life Springs, addressed the question of whether Mr Thompson should personally pay iDevelopment’s costs of the adjournment.[2] Mr Fry observed that non‑party costs orders should only be made in exceptional circumstances, that the power should be exercised sparingly and only where the interests of justice require a departure from the ordinary rule that only parties to proceedings may be subject to costs orders. He stated there are four reasons why Mr Thompson’s conduct in this case is not so egregious as to attract a non‑party costs order and why the facts of this case can be distinguished from the director/company cases where non‑party costs orders have been made. He describes these reasons as follows:
First, these are statutory demand proceedings, the instigator of this litigation was iDevelopment by its conduct in issuing the Statutory Demand. That is, Life Springs is, in many respects, in the position of a defendant.
Second, although Mr Thompson fairly recognises he was responsible for Life Springs’ breach of the Court timetable, any opportunity he may have had to remedy that breach was lost when he was diagnosed with Covid-19 on 6 October 2021, less than a week prior to the hearing of this matter. That was, objectively, an extraordinary and unusual event.
Third, there is a very real prospect that even if Life Springs had complied with the Court timetable, the hearing would still have been adjourned in circumstances where Mr Thompson was unwell, and in isolation.
Fourth, and perhaps most importantly, if the Court accepts Life Springs’ argument pursuant to section 459J(b) of the Corporations Act, then a fortiori, the catalyst for this litigation has at all times been iDevelopment’s conduct in issuing a statutory demand inconsistent with the objects and regime provided for in Part 5.4 of the Corporations Act. In the premises, it would be unjust to impose a non-party costs order on Mr Thompson, where the costs the subject of order are referable to, at worst, an abuse of Part 5.4 of the Corporations Act, and at best, a Statutory Demand which has at all times been fundamentally misconceived.[3]
[2]Life Springs’ written submissions dated 22 October 2021, [66]-[72].
[3]Ibid [69]-[72] (italics in original) (footnotes omitted).
In his submissions directed to this issue, Mr Wirth of counsel for iDevelopment responded to Mr Fry’s submissions contending that none of the matters advanced by Mr Fry were a sound answer to the proposed order. Dealing with each of Mr Fry’s submissions in turn, Mr Wirth submitted:
(a) The first assertion is, in effect, that iDevelopment chose its plaintiff. So much is a fair comment with respect to the costs of the usual running of a proceeding of this nature, where a successful defendant may never see the benefit of a costs order in its favour, as it will likely wind up the plaintiff in insolvency. The costs that Mr Thompson ought to pay personally are not those costs. They are costs thrown away by his own derelict conduct of Life Springs’ part of the proceeding, and contrary to various overarching obligations in the Civil Procedure Act 2010.
(b) The second assertion is that the opportunity to remedy the failure to comply with the Court’s timetable was lost on 6 October 2021. That is no answer for not taking any action prior to that date, by which time iDevelopment had incurred costs now thrown away.
(c) The third assertion is that the hearing would likely have been adjourned even if Life Springs had complied with the timetable, because Mr Thompson would still have been unwell. As was observed at the hearing on 12 October 2021, hearings in this kind of proceeding do not require the personal participation of the parties. They are of a wholly different nature from ordinary contested trials.
(d) The fourth assertion is that Mr Thompson should not be required to pay costs in a proceeding where Life Springs is successful. That misconceives the nature of the costs that he ought pay: they are thrown away and they are thrown away because of his own conduct. The justice of who ought bear those costs is independent of the merits of Life Springs’ substantive application.
Further, Mr Thompson received his diagnosis of Covid-19 on 6 October 2021. He says he first experienced symptoms on 1 October 2021, the same day he was informed his business premises were an exposure site. He does not say:
(a) when he attended that site and was likely to have contracted the virus;
(b) on what basis he was permitted to attend the site;
(c) if permitted to do so, what justified taking such a risk;
(d) whether and to what extent he was vaccinated against Covid‑19 to mitigate the risk.[4]
[4]iDevelopment’s further written submissions dated 25 October 2021 [43]-[44].
Mr Fry had addressed the issue again in his submissions of 22 July 2022 referring to his earlier submissions, in particular the fourth matter referred to in paragraph 9 above. In addition, he submitted that a further significant issue is the recognition of the fundamental policy consideration which informs the Court’s discretion to make a non‑party costs order: the risks that a successful litigant will be unjustly deprived of the recovery of its costs.[5]
[5]Citing Knight v FP Special Assets Ltd (1992) 174 CLR 178.
Mr Fry submitted that in this case there is no risk of iDevelopment’s order against Life Springs for its costs of the adjournment going unsatisfied. That is because any such costs will be set off completely by Life Springs’ entitlement to its costs of the proceeding, should those costs be awarded.
For this reason, Mr Fry contended the considerations applicable to the making of non‑party costs orders are not engaged. The statutory demand, having been set aside, Life Springs is not presumed to be insolvent and there is no evidence that it is a ‘man of straw’ so far as its ability to satisfy the costs of the adjournment is concerned. Even if it was, he contended, iDevelopment’s conduct in issuing, and pressing, the entirety of its statutory demand and the circumstances identified in paragraphs 108 to 109 of the primary judgment constituted disentitling conduct such that in all of the circumstances it would be unjust to make a non‑party costs order against Mr Thompson.
I think there is force in Mr Fry’s submissions. I reserved the question of whether there should be an order for costs against Mr Thompson personally so as to have the benefit of knowledge of the outcome of the proceeding between the parties at trial. Life Springs has been successful and I consider it should have its costs of the proceeding. No reason is advanced by iDevelopment as to why costs should not follow the event. Indeed, so much is accepted by iDevelopment in its submissions of 29 July 2022.[6] I agree with iDevelopment’s submission that there is no reason in this proceeding why Life Springs should have those costs on any other basis than an ordinary basis.
[6]See iDevelopment’s written submissions as to costs dated 29 July 2022 [3].
iDevelopment contends that the issue of costs is a ‘balancing act’ between Life Springs’ costs of the proceeding taxed on a standard basis and iDevelopment’s costs thrown away by reason of the adjournment of Life Springs’ application taxed on an indemnity basis. iDevelopment invites the Court to make no order as to costs by reason that when one compares Life Springs’ costs of the proceeding taxed on a standard basis against iDevelopment’s costs thrown away of the hearing of 12 October 2021 on an indemnity basis, it is not unreasonable to suggest that any costs order made in favour of Life Springs would be offset and perhaps extinguished by the indemnity costs order made in favour of iDevelopment.
By reason that the costs will be offset, I do not consider that there should be an order for costs made against Mr Thompson in respect of the adjournment that I ordered on 12 August 2021. I agree that one of the principle reasons that I reserved such question was to protect iDevelopment’s position in the event that it was successful and would be left wanting if Life Springs was presumed to be insolvent and was wound up. That situation does not now raise.
iDevelopment’s submission has the attraction of avoiding the costs of a taxation if the parties cannot come to an agreement on the issue, but I do not think I am entitled to assume, as iDevelopment contends I should, that the costs will effectively be netted off so that no party is indebted to the other for costs and that therefore there should be no order as to costs of the proceeding
In my view, justice is better served by each party having the benefit of the costs orders that I have described and I am reasonably confident that they can reach an agreement in that regard to offset them.
I will make orders as follows.
(1)The statutory demand for payment of debt dated 7 July 2021 and served on the plaintiff by the defendant is set aside.
(2)The defendant is to pay the plaintiff’s costs of the proceeding, including reserved costs.
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