WA Welder Repairs Pty Ltd v SHROPSHALL
[2009] WASC 172
•11 JUNE 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WA WELDER REPAIRS PTY LTD -v- SHROPSHALL [2009] WASC 172
CORAM: MASTER SANDERSON
HEARD: 11 JUNE 2009
DELIVERED : 11 JUNE 2009
PUBLISHED : 18 JUNE 2009
FILE NO/S: COR 85 of 2009
BETWEEN: WA WELDER REPAIRS PTY LTD (ACN 099 815 586)
Plaintiff
AND
DAVID WILLIAM SHROPSHALL
EPIFANIA SERON SHROPSHALL
Defendants
Catchwords:
Costs - Application for indemnity costs when opposition to application to set aside a statutory demand was bound to fail - Failure of defendants' solicitors to properly advise defendants
Legislation:
Nil
Result:
Indemnity costs awarded
Category: A
Representation:
Counsel:
Plaintiff: Mr J L Sher
Defendants: Mr O D Feinauer
Solicitors:
Plaintiff: Butcher Paull & Calder
Defendants: Feinauer & Associates
Case(s) referred to in judgment(s):
Ambassador at Redcliffe Pty Ltd v Emerald Constructions Australia Pty Ltd (2006) 24 ACLC 882
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85
Help Desk Institute Pty Ltd v Adams (1999) 17 ACLC 18
MASTER SANDERSON: This was the plaintiff's application to set aside a statutory demand. When the matter was called on for hearing counsel for the defendants indicated that the defendants neither consented to nor opposed an order being made setting aside the demand. As I was satisfied there was a genuine dispute in relation to this matter, I set aside the demand. There was then an argument as to costs. The plaintiff sought to have its costs paid on a full indemnity basis. The defendants suggested the costs be reserved. After hearing argument I made an order in favour of the plaintiff for indemnity costs. I indicated that I would publish reasons for that decision. These are those reasons.
The application to set aside the statutory demand was filed on 6 May 2009. It was supported by an affidavit of Bryan Eugene McGrath sworn 6 May 2009. Attached to that affidavit were five separate statutory demands. Each of the demands was for $8,000. The only variation between each demand was a date found in the schedule to the demand under 'Description of the debt'. I can illustrate the point by reference to the first demand which appears as attachment BEM1. Under the description of the debt there appears the following:
The debt is for monies due and payable as and by way of the instalment payment due 15 December 2008 payable to the Company by the Creditor pursuant to clause 10.2 of the Share Sale Agreement entered into between the Company and the Creditor dated 13 October 2008.
The second of the demands refers to 15 January 2009. The third to 15 February 2009 and so on. Although there were five demands, only one application was issued to set aside the five separate demands. This is a perfectly proper course to follow in circumstances such as this: see Help Desk Institute Pty Ltd v Adams (1999) 17 ACLC 18; Ambassador at Redcliffe Pty Ltd v Emerald Constructions Australia Pty Ltd (2006) 24 ACLC 882.
A copy of the Share Sale Agreement (the Agreement) appears as attachment BEM6 to Mr McGrath's affidavit. It is expressed to be between the defendants as 'the Vendor', Powerscourt Pty Ltd as trustee for the McGrath Family Trust 'the Purchaser' and the plaintiff 'the Company'. Recital C is in the following terms:
The Vendor has agreed to sell the Shares to the Purchaser and the Purchaser has agreed to buy the Shares from the Vendor on the terms of this Agreement.
The term 'Shares' is defined in cl 1.1 to mean 20 fully paid ordinary shares in the capital of the Company held by the Vendor.
It is then tolerably clear what is anticipated. The Company runs a business enterprise. Rather than sell that enterprise to the Purchaser, the Vendor is selling the Shares in the Company to the Purchaser. The net effect is the same ‑ the Purchaser winds up with the business. It is not a complicated transaction.
Turning to cl 10 of the Agreement, it is headed 'Stock in Trade/Inventory'. The clause itself is in the following terms:
10.1Prior to making this agreement the parties agreed that the Company's stock or inventory levels would be at a minimum value of $180,000. The parties agree that as at the Completion Date the value of the Company stock and inventory on hand is $260,000.
10.2The Purchaser will procure the Company to pay to the Vendor $80,000 for the Company's additional stock and inventory by 10 instalments of $8,000 payable on the 15th of each month (for 10 months) commencing on 15 December 2008.
It was the plaintiff's position that cl 10.2 was ambiguous and there was a genuine dispute as to whether the defendants were liable to make payment to the plaintiff of $8,000 per month. With respect, that submission seems to me to be unanswerable. Without going into detail it must be open to question what the word 'procure' in cl 10.2 means. All the party who seeks to set aside a statutory demand has to do, is establish there is a genuine dispute. In my view, having read the affidavit of Mr McGrath and considered the terms of cl 10.2, it should have been obvious to the defendants' legal advisers that there was a genuine dispute.
The matter was first called on for hearing on 21 May 2009. By that stage, the defendants had filed an affidavit of the first‑named defendant sworn 18 May 2009. That affidavit does not set up any defence to the application. What it does, is explain without reference to the Agreement, the first‑named defendant's subjective understanding of the agreement reached for sale of the business. Once again, it should have been obvious to the defendants' legal advisers that the material contained in the affidavit could not answer the plaintiff's claim that there was a genuine dispute as to the debt.
At this hearing, programming orders were made. Both the plaintiff and defendants were to file their written submissions 14 days before the hearing. The plaintiff complied with that order. But as at the date of the hearing of the application the defendants had filed no written submissions. It was not until just before the hearing that the defendants indicated there would be no contest to the plaintiff's application.
In support of his application for indemnity costs, counsel for the plaintiff referred to what was said by Martin CJ in the recent decision of Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85. His Honour there made some comments about circumstances when it would be appropriate to award indemnity costs. In my view, taking into account what his Honour said and applying the general principles in relation to indemnity costs, this was a case which justified such an order.
In my view, from the moment the plaintiff's affidavit in support of its application was received by the defendants, the defendants' solicitor should have realised there was a genuine dispute in relation to this matter. It was entirely inappropriate to prepare and file an affidavit which did nothing to advance the defendants' case relying as it did on the subjective views of the first‑named defendant. The very act of preparing that affidavit should further have alerted the defendants' solicitors to the fact that their opposition to the application was hopeless. The clear and cogently expressed submissions filed on behalf of the plaintiff, should have sealed the matter.
On top of all of that, the defendants' solicitors did not themselves provide submissions in accordance with the programming orders. There is no reason why they should not have done so. In fact, had they taken the step of drafting the submissions, it would have become plain that the defendants' position was hopeless and that the plaintiff's application should not be opposed. So at four separate points along the way, the warning bells should have rung. The fact that the bells did not ring or were ignored by the defendants' solicitors led to a situation where in my view indemnity costs were warranted.