New South Wales Supreme Court CITATION : Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1317 HEARING DATE(S) : 12/10/07 Plaintiff's submissions on costs - 22/10/07 JUDGMENT DATE : 20 November 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Defendant to pay plaintiff's costs of the proceedings, such costs to be assessed on the indemnity basis. CATCHWORDS : PROCEDURE - costs - application for order setting aside statutory demand - application successful - application should have been seen by defendant from the outset as irresistible - indemnity costs awarded to plaintiff LEGISLATION CITED : Corporations Act 2001 (Cth), Part 2B.5, ss.459E(3), 459G, 459J(1) Uniform Civil Procedure Rules 2005, rule 42.1 Alliance Accounting & Business Consultants Pty Ltd v Australian Property Investment Development Pty Ltd [2007] NSWSC 775 Austral Rail Pty Ltd v Hunter Premium Funding Pty Ltd [2001] NSWSC 654 CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100 CASES CITED : Oshlack v Richmond River Council (1998) 193 CLR 72 Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529 Professional Advantage Pty Ltd v Australian Broadcasting Corporation [2007] NSWSC 607 Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143 PARTIES : Saferack Pty Ltd - Plaintiff Marketing Heads Australia Pty Ltd - Defendant FILE NUMBER(S) : SC 3937/07 COUNSEL : Mr M.R. Ellicott - Plaintiff Mr J.M. Miller - Defendant SOLICITORS : Hagan & Co - Plaintiff IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J TUESDAY, 20 NOVEMBER 2007 3937/07 SAFERACK PTY LTD v MARKETING HEADS AUSTRALIA PTY LTD JUDGMENT 1 On 16 October 2007, I made an order setting aside a statutory demand dated 30 July 2007 served on the plaintiff by the defendant: see Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143. 2 The question of costs was at that time reserved and I made directions for the filing of written submissions on costs. It was directed that submissions by the successful plaintiff be filed by 23 October 2007 and that submissions by the defendant be filed by 30 October 2007. 3 Counsel for the plaintiff, Mr M.R. Ellicott, delivered written submissions on 22 October 2007. When nothing had been received by 30 October 2007 from the defendant, my Associate emailed the defendant's counsel, Mr J.M. Miller, asking whether submissions should be expected. In the absence of any reply, my Associate telephoned Mr Miller's chambers on 8 November 2007 and, when it was indicated that Mr Miller was not available, left a message requesting him to say whether submissions would be forthcoming or not. Again there was no response. I therefore proceed to deal with the matter of costs by reference to the plaintiff's submissions only. 4 The plaintiff's position is that it should have a costs order against the defendant and that costs should be assessed on the indemnity basis. 5 There can be no quarrel with the first proposition. Under rule 42.1 of the Uniform Civil Procedure Rules 2005, the court must order that costs follow the event unless it appears to the court that some other order should be made. No basis for any other order is shown. 6 It is then necessary to decide whether the costs awarded to the plaintiff and against the defendant should be assessed on the indemnity basis. 7 The case had three elements to it. Taking them in the order opposite to that in which they were dealt with in the judgment, they were, first, the question whether there was a genuine dispute as to the existence or amount of the debt; second, the question whether defects in the s.459E(3) affidavit warranted the setting aside of the statutory demand; and, third, whether the s.459G application and copies of the supporting affidavits had been served by the plaintiff on the defendant. 8 The court's conclusion on the first question was, as stated at [49], that there "could not be a clearer case of dispute about the existence of the alleged debt the subject of the statutory demand". This flowed from the fact that, before the statutory demand was served, issue had been joined in subsisting District Court proceedings in which the defendant sought to recover from the plaintiff the very moneys made by it the subject of the statutory demand. 9 The court's conclusion on the second matter was that the absence from the s.459E(3) affidavit of the required statement that the debt was due and payable and the required statement that there was no genuine dispute about the existence or amount of the debt constituted a basis for exercise of the remedial jurisdiction created by s.459J(1). As was said at paragraph [43] of the judgment: "The legislation allows a creditor to adopt the statutory demand procedure in relation to a debt only if that debt is of a particular kind. If a creditor fails in the duty to provide sworn confirmation regarding qualities essential to the character of the debt as one capable of being the subject of a statutory demand, that creditor is seen to be attempting to use the procedure otherwise than in the way the legislature intends it to be used. The recipient of the demand is entitled to confirmation on affidavit that the creditor or, in the case of a corporate creditor, the person authorised by it has turned the person's mind to essential characteristics of the debt and has found them to be such that the debt is of a kind that ought to be paid upon pain of a presumption of insolvency. If the recipient is not given that assurance, the creditor can be seen to be using the demand for a purpose and in a way not contemplated by the provisions under which a creditor may obtain the benefit of such a presumption. Section 459J(1)(b), as an instrument for avoiding subversion of the statutory scheme then comes into play." 10 Because of the pendency of the District Court proceedings, it may, in this case, be inferred that absence of the required statements from the s.459E(3) affidavit was deliberate. In the particular circumstances, the deponent simply could not make those statements without departing from the truth. 11 The third general issue canvassed in the proceedings was the question of service on the defendant. It was argued for the defendant that the plaintiff had not effected service at the defendant's registered office, which was described as being care of a named firm of accountants on a stated floor of a building at a stated address in North Sydney. The accountants had moved their practice to premises in another suburb some time beforehand, but the court found that they maintained a residual presence at a difference office suite on the particular floor of the particular building at North Sydney. It was held that delivery to that other office suite was delivery to the registered office. 12 In this part of the case, the defendant sought to take advantage of circumstances rendering doubtful or obscure the situation of its registered office. That is an entirely unmeritorious position for it to have taken. Part 2B.5 of the Corporations Act works on the clear premise that the location of a company's registered office must be fixed and certain, as a matter of fact, and that anyone wishing to serve the company may, by going to the specified place, find the registered office with relative ease. The defendant did not meet that requirement and then sought to capitalise on its failure to do so. 13 The simple fact is that the plaintiff's attempt to have the statutory demand set aside should have been seen by the defendant from the outset to be irresistible. The defendant's attempt to defend the indefensible – including by reliance on its own failure to have on public record a specification of the situation of its registered office allowing ready location and access – ought never to have been made. 14 In s.459G cases, the court must be careful not to seem to stifle, by indemnity costs orders, proper attempts by a defendant to put the plaintiff to proof of its claim of genuine dispute, offsetting claim, defect or other matter said to warrant setting aside of the statutory demand. At the same time, however, defendants must bow to the inevitable before trial when the convincing merits of the claim can clearly be seen. These matters are discussed in cases such as Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529, Austral Rail Pty Ltd v Hunter Premium Funding Pty Ltd [2001] NSWSC 654, CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100, Professional Advantage Pty Ltd v Australian Broadcasting Corporation [2007] NSWSC 607 and Alliance Accounting & Business Consultants Pty Ltd v Australian Property Investment Development Pty Ltd [2007] NSWSC 775. 15 This case is one in which the defendant's defence involved what Gaudron J and Gummow J, in Oshlack v Richmond River Council (1998) 193 CLR 72 at p.89, called "some relevant delinquency on the part of the unsuccessful party". 16 It is therefore ordered that the defendant pay the plaintiff's costs of the proceedings, such costs to be assessed on the indemnity basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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