In the matter of Think Global Logistics Pty Ltd [2017] NSWSC 1264

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Think Global Logistics Pty Ltd [2017] NSWSC 1264 Hearing dates: In chambers Date of orders: 20 September 2017 Decision date: 20 September 2017 Jurisdiction: Equity Before: Robb J Decision: The court makes no order for the costs of the proceedings with the intent that each party will bear its own costs. Catchwords: COSTS. Legislation Cited: Corporations Act 2001 (Cth) s 459G Corporations Regulations 2001 (Cth) sch 2 Service and Execution of Process Act 1992 (Cth) Cases Cited: Immigration and Ethnic Affairs, Re Minister for; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Re International Materials & Technologies Pty Ltd [2013] NSWSC 787; (2013) 282 FLR 362 Category: Costs Parties: Think Global Logistics Pty Ltd (plaintiff) Flag Investments Pty Ltd (defendant) Representation: Counsel: E Glover (plaintiff) FA Robertson (defendant)

Solicitors: Panetta & Associates(plaintiff) Fort Knox Legal (defendant) File Number(s): 2016/352306

Judgment 1. On 20 June 2017, I made an order by consent dismissing the originating process filed by the plaintiff, Think Global Logistics Pty Ltd (Think Global). The parties have served written submissions on the question of the costs order that should be made by the court. This judgment deals with that question. 2. Think Global has submitted that its costs should be paid by the defendant, Flag Investments Pty Ltd (Flag). On the other hand, Flag has submitted that, as the claim against it has been dismissed, costs should follow the event and Think Global should be ordered to pay Flag its costs. 3. As this is a somewhat unusual case, it will be necessary to address the chain of events that led to the order dismissing the originating process. 4. By a creditor's statutory demand purporting to be issued under s 459E of the Corporations Act 2001 (Cth) (the Act) dated 26 October 2016, Flag claimed that Think Global was indebted to it in the amount of $300,000. 5. On 24 November 2016, Think Global filed the originating process in these proceedings in which it sought an order under s 495G of the Act that the statutory demand dated 26 October 2016 be set aside. The originating process was supported by an affidavit of La Chang affirmed 24 November 2013. 6. The parties then engaged in the usual process to prepare the matter for hearing to determine whether there was a genuine dispute as to the existence of the debt or some other ground for setting aside the statutory demand, and on 3 April 2017 the originating process was set down by Black J for hearing by me on 20 June 2017. 7. It appears that shortly before 20 June 2017, counsel who was briefed on the hearing for Think Global considered the issues that were thrown up by the matter and concluded that the events that had occurred precluded the court from having jurisdiction to make an order under ss 459H or 459J setting aside the statutory demand. 8. Counsel for Think Global raised this issue at the beginning of the hearing, and explained the basis of the court's lack of jurisdiction by reference to the relevant statutory provisions in the Act and the Service and Execution of Process Act 1992 (Cth), Form 509H, and a number of authorities. Counsel for Flag was given time to consider the position and to seek instructions. He then informed the court that Flag agreed with the position adopted by Think Global, which had the result that the court did not have jurisdiction to grant the relief sought in the originating process, so that the only course was for the court to dismiss the originating process. 9. Accordingly, in addition to dismissing the originating process by consent, which I did by order 4 made on 20 June 2017, I made the following notation: 3. NOTES that the parties joined in asking the Court to dismiss the plaintiff's originating process on the basis that the Court does not have jurisdiction to hear the claim by reason of the plaintiff's failure to comply with the Service and Execution of Process Act 1992 (Cth) and s 459G of the Corporations Act 2001 (Cth) but the dismissal of the originating process is without prejudice to the rights of the parties in relation to the issue of whether the creditor's demand served by the defendant on the plaintiff is defective. 1. I will give a brief explanation of the basis put to the court by Think Global, and agreed to by Flag, as to why the court had to dismiss the originating process on the ground that the court did not have jurisdiction to make the orders sought. I stress that the court was not required to consider the issue and determine whether or not it did not have jurisdiction to make the orders. I was not required to give reasons concerning the absence of jurisdiction, and I did not do so. By consent of the parties, I acceded to their joint position that the court did not have jurisdiction. Accordingly, in briefly relating the basis of the position adopted by the parties, I make no comment on its validity, and will not deal with the issue thoroughly. 2. In essence, the position was, as explained to the court by counsel for Think Global, that the creditor's statutory demand was defective in three respects. It did not comply with Form 509H as required by schedule 2 of the Corporations Regulations 2001 (Cth). First, par 6 of the form required that the statutory demand specify an address for service of the creditor and a solicitor within the State or Territory in which the demand was served. The demand was served in New South Wales, but no address for service in that State was given. Secondly, where an interstate address is nominated as the address for service, it is required to be the registered office of the creditor. In fact, the address for service was not the registered office of Flag, but was the office of Flag's solicitors in Western Australia. Thirdly, by reason of an amendment to Form 509H made in 2007, the form was required to include a box that contained writing in bold that stated that failure to respond to the statutory demand would have serious consequences for the recipient company. This box was omitted from the statutory demand that was served on Think Global. 3. Section 9 of the Service and Execution of Process Act required that service of a process issued by the Supreme Court of New South Wales in Western Australia be affected on a company at its registered office. 4. As I understand the position, it was agreed by the parties that Think Global had served the originating process and supporting affidavit on Flag just before the expiration of the last day of the 21 day period provided for in s 459G of the Act at Flag's solicitors' office, which was a mode of service invited by the statutory demand (and which was reinforced by an agreement by the solicitors to accept service) but which was not the mode of service mandated by the Service and Execution of Process Act. 5. On the basis of a number of authorities that were provided by counsel for Think Global to the court, but which were not considered in detail by the court, the parties agreed that s 459G of the Act had not been complied with and that effective service under the Service and Execution of Process Act had not occurred. The consequence was that the court did not have jurisdiction to determine an application by Think Global to set aside the statutory demand. 6. The consequence may be, as counsel for Think Global suggested, that by reason of the principles discussed by Brereton J in Re International Materials & Technologies Pty Ltd [2013] NSWSC 787; (2013) 282 FLR 362 at [16]-[21], the statutory demand in this case may be subject to either a declaration that it is null and void or an injunction restraining Flag from acting upon it. 7. The validity of that suggestion made on behalf of Think Global was not, however, a matter to be determined by the court in this case (which explains part of the note in par 3 of the orders made on 20 June 2017). 8. It was in these circumstances that Flag submitted that Think Global should be ordered to pay its costs of the proceedings, because Think Global's originating process was dismissed and the costs should follow the event. 9. Think Global countered this submission by submitting that Flag should be ordered to pay its costs, because the underlying reason for the need for the court to dismiss the originating process for want of jurisdiction was the various defects in the statutory demand that required Think Global to serve the originating process and the supporting affidavit in a way that would not comply with the mandatory requirements of the Service and Execution of Process Act. Think Global relied upon the observations made by Brereton J in Re International Materials & Technologies Pty Ltd to the effect that the defects in the form of the statutory demand had the effect of entrapping Think Global to fail to comply with either s 459G of the Act or the Service and Execution of Process Act. It said that it was therefore the wrongful conduct of Flag, at the inception of the process, that was responsible for the need for the court to dismiss the originating process. 10. On the issue of what is the appropriate costs order for the court to make in this case, I do not accept the submission made by either of the parties. The court has not dealt with the merits of the issues raised by the originating process. Even though the reason for that result was that the court has proceeded on the basis that it lacked jurisdiction to determine the issues raised by the originating process, that was not because the court itself has heard and determined the merits of a claim that the court lacked jurisdiction. Instead, the parties joined in asking the court to dismiss the originating process on the assumption that the court lacked jurisdiction. The parties did not compromise the claim in the originating process, but they did effectively compromise, albeit in an informal way, the issue of whether or not the court had jurisdiction. 11. The outcome of the proceedings depended on a compromise between the parties and did not depend upon the court determining any issue that arose in the proceedings on its merits. In my view this is a case where the principles discussed by McHugh J in Immigration and Ethnic Affairs, Re Minister for; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 apply. In particular, this is a case where it is appropriate for the court to decline to order that either party pay the costs of the other, on the basis that each party should pay its own costs of the proceedings. 12. That is in my view a fair outcome in this case. On the one hand, it is apparent that the failure on the part of Flag to ensure that the statutory demand was in proper form was the ultimate, underlying reason why the court was asked to dismiss the originating process without dealing with its merits. On the other hand, it is not in my view sufficient for Think Global to say that the deficiencies in the statutory demand were serious matters that prevented Think Global from complying with mandatory statutory requirements. It may be to the credit of counsel for Think Global that she recognised the difficulties shortly before the hearing. On the other hand, the deficiencies were manifest on the face of the statutory demand at the time that it was served on Think Global. If the consequences of the deficiencies had been recognised at the outset, Think Global should have sought different relief concerning the validity of the statutory demand, rather than commencing the proceedings to have the statutory demand set aside. Even though in those circumstances, Think Global may have avoided all of the costs being incurred, the points ultimately discovered by counsel for Think Global who was briefed on the hearing were obscure, and it would not be justified for the court to be too hard on Think Global or its legal advisers for initially missing the significance of those points. 13. An order for costs that has the effect that each party must bear its own costs will in this case be a fair balance that recognises on the one hand that Flag's conduct was the ultimate cause of the waste of costs, and on the other that Think Global could have avoided that waste if it had been more incisive and realised the consequences of the deficiencies in the statutory demand before these proceedings were commenced. 14. Accordingly, the final order that the court will make is as follows: The court makes no order for the cost of the proceedings with the intent that each party will bear its own costs.