Advice Central Professional Wealth Management Pty Ltd v HMW Planning Pty Ltd

Whether the Court should dispense with UCPR rr 7.1-7.2 to permit Mr Katter to represent Bitar in the adjournment application or generally

1. Mr Katter seeks to represent Bitar in respect of an adjournment application which he has foreshadowed on Bitar's behalf, on the basis that he wishes to retain a "proper solicitor" to represent Bitar in respect of Hebbel's application to set aside the Demand. Bitar takes that position in circumstances where the history of the wider proceedings between Hebbel and Bitar suggests that Bitar has, over a period, retained many previous solicitors whose retainers have been terminated or who have ceased to act for it in the proceedings. Mr Katter initially did not seek leave to represent Bitar in respect of the substantive proceedings to set aside the Demand, although I will deal with that question in case there is any uncertainty in that respect.
2. I am satisfied that I should dispense with UCPR rr 7.1-7.2 to permit Mr Katter to represent Bitar in respect of its adjournment application, where the issues raised by that application will be in narrow scope. I will take that course notwithstanding that, for the reasons that I will explain below, it appears that Mr Katter has only a limited understanding of the issues that are likely to arise in respect of the wider application to set aside the Demand.
3. As I noted above, it initially appeared that Mr Katter did not seek to have me dispense with UCPR rr 7.1-7.2 to permit him to represent Bitar in respect of the wider application to set aside the Demand, and I am comfortably satisfied that I would not have dispensed with those rules had he sought to have me do so. Those rules relevantly provide that a company may only appear by a director if the company is also a plaintiff in the proceedings. Bitar cannot satisfy that requirement, because Bitar cannot be a plaintiff in respect of Hebbel's application to set aside the Demand that Bitar has served, where its role is necessarily as a defendant to that application. The case law has pointed, in respect of natural persons, to the difficulties which arise where unqualified persons represent such natural persons: see, for example, Damjanovic v Maley (2002) 55 NSWLR 149; [2002] NSWCA 230. The case law has also dealt with circumstances where a director seeks to represent a company in respect of an application to set aside a creditor's statutory demand, and the Court has rarely dispensed with the applicable rules to permit a director to do so. Relevant decisions include JSBG Developments Pty Ltd v Kozlowski (2009) 75 NSWLR 745; [2009] NSWSC 1128; DB Mahaffy & Associates Pty Ltd v Mahaffy [2011] NSWSC 673; Re DB Mahaffy & Associates Pty Ltd [2012] NSWSC 776; and Business Innovation Pty Ltd v Maddison Morgan & Bailey Pty Ltd [2018] NSWSC 1523. I have recently reviewed the relevant authorities in Advice Central Professional Wealth Management Pty Ltd v HMW Planning Pty Ltd [2024] NSWSC 571 and I adopt without repeating that review.
4. It is plain from Mr Katter's submissions that he lacks an understanding of the limited scope of an application to set aside a creditor's statutory demand. In particular, it is plain from his submissions that he does not appreciate that the existence of an offsetting claim exceeding the amount claimed in the Demand, which can be established to a low threshold of proof, will give rise to reason to set aside the Demand. He also plainly does not appreciate that the Demand may be set aside for some other reason if the service of that Demand is inconsistent with the objectives of Pt 5.4 of the Act. It also appears that Mr Katter seeks to use the Demand, or at least the application to set it aside brought by Hebbel, as an opportunity to agitate his discontent with the conduct and outcome of the lengthy previous litigation between Hebbel and Bitar. No doubt, Bitar and Mr Katter may have good reason to be discontented with the many years of litigation between those companies; no doubt, Hebbel may also have good reason to be discontented with that matter, where both parties will have incurred substantial costs of the proceedings demonstrates a substantial waste of cost by the parties, which are likely disproportionate to the amounts in dispute between them. However, the fact that Bitar, or Hebbel, or both parties, may be discontented with the history and outcomes of the litigation between them is not a matter that will be relevant to whether the application to set aside the Demand succeeds, except to the extent that it demonstrates the risk of re-agitation of earlier proceedings that likely arises in that regard.
5. For all of these reasons, where Mr Katter also fairly accepts that he is not legally qualified and does not have a full understanding of the matters in issue, I would not have dispensed with the relevant rules, if Mr Katter had sought to represent Bitar in the substantive application to set aside the Demand. I will, as I previously foreshadowed, dispense with those rules only for the purpose of allowing Bitar an opportunity to be heard as to its adjournment application. I should note for completeness that, after I dealt with Bitar's adjournment application, Mr Katter reversed his earlier position and sought to represent Bitar in the substantive application to set aside the Demand. I then declined to dispense with UCPR rr 7.1-7.2 to permit him to do so for the reasons set out above.

Bitar's adjournment application

1. Mr Katter submits that the Court should adjourn (or more precisely, vacate) the hearing fixed for today for eight weeks, in order to allow Bitar to retain new solicitors to act in the proceedings. He relies on his affidavit dated 5 June 2024 in this respect, which indicates that he has sought to find a new lawyer for Bitar but that he has "not had time" to look for a solicitor and no solicitor was willing to appear at a hearing in the proceedings at "such short notice".
2. The evidence is that the relationship between Bitar and its former solicitor had failed by at least 24 May 2024, when Mr Davis, Bitar's former solicitor, advised Mr Katter that he sought to terminate his retainer to act for Bitar. Mr Katter also indicates, and I accept, that he is unable to conduct and carry on the hearing without a lawyer. That proposition seems to me to be correct in circumstances that UCPR rr 7.1 - 7.2 would prevent him appearing for Bitar, and I have noted above that his lack of understanding of the matters in issue is such that it would not be appropriate to dispense with those rules in the relevant circumstances, had he sought to have me do so. Mr Katter's evidence is that he perceives that it would not be in Bitar's or Hebbel's interests for him to represent Bitar in the proceedings and I accept that proposition. He also indicates that he does not have Bitar's file and the documents necessary to conduct the hearing. I do not accept the latter proposition, where a qualified guillotine order was previously made in respect of affidavit evidence and relevant documents, namely the affidavits led to date, are contained in the Court Book. There seems to be no realistic prospect that, in an application to set aside a creditor's statutory demand, the Court would now permit voluminous evidence to be led by Bitar as to the history of the proceedings over the last several years, where that evidence would not go to the existence or nonexistence of grounds to set aside the Demand, other than to emphasise the extent to which a re-agitation of the issues previously determined in the proceedings would be inconsistent with the summary procedure contemplated in respect of a statutory demand under Pt 5.4 of the Act. Mr Katter also complains that Hebbel's solicitors did not advise him, at his request, of what was occurring in the proceedings, but that fails to recognise that it would have been improper for them to do so, where Bitar was then represented by its former solicitor and Hebbel's solicitors were obliged to deal with Bitar's solicitor rather than with Mr Katter directly.
3. Hebbel opposes the adjournment, on the basis of the history of the proceedings and the circumstances in which the proceedings were fixed for hearing, and also relies on issues affecting Mr Taouk, who is the elderly director and sole shareholder of Hebbel. Hebbel also points to the time and expense which has been incurred by it in the proceedings, which it points out is responsive to the Demand served by Bitar, and to the fact that an earlier statutory demand issued by Bitar ("2022 Demand") had previously been set aside by Hammerschlag CJ in Eq in his judgment in Hebbel Constructions Pty Ltd v Bitar Pty Ltd [2022] NSWSC 1594 ("2022 Judgment"). Hebbel also points to Bitar's previous retainer of multiple legal representatives over the period of the wider dispute between the parties.
4. I am satisfied that it would not be appropriate to adjourn the proceedings for the eight week period that is sought by Mr Katter. I reach that view because, in the relevant circumstances, the issues that would or could be addressed by a new solicitor for Bitar are narrow in scope. Orders have been made for the filing of evidence which include a qualified guillotine order, the proceedings have been fixed for hearing today, and there is little prospect that Bitar could now obtain leave to lead expansive further evidence in the proceedings. Second, any competent legal representative now retained for Bitar would recognise, in the relevant circumstances, that any further evidence now led by Bitar as to the history of the wider proceedings between the parties would likely make Bitar's prospects of sustaining the Demand worse, rather than better, so far as that evidence would likely demonstrate that the amount claimed in the Demand relates to one aspect of a much larger dispute between the parties, and appears to involve, on one view, an attempt to isolate one set of costs orders of one aspect of the proceedings from multiple other costs orders and other unresolved issues in the wider proceedings. I should proceed on the basis that a competent legal representative would advise Bitar sensibly, and that Mr Katter would act sensibly in respect of that advice, and that Bitar would not seek to lead evidence which would likely make its position worse rather than better or in a manner that would likely be inconsistent with s 56 of the Civil Procedure Act 2005 (NSW) ("CPA").
5. I recognise that, as Mr Klineberg (who appears for Hebbel) points out, any adjournment is to some extent prejudicial to Hebbel, where it had a proper expectation of a hearing today, because the matter was fixed for hearing today. Having said that, it seems to me that an adjournment for a short period to allow Hebbel to retain a new solicitor who could properly advise it as to its position and prepare submissions would involve limited disadvantage to Hebbel and would not significantly increase the stresses suffered by its elderly director and shareholder in respect of this application. I have also not neglected the fact that, as Mr Klineberg also rightly points out, an application for an adjournment of the hearing, which is in truth an application to vacate a hearing date, involves issues of the public interest. In Elsmore Resources Ltd [2016] NSWSC 884 at [13], I referred to ss 56-57 of the CPA, and noted that the late vacation of a hearing date, was potentially destructive of the public interest in the proper administration of justice. I recognise that there is a real prejudice to other members of the community in that respect, so far as another hearing date that would otherwise be available to other litigants would be lost.
6. Having said that, I would have here granted Bitar an adjournment for a shorter period than it sought, of about two weeks, on terms that Mr Katter personally pay the costs thrown away by the vacation of the hearing date, had Bitar and Mr Katter wished to accept that condition. It seems to me that a costs order against Bitar rather than Mr Katter would not adequately protect Hebbel's position, where there are already multiple costs orders between the parties; there have been difficulties in enforcing them because of the complexity of the matters in issue between the parties; and there is no basis to assume, and Bitar leads no evidence to establish, that it has the capacity to meet an order for costs thrown away in respect of the hearing today.
7. Mr Katter submits that such a condition would be unfair and that his former solicitor, rather than he, is at fault in that respect. It is not possible to reach a conclusion as to whether Mr Katter or his solicitor is at fault, if anyone is at fault, in that respect, where Bitar has not sought to lead evidence that could establish that matter and has not waived legal professional privilege over its dealings with its former solicitor. What is clear is that Hebbel is not at fault in that respect, because it is in a position to proceed with the hearing today, and seeks to do so, having led evidence and made submissions, and that any adjournment would operate to its disadvantage. In those circumstances, a condition as to wasted costs does not depend on a finding of fault on Bitar's part, or Mr Katter's part, but is necessary to protect Hebbel's position, where an adjournment would be allowed over Hebbel's opposition, and in circumstances that the matter was listed for hearing today, and it will be exposed to wasted costs in consequence.
8. Mr Katter has indicated that he rejects such a condition and does not wish to accept liability for a personal costs order. He points to uncertainty as to the amount of the wasted costs order, although I drew his attention, in the course of his submissions, to the matters which would be relevant to his assessment of the likely costs involved, and it is clear that Mr Katter has substantial experience of dealing with legal practitioners over the many years of this litigation, and is likely well aware of the costs that would have been incurred by Hebbel in the preparation for the hearing today and the time that has already been spent in Court today. It is Mr Katter's prerogative not to accept a condition that he pay the costs thrown away by the adjournment, and I would not impose such a condition on him personally against his will. However, absent such a condition, I am not satisfied that an adjournment should be permitted. I recognise that that has the consequence that Bitar will not be given the opportunity to be heard in opposition to the application to set aside the Demand, where Mr Katter cannot represent it at the hearing. However, that is the consequence of Mr Katter's decision not to accept the condition on which I would have granted an adjournment, although for a lesser period than that which Bitar has sought. It is, of course, open to Mr Katter to change his mind in this respect, over the lunch adjournment, and I would adjourn the proceedings as noted above if he did so.

Mr Katter's further application to dispense with UCPR rr 7.1-7.2

1. After the lunch adjournment, Mr Katter reversed his earlier position and sought to have the Court dispense with UCPR rr 7.1-7.2 so that he could represent Bitar in the substantive application to set aside the Demand. I have, in my judgment earlier this morning, noted Mr Katter's acknowledgment that he lacks an understanding of the relevant issues in the application to set aside the Demand, with no criticism of him, and that is amply demonstrated by the submissions that he has made this morning. In particular, it is apparent that Mr Katter has no real appreciation of the limited scope of a summary application to set aside a creditor's statutory demand and appears to view the proceedings as a means to agitate his concerns as to other and wider issues arising from the long history of litigation between Hebbel and Bitar.
2. In my judgment delivered earlier this morning, where I dispensed with UCPR rr 7.1-7.2 to permit Mr Katter to be heard in respect of Bitar's adjournment application, which I would have allowed (for a shorter period than Bitar sought) on a condition that Mr Katter was not prepared to accept, I indicated why I would not have acceded to an application to dispense with those rules to permit Mr Katter to represent Bitar in respect of the substantive application to set aside the Demand. Nothing has changed since I delivered that judgment, and I decline to dispense with the applicable rules to permit Bitar to be represented by Mr Katter in respect of that application. I recognise that that will have the consequence that Bitar is unrepresented in the balance of the hearing, but that is in turn the consequence of Bitar's and Mr Katter's choice not to have an adjournment on the condition on which such an adjournment would have been available.
3. For these reasons, I decline to dispense with the relevant rules to permit Mr Katter to represent Bitar in the balance of the hearing.

Whether the Demand should be set aside

1. I now turn to the substantive question whether the Demand should be set aside. Importantly, as I will note below, a number of the matters that are relevant to that question have previously been determined by Hammerschlag CJ in Eq in the 2022 Judgment, in respect of the 2022 Demand previously issued by Bitar to Hebbel which was previously set aside and I will return to the relevance of his Honour's reasoning in that regard below.
2. By its Amended Originating Process, Hebbel initially also sought orders that a costs judgment entered on 8 November 2023 against it be stayed and prohibiting Bitar from enforcing that judgment. Hebbel properly did not press that application, where it is not one which could properly have been joined with an application to set aside the Demand, applying the principles noted in Gujarat NRE Australia Pty Ltd v Williams [2006] NSWSC 211 at [3] and summarised in my judgment in Re Buildlux Pty Ltd [2024] NSWSC 614 at [2].
3. I should recognise, before turning to the evidence and submissions, that Bitar has not been heard in respect of this aspect of the hearing. As I noted above, Bitar's solicitor was granted leave to cease to act for it, where Bitar indicated it had lost confidence in him; Mr Katter, a director of Bitar, ultimately sought to have the Court dispense with UCPR rr 7.1-7.2 to permit him to appear for Bitar, although he had previously accepted that he had little understanding of the matters in issue, and had (without any criticism of him) demonstrated that matter in the course of his submissions this morning, and I declined to dispense with those rules in respect of the substantive hearing; and Bitar and Mr Katter did not accept the condition on which I would have been prepared to grant a short adjournment of the proceedings to allow Bitar to retain a further solicitor to appear for it, so that adjournment was not allowed. In those circumstances, the fact that Bitar is not represented in respect of the application is the product of its choice, or Mr Katter's choice, particularly not to accept the condition on which an adjournment would have been available to it. Affidavit evidence
4. Hebbel relies on an affidavit of its solicitor, Ms Abordo, filed on 20 December 2023 which addressed a second creditor's statutory demand ("Second Demand") issued by Bitar to Hebbel which was subsequently not pressed by Bitar, prior to the service of the Demand that is now in issue. Ms Abordo also there referred to the unfortunate history of the proceedings between Hebbel and Bitar, relating to the dissolution of a partnership, which have now been ongoing for about ten years.
5. Ms Abordo also refers to the 2022 Demand, which was set aside by Hammerschlag CJ in Eq in the 2022 Judgment. That matter is of significance, because there is a substantial overlap between the amount claimed by Bitar in the 2022 Demand and the amount now claimed by Bitar in the Demand. I will refer below to the reasoning of Hammerschlag CJ in Eq in the 2022 Judgment, which I will also adopt in respect of one basis on which these proceedings should be determined. Ms Abordo also refers to offsetting claims on which Hebbel relies in respect of costs ordered in its favour in respect of aspects of the proceedings. Some of those costs orders were in issue before Hammerschlag CJ in Eq and were addressed in the 2022 Judgment, and others have arisen since the 2022 Judgment. It appears that assessments of those further costs have not yet issued, because Bitar has not paid the costs which were required to be paid by it in respect of those costs assessments.
6. By a second affidavit dated 26 March 2024, Ms Abordo refers to the Demand which is now the subject of this application, by which Bitar claimed that Hebbel owed it the amount of $321,004.83 being the amount of the debt described in the schedule. The schedule in turn referred to a judgment debt in the amount of $466,624.83, which was the result of a costs assessment registered as a judgment, and deducted unidentified offsetting claims in the amount of $145,620. An affidavit supporting the Demand, sworn by Mr Katter as the director of Bitar, indicated that the amount of $145,620 had been excluded from the judgment debt claimed in the Demand on the basis of unidentified offsetting claims. Mr Katter there asserted that the amount claimed, being the amount of the judgment debt less the unidentified offsetting claims, was due and payable by Hebbel and he believed that there was no genuine dispute about the existence or amount of the debt. It is difficult to see how the latter statement could properly have been made, where it was then apparent that there were ongoing costs assessments in respect of other costs payable by Bitar to Hebbel as well as significant ongoing disputes in respect of the working out of orders made for an accounting as between the members of the partnership whose affairs were in issue in the substantive proceedings, being Bitar on the one hand and Hebbel on the other.
7. By a further affidavit dated 29 May 2024, Ms Abordo responded to aspects of Mr Katter's affidavit evidence (which was not read in Bitar's case where Bitar was not represented in this aspect of the hearing) and part of Mr Katter's affidavit was tendered in Hebbel's case. Ms Abordo also annexed orders which I had made on 25 June 2021 to seek to bring finality to the costs claimed by the parties in respect of the earlier proceedings. It is plain enough that those orders have not brought about such finality, where an assessment contemplated by them is ongoing before a Review Panel, which it appears has not yet delivered its decision.
8. Mr Klineberg also draws attention to the terms on which certain legal costs incurred by receivers appointed to the partnership were paid, subject to an undertaking that they be repaid to the extent that the assessment determined that they were excessive, as Hebbel and/or Bitar have contended. It is possible, as Hammerschlag CJ in Eq previously noted in the 2022 Judgment, that part of those costs will be repayable and will become an asset of the partnership by reason of the outcome of that assessment. Mr Klineberg also refers to an order made in June 2021 that Bitar pay the receiver's and Hebbel's costs of the application then heard before me on an indemnity basis up to and including 26 April 2021, excluding certain costs. It is plain enough that that order gives rise to a claim by Hebbel against Bitar, although the amount of that claim has not yet been determined. It is less apparent why the receiver's entitlement to recovery of those costs, as against Bitar, has any particular significance for a determination of this application.
9. As I noted above, Hebbel also tendered part of Mr Katter's affidavit dated 16 May 2024 which referred, in paragraphs 10-24, to the complex history of costs claims as between Hebbel and Bitar, which was a matter that was addressed, in respect of earlier costs applications, by Hammerschlag CJ in Eq in the 2022 Judgment. The 2022 Judgment
10. Hebbel also drew attention to the decision of Hammerschlag CJ in Eq in the 2022 Judgment, to which I have referred above. His Honour there referred to the circumstances in which a creditor's statutory demand may be set aside for some other reason under s 459J(1)(b) of the Act and identified matters which, his Honour found, had the consequence that the then creditor's statutory demand served by Bitar should be set aside. Those matters included that the dispute between the parties concerning the dissolution of the partnership was not yet over and that my orders made in June 2021 had not then (and, I interpolate, have not now) run their course; that there were claims and cross-claims which were yet to be resolved as part of the partnership accounting, which his Honour observed included the amounts claimed in the then creditor's statutory demand; that Hebbel had paid $400,000 into Court in respect of a District Court judgment, which was available to meet claims by Bitar against Hebbel; and that there was a potential that the receiver's solicitors may have to refund, under the undertaking recorded by my orders made in June 2021 to which I referred above, at least part of the legal costs found by an assessor to have been excessive, giving rise to a potential recovery by Hebbel against partnership assets. His Honour there noted (at [42]) that: "A number of these considerations are sufficient in themselves to make reliance on the demand by Bitar unconscionable, an abuse of process or, if the demand were to stand, to wreak a substantial injustice. But their cumulative effect is overwhelming as a reason why the demand should be set aside under s 459J(1)(b). The parties are in the midst of a mutual accounting process of which the demanded amounts form part; both judgments relied on by Bitar are stayed; Hebbel has admitted offsetting amounts; and there are more than enough partnership assets to satisfy the balance of any legitimate claims Bitar might have."
11. Mr Klineberg recognises that one of the matters on which Hammerschlag CJ in Eq relied in the 2022 Judgment, namely that the costs judgments were stayed, is not available to Hebbel in respect of the costs judgment as to which Bitar has served this Demand. However, each of the other matters to which his Honour referred, in reaching the conclusion that 2022 Demand issued by Bitar should be set aside under s 459J(1)(b) of the Act, apply equally to the position in respect of the Demand. Hebbel's submissions
12. Turning now to Hebbel's submissions, Mr Klineberg refers to the history of the proceedings and refers at some length to the reasoning of Hammerschlag CJ in Eq in the 2022 Judgment, to which I have referred above. He submits, and I have accepted above, that a number of the matters to which Hammerschlag CJ in Eq referred are equally applicable to the position that now exists in respect of the Demand now served by Bitar. He submits, and I also accept, that the only difference between the position which Hammerschlag CJ in Eq addressed in the 2022 Judgment and the position which now exists is the fact that there is no stay in respect of the current costs judgment in Bitar's favour, but that was only one of the several matters on which Hammerschlag CJ in Eq relied in that judgment.
13. The case law as to the circumstances in which a creditor's statutory demand may be set aside for some other reason under s 459J(1)(b) of the Act is well established, and Hammerschlag CJ in Eq referred to aspects of that case law in the 2022 Judgment. That section permits the Court to set aside a creditor's statutory demand where there is some other reason for it to do so. The power to set aside a creditor's statutory demand under that section exists to maintain the integrity of the process provided under Pt 5.4 of the Act and is to be used to counter an attempt at subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness: see the authorities to which I referred in Re Gemi 169 Pty Ltd [2024] NSWSC 615 at [27].
14. It seems to me that, first, the Demand must here be set aside on the basis identified by Hammerschlag CJ in Eq in the 2022 Judgment which, apart from the absence of a stay in respect of the costs judgment on which Bitar relies, is equally applicable in respect of the Demand as it was applicable in respect of the 2022 Demand. For the reasons expressed by Hammerschlag CJ in Eq in respect of the 2022 Demand, it seems to me that the issue of the Demand in these circumstances is inconsistent with the statutory regime contemplated by Pt 5.4 of the Act, so far as it would subvert rather than promote the accounting process contemplated in the earlier proceedings, and isolate one claim by Bitar against Hebbel from the multitude of other claims between the parties, both in their own capacities in respect of costs and in their capacities as partners in the partnership.
15. I should also indicate that, had it been necessary to do so, I would have set aside the Demand under s 459J(1)(b) of the Act for a second reason, as to which I also reviewed the authorities in Gemi 169 at [38]ff. The case law, including my judgment in Re UGL Process Solutions Pty Ltd [2012] NSWSC 1256 and the judgment of Rees J in Re Granite Power Ltd (admins apptd) [2019] NSWSC 1491 indicates that a creditor's statutory demand which substantially overstates the amount claimed may constitute an improper use of the statutory scheme such that it should be set aside under s 459J(1)(b) of the Act. I identified the policy which supports that approach in Gemi 169 at [39], where I noted that the service of a creditor's statutory demand that claimed a substantial amount that was not properly due would place the recipient at the risk of a presumption of insolvency unless it either paid the inflated amount claimed or incurred the costs of an application to set aside the demand. It is here plain, beyond any doubt, that the amount claimed in the Demand is significantly overstated, where it allows for some but not all of the costs claimed by Hebbel against Bitar and, in particular, makes no allowance for amounts where the assessments have not been released by reason of Bitar's non-payment of the costs of the assessment.
16. I recognise that, in submissions, Hebbel also relied on the costs claimed by it as offsetting claims and also sought to set aside the Demand under s 459H of the Act. It is plain that some part of those offsetting claims is additional to those which Bitar had recognised, in allowing a deduction from the amount claimed in the Demand, so far as the costs claimed are subsequent to the matters addressed in the 2022 Judgment. However, for the same reasons that it was not necessary for Hammerschlag CJ in Eq to determine the offsetting claims on which Hebbel relied in the 2022 Judgment, it is not necessary for me to do so, where the Demand should be set aside for some other reason under s 459J(1)(b) of the Act.

Costs

1. It remains to deal with the question of the costs of the proceedings, and it was not necessary to hear Mr Klineberg in that respect. An order for indemnity costs may be made where the conduct of a matter is unreasonable, not by way of any punishment of the party that conducts proceedings in that way, but in order to compensate the party which is subjected to additional costs by reason of the unreasonable conduct of proceedings. I should add to my oral judgment that I summarised the applicable principles in Gemi 169 at [44] as follows: "I recognise that the Court has power to award costs on an indemnity basis under s 98(1)(c) of the Civil Procedure Act 2005 (NSW) and, in order to establish a claim to indemnity costs, a party must ordinarily show conduct of the other party that is unreasonable or delinquent: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324; [2008] NSWSC 199. An indemnity costs order does not punish an unsuccessful party for bringing a case that failed, but compensates the successful party for incurring costs arising from the other party's unreasonable conduct: Hamod v New South Wales (2002) 188 ALR 659; [2002] FCA 424 at [20]."
2. Here, it seems to me that the conduct of the proceedings by Bitar was plainly unreasonable. An earlier creditor's statutory demand was issued by Bitar and then not pressed after Hebbel commenced these proceedings to set it aside. Bitar then issued the Demand, although substantially all of the matters which have had the consequence that it should be set aside had been identified by Hammerschlag CJ in Eq in his 2022 Judgment. It seems to me that Bitar could not have reasonably understood that it could avoid the Demand being set aside by reason of those matters. In those circumstances, Bitar must pay the costs of these proceedings on an indemnity basis.

Orders

1. For those reasons, I make the following orders:
2. Order that the statutory demand dated 29 February 2024 issued by Bitar Pty Ltd to Hebbel Constructions Pty Ltd be set aside.
3. Bitar Pty Ltd pay the costs of the proceedings on an indemnity basis, as agreed or as assessed.

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