Supreme Court New South Wales Medium Neutral Citation: T & M Industries Pty Limited v Orsini [2011] NSWSC 146 Hearing dates: 10 March 2011 Decision date: 10 March 2011 Before: Barrett J Decision: Originating process dismissed with costs, such costs to be assessed on the indemnity basis. Legislation Cited: Corporations Act 2001 (Cth), s 459G Cases Cited: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 Wharfside Pty Ltd v McCormick [2010] NSWSC 398 Category: Principal judgment Parties: T & M Industries Pty Limited - Plaintiff Julie Ann Orsini - Defendant Representation: Counsel: Mr M K Condon/Mr E G B Cox/Ms T Davy - Plaintiff Mr D W Elliott - Defendant Solicitors: Terrence Roland Tindale in person - Plaintiff File Number(s): 2010/416372 Judgment 1The plaintiff purports to make application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. The originating process was filed on 15 December 2010 by the plaintiff itself, that is, without the intervention of a solicitor. 2I say that the plaintiff "purports to make application" because there is a preliminary issue, raised by the defendant's interlocutory process filed on 2 February 2011, as to whether the plaintiff took all the steps made necessary by s 459G(3) to constitute a valid s 459G application. 3The interlocutory process was listed for hearing today. When the matter came before the court, however, the plaintiff indicated that it no longer pressed its purported s 459G application with the result, it was submitted, that there was no utility in the hearing of the defendant's interlocutory process. In short, both applications had been overtaken by events. 4The relevant events occurred on 4 March 2011 when there was before the court a winding up application made by the defendant in respect of both the plaintiff and another company, Catalyst Engineering Pty Ltd. The defendant's position apparently was that the plaintiff and Catalyst were jointly indebted to her in respect of the debt the subject of the statutory demand to which this present case relates. She served statutory demands on both of them. No move towards having the statutory demand served on it was made by Catalyst. The defendant initiated winding up proceedings against both companies. 5On 4 March 2011, the winding up proceedings were settled and the court made the following orders: "1. Summons dismissed; 2. Order the second defendant (Catalyst Engineering Pty Limited) to pay the Plaintiff's costs of these proceedings whether incurred with respect of the first defendant [the present plaintiff] or the second defendant as agreed or assessed; 3. Otherwise there be no order as to costs with the intent that the first defendant bear its own costs of these proceedings and have no liability to the Plaintiff; 4. The Court notes that the amount claimed in the creditors statutory demand has been paid without admissions." 6It is because the debt the subject of the statutory demand served on it by the defendant (that is, the statutory demand the subject of these proceedings) has been paid that the plaintiff no longer seeks to have that statutory demand set aside and therefore regards as academic the question raised by the defendant's interlocutory process, that is, whether there was in truth a valid s 459G application. 7The defendant, for her part, accepted that the central issue disappeared as a result of the payment of the debt and the making of the orders of 4 March 2011. The defendant contended, however, that the court should nevertheless proceed to determine the narrow question at the centre of her interlocutory process, since to do so would indicate the appropriate outcome as to costs, being the only live issue remaining. 8As to costs, the plaintiff's position is that there should be no order as to costs. The defendant says, however, that she should be awarded her costs of the proceedings and that those costs should be assessed on the indemnity basis. 9Mr Condon of counsel, who appeared for the plaintiff, referred to authority to the effect that the court should not, merely for the purpose of deciding a question of costs, embark on the trial of issues that have become academic: see for example, Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622; Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194. Mr Condon took me to the following passage in the judgment of Hill J in the latter case (at 200-201): "I should say that both parties recoiled from submitting that I should, in the guise of determining how costs should be borne as between the parties, actually decide the merits of the original application. It should be noted that no witness was cross-examined and that a trial on the merits would undoubtedly have required me to form some view as to the credit of Mr and Mrs Bunt. It can not, I think, be accepted that because Cooper J directed that affidavit evidence be adduced on the question of costs, his Honour contemplated that that evidence would involve contesting the merits of the initial application. In the SEQEB case, proceedings had been instituted under the Administrative Decisions (Judicial Review) Act 1977 (Cth) challenging the refusal of the applicant's request that it be authorised to maintain an existing telephone system. Ultimately those proceedings were settled but for the question of costs. Both parties in the case contended that the Court should not attempt to predict the likely outcome of the litigation, a contention which appears to have been accepted by his Honour. Pincus J was of the view that the Court could dispose of the question of costs at the request of the parties without requiring a trial to determine who would have won, although his Honour did observe that: '... in some cases where the result of litigation has become academic, the Court may not be able rationally to decide the issue of costs without attempting some such prediction.' The matters ultimately taken into account by his Honour were the reasonableness of the applicant in commencing the proceedings and the reasonableness of the respondent in defending them. However, his Honour also considered the strength of the applicant's case, expressing the view that the applicant had: "a fairly strong case - one more promising than that of the respondent." The reasonableness of commencing the proceedings (and defending them) were matters also regarded as relevant in Liddle v Kooralbyn Pty Ltd (unreported, Supreme Court, Queensland, 9 October 1987) per Ryan J. In R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13 an order nisi had been granted to show cause why a writ of mandamus should not issue to compel a council to determine an application before it. After the order nisi had been obtained the council considered the application and granted it. The Full Court held that it was not necessary to determine the merits of the matter as a condition precedent to an order for costs. It was, however, relevant that the prosecutor had reasonable grounds for complaint and in the circumstances the prosecutor was granted costs to the time the council granted the application. Reference may also be made to the decision of Master White in Austcorp Finance and Leasing Pty Ltd v Thomas (unreported, Supreme Court, Queensland, 23 August 1991) and the decision of the Court of Appeal in J T Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547; [1969] 3 All ER 1122. Stratford was a case where an interlocutory injunction had been granted. The interlocutory proceedings were, however, fought through until the House of Lords. Thereafter the proceedings went to sleep and never came to trial. Ultimately the defendants applied to dismiss the proceedings for want of prosecution. The plaintiff countermanded with an application to discontinue the proceedings. Ultimately it was held that the plaintiff should be given leave to discontinue. As Lord Denning MR put it (at 1553; 1123): 'Nobody has lost. Nobody has won ... Neither side wanted to go on. But neither side wanted to pay the costs of the other side.' Speaking rhetorically his Lordship continued (at 1553; 1123): 'So what is to be done? Is this case to go on simply about costs? I think not.' His Lordship declined to consider the merits of the dispute. Rather, he affirmed the exercise of discretion below that each side should pay its own costs. Winn LJ and Cross LJ also were of opinion that the assessment of a theoretical prospect of success was impractical and that the merits should not be gone into. Both were of the view that there should be no order as to costs. These cases seem to me to support the following propositions being made. (1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case. (2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford . This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue. (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB). (4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371. (5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration." 10Mr Elliott of counsel, who appeared for the defendant, did not, in substance, take issue with the principles but pointed to the recognised exception or variant that allows resort to the merits where a simple and clear cut point alone is involved. He referred to the observation in Wharfside Pty Ltd v McCormick [2010] NSWSC 398 (at [13]) that a good example of such a case "is where the s 459G application was served after the end of the mandatory 21 day period". 11I am satisfied that this case is one in which it is appropriate to proceed in accordance with that exception or variant. The central matter in issue is whether the defendant failed to take one necessary step. While the plaintiff served, within the relevant period of 21 days, a document which may well be "a copy of the supporting affidavit" as referred to in s 459G(3)(b), the defendant maintains that the plaintiff did not serve, within that period or at all, what the same provision refers to as "a copy of the application", that is a copy of the originating process which the court file shows to have been filed on 15 December 2010. 12If the plaintiff did not serve "a copy of the application" within the relevant period of 21 days, the court has no jurisdiction to set aside the statutory demand: David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 . 13The defendant accepts that a copy of the relevant affidavit (being Mr Tisdale's affidavit of 15 December 2010) was served on her by Mr Hirst at her Lilyfield premises on 16 December 2010. She gave evidence that she looked at the document, realised that it was an affidavit (she being a solicitor) and asked Mr Hirst whether he had anything else to give her. She says that Mr Hirst's response was to shrug his shoulders. She then showed him the affidavit and asked whether that was all he had to give her, to which he replied, "Yes, that's it." Mr Hirst then left the premises. 14Mr Hirst is an employee of the plaintiff. He is not a professional process server; nor is he a lawyer. He had been sent by his superior, Mr Tisdale, to effect service on the defendant. 15In an affidavit of 25 January 2011, Mr Hirst deposed to having gone to the Lilyfield address on 16 December 2010 and spoken to the defendant. He continued: "I handed Ms Orsini a copy of the originating process filed on 15 December 2010 and the supporting affidavit of Terrence Roland Tisdale." 16Mr Hirst swore another affidavit on 14 February 2011. In that affidavit he said: "I did not read the documents that Terry gave me that morning except that I noticed that the first document said that it was an affidavit of Terrence Roland Tisdale . . . I do not know what else was in the bundle. At the time of swearing my previous affidavit I was informed by an employee of the plaintiff and believe that the bundle also contained the originating process." 17Mr Tisdale (the "Terry" referred to by Mr Hirst) deposes that he gave "a bundle of documents" to Mr Hirst on 16 December 2010 and instructed him to hand them to the defendant at the Lilyfield address. He says that the bundle consisted of a copy of the originating process and a copy of his affidavit of 15 December 2010. 18On 11 January 2011, the defendant sent a facsimile to the plaintiff confirming that a copy of Mr Tisdale's affidavit of 15 December 2010 had been served on her and stating that no copy of an originating process was served. The defendant later received by post on 17 January 2011 a letter from the plaintiff enclosing "another copy of affidavit for proceedings 2010/416372". The letter was accompanied by a further copy of the affidavit of Mr Tisdale but no copy of the originating process. 19The defendant sent a further letter to the plaintiff dated 21 January 2011 repeating that she had not been served with any originating process. The plaintiff replied by letter dated 24 January 2011 and enclosed a copy of the originating process. By her letter in response the defendant said that that copy was "the first and only copy of the originating process ever provided". 20Had the proceedings gone to trial, the plaintiff would have had the task of proving all elements of its cause of action, including that a copy of the originating process filed on 15 December 2010 was served on the defendant within the period of 21 days referred to in s 459G(3). 21The plaintiff's evidence, in that respect, consists only of the evidence of Mr Hirst as to what happened at the Lilyfield address on 16 December 2010 plus Mr Tisdale's evidence of what he gave Mr Hirst to serve on the defendant. The plaintiff does not suggest that anything done on any other day is relevant. Its case stands or falls on the proposition that the actions of Mr Hirst on 16 December 2010 caused a copy of the originating process, as well as a copy of the supporting affidavit, to be served on the defendant. 22There is no dispute that the address at Lilyfield was the defendant's address. Nor is there any dispute that Mr Hirst served on the defendant personally at that address a copy of Mr Tisdale's affidavit of 15 December 2010. The contentious question is whether a copy of the originating process was served at the same time; and on that, as I have said, the onus of proof would have rested with the plaintiff. 23The plaintiff would have had the task of discharging the onus of proof according to the balance of probabilities. On the material before me, the plaintiff would have failed in that task. 24The defendant, a solicitor familiar with documents of the relevant kind, has said throughout that Mr Hirst handed her a copy affidavit alone, without any copy of an originating process and that she queried him as to whether there was anything else. 25Mr Hirst's first affidavit refers to service on 16 December 2010 of both documents. A copy of each is annexed to the affidavit. In his second affidavit, however, Mr Hirst says that he did not read "the documents" that Mr Tisdale gave him except to see that "the first document" was an affidavit of Mr Tisdale. It is particularly pertinent that he then says that he did "not know what else was in the bundle", beyond having been told by "an employee of the plaintiff" that it contained the originating process. 26The defendant later raised in correspondence with the plaintiff the fact that she was not given a copy of the originating process with the copy of Mr Tisdale's affidavit handed to her by Mr Hirst. The plaintiff's response to this clear message about the originating process was to send the defendant another copy of the affidavit and to say nothing about the originating process. It was in response to a later letter from the defendant (the letter of 21 January 2011) that the plaintiff forwarded a copy of the originating process. That copy was, on the defendant's evidence, the first to be received by her. 27It is true that Mr Tisdale says in an affidavit that a copy of the originating process was in the bundle he gave to Mr Hirst to serve. But given Mr Tisdale's apparent difficulty in coming to grips with the defendant's letters pointing out the absence of that document, one may question whether he was in truth aware of that. I note again, in that connection, that the originating process and affidavit were apparently prepared and served without the intervention of a solicitor. 28In these circumstances, there could not have been any degree of confidence whatsoever that the position was otherwise than as the defendant said it was. The finding would have been that the plaintiff did not serve "a copy of the application" in conformity with s 459G(3)(b), with the result that an essential element of the court's jurisdiction under s 459G was lacking and the originating process was doomed to failure. 29I move now to another matter relevant to costs. The defendant made it clear to the plaintiff from the earlies stages that she maintained that there was no valid s 459G application on foot. She invited withdrawal of the purported application. Such an invitation was conveyed by her letter of 29 January 2011, two days before the first return date. The invitation was not accepted and, on 31 January 2011, the registrar placed the matter in the judge's 14 February 2011 list with a view to the allocation of a hearing date for the interlocutory process. On that day, the interlocutory process was listed for hearing today. 30But it was on that same day - 14 February 2011 - that Mr Hirst swore an affidavit saying that he did not know what was in "the bundle" (apart from an affidavit of Mr Tisdale), thus making it clear that he was quite unable to say that he had in fact served a copy of the originating process. 31The plaintiff should have recognised at that point that it was unable to succeed in its purported application under s 459G. Indeed, it should have realised that immediately the defendant raised the issue of the absence of a copy of the originating process. Had Mr Hirst been questioned closely at that earlier point, he would have said that he did not know what was in "the bundle" beyond an affidavit of Mr Tisdale. It is not as if some supervening event came to change his appreciation of the content of the bundle. It was, in the sense referred to in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, "relevant delinquency" for the plaintiff, after being met at an early stage by the clear and repeated allegation of absence of a copy of the originating process, to fail to elicit from Mr Hirst the information he eventually gave and instead to persist with the proceedings. 32I order that the originating process be dismissed with costs, 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. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 March 2011