In the matter of B&B Legal Pty Ltd trading as Borthwick and Butler Solicitors

Medium Neutral Citation: In the matter of B&B Legal Pty Ltd trading as Borthwick and Butler Solicitors [2025] NSWSC 656

Hearing dates: On the papers

Date of orders: 24 June 2025

Decision date: 24 June 2025

Jurisdiction: Equity - Corporations List

Before: Brereton J

Decision: The defendant is to pay the plaintiff’s costs of the proceedings on the ordinary basis

Catchwords: COSTS – where defendant’s statutory demand served on plaintiff was set aside pursuant to s 459G of the Corporations Act 2001 (Cth) – where plaintiff seeks an order that defendant pay its costs of the proceedings on the indemnity basis – where plaintiff relies on without prejudice letters as the basis for their indemnity costs application – where plaintiff made a Calderbank offer but only provided a modest amount of compromise – where defendant seeks there to be no orders made in relation to costs or for costs to be limited to those assessed on the standard basis – where defendant seeks a stay on the enforcement of any costs orders – where defendant submits that any costs orders would be punitive and futile – no departure from the usual position that costs follow the event – defendant is to pay plaintiff’s costs of the proceedings on the ordinary basis

Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304
In the matter of Modern Wholesale Jewellery Pty Ltd; In the matter of Global Austral Pty Ltd; In the matter of Modern Wholesale Jewellery Pty Ltd [2017] NSWSC 236

Texts Cited: N.A.

Category: Costs

Parties: B & B Legal Pty Ltd trading as Borthwick and Butler Solicitors (plaintiff)
Leonardus Geradus Smits (defendant)

Representation: Solicitors:
C G Gillis & Co (plaintiff)
Murray Laws (defendant)

File Number(s): 2024/478846

Publication restriction: N.A.

JUDGMENT

1. I delivered reasons and made orders in these proceedings on 6 June 2025: see In the matter of B & B Legal Pty Ltd trading as Borthwick and Butler Solicitors [2025] NSWSC 587. The statutory demand dated 11 December 2024 served by the defendant on the plaintiff was set aside. The parties were given an opportunity to make written submissions (limited to two pages) regarding costs. I indicated in my reasons that unless there was good reason to do otherwise, a decision concerning costs would be made on the papers. Neither party sought an oral hearing.

2. The plaintiff filed submissions, comprising two pages. It seeks an order that the defendant pay its costs, as agreed or assessed, and that those costs be payable on the indemnity basis for the entirety of the proceedings. In the alternative, the plaintiff seeks an order that the defendant pay its costs on the ordinary basis up to and including 25 April 2025 and on an indemnity basis thereafter.

3. The defendant filed submissions comprising five pages. Those submissions begin as follows: “The defendant requests leave to exceed the page limit for these submissions, with a view to eliminating or reducing the scope of an Appeal on costs”. It was not appropriate for the defendant to proceed as if it had leave. Any application should have been made before the submissions were filed. Nevertheless, I have read the submissions. They raise an array of matters, including submissions that there should be no order as to costs, that costs should be limited in particular ways, that the claimed costs are excessive and that enforcement of any costs order should be stayed.

4. For reasons that follow, I will order that the defendant is to pay the plaintiff’s costs on the ordinary basis.

Plaintiff’s application for indemnity costs

5. The plaintiff commenced these proceedings by an originating process filed on 24 December 2024. That document outlined the bases upon which the statutory demand was disputed: it asserted that there was a genuine dispute as to the existence of the debt and that there is “some other reason” it should be set aside, including that the defendant did not depose that he believed there was no genuine dispute in relation to the purported debt. These were grounds that were upheld. The plaintiff contends that this application put the defendant squarely on notice as to the reasons why the statutory demand was liable to be set aside.

6. The plaintiff also relies on two letters sent to the defendant on a without prejudice basis. The first was a letter dated 17 February 2025 which again identified the bases on which the purported debt was disputed. The letter also addressed the defendant’s assertions regarding ineffective service of the plaintiff’s originating process. The plaintiff made an offer in this letter, inviting the defendant to: withdraw its statutory demand, provide a written undertaking and to pay the plaintiff’s costs in an agreed amount. The letter was not expressed to be made pursuant to the Calderbank principles. It cannot be said that the offer did include much, if any, compromise.

7. The plaintiff also relied on a letter dated 11 April 2025, which was stated to be made pursuant to the Calderbank principles. The offer was as follows:

1. You withdraw your statutory demand that is the subject of this matter.

2. The parties consent to an order that the defendant is ordered to pay the plaintiff’s costs fixed in the sum of $30,000.00.

3. The parties consent to an order that the proceedings are otherwise dismissed.

The offer contained some compromise, but not a great deal. The asserted compromise was that the $30,000 would cover the plaintiff’s disbursements in full and approximately 50% of its solicitor and barrister’s fees. It is impossible for me to say what the plaintiff could reasonably expect to recover on an assessment, but it would be likely to be materially less than 100%. The offer was open for a period of 14 days from the date of the letter.

8. The plaintiff relies on the principles applicable to an award of indemnity costs for s 459G applications as outlined by Black J in In the matter of Modern Wholesale Jewellery Pty Ltd; In the matter of Global Austral Pty Ltd; In the matter of Modern Wholesale Jewellery Pty Ltd [2017] NSWSC 236 at [48]:

In my view, the costs of this application should follow the event, and the result of the application warrants an order for costs against WYI on an indemnity basis. The case law permits an order for indemnity costs in respect of an application to set aside a creditor’s statutory demand which involves the improper use of the statutory demand procedure or persistence in the claim where it should have been apparent to the defendant that there was a genuine dispute as to the debt claimed. In CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd above at [19], Barrett J referred to the warning previously given by Santow J in several judgments that a creditor who issued a statutory demand in respect of a genuinely disputed debt was at risk of indemnity costs, where it put the applicant to set aside the statutory demand to expense by doing so. His Honour there noted that the party which issued a statutory demand might, in some circumstances, be entitled to test the other party’s claim that the debt was genuinely disputed, but also noted that that principle had a limit to it and that there were cases which were “so devoid of prospects of success as to be perverse” and that, if a defendant is put on notice of an “obvious and irremediable weakness in its position” and does not withdraw a statutory demand, it may well be appropriate for the court to award costs to the plaintiff on an indemnity basis. In Soudan Lane Pty Ltd v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772 at [4]–[5], White J again observed that creditors are often ill-advised to proceed with a statutory demand once plausible grounds for a dispute are asserted, and they risk an order for indemnity costs if they do so: see also Professional Advantage Pty Ltd v Australian Broadcasting Commission [2007] NSWSC 607; R2M Pty Ltd v Gourlay [2011] FCA 168; Re Suters Holdings Pty Ltd [2012] NSWSC 1051; Re Scahill & Co Pty Ltd [2016] NSWSC 712. In this case, Modern and Global have been put to the costs of these applications to set the three creditor’s statutory demands aside, heard over two days of substantive submissions (and a third day which was adjourned by reason of events affecting Mr Dimitriou), to which they would not have been exposed had the creditor’s statutory demands not been served or had those demands been promptly withdrawn.

9. While there was force in the application for indemnity costs, I do not propose to make an order for indemnity costs in this case. My reasons are as follows. First, if the defendant had succeeded in establishing that the originating process had not been served in time, it would have succeeded, regardless of whether there was a genuine dispute about the debt or there was some other reason to set aside the demand. Much of the case concerned the question of service, which was an issue anterior to the issue about whether there was a genuine dispute. The principles discussed by Black J in Modern Wholesale Jewellery do not apply with the same force in that context. Second, while the arguments advanced by the defendant on the question of service failed, I did not consider them to be so hopeless that he should be visited with an order for indemnity costs. Third, while the plaintiff has been successful in its application to set aside the statutory demand, it advanced some arguments that I did not accept (as can be seen from my earlier reasons). Fourth, the Calderbank offer involved only a modest amount of compromise.

Defendant’s applications

10. As I have noted, the defendant made a variety of submissions. I can deal with them briefly.

11. First, the defendant made submissions that concerned the amount of costs claimed. He submitted that the costs advanced by the plaintiff were “grossly excessive”. That is not a matter for me to consider because I am not being asked to quantify the costs. That is a matter for the costs assessor, if costs are not otherwise agreed. The defendant made various other arguments that concern the manner in which costs should be assessed and do not concern the character of the costs order I am being asked to make.

12. Second, the defendant submitted that any order for costs will end up being punitive or futile because he is surviving on a pension due to his serious medical conditions. I reject this submission. The defendant’s inability to pay any costs he is ordered to pay is not a reason to decline to make a costs order. Nor is there any proper basis to decline to make an order on the basis that it will be punitive. An adverse costs order is an ordinary incident of failure and is to be expected by any litigant.

13. Third, the defendant submitted that costs should be limited to issues decided in favour of the plaintiff. The fact that the plaintiff advanced arguments that were unsuccessful was a factor I took into account in deciding that an order for indemnity costs should not be made. However, I do not consider that this is a case where the Court should otherwise differentiate between the issues on which the plaintiff succeeded and those on which it failed. The issues on which the plaintiff failed were inextricably bound up with those on which it succeeded. They were not discrete: see Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38].

14. Fourth, the defendant requests a stay of enforcement of any costs order until final disposition of an intended appeal “as otherwise he will suffer serious, irreversible prejudice, loss and harm”. The request is not supported by any evidence and is not an appropriate application to be entertained by me in this context.

15. Fifth, the defendant made submissions opposing any order for indemnity costs. I have addressed the question of indemnity costs above.

16. None of the matters advanced by the defendant lead me to depart from the usual position that costs follow the event (see UCPR r 42.1). Other than to specify the basis upon which costs are to be assessed, no other orders should be made.

Order

17. The defendant is to pay the plaintiff’s costs of the proceedings on the ordinary basis.

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