Supreme Court New South Wales Medium Neutral Citation: In the matter of Niruzzi Pty Limited [2012] NSWSC 773 Hearing dates: Thursday 14 June 2012 Decision date: 14 June 2012 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: By consent, creditor's statutory demand set aside - plaintiff to pay defendant's costs Catchwords: COSTS - proceedings to set aside creditor's statutory demand - Corporations Act 2001, s 459G - difficulty of making lump sum order Legislation Cited: (Cth) Corporations Act 2001, s 459G Cases Cited: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6 K James Corporation Pty Limited [2012] NSWSC 602 Category: Principal judgment Parties: Niruzzi Pty Limited ACN 111 748 960 (Plaintiff) Bramil Industries Pty Limited ACN 007 569 333 (Defendant) Representation: VRW Gray (Plaintiff) MW Sneddon (Defendant) John Lloyd & Co (Plaintiff) Mahony's Lawyers (Defendant) File Number(s): 12/ 32333 Judgment (ex tempore) 1HIS HONOUR: By originating process filed on 1 February 2012, the plaintiff Niruzzi Pty Limited seeks an order setting aside a creditor's statutory demand dated 12 January 2012 served on it by the defendant Bramil Industries Pty Limited. Late yesterday, the defendant communicated to the plaintiff's lawyers and to the court that it no longer opposed the relief sought, but consented to an order setting aside the creditor's statutory demand, and that the only remaining issue would be one of costs. Further, the defendant's lawyers indicated that they accepted that the defendant would have to pay the plaintiff's costs, but proposed that the court make a lump sum order in that respect. In turn, the plaintiff does not in principle oppose a lump sum order being made. The real issue is the quantum of that order, and whether, in light of the dispute as to its quantum, it is appropriate that the court make a lump sum order rather than referring the matter for assessment. 2As a starting point, the plaintiff contends that the question of costs should be approached on the indemnity basis. It submits that the defendant's late concession amounted to no more than the recognition of the inevitable, and that the plaintiff's application ought never to have been opposed, and it ought never to have been put to the costs to which it has been put. 3Where parties compromise proceedings but are unable to resolve the question of costs - or, in other words, they settle proceedings except for the question of costs - authority, and in particular the judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, indicates that the Court will ordinarily not investigate the merits of the matter, but will leave the costs to be borne where they fall. The purpose of this general rule is to avoid the court having to investigate at length the merits of a claim that the parties have otherwise been able to resolve, thereby defeating part of the purposes of the settlement. This general rule is, however, subject to a number of exceptions including where it is clear that the settlement reflects no more than acceptance of the inevitable, or where it is possible to see without extensive examination of the issues that one party would have plainly succeeded and the other failed. 4In this case, the defendant rightly accepts that it must pay the plaintiff's costs, notwithstanding that the proceedings have otherwise been settled. That I think follows at least from the fact that the plaintiff has been, as a result of the settlement, substantially wholly successful in the proceedings; but it is also necessary to bear in mind that, by the defendant's concession, albeit belated, the additional time and costs that would have been incurred by a contested hearing today have been avoided. I do not think it is possible in these circumstances to say that the case is one that falls within that exceptional class that warrants an indemnity costs order. While the defendant's case may not have been a strong one, it was not entirely unarguable, there being some basis in authority, including a decision of a Judge of this court, that lent some support to the defendant's approach. In those circumstances, I will not approach the matter on the basis that the plaintiff should be entirely indemnified for the costs that it has incurred. 5In proceedings of this type, which are commonplace in this jurisdiction, it is highly desirable that questions of costs be resolved expeditiously and without recourse to the process of assessment by a costs assessor, incurring, as it does, additional costs and delay. In circumstances where the solvency of corporations is often in issue, it is even less desirable that questions of costs be left outstanding for a lengthy time. 6Because of the requirements of (Cth) Corporations Act 2001, s 459G, applications under that section follow a fairly standard form and pattern, although naturally the extent of evidence adduced on them may vary from time to time. But it is possible to form a view as to the ordinary extent of such a case, and, as I understand the position, the Registrars and Judges of this court have adopted the view, that in an ordinary case an application under s 459G, uncomplicated by other matters, will incur party/party costs in the order of $7,500 to $12,500 on each side - usually higher on the plaintiff's side than on the defendant's. 7Based on that, the court has adopted the approach of making, where it can, lump sum cost orders. There is a high degree of desirability in the parties and the profession being aware of what costs they can expect to recover or to suffer in the event of successful or unsuccessful applications of a kind as prevalent as these. Thus, in the matter of K James Corporation Pty Limited [2012] NSWSC 602, I fixed the costs of a contested application under section 459G, which involved more than the minimum amount of evidence and issues, in the sum of $10,000. 8The present case is complicated by the circumstance that, by interlocutory process filed on 10 February 2012, the defendant sought an order that the proceedings be transferred to the Supreme Court of South Australia. Hammerschlag J heard that application on 19 March 2012, and, after a contested hearing, refused the application, and ordered that the defendant pay the plaintiff's costs. In the ordinary course, those costs would have to be assessed. The evidence before me as to the plaintiff's costs, however, covers its costs of that application as well as the substantive application, and in those circumstances it is both possible and desirable that I make a lump sum order that covers both the order of 19 March 2012, and also the substantive application. 9It is of course entirely a matter for a plaintiff, or for any litigant, what costs it wishes to incur with its own lawyers. But, an opposing party who might be subjected to a party/party costs order is not bound by the arrangements made between a litigant and its own lawyers. Nothing that I say is a reflection on the fees charged by counsel for the plaintiff, which I am sure as between the plaintiff and the plaintiff's lawyers are entirely appropriate, but an unsuccessful defendant is not necessarily to be visited with all the costs that a plaintiff incurs in pursuing proceedings, particularly if the plaintiff is more than ordinarily cautious, or more than ordinarily diligent in the preparation of a matter. 10To my mind, the total of $38,000 claimed for the substantive application and the interlocutory application is, on a party/party basis, significantly more than is reasonable for the defendant to be required to bear. I accept, having regard to the extent of the affidavit evidence filed that the substantive application is at the higher end of the range for this type of application; I also accept that not having been dealt with on the first or second date, but having been adjourned and fixed for hearing, the costs will be greater than in the ordinary case. Of course, provision must also be made for the interlocutory application on top of that. On the other hand, ordinarily the unsuccessful defendant ought not to be required to bear the costs of lawyers researching the law, although that might be entirely properly charged as between lawyer and client. 11In the context of this application, I have come to the view that a total sum of $22,500 is a fair, broad approximation of the plaintiff's reasonable costs, on a party/party basis, to cover the totality of the substantive application and the interlocutory application. 12My orders are: (1)By consent, order that the creditor's statutory demand dated 12 January 2012, served by the defendant Bramil Industries Pty Limited on the plaintiff Niruzzi Pty Limited, be set aside; (2)Order that the defendant pay the plaintiff's costs of the proceedings fixed in the sum of $22,500; and, (3)Note that that sum is inclusive of the costs payable pursuant to the order made on 19 March 2012. ********** 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: 01 August 2012