Product People (International) Pty Limited v Box Seat Company Pty Limited

Jurisdiction to award costs against non-parties 45 The plaintiff seeks orders under s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA) and s 459N of the Corporations Act 2001 (Cth) (Corporations Act) against non-parties to the proceedings. Section 459N provides: Costs where company successful Where, on an application under section 495G, the Court sets aside the demand, it may order the person who served the demand to pay the company's costs in relation to the application. 46 Mr Jones acknowledged that s 43 of the FCA authorises the Court to make orders against non-parties: Knight v FP Special Assets Ltd (1992) 174 CLR 178. Section 43 relevantly provides: Costs (1) … the Court or a Judge has jurisdiction to award costs in all proceedings before the Court … other than proceedings in respect of which this or any other Act provides that costs shall not be awarded. (1A) … (2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge. (3) Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following: (a) make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial; (b) make different awards of costs in relation to different parts of the proceeding; (c) order the parties to bear costs in specified proportions; (d) award a party costs in a specified sum; (e) award costs in favour of or against a party whether or not the party is successful in the proceeding; (f) …; (g) order that costs awarded against a party are to be assessed on an indemnity basis or otherwise; (h) … 47 Mr Jones originally submitted that the Court nonetheless does not have jurisdiction to order third party costs because s 1335(2) of the Corporations Act permits the Court only to make orders against parties to the proceedings. Section 1335(2) provides: The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs. 48 Mr Jones relied on the line of authorities which include Re Wridgemont Display Homes Pty Ltd (1992) 39 FCR 193 per Jenkinson J (Wridgemont) and Australian Forest Managers Limited (in liq) v Bramley (1996) 65 FCR 13 per Lindgren J in this Court (Australian Forest Managers). 49 This argument was rejected in Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd (2009) 176 FCR 348 at [293]-[314] per Lander J (Consolidated Byrnes) and in Re Firepower Operations Pty Ltd (in liq) (No 3) (2010) 183 FCR 150 at [16]-[18] per Siopis J (Re Firepower). Mr Jones ultimately conceded that the Court does have jurisdiction on the authority of the Full Court of this Court in MG Corrosion Consultants Pty Ltd v Vinciguerra (No 2) (2011) 276 ALR 319 at [15]-[18] per North, McKerracher and Jagot JJ (MG Corrosion Consultants). 50 In MG Corrosion Consultants, the Full Court said at [18] that "[i]t follows, therefore, that there is power to make an order with respect to costs in relation to a non-party to a proceeding" after it cited at [15]-[17]: Re Firepower at [16]-[18], the use of a similar power by Le Miere J in Huntingdale Village Pty Ltd v Corrs Chambers Westgarth [2011] WASC 44 at [30]-[34] and the decision of Rares J in City of Swan v Lehman Bros Australia Ltd (No 3) [2009] FCA 1190 at [13] (City of Swan). In City of Swan, Rares J concluded that under s 1337S(1)(c) of the Corporations Act, the Court's rule making powers under s 59 of the FCA were extended "without limitation, with respect to costs", so as to extend to non-parties despite the word "party" in s 1335(2). I note that Rares J took recourse to s 1337S as a second resort; counsel in argument had accepted that s 1335(2) precluded the award of costs against non-parties on the basis of the decisions in Wridgemont and Australian Forest Managers. It does not appear that his Honour was taken to the decisions of Chernov J in U.T.S.A. Pty Ltd (In liquidation) v Ultra Tune Australia Pty Ltd [1999] 1 VR 204 and Brereton J in Re Struthers, Liquidator of Project Management, Architecture and Construction, Interior (Paci) Pty Ltd (No 3) (2005) 64 NSWLR 392 which were persuasive to Lander J in Consolidated Byrnes and Siopis J in Re Firepower. The position of the later authorities is that s 1335(2) should be taken as an enabling provision, not a limitation on the power conferred by s 43: see in particular Consolidated Byrnes at [303]-[314], and I understand the Full Court's reference to City of Swan as being a further basis on which the Court has power to order costs against a non-party in appropriate cases. 51 Having regard to the language of s 459N, I regard that provision also as being facilitative, not exclusionary of the powers of the Court to award costs under s 43 of the FCA. See also Hornet Aviation Pty Ltd v Ansett International Air Freight (1994) 16 ACSR 21 at 28-29 per Northrop J and New Era Installations Pty Ltd v Don Mathieson & Staff Glass Pty. Ltd (1999) 31 ACSR 53 at [49] per Katz J.

Exercise of discretion 52 Six categories of cases in which the courts have ordered non-parties to pay costs were summarised in Symphony Group Plc v Hodgson [1994] QB 179 at 191-192 per Balcombe LJ; his Honour noted that the categories are not rigid or closed. 53 The principles governing such awards were usefully summarised by Collier J in Citrus Queensland Pty Ltd v Sunstate Orchids Pty Ltd (No 10) [2009] FCA 498 at [20]-[21]: [20] Although as a general rule costs are not awarded against a stranger to litigation, as I have already indicated it is well-settled that the Court has a discretion pursuant to s 43 of the Federal Court Act to order costs against a non-party in appropriate circumstances (Knight (1992) 174 CLR 178, Caboolture Park (1993) 45 FCR 224, Gore v Justice Corp Pty Ltd (2002) 119 FCR 429, Kebaro Pty Ltd v Saunders [2003] FCAFC 5, Life Therapeutics Ltd v Bell IXL Investments Ltd (No 2) (2008) 170 FCR 595). The exercise of such discretion is approached with caution - indeed it has been described as "rare and exceptional" (Vestris v Cashman (1998) 72 SASR 449 at 467, Kebaro [2003] FCAFC 5 at [103]) - and depends on the circumstances of each case as it is a "fact-specific jurisdiction" (Kebaro [2003] FCAFC 5 at [69]). Principles guiding the approach of the Court to the exercise of the include the following: There must be a real link between the non-party and the proceedings, which is material to the issue of costs (Bischof v Adams [1992] 2 VR 198 at 204-205, Kebaro [2003] FCAFC 5 at [70]). The mere fact that a person may benefit from litigation will not, without more, suffice to justify an award of costs (Bischof v Adams [1992] 2 VR 198 at 204-205, Vestris v Cashman (1998) 72 SASR 449, Kebaro [2003] FCAFC 5 at [70], Probiotec Ltd v The University of Melbourne (2008) 166 FCR 30 at [48]). An order for costs may be appropriate - provided the interests of justice so require - where the party to litigation is an insolvent person or a man of straw, the non-party has played an active part in the conduct of the litigation and the non-party has an interest in the subject of the litigation (Mason CJ and Deane J in Knight (1992) 174 CLR 178 at 192). Regard will be had to whether the non-party had been warned, or the non-party could have been joined as a party or applied to join earlier in the proceedings and thereby obtained the protection of the rules of the court (Vestris v Cashman (1998) 72 SASR 449, Kebaro [2003] FCAFC 5 at [75], Yates v Boland [2000] FCA 1895 at [32]). It can be appropriate to exercise the power against a person who may be characterised as no more than a real party to the litigation in critical and important respects, albeit not the only such party (Kebaro [2003] FCAFC 5 at [111], Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 at 414, Gore (2002) 119 FCR 429 at 439). An order for costs may be appropriate where a non-party causes a party to bring or defend proceedings for his or her own financial benefit, either to gain the fruits of the litigation or to preserve assets in which the person has an interest (Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 at 765). Where a non-party has maintained or financed an action, or caused an action, or has some management of the action, a costs order may be appropriate (Symphony Group Plc v Hodgson [1993] 3 WLR 830 at 840). This may be the case where, for example, the nominal plaintiff is mentally incompetent and the non-party has a substantial interest in the outcome (Flinn v Flinn [1999] 3 VR 712). [21] Conversely, the courts have declined to order costs against a non-party: Simply because the non-parties were directors of the plaintiff company and had caused the plaintiff to commence and maintain proceedings in circumstances where they ought to have known that, if the proceedings were unsuccessful, it was unlikely that the plaintiff could meet a costs order: Carborundum [1992] 3 NZLR 757. Where the non-party had not been separately represented at the hearing of the primary proceedings. Simply because the non-party is a legal expense insurer (Murphy v Young & Co's Brewery plc [1997] 1 WLR 1591). 54 The order will be made when, in the circumstances of the particular case, it is just and equitable that a non-party pay the costs of a party to the litigation: Vestris v Cashman (1998) 72 SASR 449 at 469 per Lander J. His Honour also said at 468: … In exercising the discretion regard would be had to whether the non-party could have been joined as a party earlier in the proceedings and thereby obtained the protection of the rules of court; whether the non-party has had any warning that an application for costs against that party would be made; whether, in those circumstances, the non-party could have applied to be joined in the proceedings and thereby had the capacity to influence the proceedings or the non-party could have protected itself by making an offer in accordance with the rules; whether if a warning had been given the non-party could have terminated the proceedings by discontinuance, negotiation, payment or otherwise; whether the party who would otherwise be usually liable for costs can meet an order for costs and if relevant the reason why that party cannot meet an order for costs; whether it was apparent at any earlier stage in the proceedings, and if so when, that the party could not meet costs; whether the moving party should have sought an order for security for costs; the relationship, if any, between the non-party and the party who would usually be liable for costs; whether the non-party has caused the proceedings; whether the non-party has funded the proceedings; whether the non-party stood to benefit by the litigation and if so how; whether the non-party had a direct or indirect financial interest in the litigation; and whether there has been any improper conduct on the part of the non-party. None of the matters will necessarily be decisive. Indeed the presence of one or more of those matters does not inexorably lead to the conclusion that an order for costs should be made against a non-party. In Bischof v Adams the mere fact that a person may benefit from the litigation was not enough. …

Mr Jones 55 It is fair to say that the Court has not had the benefit of full disclosure of the role played by Mr Jones. Mr Jones has provided no evidence himself. Nor has Ms Edwards provided evidence on the costs issue; she played a pivotal role in the Statutory Demand and the conduct of the defendant's role in the proceedings. The Brown Affidavit is of very limited scope. Had the Hathway Affidavit not been provided, and in the terms it was, it is doubtful whether much of the correspondence which is attached to the Noonan Affidavit would otherwise have emerged. That correspondence reveals the relationship of Brown & Partners with Mr Hathway and staff at SV Partners and, incidentally to that, with Mr Jones. The Noonan Affidavit does not say that it attaches all of the correspondence between Brown & Partners and Mr Jones or Mr Hathway and SV Partners nor does it include file notes of conversations with them or anyone else at SV Partners (if such file notes exist) which might illuminate with certainty from where Brown & Partners received its instructions at each stage of the proceedings. 56 Nevertheless, on the basis of the evidence available to me, I am satisfied that it would be appropriate to make an order for the payment of costs by Mr Jones. 57 The evidence which has been provided discloses a real link between Mr Jones and the issue of the Statutory Demand and subsequent proceeding. Mr Jones has played an active part in the conduct of the litigation, even if the Liquidators' (through Mr Gallant's letter to Mr Carroll of 6 May 2013) resist the characterisation that they acted at his "behest" and assert that Mr Hathway exercised his powers independently. The Liquidators certainly acted at Mr Jones instigation in issuing the Statutory Demand and he financed the litigation; they would not have acted without Mr Jones' indemnity; he was in a position to bring the proceedings to an end at any time and Brown & Partners acted on his instructions to issue the Rejection Letter. Mr Jones is the person who would benefit from pursuit of the action. He was not simply a creditor of an insolvent company who might benefit, along with other creditors, from action pursued by the Liquidators of their own initiative. Ms Edwards appeared to look to Mr Jones first: I consider it fair to characterise him as the "real party" to the action. For these and the following reasons, I reject the submissions set out in [15] of Mr Jones' written submissions: (a) Mr Jones' commercial motivation is plain from the background provided to Mr Hathway in Ms Edwards' letter of 8 March 2013 and Ms King's letter of 26 January 2012: see [13]-[14]. It appears that until at least 21 February 2013, Mr Jones was and would have expected to be the sole creditor of the defendant for $430,000 (albeit that if Ms King is right and Mr King paid half of the amount outstanding to NAB the basis for a debt of $430,000 to Mr Jones is unclear). Mr Jones would therefore have expected to be the beneficiary of the payment of the Statutory Demand (subject to payment of professional costs). He would have been in a position to exert commercial leverage on Mr King by reason of the service of the Statutory Demand and the conduct of the proceedings. Mr Jones and Mr King appear to have a failed business relationship and a difficult litigious history. (b) Mr Jones' instructions to Brown & Partners in relation to the preparation of the Statutory Demand predate the Liquidators' involvement with Brown & Partners and Brown & Partners (and Counsel who acted for the defendant in the proceedings) continue to act for Mr Jones. Mr Jones instructed Brown & Partners to draft the Statutory Demand which was provided to Mr Zheng and Mr Hathway (cc Mr Jones) on 20 July 2012: see [15]. The Costs Agreement between Brown & Partners and the Liquidators is dated the same day (17 August 2012) as the indemnity from Mr Jones: see [16] and [17]. In his letter of 6 May 2013, Mr Gallant says: "It is certainly the case that had the indemnity not been provided the liquidator would not have issued the statutory demand". This is because the defendant had no funds from which the Liquidators could have acted independently. (c) Mr Jones funded all aspects of the proceedings from the drafting of the Statutory Demand onwards. It is true that Mr Jones did not stand to "profit" from the proceedings in the sense of a commercial funder (as was found relevant in Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429). Mr Jones sought the Liquidators' agreement that he would share in the "fruits" of the proceedings only after receiving back the costs of the litigation, the Liquidators' fees and then equally with other creditors (see [18]), although the Liquidators did not respond to this proposal. Until 21 February 2013 when TPP lodged its claim, Mr Jones was the sole creditor for an amount of $430,000: annexure B to the Second Carroll Affidavit. It appears that Ms Edwards had reason to suspect that TPP might lodge a claim as early as approximately 30 January 2013 (see [29]), but that claim did not emerge until after the plaintiff's application to have the Statutory Demand set aside had been heard. Accordingly, Mr Jones would reasonably have expected to be the sole beneficiary if the defendant was successful. While the Statutory Demand is a claim only the defendant could make, its prosecution served Mr Jones' interests and no one else. (d) Correspondence with the Carrolls Lawyers was often sent by Ms Edwards first to Mr Jones and then copied to the Liquidators or their staff (albeit often in the same email). Mr Jones was copied on all substantial correspondence: see [20]-[41] above. While there are clear gaps in the correspondence provided so that all aspects of Mr Jones' involvement with Brown & Partners is not transparent, Mr Hathway's evidence that the Rejection Letter was sent without the Liquidators' instructions is uncontroverted by the Noonan Affidavit and it is consistent with Ms Edwards having acted on instructions from Mr Jones, as is the 5 April 2013 letter to Mr Carroll which clarifies that the Rejection Letter was made on behalf of Mr Jones even though he was not a party to the litigation in any formal sense (see [41]). It is not clear on what basis the moneys received by Brown & Partners from the plaintiff in December 2012 were applied to legal costs: the evidence is that the Liquidators did not respond to the regime for dealing with the "fruits" of the Statutory Demand (see [18]) and it would have been more appropriate for Brown & Partners to seek instructions from the Liquidators about how those moneys were to be applied rather than take it upon themselves to act first and inform the Liquidators later (see [33]). It is, however, consistent with the view that Mr Jones was an active participant in the litigation and Ms Edwards looked to him for direction. (e) The fact that Mr Jones instigated the issuing of the Statutory Demand (including instructing his solicitors to draft it and then seek the Liquidators' agreement to issue it), funded the proceedings (without which the proceedings would not have commenced and are unlikely to have continued), his lawyers had conduct of the matter both before and after the Liquidators were involved in relation to the Statutory Demand and the proceedings, and the extent of his involvement as disclosed in the correspondence referred to in the immediately preceding paragraph all demonstrates that Mr Jones did take an active role in the proceedings. It is my view that the evidence demonstrates that at the very least Mr Jones shared control with the Liquidators. That the Liquidators had previously sought information from Mr King and Ms King by their letters of 23 November 2011 and 3 May 2012 does not derogate from the role that Mr Jones played. I deal with the relevance of the difficulties faced by the Liquidators in getting relevant information from Mr King and Ms King at [65] below. The letter of 3 May 2012 did attach a copy of the 2010 Balance Sheet: that letter did not, as asserted in Mr Jones' submissions, demand payment of the amount of the Statutory Demand, but rather requested information: see attachment G to the Edwards Affidavit. The 3 May 2012 letter was in the following terms: Balance Sheet We refer to the Balance Sheet for TBSC for the period ending on 30 July 2010 (copy attached), and in particular a loan of $75,221.96 to TPPI: 1. What was the purpose of this loan and to whom was it paid? 2. Has this sum been repaid? If so, when? 3. Has any arrangements been made to repay the same? 4. Is TPPI able to pay the same? 5. Please provide a copy of the latest Balance Sheet of TPPI. 6. Please provide a list of payments reflecting how this money was applied. 58 Mr Jones asserted that it was a relevant factor that notwithstanding that the plaintiff knew that the defendant lacked funds it did not seek an order for security for costs. The special nature of proceedings under s 459G was recognised in Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 622 per Sundberg J and most lately in Aurora Networks Pty Ltd v Halbedl; In the matter of Aurora Networks Pty Ltd [2013] FCA 632 in which Foster J refused to grant an application by the defendant for security for costs against the plaintiff because a s 495G action is essentially defensive: it is necessary to avoid the statutory presumption of insolvency. In Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 13 ACSR 263 and Aspermont Ltd v Lechmere Financial Corp [2001] WASC 35, the Court recognised that it may be appropriate for this reason to award security for costs on a s 459G application against a foreign defendant but in each case it was not done for discretionary reasons. 59 I do not consider that the plaintiff's failure to seek security for costs is a factor which should prevent a non-party costs order against Mr Jones in the facts of this case. Mr Jones had an active role in these proceedings as discussed in [57] and suffered no prejudice by not being joined as a party or from the failure of the plaintiff to seek security for costs. Mr Jones was formally put on notice of the jeopardy of the application for costs against him from 6 February 2013 when he received a copy of the Settlement Offer. The Settlement Offer identified the fact that if the Statutory Demand was not withdrawn and the proceedings terminated on the basis that each party pay its own costs the plaintiff would seek party/party and if appropriate indemnity costs against the "the liquidator and/or the funder of the present Proceeding": see [30] above. Mr Jones has also had the opportunity to provide submissions and submissions in reply on the issue of costs.

The Liquidators 60 The Liquidators are also non-parties to the proceedings. I am satisfied that no costs order should be made in relation to them primarily because the plaintiff seeks the order against the Liquidators in the alternative and I am satisfied that an order should be made against Mr Jones. This view is reinforced by the suggestion made to Carrolls Lawyers in Ms Edwards email of 5 April 2013 (see [40] above) that if an order were to be made against the Liquidators, Brown & Partners would advise them to have recourse to the indemnity provided by Mr King (presumably at the time of the members voluntary winding up), rather than her other client, Mr Jones who had given an indemnity in relation to the conduct of these proceedings. It is, perhaps, as well that the Liquidators sought other advice which was not open to conflict of interest at this point. 61 Other relevant factors are: (1) Mr King and Ms King failed to provide information to the Liquidators in a timely way when requested, and Ms King only provided the 2011 Balance Sheet in response to a notice to produce which was issued by the defendant in October 2011; (2) the Liquidators were acting in pursuance of their statutory function of getting in the assets of an insolvent company; (3) importantly, they are indemnified by Mr Jones, who appears to be the real contestant as part of an ongoing dispute with Mr King and Ms King; and (4) it is arguable that Liquidators should have recognised that there was a real dispute about the claimed debt on which the Statutory Demand was based at the latest on 30 November 2012 (because the Edwards Affidavit demonstrated that the 2010 Balance Sheet was plainly incorrect and they had by that time access to the 2011 Balance Sheet which showed that TPP, not the plaintiff, was a debtor of the defendant); that it is even more so the case after 13 December 2012 and that they should prudently have settled the proceedings on receipt of the Settlement Offer. Their conduct therefore may not be above criticism. However, I do not consider that this would be a sufficiently compelling case in the interests of justice to award costs against them when it is open to the Court to make a costs order against Mr Jones: see Macks v Hedley (1999) 94 FCR 188 at [82]-[85]. In that case the Full Court of this Court (Gallop, Moore and Madgwick JJ) remarked on the special position of official liquidators which is to be protected, absent serious delinquency on their part and I do not consider that Liquidators' conduct amounted to serious delinquency. 62 I have taken into account Mr Gallant's 6 May 2013 letter to Mr Carroll which said: It is certainly the case that had the indemnity not been provided the liquidator would not have issued the statutory demand. The liquidator does not agree that he acted at the "behest" of Mr. Jones - the liquidator exercises his powers and responsibilities independently and has not acted at "behest" … of anyone. We raise this only due to our understanding of the meeting [sic] of the word "behest" but trust this part of the response addresses the queries you have raised. 63 I have also taken into account that paragraphs [5] and [6] of the Hathway Affidavit are clearly not correct based on the email correspondence annexed to the Noonan Affidavit and that staff of SV Partners (and on occasion Mr Hathway himself) were involved in decisions or given notice of the conduct of the proceedings. I accept that the Rejection Letter was issued without the Liquidator's instructions. There is nothing annexed to the Noonan Affidavit which demonstrates that anyone at SV Partners gave instructions to reject the Costs Settlement Letter and the Noonan Affidavit otherwise provides evidence of communications between Brown & Partners, Mr Jones and SV Partners including Mr Hathway on almost every other significant aspect of the proceedings which are raised by Mr Hathway's claims in the Hathway Affidavit. I also accept that the Liquidators did not instruct Brown & Partners that they may act on the instructions of Mr Jones. However, there is no evidence that the Liquidators gave Brown & Partners instructions that they should not have regard to Mr Jones' views and it is plain from the correspondence that he played an active role in the proceedings.

Costs 64 I am satisfied that it would be unfair to leave the plaintiff with a worthless award of costs against the defendant. The fact that the defendant is impecunious is not contested. 65 I am not satisfied that costs should be awarded in respect of the period to 14 December 2012. This is because: (a) Although Carrolls Lawyers' letter of 24 September 2012 pointed out that the defendant's claim could not be maintained, Mr King and Ms King as company officers had not provided the Liquidators with up to date books and records of the defendant on the basis of which its assets and liabilities could be definitively determined. This is despite the requests for information by the Liquidators on 23 November 2011 and 3 May 2012 and Ms King's response on 26 January 2012. It was in the response of 26 January 2012 that the 2010 Balance Sheet was provided to the Liquidators. Ms King's explanation in the Supporting Affidavit for the plaintiff being shown as a debtor of the defendant in the 2010 Balance Sheet was error on her behalf which the defendants were entitled to test. Greater clarity was only achieved after the 2011 Balance Sheet and other information which was provided in response to a notice to produce issued in October 2012 and the work done by Ms King on books and records to enable her to prepare the December Affidavit to respond to the Edwards Affidavit and to correct errors in her Supporting Affidavit. (b) Even though the plaintiff asserts that the amount of $8,383.33 paid by the plaintiff on 14 December 2012 was not the same debt as claimed in the Statutory Demand, it was an amount owed by the plaintiff to the defendant, and the plaintiff's contention that it is not part of the same debt is not clearly right. The amount exceeded the statutory minimum. 66 The plaintiff claims indemnity costs, and in the alternative on the ordinary basis until 5 February 2013, the date on which it sent the Settlement Offer, and thereafter on an indemnity basis. 67 In CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100 (CGI) at [18] - [22] there is set out the relevant principles for determining when indemnity costs are appropriate to be awarded to a successful plaintiff on a s 459G application: [18] CGI seeks an order for costs on the indemnity basis. In doing so, it invokes the general principle that an award of costs on that basis is appropriate in cases of what Gaudron and Gummow JJ called, in Oshlack v Richmond River Council (1998) 193 CLR 72; 152 ALR 83, "relevant delinquency", including "some improper defence or other misconduct". [19] In the s 459G field, Santow J warned in a number of judgments that, with the hurdle to be cleared by companies seeking to have statutory demands set aside being so low, creditors persisting with the defence of such applications need to consider carefully, against the possibility of an order for indemnity costs, whether there are valid grounds for their taking up court time and putting the company to expense by doing so: see eg Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1997) 16 ACLC 529; Buddies Liquor Pty Ltd v Wah Lai Investment (Aust) Pty Ltd (2001) 19 ACLC 855; Austrac Rail Pty Ltd v Hunter Premium Funding Pty Ltd [2001] NSWSC 654; BC200104352. A clear warning to the same effect was issued by the Full Court of the Supreme Court of South Australia in Drewniak v Air Rubber Pty Ltd (2002) 84 SASR 302. [20] Indemnity costs have been awarded in some s 459G cases. In Galaxy Resources Ltd v Arrinooka Pty Ltd [2002] WASC 70; BC200201522, an order of that kind was made where the statutory demand asserted debts said to come from an oral agreement, where the supposed conversation was denied by one of its supposed parties and the plaintiff offered to withdraw its application and bear its own costs on the basis that the defendant withdrew its statutory demand, an offer that Master Bredmeyer said should have been accepted. In Wildtown Holdings Pty Ltd v Rural Traders Co Ltd (2002) 172 FLR 35, the Full Court of the Supreme Court of Western Australia found that the statutory demand was grossly defective and its accompanying affidavit was obviously inadequate, yet the defendant persisted in resisting an application to have the demand set aside. The court saw the case as involving "shortcomings … sufficiently serious … to warrant the conclusion that the respondent's defence of its position was an abuse of the court's process, arguably justifying an award of indemnity costs". In Carinda Homes Pty Ltd v Highlands Austral Pty Ltd [2003] FCA 275; BC200301362, Lindgren J ordered costs on the indemnity basis where the evidence made it plain that the time limit fixed by s 459G(2) and (3) (which is immutable: David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; 131 ALR 353; 18 ACSR 225) had not been met, so that, as his Honour put it, "the proceeding was doomed to fail" and it was "quite unreasonable for it to be pursued once 25 February 2003 had passed without service having been effected". [21] At the same time, it is important to remember that the party by whom a statutory demand is served is entitled not only to test the recipient company's claim that the alleged debt is genuinely disputed but also to see the evidence the plaintiff is able to marshal in support of the claim of genuine dispute. That principle has been stated on several occasions by Palmer J in sounding a note of caution about the award of indemnity costs in this type of case: see Redglove Holdings Pty Ltd v GNE & Associates Pty Ltd (2001) 165 FLR 72; Club Marconi of Bossley Park v AVR Services (NSW) Pty Ltd [2002] NSWSC 584; BC200203662; Grass Manufacturers Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95; BC200300470. [22] I accept that the possibility of an order for indemnity costs should not be allowed to deter a party by whom a statutory demand has been served from putting the company to appropriate proof of the genuine dispute it asserts. But that principle has a limit to it. As Galaxy Resources, Wildtown Holdings and Carinda Homes show, there are cases in which attempts to resist the setting aside of the demand are, even on the interpretation of the facts most favourable to the defendant, so devoid of prospects of success as to be perverse. The opportunity to put the company to proof of the asserted genuine dispute is something to which the defendant should not be regarded as entitled in such obvious cases. A defendant, on having an obvious and irremediable weakness in its position pointed out, ought to withdraw the statutory demand. If, in such circumstances, such a defendant does not do so, it may well be appropriate for the court to award costs to the plaintiff on the indemnity basis. 68 It is plainly inappropriate that Court time be taken and the plaintiff incur the time, cost and anxiety attendant on statutory demands when the defence to a s 459G application to set aside a statutory demand is irredeemably weak. The service of the Statutory Demand in this case may have been justified although the 2010 Balance Sheet was always a slender basis for the demand. I consider that there were circumstances demonstrating a plausible contention requiring investigation from 30 November 2012 when Ms Edwards swore the Edwards Affidavit for the reason at [39] of Product People and that became clearer by 13 December 2012 when the December Affidavit was served and the payment of money was foreshadowed for an admitted debt. However, I do not consider that the award of indemnity costs is appropriate notwithstanding the Settlement Offer because the defendant had available arguments which deserved testing (albeit not successful) (primarily that based on the Greywinter principle) and I am conscious of the stricture at [21] of CGI. Further, the Settlement Offer did not comply with the time periods justifying the award of indemnity costs under Part 25 of the Federal Court Rules 2011 (Cth). 69 I will therefore make no order as to costs in respect of the period to 14 December 2012. I order that Mr Jones pay the plaintiff's costs (including costs of the application for costs) incurred after that date on a party/party basis. I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.