Relevant matters
15Mr Carolan, who appeared on behalf of Bamburgh, pressed an application that Mr Kennedy pay the costs of the application. He noted that, as at the date that the Originating Process to set aside the Demand was filed, Bamburgh had indicated that it would pay Mr Kennedy's outstanding entitlements (and in fact it did so on that date) and that the balance of the amount claimed was not properly the subject of a statutory demand. Mr Spencer, who appeared for Mr Kennedy, pointed to authorities indicating that the usual position where consent orders were made in matters of this kind was that there be no order as to costs, and also contended that the Demand, when served, was valid at least to the extent of the amount of $8,490.23 admitted by Bamburgh and would not have been set aside but, at best, varied down to that amount and treated as having no continuing effect so far as that amount had been paid.
16The Court's power to award costs is discretionary and, in an appropriate case, the Court will make such an order even where there has been no hearing on the merits, although it is less likely to do so where this would involve the trial of a hypothetical action between the parties and deprive them of the cost saving which they would have achieved by settlement. In particular, costs may be awarded where a Judge is confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625.
17As at the date of the application to set aside the Demand was filed, or at least by the next day, it was apparent that the amount of Mr Kennedy's undisputed entitlements supporting the Demand had been paid. The balance of that Demand related to superannuation to which I have referred above and to the amount claimed to 31 July 2011 under the terms of his contract of employment. Unless Mr Kennedy withdrew the Demand, it was necessary for Bamburgh to file and proceed with an application to set aside the Demand to avoid the presumption of insolvency which would otherwise arise from an unsatisfied statutory demand. It was also necessary for Bamburgh to pursue that application, although its likely outcome was that the Demand would be varied down to the amount which Bamburgh had already paid and be treated as satisfied in respect of that amount. The fact that a company faced with a statutory demand has no option but to commence an application under s 459G to set aside that demand, even if the ultimate order sought under s 459H(4) varying the demand to the amount which is not genuinely in dispute, was noted by White J in Soudan Lane Pty Ltd v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772 at [4].
18I do not regard this as a case where Bamburgh capitulated to Mr Kennedy's demand after commencing proceedings to have the Demand set aside by paying the sum demanded; rather, Bamburgh paid the amount which it had acknowledged was due to Mr Kennedy, and pursued the application to set aside the Demand in respect of the larger amount which was in dispute. In Soudan Lane Pty Ltd v Glen Bradshaw t/as Pacific Coast Digital above, White J made an order that the defendant pay the plaintiff's costs where it acted unreasonably in serving the statutory demand and not agreeing to its withdrawal. In other circumstances, Courts have taken different approaches, having regard to their assessment of the conduct of the particular parties: for example, Jem Number Four Pty Ltd v Southern Cross Construction (NSW) Pty Ltd [2006] NSWSC 602; Gee Ha Pty Ltd v Dera Developments Pty Ltd [2007] NSWSC 95.
19In the present circumstances, I am satisfied that Bamburgh was required to proceed with the application to set aside the Statutory Demand by Mr Kennedy's failing to withdraw that Demand after the undisputed amount was paid and the application to set aside the Demand was filed on 17 March 2011. Had Mr Kennedy not conceded that the Demand should be set aside, I would have varied that Demand down to the amount which had already been paid by Bamburgh so that it had no continuing effect, having regard to the authorities which have been referred to in correspondence between the parties' solicitors, particularly Rothenberger Australia Pty Ltd v Lumley General Insurance Ltd (2003) 58 NSWLR 288; [2003] NSWSC 788.
20In these circumstances, I consider that I should order that Mr Kennedy pay Bamburgh's costs of and incidental to its application to set aside the Demand incurred on and from 17 March 2011, as agreed or as assessed. I do not order that Mr Kennedy pay any costs of Bamburgh incurred prior to 17 March 2011 since the amount which Bamburgh conceded was due was not paid until that date and, until that date, it was reasonable for Mr Kennedy to proceed with a statutory demand since he had no assurance as to when Bamburgh would pay that amount.
21Mr Spencer puts that any order for costs against Mr Kennedy should exclude an additional period of time after 17 March 2011, since Mr Kennedy should be allowed time to analyse the implications of the payment which had been made by Bamburgh on that date. I do not consider it is appropriate to accept that submission since, from that date, no amount remained unpaid by Bamburgh which would support the continuance of the Demand. The order for costs in favour of Bamburgh from that date is directed to compensating it for the costs which it reasonably incurred in moving to set aside the Demand from that date.
22Mr Spencer also argues that an order for costs against Mr Kennedy should not continue beyond 11 July 2011 when he offered to consent to setting aside the Demand with no order as to costs. I do not consider that offer is sufficient to avoid liability for costs after that date, since Bamburgh did not act unreasonably in not accepting an offer that would have required it to bear the costs which it had already incurred in respect of the application. Mr Kennedy subsequently agreed unconditionally to the Demand being set aside, but not as to any payment of Bamburgh's costs, and it was therefore necessary for argument to proceed today as to the question of costs.
23Accordingly, I order that the Defendant pay the Plaintiff's costs of the to the application to set aside the statutory demand dated 25 February 2011 incurred on and from 17 March 2011, as agreed or as assessed.