Biron Capital v Velowing - Costs [2004] NSWSC 7

New South Wales Supreme Court

CITATION : Biron Capital v Velowing - Costs [2004] NSWSC 7 HEARING DATE(S) : Written submissions - 12/12/03, 16/12/03 JUDGMENT DATE : 3 February 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Defendant to pay plaintiff's costs

CATCHWORDS : CORPORATIONS - winding up - costs - application by company for leave to defend under s.459S - s.459S application determined before winding up application heard - whether the two should have been dealt with together - whether costs of s.459S application should be costs in the cause LEGISLATION CITED : Corporations Act 2001 (Cth), ss.459S, 466 CASES CITED : Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 Biron Capital Limited - Plaintiff PARTIES : Velowing Pty Limited - Defendant

FILE NUMBER(S) : SC 4195/03 COUNSEL : Mr M J Cohen - Plaintiff Mr G A Moore - Defendant SOLICITORS : Gadens - Plaintiff Brock Partners - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

TUESDAY, 3 FEBRUARY 2004

4195/03 – BIRON CAPITAL LIMITED v VELOWING PTY LIMITED JUDGMENT ON COSTS

1 On 11 December 2003, I dismissed a application by the defendant for leave under s.459S of the Corporations Act 2001 (Cth) to advance certain grounds of opposition to an application for an order for winding up in insolvency brought by the plaintiff against the defendant: Biron Capital Ltd v Velowing Pty Ltd [2003] NSWSC 1181. The application was dismissed because one of the grounds on which the defendant wished to rely could not conceivably be seen as material to proving the defendant's solvency (so that it did not meet the criterion in s.459S(2)) and the remaining grounds, being grounds arising from events occurring after the deadline for challenging the statutory demand, were grounds reliance on which was in any event not precluded by s.459S(1). 2 The plaintiff, having been successful on the interlocutory application under s.459S, afterwards sought an order for costs. The defendant's response was that costs of the interlocutory process should be costs in the cause. The matter on which the parties make competing submissions is whether the s.459S application could (or should) have been dealt with concurrently with – and effectively as part of – the hearing of the winding up application itself. The submission on behalf of the defendant is that, had the two matters been dealt with together, the separate interlocutory hearing would have been avoided. It is on that basis that the defendant submits that the costs of that interlocutory hearing should be costs in the cause. 3 These submissions cannot be accepted. They are inconsistent with the correct approach to such matters explained by the Court of Appeal in Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661. Spigelman CJ, with whom Handley and Giles JJA agreed, said that to treat a s.459S application as part of the final determination of the winding up application "would contradict the legislative policy which underlines Pt 5.4 of the Corporations Law …". Referring to the Part 5.4 provisions introduced as part of the reforms of 1993, the Chief Justice said: "The new scheme seeks to avoid disputation at the final hearing of the application for winding up about the genuineness of the debts which were the subject of the applicant's statutory demands. A debtor who disputes the claim made by the creditor in a statutory demand is ordinarily expected to invoke s459G. The 'safety net' in s459S is ordinarily expected to be determined before the hearing of the s459P application. If applications under s459S are, as a general rule, heard with the winding up summons, this would establish a path permitting the delay of, and prolonging the hearing of, such applications. The new scheme sought to change pre-existing practices and ensure that issues of this character would be determined in the main at an early time and on a strict timetable. The objectives of the scheme, including the strict time limit of s459G(2) would be compromised if s459S applications were routinely deferred to the time of the hearing of the application." 4 The s.459S matter was accordingly correctly made the subject of a separate interlocutory hearing. 5 That, it seems to me, is sufficient to dispose of the ground on which the defendant contends that costs of the s.459S application should be costs in the cause. The costs of that interlocutory application should be dealt with in accordance with the general rule that costs follow the event. It is therefore ordered that the defendant pay the plaintiff's costs of and incidental to the interlocutory process filed by the defendant on 3 December 2003 and heard by me on 8 December 2003. 6 Since I disposed of the s.459S application, a winding up order has been made. Campbell J made the order on 17 December 2003. The costs I now award in favour of the plaintiff, being costs incurred in the winding up proceedings by the applicant upon whose application a winding up order has been made, are accordingly costs covered by s.466. **********