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[1994] NTSC 49
Supreme Court of the NT
1994-05-24
Angel J, Kearney J
Original judgment source is linked above.
COURT IN THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA KEARNEY J CWDS Corporations - winding up - application to set aside a statutory demand - supporting affidavit - applicability of Supreme Court Rules to the Corporation Law - non-compliance with r43.03(2) of the Supreme Court Rules - failure to state grounds of belief - whether Court has discretionary power to dispense with that requirement. Supreme Court Rules (NT), r43.03, r2.04. Supreme Court (Companies) Rules (NT), r7, r12(3). Supreme Court (Corporations Law) Interim Rules (NT), r4. Corporations Law (Cth), s459G. Tchia v Rogerson, (unreported, Angel J, 9 October 1992), referred to. Re Marloss One Pty Ltd (1992) 10 ACLC 30, followed. J-Corp Pty Limited v Ingram (1988) NTJ 329, followed Corporations - winding up - application to set aside a statutory demand - general principles - Court must first ascertain if there is a "genuine dispute and/or offsetting claim" - if so satisfied, the Court is required to calculate the "substantiated amount of the demand". Corporations Law (Cth), s459H. Re Morris Catering (Australia) Pty Ltd , followed. Corporations - winding up - application to set aside a statutory demand - very limited role of Court in ascertaining if there is a "genuine dispute and/or offsetting claim" - circumstances in which factual basis may be investigated - circumstances in which deponent of supporting affidavit may be cross-examined. Mibor Investments Pty Ltd v Commonwealth Bank of Australia ; , followed. Re Morris Catering (Australia) Pty Ltd , followed. Moyall Investments Services Pty Ltd v White , followed. Eyota Pty Ltd v Hanave Pty Ltd , followed. CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd , followed. Century 21 Australasia Pty Ltd ; , referred to. Corporations - winding up - application to set aside a statutory demand - court must ascertain if there is a serious question to be tried as to whether there is a "genuine dispute and/or an offsetting claim" - applicant bears the onus of proof - need to adduce primary evidence. Moyall Investments Services Pty Ltd v White , followed. Scanhill Pty Ltd v Century 21 Australasia Pty Ltd ; , followed. CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd , followed. Re Morris Catering (Australia) Pty Ltd , followed. American Cyanamid Co. v Ethicon Ltd ; , considered. The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland , considered. Eyota Pty Ltd v Hanave Pty Ltd , followed. Corporations - winding up - statutory demand - application to set aside - costs of application - principles for award of costs. Corporations Law (Cth), ss459H, 459N. Re Morris Catering (Australia) Pty Ltd , followed Felkro Nominees Pty Ltd v Austissue Pty Ltd ; , followed. Eyota Pty Ltd v Hanave Pty Ltd , referred to. L and D Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd , followed. Costs - winding up of corporation - statutory demand - application to set aside - costs of application - principles for award of costs. Corporations Law (Cth), ss459H, 459N. Re Morris Catering (Australia) Pty Ltd , followed. Felkro Nominees Pty Ltd v Austissue Pty Ltd ; , followed. Eyota Pty Ltd v Hanave Pty Ltd , referred to. L and D Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd , followed. HRNG DARWIN, 22 April 1994 #DATE 24:5:1994 Counsel for plaintiff: A. Wyvill Solicitors for plaintiff: Halfpennys Counsel for defendant: N. Henwood Solicitors for defendant: Cridlands ORDER Order that the Statutory Demand of 9 February 1994 be set aside. JUDGE1 KEARNEY J On 9 February 1994 the respondent (herein "P and H") served a Statutory Demand on the applicant (herein "Ranford"), pursuant to s459E(2)(e) of the Corporations Law. P and H claimed that Ranford owed it $180,869.04, as the balance of monies due and payable for the haulage of ore and (waste) overburden between 2 November 1993 and 21 December. On 2 March 1994 Ranford applied pursuant to s459G for an order to set aside the Notice of Demand. I rule this afternoon on this application. BACKGROUND FACTS 2. Ranford has been an alluvial gold producer since 1989. Since December 1992 it has operated an alluvial gold mine on a tribute basis, at Bridge Creek. Its operation there consists of 3 working areas from which overburden and ore are removed, a small camp, and an alluvial processing plant. 3. In 1993 Ranford considered it would be unable by its own efforts to maintain a supply of ore at a level sufficient for it to continue to process ore efficiently during the Wet season. For that purpose it needed to build up a stockpile of ore near its processing plant. Consequently, on two separate occasions, in July 1993, and October - December 1993, Ranford contracted with P and H for that company to remove overburden, cart the underlying ore to a stockpile adjacent to Ranford's processing plant, and dispose of the overburden. P and H's demand arises out of the second contract. 4. The second contract was verbally entered into "on or about 3 November 1993", according to par4 of the affidavit of Mr Hutchinson, a director of P and H, of 8 March. It is not in dispute that its terms were subsequently reduced to writing. I note in passing that while the written contract is dated 8 November 1993, Mr Hutchinson deposed that it was "signed by (Ranford) on 20 January 1994". The written contract, clearly prepared by P and H, is as follows:- "In response to our meeting on site at Bridge Creek on 3rd November, 1993, and the verbal agreement for our company (P AND H) to strip overburden and mine alluvial ore at the above site, we now wish to confirm our agreement and clarify the following points:
I accept Mr Henwood's submission. However, Moyall (supra) does not refer to the standard of proof which Ranford must meet in that regard. Mr Wyvill submitted that the "arguable case" standard applies; that is, it is the same standard as on an application for an interlocutory injunction. See in this regard American Cyanamid Co. v Ethicon Ltd [1975] UKHL 1; (1975) AC 396 at 407-408 and The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland (1982) 57 ALJR 425. 30. In my opinion, the standard to be applied for the purposes of s459G is whether Ranford has satisfied the Court that there is a serious question to be tried: see Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 120 ALR 173 at 189, CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (1993) 11 ACSR 773 at 775, and Re Morris Catering (Australia) Pty Ltd (supra) at 603-604. This standard means that a "genuine dispute" connotes a plausible contention requiring investigation; see Eyota Pty Ltd (supra). RANFORD'S CASE 31. Mr Wyvill, relying on the affidavits of Mr Ewens of 2 March and 21 April and Mr Padgett's affidavit of 20 April, submitted that there is a serious question to be tried that P and H is liable in damages to Ranford, on a two-fold basis as follows. (i) Breach of contract: He submitted that the first basis of the liability of P and H is breach of contract. First, the contract (see pp2-3) contained an express warranty by P and H that the loads of the 631 and 621 scrapers respectively would contain 25 cubic metres and 18.5 metres. Alternatively, he submitted, in order to give business efficacy to the contract there is an implied warranty by P and H that it would use its best endeavours to ensure that those loads were full loads. He submitted that it was reasonably arguable that P and H was in breach of its express or implied warranty, in that if the loads had been full, Ranford's stockpile would not have been exhausted when in fact it was exhausted, on 7 March 1994. 32. I note that for the purposes only of this application Ranford conceded that there was no dispute as to the actual number of loads delivered by P and H; see Mr Hutchinson's affidavit of 8 March 1994, par6, annexure "C". Ranford's case is based solely on the volumes shifted by the 631 and 621 scrapers; it alleges they were "wrong to a substantial degree", as compared to the invoices. Mr Padgett deposed that:- "I believe the stockpile to have been approximately 28,000 cubic metres short on the volumes advised to Ranford by P and H." The total volume advised by P and H was 99,449 cubic metres of ore; see Mr Padgett's affidavit of 20 April, annexures "B" and "C". 33. To substantiate Ranford's claim of this shortfall of about 28,000 cubic metres in the amount of ore P and H had shifted to the stockpile, Mr Padgett deposed to the following calculations:- "15. manufacturers of the 631 and 621 scrapers, Caterpillar, advise in their technical brochures that the 631 is capable of being loaded to a maximum of 23.7 cubic metres, and the 621 to a capacity of 15.3 cubic metres. ... 18. My calculations are based on a number of factors. First, the ore is transferred from the stockpile (for the purpose of processing) to a hopper by Ranford's loader, a 966E caterpillar loader equipped with a standard general purpose bucket rated at 3.1 cubic metres loaded flat and 3.3 cubic metres loaded heaped. The average load is 3.0 cubic metres and the driver maintains a tally counter to record the number of loads and hence the volume of ore removed from the stockpile. Secondly, ore is fed to the (processing) plant from the hopper. Records indicate the volume fed by the loader to the hopper as being equivalent to the volume of ore processed by the plant at the speed at which it was set. Records indicate the volume of ore processed when set at certain speeds. The plant can be set at various speeds so as to process particular volumes of ore. 19. Figures derived from the loader records correspond with
the figure derived from the plant records. 20. Thirdly, Ranford is able to determine the quantity of gold that it can expect to extract from any given quantity of ore taken from this particular location. The amount of gold concentrate being obtained by Ranford at the present time correlates with the yield expected from the quantity and grade of ore being processed." 34. I note that in cross-examination, par18-20 were attacked; see pp26-29 of the transcript. Par15 was not sought to be controverted; this may raise an issue of mutual or unilateral mistake - see Clause 6 of the contract, at p3. However, this issue was not sought to be raised before me. (ii) Misleading and deceptive conduct: Second, Mr Wyvill submitted that it was reasonably arguable that P and H is liable in damages to Ranford, for misleading and deceptive conduct, pursuant to s52 of the Trade Practices Act. He submitted that the daily invoices (see Clauses 3-4, p3) given by P and H to Ranford, which Mr Padgett had signed, represented that P and H had, in total, shifted 99,449 cubic metres of ore to Ranford's stockpile. Ranford had relied on that representation. Consequently, pursuant to s82 of the Trade Practices Act, there was a serious question that Ranford could recover damages from P and H. P and H'S CASE 35. Mr Henwood submitted that Ranford's case was "spurious", and amounted to "bluster" and mere "assertion"; cf Re Morris Catering (Australia) Pty Ltd (supra) at p605. He submitted that Ranford had failed to discharge its onus of showing that there was a serious question to be tried, in relation to the genuineness of the offsetting claim. He submitted that this Court, in effect, was being asked to believe that there was a genuine dispute, on the basis of "an allegation, in effect, ... that the scrapers used by P and H Earthmoving were effectively two-thirds full for the whole contract". And this, notwithstanding the following 5 matters, viz: (i) Mr Padgett signed the contract on 20 January 1994, some 4-5 weeks after P and H had completed its work under the contract, notwithstanding his alleged concerns as to the "volume of ore in the stockpile" which he said he had raised in December 1993 and January 1994 with Mr Hutchinson; see pars 30-31 of Mr Padgett's affidavit of 20 April 1994; (ii) Ranford had not adduced any primary evidence to support the "assertions" that its records showed that less ore was processed than was supposed to have been in the stockpile: see Scanhill (supra) at p186. (iii) Ranford's records were unreliable: see transcript pp26-29.
where a respondent had sought to cross-examine a deponent on his supporting affidavit; and there Hayne J had not allowed it. 45. He submitted that Scanhill (supra) did not support P and H's application. In that case Beazley J did not allow cross-examination, even though the affidavit, which asserted bare facts (it resembled a pleading) was bereft of particulars; he submitted that here Ranford's supporting affidavit set out detailed particulars of its claim and consequently the case for cross-examination was weaker than in Scanhill. 46. Mr Wyvill conceded that if this case involved a simple issue of fact, such as the delivery or non-delivery of goods, cross-examination would be permissible. However, it involved a complex factual matrix and was not suitable for cross-examination. Ranford would then have to cross-examine the deponents of affidavits in support of P and H, to ascertain if the dispute is genuine. Effectively, then, the Court would be departing from its limited role in that it would be conducting an investigation into the merits and the likely result of the dispute. He submitted that:- "... the authorities are unanimous in saying that it is a very high hurdle they need to cross. It's only in the clearest of cases that you look at the genuineness and expose the lack of genuineness very quickly". He submitted that in the complex factual matrix of this case, cross-examination would not resolve that question. 47. In reply, Mr Henwood conceded that the facts were complex and that he might not succeed in cross-examination in destroying the whole of Ranford's assertions. However, he submitted that P and H could thereby clearly show that the dispute was not genuine, and that the substantiated amount was greater than the statutory minimum. 48. I ruled that:- "... this Court has a very limited role in (ascertaining)
the genuineness of the dispute. And it is clear also that that determination is not to take place as a result of some protracted inquiry. All of that would tend to support the proposition put forward by Mr Wyvill. However ... I THINK IT RIGHT IN THIS CASE AND ON THE FACTS, as I presently understand them to be, to grant Mr Henwood's application, and I will give you leave to cross-examine ...." (emphasis mine) 49. My reasons for that ruling were that I concur with what Hayne J said in Mibor (supra) at 365:- "It may be that in some, perhaps limited circumstances the court may have to make some investigation of the factual basis of the claim that a debt is disputed before it could be satisfied that that dispute is a genuine dispute. Each case will fall for decision upon its own facts." 50. I considered that this case involves allegations of several factual disputes; and notwithstanding that this Court has a limited role and must not embark on an inquiry into the merits of the dispute or the credit of a deponent, to establish if the dispute is "genuine", it was a case where the Court should "make some investigation of the factual basis of the claim before it could be satisfied that that dispute is a genuine dispute"; see Mibor (supra) at p365. 51. In my opinion, what amounts to an "extreme case" (Eyota Pty Ltd v Hanave Pty Ltd (supra)) or "some, perhaps limited, circumstances" or "rare" cases (Mibor, at pp364-365) is always a question of fact bearing in mind the nature of the proceedings and the limited role of the Court therein. WHETHER THE SUBSTANTIATED AMOUNT IS LESS THAN THE STATUTORY MINIMUM, UNDER S459H(3) 52. I have indicated I am satisfied that there is a serious question to be tried in regard to the genuineness of the dispute as to the amount of the debt and the offsetting claim. This Court is now required to calculate the substantiated amount of the demand (s459H(2)). The calculation is in accordance with the formula, "admitted total" minus "offsetting total" in s459H; see pp9-10. 53. As noted earlier, the "statutory minimum" is currently $2,000. 54. As to the approach to the calculation, Thomas J said in Re Morris Catering (Australia) Pty Ltd (supra) at 605:- "Broadly speaking, the Court is required to examine the claim, assess the undisputed parts of the debt that has been demanded, and deduct from it any offsetting claims of the debtor company. If the result is $2,000 or more, the Court has a discretion to vary the demand and to declare the varied demand to have had effect from the time when the original demand was served." However if the result is less than $2,000 then the statutory demand must be set aside: see s459H(3) and CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (supra) at 776. 55. As noted earlier, this case involves complex factual issues; this points to a serious difficulty in calculating "the substantiated amount" since many and varied factors, some presently speculative in light of the limited examination, impinge on the calculations. However, in accordance with the directive in s459H(2), I turn to this task, noting its inherent difficulties. 56. Mr Wyvill did not dispute that Ranford had become indebted to P and H, as a result of the contract, but submitted that the amount of the debt as claimed ($180,869.94) was not due and payable to P and H, and that Ranford had an offsetting claim far in excess of P and H's claim. 57. Initially, on the affidavit material, Ranford's case, as deposed to by Mr Padgett on 20 April, was that:-
"23. Average cost of carting ore and overburden amounts to
$3.07 per cubic metre. On a shortfall of 28,319 cubic
metres,
the amount that I estimate the stockpile was short
on figures supplied by P and H, Ranford has been called upon
to pay an amount
of $86,939.33 for cartage which has not
taken place.
...
25. Ranford supplied fuel to P and H for its earthmoving
equipment.
P and H moved both ore and overburden. If P AND
H have moved a volume of approximately 28,000 cubic metres
less than has
been charged, then to now move that extra
volume would mean also moving approximately 42,000 cubic
metres of overburden, a
total of approximately 70,000 cubic
metres of extra material, to make good the shortfall. This
will incur additional fuel
costs of approximately
$10,500.00.
26. P and H were requested to stockpile sufficient ore for
Ranford to operate double
shift throughout the wet season.
When it became apparent that the stockpile was insufficient,
Ranford reduced to one shift.
It has not processed any ore
of significance since 7 March 1994, when the stockpile ran
out.
27. Ranford has ben virtually
at a standstill for
approximately one month. It is unlikely that Ranford will
be able to cart its own ore again until the
end of April
1994, by which time Ranford is likely to have been
unproductive for approximately two months.
28. Ranford
has been denied income from gold production
for a period of approximately two months as a result of P
AND H failing to stockpile
the quantity of ore requested and
as invoiced.
29. The expected income from such gold production for a
period of two and
a quarter months amounts to approximately
$180,000.00. This is on the basis of processing 13,000
cubic metres per month with
a grade comparable to that which
Ranford has been experiencing over the past 12 months or so.
Gold has been selling at approximately
$17.00 per gram,
amounting to a monthly income of approximately $80,000.00.
This amounts to $180,000.00 lost because of undersupply
over
a period of two and a quarter months, the amount of time
which I believe Ranford will be out of production as a
result
of P and H's failure to stockpile as requested and as
invoiced."
58. In essence, Ranford here claims that the amount of its undisputed
debt to
P and H is $93,929.71, based on the amount of ore it contends was delivered by
P and H; that figure is derived from $180,869.04
(P and H's claim) -
$86,939.33 (par23) to make good the alleged shortfall. It also claims to have
an "offsetting claim" of $190,500
(being $180,000 plus $10,500 for fuel). If
Ranford's version of the facts is accepted as reasonably arguable, and the
statutory
formula in s459H is applied to these figures, clearly the
"substantiated amount" is negative and this Court, applying s459H(3), would
have to set the statutory demand aside.
59. However, later in the proceedings, relying on evidence adduced from Mr
Padgett in cross-examination
and re-examination, Mr Wyvill prepared "a
statement of the assessment of loss" which sets out a 'best case' and 'worst
case' assessment
of the loss Ranford claims to have sustained.
60. That assessment of loss is as follows:-
"RANFORD GOLD MINES
ASSESSMENT OF
LOSS
Cost of rectifying Respondent's breach
Best case
ore 28,000 by $3.07 per cubic meter 85,960.00
o/burden
42,000 by $3.07 per cubic meter 128,940.00
extra fuel 10,500.00
Total
$225,400.00
Worst case
ore 28,000 by $1.62 per cubic meter 45,360.00
o/burden 42,000 by $1.00 per
cubic meter 42,000.00
extra fuel 10,500.00
Total $97,860.00
Consequential loss
Worst case - loss on income
March - 3 weeks at $20,00 per week 60,000.00
April - 4.5 weeks
loss of 60% capacity 53,000.00
May - 4.5 weeks loss of 50% capacity 45,000.00
Total
$158,000.00
Best case - additional expenses
17 weeks (4 months) at $15,000.00 per week additional
overheads -
$255,00.00
SUMMARY
Worst case 158,000 + 97,860 = $255,860.00
Best case 225,000 + 255,000=
$480,400.00 "
61. If the facts upon which Ranford made these calculations are accepted as
reasonably arguable, on Ranford's 'best
case' assessment the undisputed debt
to P and H for its work under the contract would be $94,909.04 (P and H claim
for 180,869.04
255,000)= $394,440; see the submissions at transcript pp45-46. The substantiated amount would therefore be negative. 62. On the 'worst case' scenario for Ranford on its figures, its undisputed debt to P and H would be $135,509.04 (180,869.04 - 45,360). Ranford's offsetting claim would amount to (42,000 + 10,500 + 158,000)=$210,500. Again the substantiated amount would be negative. 63. Mr Wyvill submitted that since whichever of these two bases the Court adopted, the "substantiated amount" would be lower than the statutory minimum, the statutory demand must be set aside, pursuant to s459H(3). 64. Mr Henwood submitted that Ranford's assertion that its undisputed debt, on the initial calculation, is $94,909.04, cannot be sustained. He submitted that there is no basis to support Mr Padgett's claim that the "average cost of carting ore and overburden amounts to $3.07"; see par23 of Mr Padgett's affidavit. He submitted that at best the contract price of $1.62 (see p3) could be used to calculate the amount involved in genuine dispute. 65. Mr Padgett, clearly an experienced person in alluvial gold mining operations (see par5, 6, 7, 8 and 9 of his affidavit), was not cross-examined on this aspect of his evidence. On those bases, I find that that amount is in genuine dispute, and reject Mr Henwood's submission. 66. For the purposes of calculating the "admitted total" and the "offsetting total", I consider that the contract figure of $1.62 (p2) should be used in assessing the undisputed debt, and the remainder of the $3.07 ($1.45) should be used in calculating the offsetting total. 67. On that basis Ranford's undisputed debt to P and H, according to Ranford, amounts to $45,876.78 (1.62 x 28,319); while the remainder, of $41,062.55 (1.45 x 28,319), forms part of the offsetting total. I also take into account Ranford's offsetting claim for $10,500 in respect of the fuel (par25 of Mr Padgett's affidavit, p20). Mr Henwood did not cross-examine Mr Padgett on this aspect; taking into account Mr Padgett's experience in alluvial mining operations (see p23), I consider that that amount may be treated as part of a genuine offsetting claim for present purposes. 68. In respect of Ranford's substantive "offsetting claim", Mr Henwood submitted (transcript pp28, 29) that the figure of $180,000 for loss of production (see par29 of Mr Padgett's affidavit, p23) has not been made out by Ranford as "the gold remains in the ground. It can be dug up at a later time". (transcript pp29 and 59). 69. He submitted that in re-examination Mr Padgett was asked how long his "tribute basis" was in force (see transcript p35) and there was no suggestion that Ranford would not have time within that period to mine the remaining alluvial gold. 70. At first blush, this submission is attractive. However on reflection, and for the purposes of this application, I consider it to be of no consequence. 71. Notwithstanding that I consider that it was not a term of the contract that P and H would deliver a fixed amount of ore to the stockpile, the evidence before this Court shows a reasonably arguable case that Ranford relied on the daily invoices presented by P and H, as accurately stating the quantity of ore stockpiled (in total 99,449 cubic metres). 72. The consequence of this approach, which I am constrained to adopt, is that Ranford arguably suffered a "loss of income". 73. For the purposes only of this application, bearing in mind the facts and the presently-speculative nature of matters relevant to calculating the "admitted total" and "offsetting total", having regard to the submissions of Mr Wyvill (at transcript p46) and par29 of Mr Padgett's affidavit, and the fact that Mr Padgett was not cross-examined on the "monthly income" of Ranford, I accept the figure of $158,000 as being a genuine offsetting amount in relation to the consequential loss of Ranford. 74. As a result, it is unnecessary for this Court to attempt to assess if there is a genuine offsetting claim in respect of "additional expenses" (p25) (see transcript p46) since, applying the formula, the substantiated amount is already negative. That is to say, the "admitted total" (180,869.04 - 45,876.78) is 134,992.26. The "offsetting total" (41,062.55 + 10,500 + 158,000) is 209,562.55. The substantiated amount, being "admitted total" less the "offsetting" total equals -$74,570.29. 75. The "substantiated amount" being a negative figure on these calculations, Ranford is entitled to an order pursuant to s459H(3) setting aside the Statutory Demand. 76. Accordingly, I order that the Statutory Demand of 9 February 1994 be set aside. RULING ON COSTS (Delivered 25 May 1994) 77. On 24 May for reasons published I granted the applicant's application of 2 March 1994 under s459G of the Corporations Law for an order that the respondent's Statutory Demand of 9 February 1994 under s459E(2)(e) be set aside. Mr Wyvill of counsel for the applicant applied for costs, Mr Henwood opposed that application, I reserved on the question and rule on it today. THE APPLICANT'S SUBMISSIONS 78. Mr Wyvill's submissions were as follows. The ordinary principle - that costs should follow the event - should apply here. The applicant had done nothing to render it inapplicable. In particular, it had not "concealed its hand" from the respondent until the latter had served its Statutory Demand on 9 February. Thomas J in Re Morris Catering (Australasia) Pty Ltd referred at 605-6 to the significance on the question of costs of "the element of surprise in the raising by the (applicant) of its disputes and its claims." In that regard par 12 of the affidavit of 8 March 1994 of Mr Hutchinson, a director of the respondent, referred to the discussion between the parties' directors on 7 February 1994 (2 days before the respondent issued its Statutory Demand) in which the applicant's directors had indicated in some detail (see Annexure "E") the basis of its denial that it was indebted to the respondent in the amount of $180,869.04 for which the respondent had invoiced it; see p4 of the judgment of 24 May. There had been no "holding back" by the applicant of its case in that respect; that is, it had not acted wrongly, unfairly or improperly in that it had not held back material facts in its case so as to induce the respondent to take the course it took on 9 February. 79. Mr Wyvill emphasized that as at 7 February the consequences of the alleged shortfall in the applicant's stockpile of ore were unknown, the applicant was still using it, and the applicant's directors had stated at the meeting that day all that they then knew. He submitted that the respondent had taken precipitate action 2 days later, without any attempt at negotiation, without waiting to see what happened as regards the stockpile, and at a time when it knew of the existence and nature of the applicant's complaint. Accordingly, the respondent should be treated as having then assumed the risk that it might have to pay costs, if the applicant's complaint proved to be sufficient to have its Statutory Demand set aside. THE RESPONDENT'S SUBMISSIONS 80. Mr Henwood's submissions were as follows. The appropriate order in the circumstances was "no order as to costs", leaving each party to bear its own burden in that respect. The bulk of the applicant's case had been provided to the respondent very late in the day - only 2 days before the hearing on 22 April. The applicant's allegation on 7 February of a shortfall in the stockpile had been very "loose"; and in any event at that time the applicant admitted that it owed the respondent a considerable amount of the invoiced debt of $180,869.04, namely $96,658.37. The judgment of 24 May held that the applicant had an arguable case for a set-off; but that case had first been raised in Mr Padgett's affidavit of 20 April, only 2 days before the hearing. Accordingly, the situation was one in which the respondent had been taken by surprise at the hearing, in most respects; the observations by Thomas J in Re Morris Catering (Australasia) Pty Ltd (supra) as to the effect on costs of "surprise" were applicable. Until 20 April the respondent could reasonably have expected to succeed as to a very considerable part of the amount of $180,869.04 set out in its Statutory Demand, and that it would not have been set aside. Accordingly, it was neither reasonable nor appropriate to now "saddle" the respondent with the whole of the costs of the application of 2 March. CONCLUSIONS 81. Section 459N vests in the Court discretionary power to order the respondent to pay the applicant's costs of its successful application of 2 March. In exercising that discretion I consider that in general the usual principle that "costs follow the event" should apply. 82. I consider that the respondent cannot rely on having been taken by surprise, as it chose to resist the application of 2 March on 22 April, 2 days after it had received what was clearly late notification of the full extent of the applicant's case. The position as to costs would have been quite different had the respondent chosen not to contest the application on 22 April. 83. In Felkro Nominees Pty Ltd v Austissue Pty Ltd ; , the respondent consented to the setting aside of its Statutory Demand, but was nevertheless ordered to pay the applicant's costs. Heerey J noted that there was a "genuine dispute" and said at p608:- "Now that a statutory regime is in force for resolving the often sterile disputes which used to take place about the validity of demands, 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 s459N expressly contemplates. Although the applicant is an alleged debtor, this proceedings is one to enforce a statutory right. it is not a case of the applicant seeking some form of discretionary indulgence. The applicant has succeeded and on ordinary principles ought to recover its costs." 84. However, the costs outcome depends on the circumstances of each case. Compare, for example, the different factual situation which led to an order that each party bear its own costs, in Eyota Pty Ltd v Hanave Pty Ltd at 790. In the present case, in light of the factual situation as it stood on 9 February, it cannot be suggested that the making of the Statutory Demand that day was an abuse of process; see the observations of McLelland J in LandD Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd at 538, which I consider apply, mutatis mutandis, when the propriety of making a Statutory Demand is under contemplation. His Honour said:- "Proceedings by a person as creditor for the winding up of a company on the ground that it is unable to pay its debts will ordinarily be held to be an abuse of process: (1) if the winding up proceedings are bound to fail, e.g. if it is clear that the applicant will not be able to prove that he is a creditor ... or will not be able to prove that the company is unable to pay its debts ...; (2) if the application is made for some improper purpose, e.g. if the applicant is seeking to use the winding up proceedings to coerce a company into paying an alleged debt without affording the company a reasonable opportunity to ascertain or have it established that the debt is properly payable; or (3) if issues will arise in the winding up proceedings of a kind inappropriate for determination in such proceedings, e.g. a substantial contest as to the existence or enforceability of a debt relied on by the applicant, which should properly be resolved in separate proceedings brought for that purpose." 85. In the circumstances of this case I see no reason why the general principle as to costs should not apply. Accordingly, the applicant should have the costs of its application of 2 March. I certify for counsel in that respect, apart from the proceedings on 24 May. 86. Orders accordingly.
Ranford Gold Mines Pty Ltd
P & H Earthmoving Pty Ltd [1994] NTSC 49
(1993) 120 ALR 173
(1982) 57 ALJR 425
(1994) 120 ALR 459
(1993) 120 ALR 155
(1973) 47 ALJR 462
(1993) 120 ALR 173