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Cases Cited: - Ayrton Investments Pty Ltd v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55
- CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100; [2003] NSWSC 728
- Davis v Certain Lloyd’s Underwriters [2022] NSWSC 131
- Dynamics Co Pty Ltd v G & M Nicholas Pty Ltd [2012] NSWSC 206
- Felkro Nominees Pty Ltd v Austissue Pty Ltd (1993) 11 ACSR 607; (1993) 11 ACLC 1142
- McNamara v San [2010] NSWSC 809
- Re Arbitrium Credit Partners Pty Ltd [2025] NSWSC 1457
- Re Aussie Strength Pty Ltd [2021] NSWSC 1594
- Re Captcha Property No 3 Pty Ltd [2026] NSWSC 60
- Re Kaloriziko Pty Ltd [2021] NSWSC 1276
- Re Ming Tian Real Property Pty Ltd [2021] NSWSC 386
- Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6
- Re Settlement Holdings Pty Ltd [2026] NSWSC 209
- Re Telegraph Point Sports & Recreation Club Ltd [2020] NSWSC 616
- Soudan Lane Pty Ltd v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772

Category: Costs

Parties: 2026/161413:
BM Chatswood Pty Ltd (Plaintiff)
Aplus Architecture Pty Ltd (Defendant)
2026/161414:
BM Chatswood Pty Ltd (Plaintiff)
Leung789 Pty Ltd (Defendant)
2026/161416:
SPG Brookville Pty Ltd (Plaintiff)
Leung789 Pty Ltd (Defendant)
2026/161417:
Sun Property Group Australia Ltd (Plaintiff)
Leung789 Pty Ltd (Defendant)

Representation: Counsel:
Mr DF Elliott (Plaintiffs)
Solicitors:
Amberlake Lawyers (Plaintiffs)
AHD Lawyers (Defendants)

File Number(s): 2026/161413, 2026/161414, 2026/161416, 2026/161417

JUDGMENT

Nature of the application and affidavit evidence

1. By Originating Processes filed on 20 April 2026, BM Chatswood Pty Ltd (“BMC”) applied to set aside a creditor’s statutory demand dated 26 March 2026 issued by Aplus Architecture Pty Ltd (“Aplus”); BMC also applied to set aside a creditor’s statutory demand issued by Leung789 Pty Ltd (“Leung789”); SPG Brookville Pty Ltd (“SPG”) applied to set aside a creditor’s statutory demand also issued by Leung789; and Sun Property Group Australia Ltd (Sun”) also applied to set aside a creditor's statutory demand issued by Leung789. The several proceedings involve associated parties that are connected and, on 22 May 2026, I made orders by consent that each proceeding be dismissed, reserving the question of costs to be determined in Chambers. BMC now seeks an order that each of Aplus and Leung789 pay costs as agreed or assessed, or alternatively a gross sum costs order under s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (“CPA”); and SPG and Sun each seek corresponding orders against Leung789.

2. In each of the proceedings, BMC, SPG and Sun rely on an affidavit of 20 April 2026 of Mr Sun which appears to be directed to establishing a genuine dispute in respect of the statutory demands. In each of the proceedings, they also rely on affidavits dated 9 June 2026 of Mr Hidayat, their solicitor, which refer to unbilled costs extracted from his firm’s time management system in varying amounts; an estimate of unbilled costs of Counsel, provided at a time that Counsel had not yet rendered an invoice; and to the Court filing fee. Mr Hidayat also refers to relevant correspondence between the parties’ solicitors, before each of Aplus and Leung789 withdrew the relevant statutory demands. Aplus and Leung789 in turn read affidavits dated 24 June 2026 of their respective director, Mr Leung, who refers to the circumstances in which notices of default had been issued in respect of the relevant debts and indicates his belief that there was no response to those notices before the statutory demands were issued. His evidence is that any dispute as to the debts were first raised in correspondence after the demands were issued, and he points to the fact that the demands were withdrawn promptly after the proceedings to set them aside were filed.

The applicable principles

3. This application takes a common form, and I have reviewed the relevant case law in my judgments in Re Kaloriziko Pty Ltd [2021] NSWSC 1276 (“Kaloriziko”), Re Aussie Strength Pty Ltd [2021] NSWSC 1594, Re Captcha Property No 3 Pty Ltd [2026] NSWSC 60 and again in Re Settlement Holdings Pty Ltd [2026] NSWSC 209 (“Settlement Holdings”) to which the parties referred. I have drawn on that review below.

4. Section 98(1) of the CPA provides that, subject to the Rules of the Court, the CPA and any other Act, costs are in the Court’s discretion. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) provides that, if the Court makes any order as to costs, the Court is to order that costs 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. However, where a proceeding is dismissed by consent, without any determination on the merits, then there is usually no relevant “event”, and the proper exercise of the Court’s discretion will ordinarily be to make no order as to costs. The Court will not, merely for the purpose of deciding a question of costs, embark on a trial of issues that have become moot; but the Court may make a costs order, if it is satisfied that one party has effectively capitulated or has acted unreasonably: Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624–625; [1997] HCA 6 (“Lai Qin”).

5. In the context of applications to set aside a creditor’s statutory demand, in Felkro Nominees Pty Ltd v Austissue Pty Ltd (1993) 11 ACSR 607 at 608; (1993) 11 ACLC 1142, Heerey J noted 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.”

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

7. In CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100; [2003] NSWSC 728 at [19], Barrett J referred to earlier authority that creditors who issued statutory demands in respect of genuinely disputed debts, and who put the recipient to the expense of taking steps to set aside the statutory demand, were at risk of indemnity costs. His Honour also observed (at [21]) that a 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 (at [22]) that it may well be appropriate for the Court to award costs to a plaintiff on an indemnity basis where a defendant’s case was “so devoid of prospects of success as to be perverse” or if a defendant was put on notice of an “obvious and irremediable weakness in its position” and did not withdraw a statutory demand.

8. In Soudan Lane Pty Ltd v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772 at [3]–[4], White J referred to the principles set out in Lai Qin, which I referred to above, and observed that these principles apply to proceedings to set aside a statutory demand, but that special features of such proceedings also need to be taken into account in judging the reasonableness of the parties’ conduct. His Honour observed (at [4]–[6]) 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 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]).

On the other hand, a company which capitulates to the creditor’s demand after commencing proceedings to have the demand set aside by paying the sum demanded, or a company which puts the creditor to unnecessary expense in defending an application to set aside the demand before recovering what is unquestionably due, is likely to have to pay the creditor’s costs even though the demand is set aside upon the creditor being paid (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).”

9. In Dynamics Co Pty Ltd v G & M Nicholas Pty Ltd [2012] NSWSC 206 at [26], I noted several of these authorities and expressed the view that:

“… consistent with the approach adopted by Higgins J in Ayrton Investments, the reasonableness of a party serving a statutory demand must be determined by reference to what that party knew as to the nature of any dispute as to the debt; conversely, a debtor which fails to pay a debt which is apparently due and undisputed, and also fails to disclose the basis of any dispute, can scarcely complain when the statutory demand procedure is invoked by a creditor who is acting reasonably on the basis of the information which is then known to it.”

10. In Re Telegraph Point Sports & Recreation Club Ltd [2020] NSWSC 616, I made no order as to the costs of an application to set aside a creditor’s statutory demand where I found (at [13]) that:

“It seems to me that, in this case, the Court is not in a position to assess the likely outcome of the application to set aside the Demand, had it proceeded to a hearing, or the cogency of evidence that was to be relied on in the application to set aside the Demand but has not been read or tendered in the application for costs. I am not able to find whether the debt was genuinely disputed, or whether there was an offsetting claim or some other reason to set aside the Demand, and this is not one of the rare cases where I can be satisfied that one party was almost certain to have succeeded if the matter had been fully tried. It is also not possible to determine whether either party acted unreasonably so as to warrant an order for costs against it.”

11. I similarly made no order as to costs in Re Ming Tian Real Property Pty Ltd [2021] NSWSC 386, where genuine issues had been raised but were not determined when the demand was not pressed. On the other hand, in Kaloriziko, I made an order for costs in favour of the plaintiff which obtained an order to set aside a creditor’s statutory demand, where the other party, after litigating for some time although it led no substantive evidence, effectively surrendered to the plaintiff’s claim to set aside that demand.

12. I also have regard to r 42.20 of the UCPR which provides that, if the Court makes an order for the dismissal of proceedings, then, unless the Court orders otherwise, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which they have been dismissed. The effect of that rule was summarised by Hallen AsJ (as his Honour then was) in McNamara v San [2010] NSWSC 809 at [12], and I have followed that summary in cases including Davis v Certain Lloyd’s Underwriters [2022] NSWSC 131 at 9[ff].

The parties’ submissions and determination

13. In submissions for BMC, SPG and Sun, Mr Elliott refers to their commencement of proceedings to set aside the relevant statutory demands, which were served on 20 April 2026, and to the advice of Aplus’ and Leung789’s solicitors given on 21 April 2026 that the statutory demands would be withdrawn and that Aplus and Leung789 would bring substantive proceedings to recover the outstanding amounts. Mr Elliott contends Aplus’ and Leung789’s approach implied that there was genuine dispute as to each of the debts claimed in the statutory demands. I do not accept that submission, where that approach is at least equally consistent with a sensible recognition by Aplus and Leung789 that once BMC, SPG and Sun rightly or wrongly contended that a genuine dispute existed, it would likely be more cost effective for Aplus and Leung789 not to incur the costs of defending the statutory demands, and instead to pursue substantive proceedings, as they indicate they will do. Mr Elliott also refers to Nixon J’s summary of the applicable principles in Re Arbitrium Credit Partners Pty Ltd [2025] NSWSC 1457 at [39]ff and to my summary of those principles in Settlement Holdings at [5]–[7].

14. Mr Elliott in turn outlines the alleged factual circumstances of dealings between BMC, SPG and Sun on the one hand and Aplus and Leung789 on the other, where each statutory demand was issue in respect of an allegedly overdue loan, and he refers to correspondence from BMC’s, SMC’s and Sun’s solicitors which contended that there was a genuine dispute and, implicitly, an offsetting claim, as to the debt claimed by the statutory demands. Mr Elliott contends that, upon receipt of that correspondence, it ought to have appeared to Aplus and Leung789 that there was a genuine dispute as to the debt claimed in the statutory demands. The asserted disputes appeared to relate, first, to the basis on which interest on the loans was calculated and, second, to possible offsetting claims arising from defects and deficiencies in services provided. There has been no determination on the merits whether the asserted defects and deficiencies are genuinely arguable, and the bare assertion of them does not establish that they are genuinely arguable.

15. The solicitors acting for Aplus and Leung789 make substantially the same submissions in all proceedings and refer to Lai Qin and Settlement Holdings. They contend that the relevant question is whether Aplus and Leung789 had acted unreasonably in issuing the statutory demands, and contend that they had not where no response identifying any dispute had been received from the debtors to the notices of default that required payment of the debt and where the statutory demands had been promptly withdrawn after the asserted disputes were identified.

16. It is plain enough that BMC, SPG and Sun now assert matters that are said to give rise to a genuine dispute or offsetting claim in respect of the relevant statutory demands; it is not possible to determine whether those matters give rise to a genuine dispute or offsetting claim, where there has been no determination on the merits; it is not apparent that Aplus or Leung789 had notice of the asserted disputes before the statutory demands were issued; and this is not a proper case in which to make an order for costs in favour of BMC, SPG or Sun. There should, as Aplus and Leung789 contend, be no order as to the costs of the proceedings. It is not necessary to decide whether a costs order should also be declined by reason of the indemnity principle, where BMC, SPG and Sun had not been billed, still less paid, the costs which were the subject of their claim for costs.

17. Mr Elliott also refers to Arbitrium at [65]ff in support of BMC’s, SPG’s and Sun’s claim for a gross sum costs order, summarises the costs and disbursements set out in Mr Hidayat’s affidavit and accepts that a broad brush discount of 30% of solicitors’ costs should here be applied in making such an order. No question of making a gross sum costs order arises, where I am not satisfied that a costs order should be made in favour of the several Plaintiffs. Even if I had been satisfied of that matter, I would not have been satisfied that I should make a gross sum costs order, where the risk of duplication of work across the several proceedings which involve similar issues could not readily be addressed by the broad brush approach that would be adopted by the Court in making such an order, and would more properly be addressed in an assessment.

18. The Plaintiffs have, as regrettably now occurs far too often, unsuccessfully brought a claim for costs of their applications to set aside the creditor’s statutory demands, absent a determination of their merits, and they should pay the costs of and incidental to that costs application.

19. I make the following orders in each of the four proceedings:

20. There be no order as to the costs of the proceedings, up to and including 22 May 2026.

21. The Plaintiff pay the Defendant’s costs of and incidental to its application for costs, as agreed or as assessed.

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