FEDERAL COURT OF AUSTRALIA

Australasian Jet Pty Ltd v Air Affairs (Australia) Pty Ltd [2017] FCA 1043

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff pay the defendant’s costs of the proceeding that was dismissed by the Court’s order of 28 August 2017.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    By an application dated 8 March 2017, the plaintiff commenced a proceeding to wind up the defendant on the grounds of insolvency under s 459P of the Corporations Act 2001 (Cth) (the Act).

2    The application relied on the defendant’s purported failure to comply with a statutory demand dated 10 February 2017. That statutory demand relied on an alleged debt arising out of the unpaid balance of an invoice for the amount of the purchase price remaining to be paid under a contract for the sale of a Learjet and a “pod”, which contains camera equipment used for firefighting.

3    By interlocutory application filed 3 April 2017, the defendant sought to strike out or permanently stay the proceeding as an abuse of process.

4    Although the plaintiff originally insisted that it should have leave to discontinue the proceeding (see its interlocutory application filed 4 August 2017), it eventually agreed that the proceeding should instead be dismissed, although not for one of the two reasons on which the defendant relied (namely, abuse of process).

5    In those circumstances, on 28 August 2017, I made an order dismissing the proceeding. The only remaining question, therefore, is costs.

Relevant principles

6    Although the usual rule is that the successful party should have its costs, the plaintiff says that the defendant should pay its costs of the interlocutory process, together with its costs of the proceeding from 11 April 2017 up to the date of the order.

7    The defendant submitted that the bringing of the winding up application was an abuse of process, citing Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551 at [56]; 640 Esplanade Pty Ltd v Splash Bay Pty Ltd (No 2) [2017] FCA 89 at [131]ff; Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374 at [56]-[57] per Beazley JA, Hodgson, Santow JJA agreeing; Offstage Support Association Inc v Time of My Life Pty Ltd [2011] FCA 378 at [9]-[12]; and Fortuna Holdings Pty Ltd v Deputy Commissioner of Taxation [1978] VR 83 at 93-94.

8    Relevantly, the defendant contended that the proceeding was an abuse of process, and the plaintiff could never have relied upon the statutory demand, because: (a) it was not owed a debt by the defendant; and (b) the statutory demand was never served on the defendant.

9    The plaintiff, on the other hand, submits that, although it now accepts that the statutory demand was not in fact delivered to the defendant’s registered office, and therefore not served on it, and that no presumption of insolvency under s 459C of the Act would have arisen on the winding up hearing (see Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87), the unusual costs order it seeks is warranted because:

(1)    the defendant filed late (by about three months) the evidence which proved non-delivery of the statutory demand and it was not, the plaintiff says, possible to conclude until mid-July 2017 “that the ground of opposition had merit”;

(2)    the defendant incurred significant costs from mid-April, when the affidavits were due, until mid-July;

(3)    the plaintiff “believed” that the statutory demand had been served; and

(4)    the defendant had not filed any admissible evidence that it was solvent taking into account a genuine dispute about the debt (see s 459S(2) of the Act).

10    The defendant has now commenced a proceeding in the Supreme Court of New South Wales seeking a declaration that it is not indebted to the plaintiff.

11    In those circumstances, it is undesirable that I express any view about the merits of the underlying dispute and whether the defendant is indebted to the plaintiff. And, of course, I should not conduct a trial within a trial on the question: see Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625.

12    It is also not necessary for me to address the submission that the proceeding was an abuse of process, because the submission is now only put in aid of the contention that the defendant should have its costs of the proceeding.

13    There was no dispute about the applicable principles. Ordinarily, costs follow the event, and a successful litigant receives costs in the absence of special circumstances.

14    Rule 16.12(7) of the Federal Court Rules 2011 (Cth) also provides:

Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

15    As Flick J said in Ashby v Slipper [2014] FCA 973 at [20]: “[t]he right to discontinue a proceeding is a recognition of the fact that a party should not be forced to litigate a case … But where a party seeks to discontinue a proceeding, be it with consent or with leave, that party usually is required to pay the costs of the discontinuance …” (citations omitted).

16    In my view, the plaintiff has not given any good reason why the ordinary rule as to costs should not be applied. Conversely, there are many good reasons why it should.

17    First, the evidence shows that the plaintiff’s solicitors have at all times well understood that there was a genuine dispute about the existence of any debt or obligation to pay damages. That is apparent from its opening salvo on 21 January 2017 when, by a letter from its solicitors, the plaintiff gave notice of what it said was a breach of the agreement for the sale of the plane and the pod and threatened that, if the breach was not remedied within 10 days, the plaintiff might: affirm the contract and sue for damages; affirm the contract and sue for specific performance; or terminate the contract, forfeit the deposit and sue for any damages. The defendant’s solicitors responded a little over a week later, setting out, at great length, why the plaintiff had no right to seek completion or payment. The plaintiff’s solicitors then replied, disagreeing and inviting the defendant’s solicitors to confirm that they were instructed to accept service. It was not explained to me how in those circumstances it could be said in the statutory demand, signed and despatched the following day, that there was no genuine dispute as to the existence of the debt claimed.

18    Secondly, and relatedly, the plaintiff’s solicitor wrote to the defendant’s solicitor on 30 March 2017 admitting that, simultaneously with issuing the statutory demand, it had briefed counsel to draw a statement of claim “in the event that it became necessary to withdraw the statutory demand”. That too is inconsistent with an assertion that there was no genuine dispute.

19    Thirdly, as to the late service of the affidavit material, in my view that has no bearing on the matter. As counsel for the defendant submitted, the evidence that proved beyond a doubt that the demand had not been delivered was the evidence of an independent witness (Mr Robert Dunstan, the operator of the post office on the naval base, HMS Albatross, in Nowra), whom the plaintiff could just as easily have procured.

20    Fourthly, the plaintiff should never have persevered in this proceeding without satisfying itself that the statutory demand had been served, because it knew from the records of Australia Post that the document had been delivered to a place other than the defendant’s registered office.

21    For those reasons, there is no reason why the ordinary rule as to costs should not apply.

DISPOSITION

22    The Court will order the plaintiff to pay the defendant’s costs of the proceeding that was dismissed by the Court’s order of 28 August 2017.

Associate:

Dated:    1 September 2017