Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd & Anor

Corporations Act 2001 (Cth) Property, Stock and Business Agents Act 2002 (NSW) LEGISLATION CITED : Property, Stock and Business Agents Act 1941 (NSW) Property, Stock and Business Agents (General) Regulation 1993 (NSW) Auctioneers and Agents Act 1941 (NSW) Supreme Court Act 1958 (Vic)

Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Oades v Ewart (1960) 61 SR(NSW) 89 A Norton Pty Ltd v Fowler (1967) 67 SR(NSW) 251 Jacobs v The Public Trustee (1963) 80 WN(NSW) 954 Macquarie Dictionary Revised, 3 ed Lord v Trippe (1977) 51 ALJR 574 Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 489 CASES CITED : Cook Hills Investments Pty Ltd v Rodriguez (NSW Supreme Court, 17 June 1986, Young J, unreported; BC8600927) National Business Consultants Pty Ltd v Reysson Pty Ltd [1986] Tas R (NC) N15 Berowra Holdings Pty Ltd v Gordon (2006) 228 ALR 387 Re Elgar Heights Pty Ltd (No. 1) [1985] VR 657 IOC Pty Ltd v Mobil Oil Australia Ltd (1975) 49 ALJR 176 at 182; 11 ALR 417 Jarena Pty Ltd v Sholl Nicholson Pty Ltd (1996) 19 ACSR 425 Callite Pty Ltd v Peter John Adams [2001] NSWSC 52 CGI Information Systems v Management Consultants Pty Ltd & Apra Consulting Pty Ltd (2003) 47 ACSR 100

Remuneration Data Base Pty Ltd PARTIES : v Pauline Goodyer Real Estate Pty Ltd & Anor

COUNSEL : Plaintiff: A J Grant Defendants: E T Finnane

SOLICITORS : Plaintiff: Grahame W Howe & Co Defendants: Slater & Gordon

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

3845/06 Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd & Anor JUDGMENT 1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand served on the plaintiff by the defendants on 3 July 2006.

2 The defendants trade as real estate agents under the name Goodyer Donnelly Real Estate. They demanded payment of a debt of $55,000 described as "selling fee due and payable to the Creditor pursuant to written agreement dated 23 May 2005 and written undertaking dated 22 December 2005".

3 Section 36 of the Property, Stock and Business Agents Act 2002 (NSW) provides: " 36 Review of commission and fees (1) An action or other proceedings cannot be commenced by a licensee for the recovery of remuneration or any sum as reimbursement for expenses until the expiration of 28 days after a statement of claim has been served personally or by post on the person to be charged with the remuneration or expenses. (2) The statement of claim must be in writing, set out the amount claimed and contain details of the services performed by the licensee in respect of which the remuneration or expenses are claimed. … (4) A person who is served with a statement of claim under this section or is provided with an itemised account of a transaction as provided by this section may apply to the Tribunal for the determination of a consumer claim within the meaning of Consumer Claims Act 1998 in relation to: (a) the entitlement of the licensee to the whole or any part of the amount specified in the statement of claim or the itemised account, or (b) whether the whole or any part of the amount is reasonable, or both. … (8) In this section: expenses means expenses or charges incurred in connection with services performed by a licensee in his or her capacity as a licensee. remuneration means remuneration by way of commission, fee, gain or reward for services performed by a licensee in his or her capacity as a licensee. Tribunal means the Tribunal under the Consumer Claims Act 1998 . "

4 The issues on the present application are: 1. whether s 36 applies to the debt the subject of the statutory demand;

2. if so, whether a statement of claim complying with s 36 was given more than 28 days before the statutory demand was served; 3. if not, whether, when the statutory demand was given, the plaintiff owed a debt to the defendants which was then due and payable within the meaning of s 459E(1) of the Corporations Act ; 4. if so, whether there is a genuine dispute as to the existence or amount of the debt on the ground: a. that the agency agreement of 23 May 2005 did not comply with requirements of s 55 of the Property, Stock and Business Agents Act ; or b. that the defendants failed to perform, or failed to perform substantially, the services contracted for or which could reasonably have been expected; and 5. whether the plaintiff is precluded on the principles in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 at 459 from relying on the two grounds in paragraph 4 above, for disputing the existence or amount of the debt.

5 The plaintiff was the registered proprietor of units 3 and 4 at 8 Pacific Avenue, Tamarama, New South Wales. There were four strata units in the block. Units 1 and 2 were owned by Mr Christopher Costello. Mr and Mrs Costello are the sole shareholders and directors of the plaintiff.

6 On 23 May 2005, the defendants entered into an agreement called a Sales and Marketing Agreement with the plaintiff. The agreement contained the following provisions: "1. You have instructed GoodyerDonnelley Real Estate that you, Remuneration Databas Pty Ltd of 6th floor 110 Sussex Street Sydney wish to sell the property at 1 & 2/8 Pacific Avenue Tamarama (' The Property '), including the following fittings and fixtures that may not be specified in the contract for sale (prepared on your behalf). … 6. a) You agree to pay GoodyerDonnelley Real Estate a fee calculated at the rate of 2.2 per cent of the sale price (including GST if applicable) of the Property (' the Selling Fee ') if:- (i) you enter into a contract for the sale of the Property with a purchaser introduced to the Property by you or GoodyerDonnelley Real Estate or any other agent or person during the Exclusive Selling Period; or (ii) you enter into a contract for the sale of the Property with a purchaser introduced to the Property by you or GoodyerDonnelley Real Estate during the Non-Exclusive Selling Period. … 8. You, as vendor, are of the opinion that the value of the property is $5m-8m (entire block). You acknowledge that this opinion and/or our estimate may change from time to time due to external circumstances and following any advice from us you may instruct us to change tour (sic) estimate at any time. You require us to submit all offers for the purchase of the property to you in writing and such writing should include the price, material terms and identification (to the satisfaction of us) of the buyer. You agree to pay the Selling Fee to GoodyerDonnelly Real Estate on the day of completion of the sale including any GST payable on the selling fee. 9. If a contract for the sale of the property is not completed because of your default or, because of the default of the purchaser in circumstances in which you are entitled to retain the deposit, you agree to pay the Selling Fee, any applicable goods and services tax (' GST ') payable thereon, any outstanding Marketing Fees in respect of the marketing of the Property and any bank and government charges, duties and taxes incurred by GoodyerDonnelly Real Estate in relation to the deposit (' the Commission Fees ') to GoodyerDonnelley Real Estate within seven (7) days of a written demand. "

7 Clause 10 provided that Goodyer Donnelly Real Estate was to hold the deposit of the stakeholder and was authorised to deduct and retain its commission fees from the deposit.

8 On 24 June 2005, contracts were exchanged for the sale of the four units for $5,000,000. The purchaser was a Mr Leslie King. On the same day, the defendants sent a letter addressed to Mr and Mrs Costello. The defendants contend that the letter and a document accompanying it was a statement of claim which complied with s 36 of the Property, Stock and Business Agents Act. The letter was sent by post to Mr and Mrs Costello's address at 110 Sussex Street, Sydney, New South Wales. This was the address given in the Sales and Marketing Agreement as the address for Mr Costello and the plaintiff. It was not the plaintiff's registered office.

9 So far as relevant, the letter stated: " Congratulations on the sale of your property for $5,000,000.00 (now that a formal exchange of contracts has occurred). We trust that you are satisfied with the result, and we take this opportunity to thank you for allowing goodyerDonnelley Real Estate to facilitate your sale. All details of your sale are set out in the enclosed Vendor's Sales Summary. We have also sent a copy of this summary to your solicitor. The contract provides for the deposit to be invested by goodyerDonnelley Real Estate between exchange and settlement. … Whilst we will continue to monitor the progress of your sale until settlement, we expect that your solicitor will be keeping you informed about the progress with the legal aspects of your sale between exchange and settlement. " 10 Accompanying the letter was a document headed "Vendor Sale Summary/Tax Invoice". The defendants contended that the document was a tax invoice as well as a sales summary, although it was not so described in the accompanying letter. It stated: " The key details relating to the sale of 1-4/8 Pacific Avenue, TAMARAMA, NSW 2026 are as follows:

Property Address 1-4/8 Pacific Avenue TAMARAMA, NSW 2026

Vendor Chris & Merelyn Costello 62 The Chelsea 110 Sussex Street SYDNEY, NSW 2000

Vendor's Solicitor Ray Perkes McCabe Terrill DX 145 SYDNEY, NSW 2000 TEL: 9265 3251 FAX:

Purchaser Leslie King or Nominee 334 Birrell Street Tamarama, NSW 2026

Purchaser's Solicitor Steven Alexander Alexanders Lawyers Level 3 888 Anzac Pde Maroubra Junction 2035 TEL: 9314 2988 FAX:

SELLING FEE $110,000.00 (G.S.T incl.) " 11 Mrs Costello deposed that there were difficulties in banking Mr King's cheque for the $250,000 deposit. Ultimately, Mr and Mrs Costello and Mr King agreed to rescind the contract for sale of 24 June 2005. They exchanged a new contract with Mr King on 23 August 2005 for the same price. The same deposit was also payable and was paid on exchange. The deposit was released to the vendors. It was not held by the defendants. Completion of the new contract was due on 16 September 2005.

12 On 23 August 2005, Mr Costello forwarded to the defendants two cheques totalling $110,000 being their commission on the sale of the property. Mr Costello asked the defendants to "hold these cheques for what should only be a matter of days, until I advise funds are clear for their deposit."

13 One cheque was drawn by the plaintiff for $55,000. The other was drawn by Mr Costello. The cheques were banked on 9 September 2005 and were cleared.

14 The purchaser failed to settle on the due date. A notice to complete was served requiring settlement on 20 December 2005. Still, the purchaser failed to complete.

15 In mid December 2005, Mr and Mrs Costello asked the defendants to release the commission. The defendants were reluctant to do so, but ultimately agreed to release half the commission on being given certain written undertakings. On 21 December 2005, the solicitors for the plaintiff and Mr Costello wrote to the defendants as follows: " We refer to recent correspondence and confirm that we have been instructed by Mr Costello in his own right and on behalf of Remuneration Data Base Pty Ltd that they will be responsible for payment of your selling fee in relation to the above property whether or not same is completed by Mr Les King in due course. Our clients undertake to comply with the provisions of Clause 8 and 9 of the Sales and Marketing Agreement dated 23 May 2005. In consideration of same kindly release the moneys held in your Trust Account to Mr Costello or as he shall direct. "

16 On 22 December 2005, Mr and Mrs Costello, as directors of the plaintiff, and in their own right, wrote as follows: " We the undersigned request that you release immediately by way of direct debit the sum of $55,000 into the following account Account Name: Remuneration Data Base Pty. Limited ACN 001 838 106 Bank: NAB Address: 345 George Street Branch, Sydney NSW BSB: 082 001 Account No. 64088 0384 Amount: $55,000.00 Chris Costello and Remuneration Data Base Pty. Limited undertake to comply with the provisions of Clause 8 and 9 of the Sales and Marketing Agreement dated 23 May 2005. This undertaking supersedes and replaces the earlier undertaking given to Goodyer Donnelly regarding the release of your selling fee. " 17 In reliance on these undertakings, the defendants transferred $55,000 to the plaintiff's bank account on 22 December 2005.

18 The vendors agreed with the purchaser not to terminate the contract for sale following the failure of the purchaser to comply with the notice to complete. There were attempted negotiations with the purchaser. The plaintiff complains that Ms Goodyer failed to attend meetings held with Mr King to discuss settlement of the sale.

19 The vendors considered relisting the property although they had not terminated the contract. They asked Ms Goodyer to provide them with a list of the persons who had inspected the property. They complained that she failed to do so. On 20 March 2006, they instructed Ms Goodyer to relist the property for sale. They complain of a delay in putting up a "For Sale" sign and they complain that there was a delay in the property being listed for sale on the defendants' website.

20 On 30 March 2006, Mr and Mrs Costello terminated the Sales and Marketing Agreement of 23 May 2005.

21 On 14 June 2006, the contract with Mr King was terminated. Presumably the deposit was forfeited.

22 On 16 June 2006, contracts for sale were exchanged through another agent to a new purchaser.

23 On 19 June 2006, the defendants wrote to the plaintiff's solicitors. They advised that would apply the $55,000 then held on trust to pay their outstanding commission. They demanded payment of the balance of $55,000. On 23 June 2006, the defendants again wrote to the plaintiff's solicitors. They advised that they had transferred to their general account the sum of $55,000 and confirmed that they would commence recovery proceedings against the vendors for the remaining $55,000 owing to them, together with appropriate interest and costs. The defendants did not submit that the correspondence of 19 and 23 June 2006 constituted a statement of claim which complied with the requirements of s 36 of the Property, Stock and Business Agents Act.

24 The statutory demand was served on 3 July 2006. On 11 July 2006, the plaintiff's solicitors sought an undertaking that the statutory demand be withdrawn. They stated that: " 1. Your client is in breach of s 36 of the Property, Stock and Business Agents Act in that it has failed to serve a statement of claim under that Act; … "

25 They asserted that the statutory demand was an attempt to enforce an alleged debt without affording the plaintiff the opportunity to have the benefit of the review mechanism provided for by the Property, Stock and Business Agents Act. First Issue: Applicability of s 36

26 The defendants submitted that the debt was payable under the agreement made on 22 December 2006, being the undertaking given by the plaintiff on that day in consideration for which the defendants paid $55,000 to the plaintiff. They submitted that: " pursuant to this later agreement, the plaintiff is required to comply with clauses 8 and 9 of the earlier agreement, not because the commission has been earned under the earlier agreement, but because it agreed to do so as its consideration for the later agreement. "

27 I do not accept the submission that the later agreement of the plaintiff and Mr Costello to pay commission means that s 36 of the Property, Stock and Business Agents Act is inapplicable. Subsection 36(1) applies to an action or other proceeding for the recovery of remuneration by way of commission, fee, gain or reward for services provided by a licensee in that capacity. The plaintiff's undertaking of 22 December 2005 was to honour its earlier undertaking to pay the defendants' selling fee under the Sales and Marketing Agreement. In other words, it was a promise to pay fees or commission. There was no promise to pay any money other than by way of fee or commission for services provided. Accordingly, s 36 applies.

Second Issue: Did the Defendants Serve a Statement of Claim Under s 36?

28 The defendants contended that the letter of 24 June 2005 and accompanying "Vendor Sales Summary/Tax Invoice" was such a statement of claim. No particular form of a statement of claim is prescribed. Nor is there currently a requirement that a statement of claim be accompanied by a notice advising the recipient of his or her rights to seek a review of commission. (Compare s 42AA(1) of the Property, Stock and Business Agents Act 1941 (NSW) and clause 9 of the Property, Stock and Business Agents (General) Regulation 1993 (NSW), since repealed.) The defendants submitted that by parity of reasoning with authorities concerned with earlier legislation (Oades v Ewart (1960) 61 SR(NSW) 89 at 91-92; A Norton Pty Ltd v Fowler (1967) 67 SR(NSW) 251 at 257), it was not necessary for a statement of claim to include a detailed account of the work performed. It was submitted that it was sufficient for the real estate agent to identify the property sold, the vendor and purchaser of it, the price, and the amount claimed as commission. The defendants also submitted that the statement of claim may be given before the commission claimed becomes payable (Jacobs v The Public Trustee (1963) 80 WN(NSW) 954). They submitted that the letter of 24 June 2005 and accompanying "Sales Summary/Tax Invoice" was a claim for the commission of $110,000 which sufficiently identified the service for which the commission was due, namely, the effecting of a contract for the sale of the property on that date to Mr King for $5,000,000.

29 I do not accept the submission that the defendants served a statement of claim. The letter of 24 June 2005 and accompanying document made no demand for the payment of remuneration. It merely advised of the amount of commission which would become payable. The defendants submitted that the attachment to the letter was a tax invoice and that that invoice conveyed a demand for payment. I do not agree. The document was described in the accompanying letter as a sales summary, and that is what it was. It was sent on the same day as the contracts were exchanged. No commission was then due, and it was not known when, or even whether, it would become due.

30 The expression "statement of claim" is not defined. However, in the present context, its ordinary meaning is a demand for something as due and an assertion of a right or alleged right (Macquarie Dictionary Revised, 3 ed). I accept that a statement of claim may be delivered before commission has become payable (Jacobs v The Public Trustee at 956). Nonetheless, to qualify as a statement of claim, the document must make it clear that the agent is making a demand for the payment (when it becomes due) of commission. The service of a statement of claim gives the vendor the right to challenge the licensee's entitlement to the remuneration claimed, or the reasonableness of the charge. There is no legislative requirement that a statement of claim expressly state that it is made under s 36 of the Property, Stock and Business Agents Act. Nor is there currently a requirement that a vendor be advised of his or her entitlement to seek a review of the remuneration or expenses claimed. Nonetheless, it should be clear to a person cognisant of his or her right to seek a review that he or she has been served with a statement of claim. The sales summary did not make that clear.

31 Further, the statement of claim is not addressed to the plaintiff. It is addressed to Mr and Mrs Costello. Nor was it served at the company's registered office. The vendor was also described as Mr and Mrs Costello. I assume that was an error (although the contract of 24 June 2005 was not in evidence). On its face, the document merely advises Mr and Mrs Costello that contracts have been exchanged, the price, and the commission which would become payable. It makes no claim on the plaintiff for payment of that commission.

32 It was submitted for the plaintiff that a further objection was that the contracts of 24 June 2005 were rescinded and a new contract was entered into on 23 August 2005. It was submitted that the document of 24 June 2005 could not be a statement of claim for commission, the entitlement to which, it was said, could only have arisen from 23 August 2005.

33 Had the documents in question otherwise qualified as a statement of claim, the fact that the contract of 24 June 2005 was rescinded and replaced by a later agreement between the same parties would not affect the defendants' right to commission (Lord v Trippe (1977) 51 ALJR 574). However, for the reasons I have given, the letter of 24 June 2005 and accompanying sales summary was not such a statement of claim.

Was the debt due and payable in the absence of a s 36 statement of claim?

34 The defendants submitted that subs 36(1) did not forbid the service of a statutory demand for the claimed debt. Subsection 36(1) provides that no action or other proceeding can be brought for recovery of a debt for commission or other remuneration. The defendants submitted that whilst the service of a statutory demand may be a "proceeding" it was not a proceeding for the recovery of money (Standard Commodities Pty Ltd v Societe Socinter Department Centragel (2005) 54 ACSR 489 at [20]). This proposition was not in dispute.

35 However, a creditor may only serve a statutory demand in relation to a debt or debts which is or are due and payable (Corporations Act s 459E(1)). The plaintiff submitted that until the requirements of s 36 are satisfied, a licensee does not have a cause of action for recovery of moneys by way of commission or other remuneration, but only an "inchoate right" to such commission or remuneration. It submitted that in the absence of service of a statement of claim, no debt was owing by it to the defendants. A fortiori no debt was due and payable. In support of this submission, the plaintiff referred to Cook Hills Investments Pty Ltd v Rodriguez (NSW Supreme Court, 17 June 1986, Young J, unreported; BC8600927) and National Business Consultants Pty Ltd v Reysson Pty Ltd [1986] Tas R (NC) N15; BC8600005.

36 Cook Hills Investments Pty Ltd v Rodriguez concerned a claim by a real estate agent for a Mareva injunction to restrain the defendant from dealing with its assets. No notice had been given under s 42A of the Auctioneers and Agents Act 1941 (NSW). Young J (as his Honour then was) said that, prior to serving the required notice, the plaintiff had at most "an inchoate right of action" and might never obtain a right to sue the defendant. In National Business Consultants Pty Ltd v Reysson Pty Ltd, Cosgrove J said that the licensee's entitlement to remuneration for performance of the contract was governed by s 42A of the Auctioneers and Agents Act and such a person had no right to commission without calling in aid the Act. His right to remuneration was "inchoate" until the procedure outlined in s 42A had been followed (BC860005 at 5). In other words, it was held that the licensee's right to commission arose under the Act. It was not a right existing independently of the Act, although regulated by it.

37 The defendant took issue with these statements. It submitted that s 36(1) of the Property, Stock and Business Agents Act went no further than postponing a licensee's entitlement to commence proceedings to recover unpaid remuneration. It did not purport to interfere with or postpone the accrual of a debt under an agency agreement. The defendants submitted that in National Business Consultants Pty Ltd v Reysson Pty Ltd, Cosgrove J was wrong in saying that the licensee could not demonstrate any right to commission without calling in aid the Auctioneers and Agents Act. Rather, it was submitted, that whilst the Property, Stock and Business Agents Act regulates the form and content of an agency agreement (Part 4), the right to commission arises under the contract, not under the Act. Section 36 imposes conditions which must be satisfied before an action can be taken to recover commission, but that does not mean, it was submitted, that the commission is not a contractual debt presently due and payable. It merely postpones the remedy of the common law right to commence proceedings for recovery of a presently due and payable debt (Berowra Holdings Pty Ltd v Gordon (2006) 228 ALR 387 at [23], [35]).

38 I think there is much to be said for the defendants' submissions. However, it is not necessary to decide that point. On any view, s 36(1) of the Property, Stock and Business Agents Act precludes action being brought for the recovery of a debt until a statement of claim has been served. It was decided in Re Elgar Heights Pty Ltd (No. 1) [1985] VR 657 that a statutory demand could only be validly served in respect of a debt which was not only immediately payable, but also presently recoverable by action. This conclusion was reached in the context of s 364(2)(a) of the Companies (Victoria) Code. That section applied where "a creditor … to whom the company is indebted in a sum exceeding $1,000 then due has served on the company a demand …". 39 In Re Elgar Heights Pty Ltd, solicitors served a statutory demand on their client in respect of unpaid legal costs. Section 81 of the Supreme Court Act 1958 (Vic) precluded solicitors from commencing or maintaining any action for the recovery of such costs until one month after delivery of a bill of costs. The account rendered was not a bill of costs. Therefore, the claimed debt could not be recovered by action. The question of whether a debt which was not immediately enforceable by action could be the subject of a statutory demand had not formerly been decided. Ormiston J reviewed the cases exhaustively and concluded that such a debt could not validly be the subject of a statutory demand. His Honour concluded that the words "then due" in s 364(1)(a) required that the debt should not only be immediately payable, but should be presently recoverable by action (at 669, 671).

40 Section 459E of the Corporations Act requires not only that a debt be due, but also that it be payable. Given that, under the former legislation, in order for the debt to be "due" it had to be enforceable by action, the same must be true under s 459E. Whilst the statutory regime dealing with statutory demands has changed significantly, the underlying reasoning for Ormiston J's conclusion is still applicable. One strand of his Honour's reasoning was that winding-up proceedings at the instance of an unpaid creditor can be regarded as an indirect means of recovering a debt (IOC Pty Ltd v Mobil Oil Australia Ltd (1975) 49 ALJR 176 at 182; 11 ALR 417 at 427; Re Elgar Heights Pty Ltd at 667). Such a procedure should only be available in respect of debts which can be enforced by action. This is also consistent with Jarena Pty Ltd v Sholl Nicholson Pty Ltd (1996) 19 ACSR 425 and Callite Pty Ltd v Peter John Adams [2001] NSWSC 52, where it was concluded that statutory demands should be set aside pursuant to s 459J(1)(b) of the Corporations Law for "some other reason" where they were sought to be used to bypass statutory restrictions on a solicitor's right to recover costs.

41 The second reason given by Ormiston J in Re Elgar Heights Pty Ltd for construing the phrase "then due" in s 364(2)(a) of the Companies (Victoria) Code as requiring that a debt be presently recoverable by action was that the presumption of insolvency arising from a company's not satisfying a statutory demand should only arise where the debt in question is one about which no inference can be drawn in the event of non-payment, other than that the company was unable to pay the debt. Where the debt is not recoverable by action, particularly in the circumstances as obtained in Re Elgar Heights Pty Ltd, and as obtains in the present case, namely, where Parliament has provided a mechanism for review of the claimed debt before the debt can be sued for, then no such inference should arise from the non-payment of the debt.

42 Re Elgar Heights Pty Ltd has frequently been followed. In my view, because the claimed debt was not presently recoverable by action at the time the demand was served, it was not "due and payable" within the meaning of s 459E(1) of the Corporations Act.

43 It follows, that the statutory demand should be set aside. It is unnecessary to deal with the alternative arguments which the plaintiff sought to raise to demonstrate there was a genuine dispute as to the existence or amount of the debt.

44 The plaintiff submitted that if it were successful, its costs should be paid on an indemnity basis. It was submitted that the failure to serve a statement of claim meant that the defendants ought to have appreciated that they had no realistic chance of success, and ought to have withdrawn the demand once the weakness of their position was pointed out (CGI Information Systems v Management Consultants Pty Ltd & Apra Consulting Pty Ltd (2003) 47 ACSR 100 at 105 [22]).

45 This is not an appropriate case for an order for indemnity costs. The submissions of the defendants were fairly arguable. The defendants should pay costs on the usual party and party basis.

46 For these reasons, I make the following orders: 1. Order that the statutory demand dated 30 June 2006 served by the defendants on the plaintiff be set aside; 2. Order that the defendants pay the plaintiff's costs. ******

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