In the matter of Harness Holdings Pty Ltd

Catchwords: COSTS — party/party — general rule that costs follow the event — where application to set aside statutory demand did not proceed – where no determination of proceedings on the merits.

Legislation Cited: - Civil Procedure Act 2005 (NSW), s 98
- Corporations Act 2001 (Cth), ss 459H(1)(a), 459J
- Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.19

Cases Cited: - Ayrton Investments Pty Ltd v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55
- Fastlink Calling Pty Ltd v Macquarie Telecom Pty Ltd (2008) 217 FLR 366; [2008] NSWSC 299
- Felkro Nominees Pty Ltd v Austissue Pty Ltd (1993) 11 ACSR 607
- Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262
- One.Tel v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270
- Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (2003) 200 ALR 321; [2003] NSWSC 619
- Re Bell Potter Securities Ltd [2023] NSWSC 1528
- Re Dalski Pty Ltd [2025] NSWSC 99
- Re Kaloriziko Pty Ltd [2021] NSWSC 1276
- Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6
- Spinoccia Compressor and Air Tools Sales and Service Pty Ltd v Challenger Managed Investments Ltd [2010] NSWSC 1310

Category: Costs

Parties: Harness Holdings Pty Ltd (Plaintiff)
Charlie Nguyen and Project 1231 LLC (Defendants)

Representation: Counsel:
Mr A Ventura (Solicitor)
Mr C Nguyen and Project 1231 LLC (self-represented) (Defendants)
Solicitors:
Equium Lawyers (Plaintiff)

File Number(s): 2026/5494

JUDGMENT

Nature of the application and background

1. By Originating Process filed on 6 January 2026, the Plaintiff, Harness Holdings Pty Ltd (“Harness Holdings”) applied under ss 459H(1)(a) and 459J of the Corporations Act 2001 (Cth) (“Act”) to set aside a creditor’s statutory demand (“Demand”) issued by the Defendants, Mr Nguyen and Project 1231 LLC (“Project 1231”). By email dated 3 February 2026, Mr Nguyen and Project 1231 unconditionally withdrew the Demand so as “[t]o avoid further unnecessary legal costs for both parties and to save the Court’s time”, and proposed that the proceedings be discontinued with each party to bear their own costs. On 23 March 2026, the Court noted that matter and, on that basis, gave leave to Harness Holdings to discontinue the proceedings and reserved the question of costs to be determined in Chambers.

Applicable principles

2. I bear in mind that s 98 of the Civil Procedure Act 2005 (NSW) provides that costs are in the discretion of the Court. That section confers on the Court a wide discretion with respect to costs, and the Court has discretion to determine by whom, to whom and to what extent costs are to be paid; and costs will ordinarily follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs, in accordance with r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). However, that principle has no application where there has been no application on the merits and there is no event to follow.

3. In Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624–625; [1997] HCA 6 (“Lai Qin”), McHugh J observed that:

“In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation …

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried … [b]ut such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.” [citations omitted]

Later cases including One.Tel v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] have also recognised that an order for costs could be made without a hearing on the merits, where one party, after litigating for some time, effectively surrendered to the other.

4. These issues have also been considered in respect of applications to set aside creditor’s statutory demands. In Felkro Nominees Pty Ltd v Austissue Pty Ltd (1993) 11 ACSR 607; the applicant sought costs where a statutory demand was set aside by consent. Heerey J noted (at 608) that:

“… creditors have to realise that if they invoke winding up provisions by issuing a statutory demand they run the risk that if a debtor establishes that the amount claimed is subject to a genuine dispute, the debtor will get an order for costs, as s 459N expressly contemplates.”

5. In Ayrton Investments Pty Ltd v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55, Higgins J observed (at [19]) that a person who issued such a demand faces “a risk as to costs, not an inevitability”. His Honour there expressed at [26] the view that:

“… the focus is on the reasonableness of the decision to issue [the statutory demand]. Whether on the material known to the creditor before the notice issued, it should have been apparent that there was a dispute which, viewed objectively, was “genuine”, that is, warranting further inquiry. If so, the creditor must expect to pay costs in any event once the notice is set aside. If it was reasonable to issue the notice, but thereafter it appears that there is a genuine dispute then, as soon as that appears, the creditor must withdraw or cease to oppose the setting aside of the notice. Otherwise, the creditor risks an adverse costs order.” …

6. I took the same approach in circumstances where an application did not proceed to final hearing and the demand was set aside before the hearing in Re Kaloriziko Pty Ltd [2021] NSWSC 1276. In Re Bell Potter Securities Ltd [2023] NSWSC 1528 at [5], I accepted Counsel’s submission that:

“The relevant authorities that have considered how to exercise the Court's costs discretion in cases where a statutory demand is withdrawn prior to a final hearing have been reviewed by Black J in a number of recent decisions, including Re Ming Tian Real Property Ply Ltd [2021] NSWSC 386 (at [6]–[13]) and Re Aussie Strength Pty Ltd [2021] NSWSC 1594 at [4]–[11]. In substance, the applicable principles indicate that the relevant inquiry is to focus upon the reasonableness of the creditor's decision to issue the statutory demand, and to act promptly in respect of changes in circumstances, see: Ayrton Investments Ply Ltd v Andrlik (2000) 34 ACSR 643 at [26].”

7. I have here drawn on my summary of the applicable principles in Re Dalski Pty Ltd [2025] NSWSC 99 at [9]ff (“Dalski”), to which the parties referred in submissions. For completeness, the parties did not seek to address any application of r 42.19 of the UCPR, which would likely have been displaced in the relevant circumstances.

Affidavit evidence, submissions and determination

8. Harness Holdings relied on its affidavit dated 6 January 2026 of Mr Christopher Ventura, who is a director of Harness Holdings, which is a provider of online education, and on the affidavit dated 6 March 2026 of its solicitor, Mr Anthony Ventura. By letter dated 30 December 2025, annexed to Mr Christopher Ventura’s affidavit, Harness Holdings contended that the Demand was not in the prescribed Form 509H and that the supporting affidavit executed by Mr Nguyen and by Project 1231 LLC was not an affidavit in the requisite form.

9. Harness Holdings submits that costs should follow the event, but that submission neglects the fact that there is no event to which that principle can apply, absent a determination of the proceedings on the merits. Harness Holdings also submits that it was inappropriate for the Defendants to press the Demand after defects as to its form and content were brought to their attention, and that is the primary issue to be determined in this application. Harness Holdings in turn submits, rightly, that the focus should be on the reasonableness of Mr Nguyen’s and Project 1231’s decision to issue the Demand, and contends that it was unreasonable for the Demand to be issued or pressed in the form in which it was issued.

10. I accept that, on the face of the Demand, it did not comply with Form 509H and omitted important statements including the statement that the amount claimed was due and payable by Harness Holdings, the prescribed notification of Harness Holdings’ right to apply to set aside the Demand and an address for service for Mr Nguyen and Project 1231. I recognise that a statutory demand will not necessarily be set aside where it omits the statement that the debt is due and payable, at least if other information in the supporting affidavit indicates that the debt was due: Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (2003) 200 ALR 321; [2003] NSWSC 619.

11. It is also plain that the affidavit supporting the Demand was not in proper form, not least because it was purportedly affirmed not only by Mr Nguyen but also by Project 1231, which cannot affirm an affidavit under Australian law. A demand may be set aside if the verifying affidavit is not properly sworn or affirmed and therefore does not verify the debt: Fastlink Calling Pty Ltd v Macquarie Telecom Pty Ltd (2008) 217 FLR 366; [2008] NSWSC 299 at [14]ff; Spinoccia Compressor and Air Tools Sales and Service Pty Ltd v Challenger Managed Investments Ltd [2010] NSWSC 1310. That affidavit also did not contain the prescribed statement that the amount of the debt claimed was due and payable by the debtor company. The knowledge of a person who swears an affidavit in support of the statutory demand provides a filtering mechanism to prevent unwarranted demands; and a failure of a creditor, or, in the case of a corporate creditor, a natural person on its behalf, to verify that the relevant debt is due and payable would generally warrant an order setting aside a statutory demand under s 459J(1)(b) of the Act: Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262.

12. Mr Nguyen, who is self-represented and purports to make submissions on his own behalf and for Project 1231 (although he would not be entitled to represent that company in proceedings in this Court) addresses the circumstances in which the Demand arose and the suggested timeline of events. Mr Nguyen relies on the principle in Lai Qin, to which I have referred above, and accepts that the focus is on the reasonableness of his and Project 1231 LLC’s decision to issue the Demand and their subsequent conduct. He acknowledges that the form of the Demand was defective and also that the amount claimed was overstated, but relies on the fact that he is a self-represented individual located in the United States, without legal training or familiarity with the requirements of the Act. The difficulty with that proposition of course, is that an offshore creditor who seeks to invoke the creditor’s statutory demand procedure available under Australian law has no less an obligation first to satisfy itself as to the requirements of that procedure than an Australian creditor.

13. Mr Nguyen and Project 1231 also submit that:

“A self-represented overseas party who makes good faith procedural errors in pursuing a genuine debt should not be treated equivalently to a legally represented party who issues a demand recklessly or in bad faith.”

I broadly accept that proposition, but it is also no answer to the likelihood that the Demand would have been set aside, had it not been withdrawn. Mr Nguyen and Project 1231 also rely on the fact that the Demand was withdrawn, but that does not answer the fact that they exposed Harness Holdings to the costs of bringing these proceedings before they withdrew the Demand. Mr Nguyen in turn seeks to distinguish the decision in Dalski. While there are differences between the two cases, those differences do not displace the analysis of the underlying principles in that case. Mr Nguyen and Project 1231 then submit that each party should bear its own costs of the proceedings or alternatively that costs should be limited to the Court filing fee. I do not accept that the Court should limit the Defendants’ liability for costs in that manner, although the costs which are properly recoverable will be a matter for assessment. Mr Nguyen also submitted that an order for indemnity costs should not be made against the Defendants, but Harness Holdings had rightly not sought an order for costs on that basis.

14. Although there has here been no determination of the application to set aside the Demand on the merits, I am satisfied that the defects in the Demand, to which Harness Holdings had drawn Mr Nguyen and Project 1231’s attention, were such that the Demand would have been set aside; that the withdrawal of the Demand here amounted to a capitulation rather than a compromise of the proceedings; and that Mr Nguyen and Project 1231 had acted unreasonably in issuing the Demand. In those circumstances, I order that Mr Nguyen and Project 1231 pay Harness Holdings’ costs of the application to set aside the Demand, as agreed or as assessed.

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