Tekno Autosports Pty Ltd v Jenkins (No 2)

Tekno Autosports Pty Ltd, the plaintiff, brought proceedings against Mr Jenkins, the defendant, over the misuse of the statutory demand procedure. The primary dispute centred on whether the defendant had improperly used the statutory demand process and whether he should be held liable for indemnity costs due to his persistent defence of the demands despite the evident genuine dispute over the debt. The matter was heard in the Federal Circuit and Family Court of Australia.

The legal issues before the court included whether the defendant had improperly used the statutory demand process by issuing demands knowing there was a genuine dispute over the debt, and whether he should be liable for indemnity costs for persisting in defending these demands despite being warned that they would be set aside. Another consideration was whether the defendant’s arguments regarding the dispute over the debt were properly arguable and whether his actions warranted an order for indemnity costs.

The court found that the defendant had indeed improperly used the statutory demand procedure. It was established that he knew there was a genuine dispute over the debt when he issued the demands, yet he proceeded to apply pressure on the plaintiff to compel payment. Despite being warned that the plaintiff would seek to set aside the demands if they were not withdrawn, the defendant persisted in defending them, which the court deemed unreasonable. The court rejected the argument that indemnity costs should only be awarded in hopeless cases, holding that the defendant’s actions warranted such an order as he should not have issued the demands in the first place and should have withdrawn them upon being warned of the genuine dispute. The court also noted that the debt in question was overstated by approximately one-third due to the inclusion of already paid amounts.

The court concluded that the defendant's conduct warranted an order for indemnity costs, and that the defendant should pay the plaintiff's costs on an indemnity basis.