In the matter of Tetbury Pty Ltd

[2017] NSWSC 139

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Tetbury Pty Ltd [2017] NSWSC 139
Hearing dates:	15 December 2016, submissions as to costs 14 February 2017
Decision date:	24 February 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Order, pursuant to s 459H(4) of the Corporations Act 2001 (Cth), that the Creditor’s Statutory Demand served by the Defendant upon the Plaintiff be varied by substituting $178,748 as the amount of the Demand for the sum of $270,810.32. Declare that the Demand have effect as so varied from the date upon which it was served upon the Plaintiff. Order that the Plaintiff pay 70% of the Defendant’s costs of the proceedings on the ordinary basis, as agreed or assessed.
Catchwords:	PRODEDURE – Costs – where application to set aside Statutory Demand is unsuccessful – where the amount claimed in the Statutory Demand is nonetheless reduced.
Legislation Cited:	- Corporations Act 2001 (Cth), s 459H
Category:	Costs
Parties:	Tetbury Pty Limited (Plaintiff) John Mahony trading as Mahony Law (Defendant)
Representation:	Counsel: F Assaf (Plaintiff) A E Maroya (Defendant)   Solicitors: Russells (Plaintiff) Mahony Law (Defendant)
File Number(s):	2016/227909

Judgment

1. On 7 February 2017, I delivered judgment ([2017] NSWSC 37) in respect of an application filed by the Plaintiff, Tetbury Pty Limited (“Tetbury”) seeking to set aside a creditor’s statutory demand dated 6 July 2016 (“Demand”) served by the Defendant, Mr John Mahony trading as Mahony Law. I found that the substantiated amount of the Demand was $174,748 (although I noted that there was a question as to calculation that should be addressed by the parties) and held that the Demand should be varied accordingly under s 459H(4) of the Corporations Act. I observed that Tetbury had had limited success in reducing the amount of, but not setting aside, the Demand and that my tentative view was that it would be required to pay the large part of Mr Mahony’s costs of the application as agreed or as assessed. I directed that the parties bring in agreed short minutes of order, including as to costs, within seven days, or if there was no agreement between them, short submissions as to the differences between them. I was subsequently advised that the parties had been unable to agree upon short minutes of order.

2. It is common ground between the parties that an order should be made under s 459H(4) of the Corporations Act 2001 (Cth) that the Demand should be varied by substituting $174,748 as the amount of the Demand for the sum of $270,810.32 and that the Demand should have effect as varied from the date on which it was served on Tetbury.

3. Tetbury submits that an order should be made that it pay 65% of Mr Mahony’s costs, as agreed or as assessed on an ordinary basis. Tetbury supports an order that it pay 65% of Mr Mahony’s costs of the proceedings on the basis that Mr Mahony was successful as to approximately 65% of the amount claimed in the Demand and submits that an order that it pay almost two-thirds’ of the Defendant’s costs is consistent with the tentative view expressed in my judgment that it should pay the large part of Mr Mahony’s costs of the application. It seems to me that the proportion of the amount of the Demand sustained by Mr Mahony is of lesser significance than the extent of the issues on which Mr Mahony succeeded, and the extent of the issues on which Tetbury failed, in determining the proportion of costs that Mr Mahony should recover.

4. Mr Mahony submits that Tetbury should pay 80% of his costs, as agreed or as assessed, implicitly also on an ordinary basis. Mr Mahony relies on the observation in my judgment as to the extent of Tetbury’s success in the proceedings to which I referred above, and submits that none of the usual factors disentitling a creditor from an order for costs are present in this case. He also relies on the observation in my judgment (at [44]) that his claim for legal fees could not properly be characterised as having grossly inflated the amount of the Demand, by reference to matters that were genuinely disputed or an abuse of the statutory demand regime, and that:

“It was by no means obvious that Mahony Law’s fees could not properly have been claimed.”

5. Mr Mahony also submits, and I accept, that a large portion of Tetbury’s oral and written submissions were directed to contentions that failed, including a claim relying on the fact that Mr Mahony’s affidavit verifying the Demand was undated; a claim relying on the use of the singular in respect of the debt in the affidavit verifying the Demand; a claim that the engagement letter with Mahony Law was directed only to another entity, Tresedar Pty Limited, and did not give costs disclosure to Tetbury; a claim that there was a genuine dispute as to whether Tetbury had received the engagement letter; a claim that Tetbury was solvent in any event; and several claims as to the position as to Counsels’ fees claimed in the Demand, raised in supplementary submissions made on Tetbury’s behalf at the Court’s request.

6. The proportion of costs that Tetbury ought to be ordered to pay is necessarily a matter of judgment, as to which minds may differ. It seems to me that the parties’ submissions appropriately recognise upper and lower ends of a range in which an order for costs might be made in Mr Mahony’s favour. It seems to me that the order proposed by Tetbury gives insufficient weight to the number of issues as to which it was unsuccessful, and Mr Mahony was successful, and that the order proposed by Mr Mahony gives insufficient weight to the fact that Tetbury had a degree of success in reducing the amount of the Demand.

7. On balance, it seems to me that an order for costs should be made that recognises that each of the parties has had a degree of success, but also recognises that Mr Mahony would have incurred lesser costs had Tetbury advanced a narrower range of grounds to set aside the Demand, and is marginally closer to the position put by Tetbury than that put by Mr Mahony. It seems to me that Tetbury should pay 70% of Mr Mahony’s costs, as agreed or as assessed, on an ordinary basis.

8. Accordingly, I make the following orders:

1. Order, pursuant to s 459H(4) of the Corporations Act 2001 (Cth), that the Creditor’s Statutory Demand served by the Defendant upon the Plaintiff be varied by substituting $174,748 as the amount of the Demand for the sum of $270,810.32.

2.   Declare that the Demand have effect as so varied from the date upon which it was served upon the Plaintiff.

3.   Order that the Plaintiff pay 70% of the Defendant’s costs of the proceedings on the ordinary basis, as agreed or as assessed.

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