Yarrowie Pastoral Company Pty Limited v Bendall

Judgment 1HIS HONOUR: This judgment concerns costs. The plaintiff filed proceedings on 14 April 2011 to set aside a statutory demand dated 23 March 2011. In the demand the defendant claimed a debt owing to him of $454,000, described as a payment due from the plaintiff to him in relation to an agreement for the purchase of livestock between the parties dated 16 August 2010. 2The originating process was supported by an affidavit dated 14 April 2011 from the director of the plaintiff, a Mr Philip Heaslip. The affidavit as filed was a photocopy. The Deputy Registrar gave leave for it to be filed upon an undertaking of the plaintiff to file the original by Monday, 18 April 2011. The affidavit as filed on 14 April 2011 referred to a statutory demand and accompanying affidavit as being attached and marked "A". There was no attachment to the affidavit as filed on 14 April 2011. The original of the affidavit was filed on 18 April 2011, and included the annexure and also included a company search. 3The agreement of 16 August 2010 referred to in the statutory demand was a short document. It provided that the defendant (the vendor) had offered to sell livestock on seven properties in New South Wales, Queensland and South Australia, and that the plaintiff (the purchaser) had agreed to purchase all of the livestock on the seven listed properties for $454,000. It also provided that possession was to be taken on the date of the agreement and that title to the livestock passed on the date of the agreement. It contained no terms as to the time for payment of the price of $454,000. 4Mr Heaslip deposed in his affidavit of 14 April 2011, in substance, that the defendant made representations as to the number of sheep on the seven properties and that those representations were not true, because a round up had shown that there was a substantial deficiency in the number of stock represented. 5The defendant filed and served an affidavit of 21 June 2011 deposing to various matters relevant to the agreement, the claimed debt and the asserted representations. On 27 June 2011 the Registrar stood the matter over to 11 July and on that date it was referred to the Chief Judge in Equity on 18 July 2011. In the meantime, on about 8 July 2011, the plaintiff filed and served three other affidavits. 6In essence, the plaintiff, in its affidavits of 8 July 2011 deposed that the defendant had said that the defendant had purchased the sheep from a Mr Cockburn. The affidavits set out the basis upon which the plaintiff assumed that there would be at least 33,000 ewes on the seven properties plus their progeny. 7Mr Heaslip deposed that he was told by the defendant that the defendant had not sold any ewes or new lambs since he had bought the sheep. 8This was a different basis, at least arguably so, for asserting an off-setting claim than that propounded in the affidavit of 14 April 2011. The further affidavits of 8 July 2011 did not include any evidence as to the representations described in summary form in Mr Heaslip's affidavit of 14 April 2011. 9Had the matter proceeded to hearing, there would have been a serious question as to whether there was evidence to support the ground for an offsetting claim asserted in the affidavit of 14 April 2011. There would have been a serious question as to whether the evidence in the affidavits of 8 July 2011 went to a ground or grounds that had been raised in the supporting affidavit as giving rise to an offsetting claim. 10However, the defendant, or his lawyers accepted that the plaintiff's evidence served on 8 July 2011 was such that the plaintiff had reasonable prospects of successfully making out what was called the existence of a genuine dispute. On 18 July 2011 I made orders by consent that the statutory demand be set aside. I listed the matter for today for hearing of argument on the question of costs. 11The starting point is s 98 of the Civil Procedure Act 2005 which provides that costs are in the discretion of the Court. Rule 42.1 of the Uniform Civil Procedure Rules 2005 provides that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. The plaintiff seeks its costs on the indemnity basis, and also seeks an order under s 98(4) that those costs be assessed by the Court in a lump sum. 12The defendant submits that there should be no order as to costs. It submits that the defendant acted reasonably in serving the statutory demand and it acted reasonably in defending the plaintiff's claim on the basis of matters raised in the supporting affidavit of 14 April 2011. The defendant also says it acted reasonably in acknowledging that the plaintiff had reasonable prospects of having the statutory demand set aside and acted promptly in making that acknowledgment so as to minimise further costs. 13So far as the evidence before me shows, the plaintiff did not, at any time prior to the service of the statutory demand or, indeed, at any time prior to the service of Mr Heaslip's affidavit of 14 April 2011, assert that the defendant had misrepresented the number of sheep contracted to be sold. There had been a dispute between the parties, but it related to a different question, namely whether or not the plaintiff had title to the sheep prior to paying for them. 14The defendant acted reasonably in serving a statutory demand. However, the defendant admits that he received a payment, of $30,000 on or about 30 August 2010 and payments totalling $24,752 between 16 September 2010 and 10 November 2010. He says that the plaintiff still owes him $454,000 as a result of an oral agreement reached at a meeting in January 2011. But, the debt claimed in the statutory demand was not a debt said to arise under such an agreement made in January 2011, but under the agreement of 16 August 2010. 15On the face of it, the only amount owing under the August 2010 agreement was $399,248. Irrespective of whether the plaintiff has an offsetting claim, it would have been necessary for the plaintiff to bring an application under s 459G of the Corporations Act 2001 (Cth) to prevent the presumption of insolvency arising. 16I accept that the defendant acted reasonably in not conceding that the statutory demand should be set aside on receipt of the originating process and the supporting affidavit of 14 April 2011. That that is so can be implied from the fact that the plaintiff did not put on further evidence of the alleged representations said to have been made by the defendant as to the number of sheep on the properties. However, the fact remains that the defendant consented to the relief sought in the originating process. 17The prima facie position that a successful party is entitled to its costs is not displaced merely because the opposite, but unsuccessful, party to the litigation has acted reasonably. If that were not so, costs orders would be quite rare. 18In Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 McHugh J set out the well known principles that the Court usually will not make an order for costs where there has been no hearing on the merits because it will not try an hypothetical action between the parties and will usually only make such an order if either it can be very confident as to how the litigation would have been decided had it not been resolved, or if it can be satisfied that one or other of the parties has not acted reasonably in bringing or defending the claim. 19However, as Burchett J pointed out in ONE.TEL Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at 553, McHugh J was there describing the position where a party elects not to pursue an action because he or she has achieved relief sought either by settlement or by extra-curial means. There was not, in this case, a settlement in the usually understood sense of that word. In my view, r 42.1 has not been wholly displaced. 20I do not accept that this is a case in which indemnity costs are appropriate. This is not a case in which the defendant should have seen that there was a genuine dispute about the debt or a genuine off-setting claim. Nor is it a case in which the defendant should have appreciated earlier than he did that the claim should not be defended. 21I do not venture on a prognosis of what the fate of the claim would have been had it been litigated to judgment. It cannot confidently be said that the claim would necessarily have been resolved in the plaintiff's favour. 22The question then is what other orders should be made in relation to the plaintiff's costs. I can infer from the position taken by the defendant promptly after receiving the plaintiff's evidence of 8 July 2011, that had that evidence been served within the time for serving the originating process and supporting affidavit, the defendant would have consented then to the order setting aside the statutory demand. 23Whilst the plaintiff has the difficulty that the deponents of affidavits are based in wide-flung locations and was working to a very tight timetable, I think that had the basis for an off-setting claim been raised clearly in the supporting affidavit, as it was raised in the affidavits of 8 July 2011, the case would not have been further defended. 24The defendant has himself been put to costs of defending the claim which he will not be able to recover, but which would have been avoided had he been put in a position to make an assessment of the strength of the plaintiff's claim immediately after the service of the supporting affidavits. 25In all the circumstances, I do not think that the plaintiff should be entitled to the whole of its costs. I think that the appropriate order is that the defendant pay two thirds of the plaintiff's costs on the ordinary basis. 26I am not in a position to make a lump sum order under s 98(4) of the Civil Procedure Act . There is no evidence as to whether the plaintiff made a costs agreement with its solicitor. That may well not be a bar to a costs assessor determining a fair and reasonable amount for the plaintiff's costs having regard to the costs assessor's assessment of the fair and reasonable value of the legal services provided, (ss 319 and 365 of the Legal Profession Act 2004). But, as counsel for the defendant submits, there is no evidence as to the reasonableness of the charges made. 27I am not in a position to take judicial notice as to whether, for example, an hourly fee of $400 for junior counsel is a fair and reasonable charge in matters of this kind. Nor am I able to take judicial notice as to whether the hourly charges of the solicitor for the plaintiff is reasonable. Indeed I do not know the seniority or experience of the solicitor for the plaintiff who has had the conduct of the matter. I am not saying that there appears anything untoward with the plaintiff's charges, but the amount to be allowed should be determined by a costs assessor. 28For these reasons, I order that the defendant pay two thirds of the plaintiff's costs on the ordinary basis. The exhibits may be returned. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 August 2011