Hampic Pty Limited ACN 001 670 097 v Cyndan Properties Properties Pty Ltd ACN 072 824 429

EX TEMPORE Judgment 1Until September this year Cyndan Properties Pty Limited ("Cyndan Properties"), the defendant in these proceedings, leased certain industrial premises in Warriewood to the plaintiff, Hampic Pty Ltd ("Hampic"). 2Before the Court today is a dispute in relation to the costs associated with the withdrawal of a statutory demand Cyndan Properties issued under the Corporations Act 2001, to Hampic. Cyndan Properties withdrew the demand after Hampic filed an originating process to set it aside. The parties cannot agree on the resulting disposition of costs. 3Hampic says on the applicable law that it is entitled to all its costs, including the costs of arguing about costs. 4Cyndan Properties, on the other hand, says that the appropriate order is that each party should bear its own costs of the proceedings up to a date in late November that it made its offer to set aside the statutory demand. 5To resolve this dispute it is necessary, briefly, to examine some further background facts and the applicable law.

Chronological Background 6The dispute between these two companies concern a sum of about $48,000, and arises from four invoices Cyndan Properties issued to Hampic between August and October this year. These invoices came at the end of a lease relationship which commenced in 2009. The lease was running out and was to expire on 15 September 2013. Such a dispute, at the tail end of a relationship such as this, is not uncommon. Here the dispute was the subject of exchanges between August and December 2013. But there are still larger issues to be resolved between the parties. 7Cyndan Properties issued four invoices to Hampic. The first of these was on 1 August 2013 in the sum of $23,182.56 for rent said to be due for the second last month of the lease, up to 15 August 2013. The second invoice was issued on 1 September 2013 in respect of rent in an amount of $11,591.29, which is said to be due for the last periodic payment of the lease up to 15 September 2013. The third invoice was issued in respect of adjustments of out-goings under the lease, and which was issued on 15 September in an amount of $1,065.24. Together these three invoices come to an amount of approximately $35,000, which Cyndan Properties says is, or should be, an undisputed amount due under the lease. 8Controversy between the parties arises from the issue of the fourth invoice on 10 October 2013 and the issue of a counter invoice by Hampic to Cyndan Properties immediately after the statutory demand. The fourth invoice in the sum of $12,182.06 was said to be due on 17 October, 2013. It contained a mixture of claims; for rent between 15 and 30 September in the sum of $8,950, for monthly out-goings for the month of September 2013 in the amount of $1,5086 and for rent of $537.00 for the alleged occupation of one third of the leased premises for the three days 1, 2 and 3 October. That amounts to $11,074.60, which together with applicable GST, providing a total of $12,182.06. 9The contents of the last invoice reveal wider disputes between the parties about the circumstances in which Hampic left the premises. The parties disagreed: about whether Hampic had permission to leave materials on the premises for a period after 15 September 2013; about how much material was left on the premises; and, about whether or not the material left in fact was not Hampic's but actually belonged to Cyndan Properties. 10By the end of October these invoices were not paid and Cyndan Properties issued a statutory demand under the Corporations Act, s 459E, in amount of the total of the invoices, less a credit of $4.88, making a net demand of $48,016.27. From the moment that demand was served, the clock started ticking, as it is required by the Corporations Act. An originating process, had to be filed by 22 November 2013 to set aside the demand, if there was no agreement to withdraw the notice. Hampic filed an originating process on 22 November to set aside the statutory demand joining Cyndan Properties as defendant. 11The service of this statutory demand on 28 October 2013, provoked a response. On 29 October 2013 Hampic issued a tax invoice for $26,000, plus GST to Cyndan Properties, making a total of $28,600. This tax invoice claimed, "the removal of landlord's raw materials and trade waste" from the leased premises in Warriewood. Cyndan Properties took the view that this invoice was devoid of substantiation. Indeed, in submissions before me, on its behalf, it was pointed out that there is no date associated with the doing the work and invoiced no indication of who or how the contracting work was done, or how the value of $26,000 was reached. It must be observed that the timing of the invoice, coming as it did within 24 hours of the issue of the statutory demand, certainly gives reasonable grounds to believe it was created in an environment where it was thought that the lodging of a counter claim to the statutory demand was urgently necessary. 12As is often the case on such costs applications, it is necessary closely to scrutinise what happened in the weeks following the issuing of the statutory demand. Not much happened in the first two weeks. All the action seems to have taken place in the last week: between 15 November 2013 and 22 November 2013. 13There are four pieces of important correspondence in that period to which I will now briefly advert. They are, respectively, a letter from Hampic on 15 November, a reply from Cyndan Properties on 19 November, a further letter from Hampic on the 19 November and then another reply from Cyndan Properties on 20 November. The originating process was then filed on 22 November. 14The skilled advocates on both sides of this case directed my attention to parts of that correspondence. What appeared to the parties in the correspondence in that period is important in determining the present costs application. 15The first item of correspondence, Hampic's letter of 15 November 2013, complained that the statutory demand was defective and claimed there was a genuine dispute between the parties. Hampic's submission is: that the 15 November letter, and its follow-up letter of 19 November, should have been sufficient, together with the Hampic invoice, to enable Cyndan Properties to recognise that there was a real dispute; and that the low threshold that generally applies to demonstrating a real dispute, should have been sufficient for Cyndan Properties then to withdraw the statutory demand, so that none of the later procedural action would have been necessary. 16Hampic's letter of 15 November 2013, confirmed that the lease expired on 14 September, asserted that Hampic had vacated the property by this time, and pointed out that a leasing agent representing Cyndan Properties had already arranged for an incoming tenant to take over the premises under a new lease as soon as Hampic vacated. It explained that after vacation of the premises some trade waste was temporarily left in the car park on-site awaiting analysis and removal, but that that was by agreement with the new tenant and was not something from which the landlord should seek to gain any advantage. But the 15 November letter also contended that most of what was left on the premises was not left there by arrangement with the landlord's agent or the incoming tenant, but was in fact the landlord's waste. 17This elicited a firm response on 19 November from the solicitors for Cyndan Properties. The responding letter of that date contained a detailed refutation of the allegations in the Hampic letter of 15 November, accompanied by photographs of the premises, pointing out that much material had been left in the premises, including cupboards, pallet racking, pots, carpet, extra plumbing. And the letter pointed out that the premises had not been restored and were left in a broken and damaged state in others. 18The evidence based approach of Cyndan Properties in this correspondence, and referring Hampic to particular provisions of the lease that it said had been breached, showed in my view, a reasoned contention on its part that looked at objectively there was no real dispute between these parties. Cyndan Properties was elaborating that what had been put up in Hampic's one page letter of 15 November really had no substance. 19But time was ticking by. Over the weekend that intervened between 15 and 19 November, Cyndan Properties gathered evidence to respond to Hampic's 15 November letter. But by the time Cyndan Properties replied on 19 November, there was in fact only two clear days before 22 November - 20 November and 21 November. Much of what happened between the 19th and 22nd of November must recognise that there were only these two clear days for the parties to respond to one another. And any sensible lawyer would have been organising to file an originating process before 22 November. 20But Hampic's quick reply on 19 November took issue with what Cyndan Properties had said. This reply went into considerably more detail about the issues originally raised in the letter of 15 November. Hampic's reply pointed out, in respect of the material allegedly left on-site, that there had been a warning given to Mr Hyland of Shaw Commercial Real Estate, the agent acting for Cyndan Properties, that relocation might be protracted and that the incoming tenant had, through the agent, apparently advised that getting into the front portion of the premises was all that it needed in the short term. 21Hampic describes many of the items in the photographs that had been sent to it as Cyndan Properties' possessions, which were left there when Hampic took over the premises in 2009. 22Hampic pointed out in its 19 November letter that the premises had been operating as a chemical manufacturing business and had many years of hard use and, therefore, some of the damage described could be fair wear and tear within the lease. But Hampic also contended that Cyndan Properties attempted to benefit by charging Hampic rental under arrangements that were never discussed or agreed. 23The calculus Hampic then put back to Cyndan Properties was this. It rejected the claim for $48,016 in the statutory demand and another invoice of almost $13,000. It pointed out that it would not pursue its recovery of the invoice of $26,000 for the landlord's trade waste removal and offered to settle all disputes for $36,000, plus GST. The offer was not accepted. 24The following day, 20 November, Cyndan Properties responded rejecting many of Hampic's assertions, in particular pointing out that whatever Hampic was saying about the incoming tenant, that the incoming tenant began occupying the premises only from 18 October, 2013, and that Cyndan Properties did not receive any rent from the incoming tenant, between the end of the old lease and 17 October, 2013, and that is why the claim was being made for rent in the fourth invoice. 25Cyndan Properties also contended in its 20 November letter that any liquid waste not removed by Hampic remained in the pit on the premises and that Cyndan Properties would be put to the expense of its removal. Cyndan Properties also pointed out that there were no photographs accompanying Hampic's letter of 19 November to prove its position. Finally Cyndan Properties warned that winding up proceedings would be commenced after expiry of the statutory demand at 5 pm on Friday, 22 November 2013. 26The originating process to set aside the statutory demand was filed on 22 November. After it was filed, Cyndan Properties, offered to set aside the statutory demand, on 27 November. The parties agreed on that course and with good sense filed consent orders before the Registrar on 11 December, setting aside the demand, but making no order as to costs. They reserved their rights to argue about costs.