In the matter of Ziwei 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
- Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited: - Ayrton Investments Pty Limited v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55
- 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
- Soudan Lane Pty Limited v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772

Category: Costs

Parties: Ziwei Pty Ltd (Plaintiff)
AGL Logistics Pty Ltd (Defendant)

Representation: Counsel:
A Berriman (Plaintiff)
D C Eardley (Defendant)
Solicitors:
Walker Hedges Forestville (Plaintiff)
Iuris Lawyers Pty Ltd (Defendant)

File Number(s): 2025/87411

JUDGMENT

Nature of the application

1. By Originating Process filed on 5 March 2025, the Plaintiff, Ziwei Pty Ltd (“Ziwei”) applied to set aside a creditor’s statutory demand dated 13 February 2025 (“Demand”) issued by the Defendant, AGL Logistics Pty Ltd (“AGLL”). On 5 May 2025, I made an order by consent that the Demand be set aside. Ziwei foreshadowed an application for costs of the application to set aside the Demand and I made orders to allow a determination of that application in Chambers.

Applicable principles

2. Section 98 of the Civil Procedure Act 2005 (NSW) 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; 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).

3. There is, however, here no event which costs should follow where there has been no determination on the merits. In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, at 624; [1997] HCA 6 (“Lai Qin”), McHugh J observed that the Court will not try a hypothetical action between the parties to determine costs but also noted that:

“In some cases, however, the Court may be able to conclude that one of the parties had acted so unreasonably that the other party should obtain the costs of the action.”

4. In Soudan Lane Pty Limited v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772, White J considered the application of Lai Qin in respect of an application to set aside a creditor’s statutory demand, and pointed to particular characteristics of such an application that may support a costs order where a statutory demand had been set aside by consent. His Honour observed (at [4]-[5]) that:

“A company faced with a statutory demand in relation to a debt, disputed in whole or in part, has no option but to commence an action under s 459G [of the Corporations Act 2001 (Cth)] to set aside the demand within 21 days even if the ultimate order sought will be an order under s 459H(4) varying the demand to the amount which is not genuinely in dispute. If a company were merely to pay the amount which was not genuinely in dispute, without securing or compromising the balance to the reasonable satisfaction of the creditor, it would face the prospect of winding up proceedings being brought against it, of its being presumed to be insolvent (s 459C(2)(a)), and of its being unable to oppose the winding-up application on a ground upon which it could have relied for the purposes of an application to have the demand set aside unless leave is given (s 459S).

A person claiming to being a creditor who uses the procedure for service of a statutory demand under s 459E to seek to force payment of a genuinely disputed debt risks an order for indemnity costs. For the purposes of s 459H a genuine dispute will exist about a debt if there is a plausible contention requiring investigation that the company is not indebted (Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 –788). Because the threshold for establishing a genuine dispute is low, creditors are often ill-advised to proceed with a statutory demand once plausible grounds for a dispute are asserted. They risk an order for indemnity costs if they do so (Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529 at 536; CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100 at 104 –105,[19] – [22]).”

5. Subsequently, in Ayrton Investments Pty Limited v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55 at [26], Higgins J observed 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 and, in Re Bell Potter Securities Ltd [2023] NSWSC 1528 at [5] (“Bell Potter”), 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 also summarised the relevant principles in Re Dalski Pty Ltd [2025] NSWSC 99 at [14]-[18] (“Dalski”) where I referred to several of the cases noted above.

The parties’ submissions and determination

8. Mr Berriman made submissions on behalf of Ziwei as to costs, referred to an affidavit dated 13 February 2025 of Mr Yan in support of the Demand and also referred to the affidavit dated 5 March 2025 of Mr Pei in support of the application to set aside the Demand and noted that Mr Pei was also a director of Standard Glass Pty Ltd (“Standard Glass”). Mr Berriman pointed to the fact that the Demand claimed the amount of $469,499.76, by reference to 59 invoices which were identified by specified information, on the bass that AGLL has acted as a customs broker for Ziwei between November 2022 and February 2025 and had incurred costs on behalf of Ziwei. Mr Berriman submitted that Mr Yang’s affidavit does not identify any oral or written agreement pursuant to which the services were provided and does not describe those services in detail.

9. Mr Berriman also noted that Mr Pei’s affidavit annexed a statement of account dated 10 February 2025 apparently issued by AGLL which was addressed to Standard Glass, also in the amount of $469,499.75, being the same amount claimed in the Demand, and by reference to the same invoice numbers listed in Mr Yang’s affidavit in support of the Demand. Mr Berriman pointed to an available inference that the debt which was the subject of the Demand was owed to AGLL by Standard Glass, although he rightly adds that that proposition is not certain. He also refers to Mr Pei’s evidence in his affidavit that Ziwei has never been engaged by AGLL as customs agent or broker, that AGLL never performed services on behalf of Ziwei and that Mr Pei is not aware of any written or oral agreement between AGLL and Ziwei for the performance of such services, although that evidence has not been tested and its cogency has not been assessed.

10. Mr Berriman refers to a letter from the solicitors for AGLL to the solicitors for Ziwei sent 15 days after the receipt of the Demand, which identified these matters and asserted the existence of a genuine dispute as to the debt claimed in the Demand. Mr Berriman in turn notes that AGLL did not comply with the Court’s direction as to filing and service of any evidence in opposition to the application to set aside the Demand and, by the consent orders, accepted that the Demand should be set aside. Mr Berriman submitted that an order for costs should be made in favour of Ziwei by reason of the alleged uncertainty as to whether the debt claimed was owed by Standard Glass or by Ziwei and on the basis that AGLL should have taken up an invitation by Ziwei’s solicitors to withdraw the Demand.

11. In response, Mr Eardley, who made submissions as to costs for AGLL, refers to the history of the application and submits that the matter was resolved at an early stage of the proceedings. He submits that there is no basis for an order for indemnity costs against AGLL, although such an order was not sought against it, and that costs are not automatically awarded in favour of a successful party. He submits that an order for costs should not be made where proceedings were resolved by a consent order and refers to my decisions in Bell Potter and Dalski above. He submits that AGLL had here acted reasonably, and the Court should make an order that each party is to bear their own costs.

12. Although there has here been no determination of the matter on the merits, it seems to me that there is sufficient basis to order costs in favour of Ziwei. It should have been apparent to AGLL, at the time the Demand was issued, that there was room for genuine dispute as to whether Ziwei or Standard Glass owed the amount claimed, not least because AGLL had invoiced that same amount, by reference to the same invoice numbers, to Standard Glass. I have not neglected the possibility that both companies may have been jointly and severally liable, but that possibility would not avoid a genuine dispute arising. That difficulty would inevitably have led to the setting aside of the Demand on the basis that a genuine dispute existed as to whether the debt was owed by Ziwei, and that is sufficient basis to make an order for the costs of the application in favour of Ziwei.

13. Accordingly, I order that the Defendant pay the Plaintiff’s costs of the application to set aside the creditor’s statutory demand and the costs of the costs application, as agreed or as assessed.

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