Jem Number Four Pty Ltd v Southern Cross Construction (NSW) Pty Ltd [2006] NSWSC 602

New South Wales Supreme Court

CITATION : Jem Number Four Pty Ltd v Southern Cross Construction (NSW) Pty Ltd [2006] NSWSC 602

HEARING DATE(S) : 16/06/06

JUDGMENT DATE : 16 June 2006

JURISDICTION : Equity DIvision Corporations List

JUDGMENT OF : Barrett J

EX TEMPORE JUDGMENT DATE : 06/16/2006

DECISION : Proceedings dismissed. Plaintiffs to pay defendant's costs.

CATCHWORDS : CORPORATIONS - winding up - application to set aside statutory demands - demands satisfied by payment on evening before hearing - appropriate disposition of proceedings - PROCEDURE - costs - where no determination on the merits - whether plaintiffs' conduct unreasonable so as to warrant costs order in favour of defendant

LEGISLATION CITED : Corporations Act 2001 (Cth), ss.459C(2)(a), s.459F(2)(a)(ii), 459G

CASES CITED : Re Minister For Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622

Jem Number Four Pty Limited - First Plaintiff PARTIES : Pacifico Number Four Pty Limited - Second Plaintiff Southern Cross Constructions (NSW) Pty Limited - Defendant

FILE NUMBER(S) : SC 1711/06

COUNSEL : Mr A.A.R. Vincent - Plaintiffs Mr G.A. Laughton SC - Defendant

SOLICITORS : Salim Lawyers - Plaintiffs CV Theodore Solicitors - Defendant

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

BARRETT J

FRIDAY 16 JUNE 2006

1711/06 JEM NUMBER FOUR PTY LTD & ORS V SOUTHERN CROSS CONSTRUCTION (NSW) PTY LTD

JUDGMENT – ex tempore (revised)

1 By their originating process filed on 3 March 2006, the plaintiffs, Jem Number Four Pty Ltd and Pacifico Number Four Pty Ltd seek against the defendant, Southern Cross Constructions NSW Pty Ltd, as principal relief, "An order that the defendant's two statutory demands for payment of a non-judgment debt, in the sum of $363,000 (inclusive of GST), served by the defendant on the first and second plaintiffs on 14 February 2006 ('the statutory demands') be set aside pursuant to section 459G of the Act." 2 The application is thus advanced under s.459G and, as the order sought shows, there are in contention two statutory demands, one served on each of the plaintiffs. 3 When the matter was called on for hearing this morning, the court was informed that the amount claimed by the two demands had been paid to the defendant late yesterday. It was then put that the court should be concerned only with the matter of costs. Each party sought an order for costs against the other. As submissions progressed, it became clear that there was no agreement as to the appropriate outcome of the proceedings, even apart from costs. The plaintiffs' contention was that, notwithstanding the payment, they should still have an order that the statutory demands be set aside. The defendant said that there should be no order setting aside the statutory demands because they had been satisfied and effectively there was nothing left to set aside. 4 My initial reaction was that, if the court did not make an order setting aside the demands, they would operate to create a presumption of insolvency under s.459C. On reflection, however, I formed the opinion that that is not so. The position is one where the sum demanded has been paid (the defendant accepts that the one payment of $363,000 operated to satisfy the payment requirement notified by each demand) and that, since that happened while the s.459G applications remained pending, the case was of the kind referred to in s.459F(2)(a)(ii) and payment within the period there mentioned (being a period beginning when the demand was served and ending upon the making of the order of final disposition in this proceeding, whatever that order may be) constituted compliance with the demand. No presumption of insolvency can therefore arise via s.459C(2)(a). 5 The appropriate order is therefore an order that the proceedings be dismissed. 6 There has been no hearing or determination on the merits. In cases of that kind, the general expectation is that there should be no order as to costs, with the result that each side is left to bear its own costs. That is subject to some exceptions, which are conveniently summarised in the judgment of McHugh J in the case of Re Minister For Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at p.624-5: ""In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs [1]. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order [2]. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.