Federal Court of Australia

Liberty Oil Convenience Pty Ltd v Golden Roo Company Ltd [2024] FCA 757

ORDERS

THE COURT ORDERS THAT:

1.    The statutory demand dated 14 December 2023 served on the plaintiff by the defendant in NSD 1582 of 2023 be set aside.

2.    The defendant in NSD 1582 of 2023 pay the plaintiff’s costs of the Originating Process dated 22 December 2023.

3.    The statutory demand dated 22 January 2024 served on the plaintiff by the defendant in NSD 133 of 2024 be set aside.

4.    The defendant in NSD 133 of 2024 pay the plaintiff’s costs of the Originating Process dated 12 February 2024.

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

REASONS FOR JUDGMENT

WIGNEY J:

1    The Golden Roo Company Limited and Essco Industries Pty Limited are importers and suppliers of equipment used in petrol stations. They separately served statutory demands on Liberty Oil Convenience Pty Limited pursuant to s 459E of the Corporations Act 2001 (Cth). Those statutory demands respectively claimed that Liberty was indebted to Golden Roo and Essco for equipment said to have been sold and delivered by them to Liberty. Liberty, which is a petroleum retailer, denied and disputed that it was so indebted and applied to set aside the statutory demands pursuant to s 459G of the Act.

2    Golden Roo and Essco initially opposed the relief sought by Liberty. After the parties each filed and served evidence in support of their respective positions, Golden Roo and Essco advised that they would not oppose the making of orders setting aside the statutory demands. The only issue that divided the parties is who should pay the costs of the proceedings. Liberty contended that it had achieved the principal relief it had sought and that Golden Roo and Essco had not only capitulated, but had acted unreasonably in both serving and pressing the statutory demands until the proverbial death-knell. Golden Roo and Essco, however, rather boldly contended that Liberty should pay their costs, or a proportion of them, because it had acted unreasonably. Liberty was said to have acted unreasonably because it denied ever having ordered or received the relevant equipment and had changed its case in relation to the nature of the dispute concerning the debts.

3    The issue, shortly stated, is whether the Court can and should endeavour to resolve those competing contentions in circumstances where there has been no hearing on the merits. For reasons that will be briefly explained, the circumstances of this case are such that it can safely be concluded, on the basis of largely uncontentious or ineluctable facts, that Liberty did not change its case in any material respect, and that Golden Roo and Essco had not only acted unreasonably in their conduct of the proceeding, but had capitulated in the face of a strong case that there was a genuine dispute concerning the debts the subject of the statutory demands.

THE NATURE OF THE PROCEEDINGs

4    It is useful, at the outset, to say something briefly concerning the nature of proceedings under s 459G and s 459H of the Corporations Act. That is because the nature of such proceedings bears on the approach that the Court should take in respect of the question of costs.

5    Applications to set aside statutory demands based on the existence of a genuine dispute concerning the underlying debt are somewhat unique because, in determining whether there is a genuine dispute concerning the existence of the debt, the party seeking to set aside the demand need only establish that there is a bona fide dispute, the grounds of which are not spurious, hypothetical, illusionary or misconceived; the Court does not endeavour to resolve the dispute or the disputed issues of fact thrown up by the evidence: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787; Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602 at [4]; Spencer Constructions Pty Ltd v G & M Auldridge Pty Ltd (1997) 76 FCR 452 at 464F; Lifese Pty Limited v Lee Crane Hire Pty Limited [2012] FCA 302 at [13]-[15].

6    It follows that the party seeking to set aside a statutory demand on the basis that there is a genuine dispute in respect of the debt to which the demand relates does not face a high bar. As Barrett J explained in Panel Tech Industries v Australian Skyreach (No 2) [2003] NSWSC 896 at [18]:

… the task faced by a company challenging a statutory demand on the “genuine dispute” ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.

7    Another special feature of proceedings involving the setting aside of a statutory demand is that the statutory regime is such that a company faced with a statutory demand in relation to a debt, disputed in whole or in part, has effectively no option but to commence proceedings to set aside the demand under s 459G within 21 days: Souden Lane Pty Ltd v Glen Bradshaw trading as Pacific Coast Digital [2007] NSWSC 772 at [4]. Failure to so do may mean that the company is precluded from raising the dispute concerning the debt in opposition to a subsequent application to wind up the company: s 459S of the Act.

8    The special features of proceedings under s 459G of the Act bear on the question of costs where the party which issued the statutory demand presses the demand and opposes the setting aside of the demand. Indeed, it has often been said that, because the “threshold for establishing a genuine dispute is low, creditors are often ill-advised to proceed with a statutory demand once plausible grounds for a dispute are asserted”: Sounden Lane at [5]. Indeed, they face the risk of indemnity costs if they do so: Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1998) 16 ACLC 529 at 536; CGI Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100 at [19]; Souden Lane at [5]. A “defendant, on having an obvious and irremediable weakness in its position pointed out, ought to withdraw the statutory demand”: CGI Information Systems at [22].

COSTS WHERE THERE HAS BEEN NO HEARING ON THE MERITS – APPLICABLE PRINCIPLES

9    The court has a broad discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth): LFDB v SM (No 2) [2017] FCAFC 207 at [7]. The exercise of the discretion in relation to costs is usually relatively straightforward when there has been a hearing on the merits and the outcome of the proceedings is clear. In such cases, costs ordinarily follow the event: see Latoudis v Casey (1990) 170 CLR 534 at 543, 566 to 568; [1990] HCA 59. Where, however, there has been no hearing on the merits because the moving party no longer wanted to pursue the action, usually because of some supervening event, the situation is not so clear.

10    The general principles that guide the exercise of the court’s discretion in relation to costs where there has been no hearing on the merits have been considered in a number of cases: see, in particular, Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6; ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [5]-[6]; Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84. The general principles established by those cases may be briefly summarised as follows.

11    First, where there has been no hearing on the merits of an action, but the moving party no longer wants to proceed with the action, the Court cannot try a hypothetical action between the parties so as to resolve the question of costs.

12    Second, in such a case, the Court can nevertheless, in an appropriate case, make an order as to costs.

13    Third, an example of a case where the Court can make a costs order, despite the absence of any hearing on the merits, is where one of the parties is found to have acted unreasonably in pursuing or defending the proceeding until the litigation was settled or its further prosecution became futile.

14    Fourth, another example of a case where a costs order may be appropriate in those circumstances is where it is possible for the Court to conclude, without reviewing swathes of evidence or resolving disputed questions of fact, that one party had been successful and the other party unsuccessful, or that one party was almost certain to have succeeded if the matter had gone to trial.

15    Fifth, “it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs”: ONE.TEL at [6]. In the former type of case, the exercise of the Court’s discretion would usually justify the award of costs to the successful party.

THE ISSUES

16    Having regard to the applicable principles, the following issues are thrown up by the rival contentions of the parties concerning costs.

17    First, did Golden Roo and Essco effectively surrender or capitulate?

18    Second, is it possible for the Court to conclude, without reviewing swathes of evidence or resolving disputed questions of fact, that Liberty has been successful, or would almost certainly have succeeded if Golden Roo and Essco had not effectively consented to orders setting aside the statutory demands and the case had proceeded to trial?

19    Third, is it possible to conclude, on the basis of largely uncontested or ineluctable facts, that Golden Roo and Essco acted unreasonably in pressing the statutory demands and not consenting to orders setting them aside until shortly before the listed hearing?

20    Fourth, did Liberty act unreasonably by initially denying that it ordered or received the equipment identified in invoices attached to the statutory demands, and then changing its case when, upon receiving Golden Roo’s and Essco’s evidence, it ascertained that some of the equipment had in fact been supplied?

21    Before addressing those issues directly, it is necessary to briefly identify some facts that are relevant to the resolution of the issues.

relevant FACTS

22    The following uncontentious or ineluctable facts may be gleaned from the Court record and the evidence filed by the parties.

The Golden Roo proceeding

23    On 14 August 2023, Liberty received an email from Essco which attached many documents. Those documents included a series of invoices and what were said to be “supporting documents”. All but two of the invoices were issued by Essco. There were two invoices that purported to have been issued by Golden Roo. One of those invoices (invoice #1049 for an amount of $291,520) was the invoice later identified in the Golden Roo statutory demand (the disputed invoice). The disputed invoice was not specifically identified or referred to in the body of the email.

24    Liberty had an established commercial relationship with Essco before the receipt of this invoice. It had, among other things, previously ordered fuel dispensers from Essco and Essco had supplied those dispensers. A director of Liberty, Mr David Goldberger, was responsible for placing orders with Essco on behalf of Liberty. He invariably did so by communicating with an officer of Essco, Mr Joel Feferkranz. By August 2023, however, commercial relations between Liberty and Essco had soured.

25    Mr Goldberger’s evidence was that the 14 August 2023 email was sent from Mr Feferkranz’s email address at Essco. On 23 August 2023, Mr Goldberger sent an email to Mr Feferkranz. In that email, Mr Goldberger made it clear that he disputed one of the larger invoices which was attached to Essco’s 14 August 2023 email. In relation to the other invoices, Mr Goldberger stated that Liberty was “in the process of reviewing” those invoices and that “the issue of these invoices is not to be construed as Liberty accepting them as having been validly issued”.

26    Mr Feferkranz did not send any reply to Mr Goldberger’s email.

27    On 14 December 2023, Golden Roo’s lawyers sent a statutory demand to Liberty. The debt to which the statutory demand related was said to be in the amount of $291,520 and was described as: “the amount pursuant to invoice for fuel dispensers … provided to [Liberty] by [Golden Roo] summarised in the Invoice dated 31 July 2023 #1049 attached”.

28    On 21 December 2023, Liberty’s lawyers sent a letter to Golden Roo’s lawyers. That letter: stated that the debt referred to in the statutory demand was disputed and that Liberty denied having ordered the fuel dispensers the subject of the disputed invoice from Golden Roo “or at all”. It also said that, prior to receiving the disputed invoice, Liberty: had no prior commercial dealings with Golden Roo; had not engaged Golden Roo to provide services; and had not received any invoice or made any payment to Golden Roo.

29    On 22 December 2023, Liberty’s lawyers served Golden Roo’s lawyers with an application to set aside the Golden Roo statutory demand and a supporting affidavit sworn by Mr Goldberger. The grounds of the application included that there was a genuine dispute concerning the existence of the debt. In his affidavit, Mr Goldberger essentially repeated the claims or assertions in the letter sent the previous day, including that, prior to receiving the disputed invoice, he had no knowledge of Golden Roo and that Liberty had never “sought, nor purchased nor obtained any fuel dispensers or signage from Golden Roo.”

30    On 18 January 2024, Liberty’s lawyers sent a letter to Golden Roo’s lawyers in which it was asserted, among other things, that it was clear from Mr Goldberger’s affidavit that there was a genuine dispute concerning the debt in the statutory demand. The letter demanded that Golden Roo withdraw the statutory demand and stated that if the demand were not withdrawn, Liberty would apply for indemnity costs should the demand later be set aside. An email to similar effect was sent on 22 February 2024, when Golden Roo was in default of orders made in respect of the filing of its evidence.

31    On 29 February 2024, Golden Roo filed and served its evidence in response to Liberty’s application. That evidence comprised an affidavit of Mr Feferkranz. The affidavit is notable in the following respects. First, it does not directly dispute or engage with Mr Goldberger’s assertion that prior to receiving the invoice he had no knowledge of Golden Roo and had never ordered fuel dispensers from Golden Roo on behalf of Liberty. Second, Mr Feferkranz stated that he believed that the order for the goods referred to in the disputed invoice was placed “sometime in the middle of 2022”, however he did not “record the order or issue a written confirmation at the time”. Third, the affidavit did not annex any documentary evidence of any such order having been placed with Golden Roo. Fourth, the affidavit exhibited various Liberty packing slips in respect of some fuel dispensers, which were identified by serial number, but those packing slips identify the client as Essco and made no reference whatsoever to Golden Roo. Fifth, Mr Feferkranz appeared to suggest that the invoice was issued by Golden Roo because Golden Roo had been the purchaser of the dispensers which were said to have been supplied to Liberty.

32    On 14 June 2024 and 17 June 2024, Liberty filed and served its affidavit evidence in reply. That evidence included a further affidavit of Mr Goldberger and an affidavit of Liberty’s Chief Financial Officer, Mr Stanely Rosen. In his affidavit, Mr Goldberger reiterated that he was the only person at Liberty who had authority to order fuel dispensers and that he had never placed an order for a fuel dispenser with Golden Roo. In relation to the serial numbers of the dispensers identified in the packing slips exhibited to Mr Feferkranz’s affidavit, Mr Goldberger stated that Liberty had conducted a search of its asset register. That search had revealed that dispensers with those serial numbers had been received by Liberty in the past, but that Liberty had paid Essco and another company associated with Mr Feferkranz, Coromandel Corporation Limited, for the majority of those dispensers. Mr Rosen’s affidavit, among other things, confirmed that Liberty had paid Essco and Coromandel for the majority of the fuel dispensers identified in the packing slips.

33    Liberty’s application in respect of the Golden Roo statutory demand was listed for hearing on 1 July 2024.

34    On 20 June 2024, Liberty filed and served its written submissions.

35    On 24 June 2024, Golden Roo’s lawyers sent a letter to Liberty’s lawyers. That letter contained an open offer by Golden Roo to the effect that Golden Roo would consent to an order setting aside the statutory demand if Liberty would not seek an order that Golden Roo pay its costs of the proceeding. The letter stated that if the offer was not accepted, Golden Roo would “continue with its case and make an application for costs of the proceedings”.

36    Liberty did not accept Golden Roo’s offer. Nevertheless, on 26 June 2024, Golden Roo’s lawyers advised Liberty’s lawyers that Golden Roo no longer opposed the orders sought by Liberty, other than in respect of costs.

The Essco proceeding

37    On 22 January 2024, Essco’s lawyers served a statutory demand on Liberty. The debt to which the statutory demand related was in the amount of $41,010.20 and was described as being: “pursuant to invoices for fuel dispenser equipment and accessories provided to [Liberty] by [Essco] summarised in” 14 attached invoices.

38    On 12 February 2024, Liberty’s lawyers served Essco’s lawyers with an application to set aside the Essco statutory demand and a supporting affidavit sworn by Mr Goldberger. The grounds of the application included that there was a genuine dispute concerning the existence of the debt. In his affidavit, Mr Goldberger: referred to the procedure at Liberty that was required to be followed in respect of acquisitions of fuel accessories and spare parts; stated that Liberty had no documentary record of the required procedure having been followed in respect of 11 of the 14 invoices identified in the statutory demand; and stated that the remaining 3 invoices related to parts that Essco was required to provide free of charge.

39    On 23 February 2024, Liberty’s lawyers sent a letter to Essco’s lawyers in which it was asserted, among other things, that there was clearly a genuine dispute about the existence of the debt in the statutory demand. The letter stated that there was no basis upon which Essco would maintain the statutory demand and that it should be withdrawn. It stated that if the demand was not withdrawn, Liberty would apply for indemnity costs should the demand later be set aside.

40    On 9 and 10 May 2024, Essco filed and served its evidence in response to Liberty’s application. That evidence principally comprised an affidavit of Mr Feferkranz. In his affidavit, Mr Feferkranz, among other things: effectively accepted Mr Goldberger’s account of the procedure that was to be followed when Liberty ordered fuel accessories and spare parts from Essco; referred to and exhibited documents which indicated that the procedure had been followed in respect of eight of the invoices identified in the statutory demand; and noted that there were no such documentary records in respect of the balance of the invoices.

41    On 11 June 2024, Liberty paid Essco the sum of $17,309.60, being the total of the eight invoices in respect of which relevant documentation had been exhibited to Mr Feferkranz’s affidavit.

42    On 14 June 2024, Liberty filed and served its evidence in reply. That evidence principally comprised a further affidavit of Mr Goldberger. In that affidavit, Mr Goldberger noted that Liberty had paid Essco in respect of eight of the invoices identified in the statutory demand. In relation to the remaining invoices, Mr Goldberger stated that Liberty continued to dispute that it was indebted in respect of those invoices on the basis that the required process for ordering goods from Essco had not been followed in respect of those goods. He noted that there was no documentary record of that process having been followed in respect of those goods.

43    Liberty’s application in respect of the Essco statutory demand was listed for hearing, along with its application in respect of the Golden Roo demand, on 1 July 2024.

44    On 20 June 2024, Liberty filed and served its written submissions.

45    On 24 June 2024, Essco’s lawyers sent a letter to Liberty’s lawyers. That letter contained an open offer by Essco to the effect that Essco would consent to an order setting aside the statutory demand if Liberty would not seek an order that Esco pay its costs of the proceeding. The letter stated that if the offer was not accepted, Essco would “continue with its case and make an application for costs of the proceedings”.

46    Liberty did not accept Essco’s offer. Nevertheless, on 26 June 2024, Essco’s lawyers advised Liberty’s lawyers that Essco no longer opposed the orders sought by Liberty, other than in respect of costs.

DID GOLDEN ROO AND ESSCO CAPITULATE?

47    The first question is whether, having resisted withdrawing or agreeing to the setting aside of the statutory demands they had served, Golden Roo and Essco effectively surrendered or capitulated on the eve of the hearing. The short answer to that question is “yes”.

48    There was no settlement. Had Golden Roo and Essco not indicated that they no longer opposed the making of orders setting aside the statutory demands, Liberty undoubtedly would have pressed its applications to set aside the demands at the hearing. There was also no supervening event which somehow changed or modified the subject of the dispute in such a way that Golden Roo’s and Essco’s abandonment of their opposition to Liberty’s applications could be said to be anything other than a capitulation.

49    Golden Roo sought to justify or explain its late abandonment of its opposition to the setting aside of the statutory demand on the basis that Liberty had changed its position and identified a new or different basis for disputing the debt in the statutory demand. The change in position was said to be that Liberty had conceded that, contrary to Mr Goldberger’s initial claims, some of the fuel dispensers that were said to be the subject of the disputed invoice were in Liberty’s possession. The new basis for disputing the debt was said to be that those dispensers had already been paid for, albeit that the payment had been made to Essco and Coromandel. Golden Roo also contended that, in light of Liberty’s concession that some of the dispensers were in its possession, Golden Roo had available to it a quantum meruit claim in respect of the amount referred to in the statutory demand.

50    I am not persuaded that there was any material change in position by Liberty, or that Liberty had raised a new or different dispute concerning its alleged indebtedness. The statutory demand was for an amount allegedly payable by Liberty for goods sold and delivered by Golden Roo. Liberty’s case from the outset was that it had never had commercial relations with Golden Roo and had never ordered or contracted to purchase any goods, including those the subject of the disputed invoice, from Golden Roo. It was accordingly never indebted to Golden Roo. That case never changed. While Liberty acknowledged that some of the dispensers were in its possession, it does not follow that it conceded that it ever owed Golden Roo any money in respect of the supply of those dispensers, or any other dispensers. While Liberty maintained that it had paid Essco for the dispensers that had been delivered, that was not a new or different dispute. Liberty’s position remained that it was never liable to Golden Roo in respect of those dispensers.

51    As for Golden Roo’s arguments based on a quantum meruit claim, if anything that was a new case being advanced by Golden Roo. Golden Roo’s statutory demand was based, in effect, on a claim for goods sold and delivered pursuant to an alleged contract between Liberty and Golden Roo. The availability of a quantum meruit claim was flagged for the first time in Golden Roo’s submissions in respect of costs. In any event, the point remains that Liberty always disputed the alleged debt on the basis that it did not order or receive any goods from Golden Roo. If, as appeared prima facie to be the case, there was a genuine issue as to whether the goods were delivered by Essco, not Golden Roo, that issue would equally apply to any quantum meruit claim by Golden Roo, even putting to one side Liberty’s claim that the goods had already been paid for.

52    Essco similarly sought to justify its late abandonment of its opposition to the relief sought by Liberty on the basis that Liberty had changed its position. The change in position was said to be the payment of eight of the 14 invoices which were the subject of the statutory demand.

53    It may be accepted that Liberty’s payment of eight of the invoices represented a change in position in respect of the indebtedness referrable to those invoices. That said, Liberty maintained its position in respect of its alleged indebtedness referrable to the balance of the invoices identified in the statutory demand. The alleged indebtedness in respect of those invoices was in the amount of $23,700.60. It would have been open to Essco to maintain that there was no genuine dispute in relation to Liberty’s indebtedness in respect of that amount. It chose not to do so. It effectively capitulated.

WOULD LIBERTY ALMOST CERTAINLY HAVE SUCCEEDED?

54    The next question is whether it is possible for the Court to conclude, without reviewing swathes of evidence or resolving disputed questions of fact, that Liberty had been successful, or would almost certainly have succeeded if Golden Roo and Essco had not effectively consented to orders setting aside the statutory demands and the case had proceeded to trial?

55    The short answer to that question is again “yes”.

56    It is clear, from the authorities discussed earlier, that had the matters proceeded to hearing, to succeed, Liberty would only have been required to demonstrate that there was a bona fide dispute as to whether it was indebted to Golden Roo and Essco as alleged. That was a low bar so far as Liberty was concerned. The Court would not have been required to resolve that dispute. It would only need to determine whether the grounds of the dispute were not spurious, hypothetical, illusionary or misconceived.

57    While the affidavit evidence filed by the parties was relatively voluminous for a case of this type, even the most cursory consideration of the evidence would support the conclusion that there was a genuine and not spurious, hypothetical, illusionary or misconceived, dispute concerning Liberty’s indebtedness. As discussed earlier, the nature of the dispute, in the case of both the alleged indebtedness to Golden Roo and Essco, was clearly articulated in Mr Goldberger’s affidavits. Nothing in Mr Feferkranz’s affidavit evidence cast any real or material doubt on the genuineness of the dispute. Of course, the competing evidence of Mr Goldberger and Mr Feferkranz threw up some factual issues and disputes. Given the nature of the proceedings, however, it would not have been necessary for the Court to resolve those factual issues and disputes. Nor, more significantly, is it necessary for the Court to consider or resolve those disputes for the purpose of resolving the question of costs.

DID GOLDEN ROO AND ESSCO ACT UNREASONABLY?

58    Given the answers that have been given to the preceding questions, it is perhaps unnecessary to go further and address the question whether Golden Roo and Essco acted unreasonably in pressing the statutory demands and not consenting to orders setting them aside until shortly before the listed hearing. In any event, for the reasons already effectively given, the answer that question is tolerably clear.

59    As discussed earlier, the reasonableness of the conduct of Golden Roo and Essco in that regard must be considered in light of the nature of the proceeding and the low bar faced by Liberty in respect of its applications to set aside the statutory demands: Souden Lane at [26]. As White J noted in Soudan Lane at [5], given that low bar “creditors are often ill-advised to proceed with a statutory demand once plausible grounds for a dispute are asserted”; and as Barrett J observed in CGI Information Systems at [22], a “defendant, on having an obvious and irremediable weakness in its position pointed out, ought to withdraw the statutory demand”.

60    It should have been apparent to Golden Roo, almost from the outset, that there were plausible grounds for Liberty’s dispute in relation to the alleged indebtedness and that there were obvious and irremediable weaknesses it its position. There was plainly a genuine issue as to whether Liberty had ever ordered dispensers from Golden Roo. It was also apparent that there was no contemporaneous documentary record which cast doubt on Liberty’s claim that it had never contracted with Golden Roo. It was equally apparent that Mr Feferkranz had no actual recollection of Liberty placing an order with Golden Roo. The plausibility of the dispute was not altered by the fact that it was subsequently ascertained that some of the dispensers which were said to be the subject of the disputed invoice were in Liberty’s possession, particularly in circumstances where the documentary record suggested that those dispensers had in fact been supplied by Essco, and that Liberty’s records indicated that Liberty had paid Essco for those dispensers.

61    Likewise, it should have been apparent to Essco that there were plausible grounds for Liberty’s claim that it was not indebted for the full amount of the Essco statutory demand. There was no real dispute concerning the procedure that was required to be followed when Liberty ordered accessories and parts from Essco. There was also a plausible contention by Liberty that the procedure had not been followed in respect of the invoices identified in the statutory demand. As events transpired, when Essco investigated that contention, the investigation revealed documents which suggested that the procedure had been followed in respect of some, but not all, of the invoiced goods. It was, at the very least, unreasonable for Essco not to withdraw the statutory demand at that point. The circumstances of the Essco statutory demand were not dissimilar to those considered in Soudan Lane. In that case, costs were awarded against the party which had served the statutory demand, even though upon investigation it was discovered that the party upon whom the demand had been served in fact owed a significant proportion of the debt identified in the demand.

62    Golden Roo and Essco submitted that they had not acted unreasonably given Liberty’s change of position in respect of the alleged indebtedness. Their argument in that respect was addressed earlier in the context of the issue as to whether Golden Roo and Essco had capitulated. For the reasons given earlier, there was no material change in Liberty’s position. It consistently maintained that it was not indebted to Golden Roo because it had never ordered from or contracted with that company. It also consistently maintained that its contemporaneous documentary record indicated that procedures in respect of orders from Essco had not been followed in respect of the invoices the subject of the Essco statutory demand, though upon investigation it was revealed that the procedures were likely to have been followed in respect of some of the invoices.

DID LIBERTY ACT UNREASONABLY?

63    This issue may be dealt with shortly.

64    As has already been noted, Golden Roo and Essco contended that Liberty acted unreasonably because it initially denied receiving the goods the subject of the invoices identified in the statutory demands. They submitted that, as a result of those initial denials, they were required to incur costs that could easily have been avoided if Liberty had checked its “equipment register” at the outset.

65    I am not persuaded that Liberty acted unreasonably as contended by either Golden Roo and Essco.

66    In relation to Golden Roo, it will be recalled that it sent Liberty the disputed invoice by way of email in August 2023. That email attached many other invoices and a large volume of other documents. The email itself did not refer to the disputed invoice. Liberty promptly responded that it was investigating the legitimacy of the invoices. Golden Roo did not respond to Liberty and served the statutory demand without taking any further steps to assist Liberty’s investigation. The statutory demand was served shortly before Christmas and Liberty had little time to investigate the disputed invoice and file its evidence in support of its application to set aside the demand. In any event, while Liberty was ultimately able to ascertain that the dispensers that were said to be the subject of the disputed invoices were in its possession, Liberty’s documents indicated that those dispensers were supplied by Essco, not Golden Roo, and had already been paid for. In other words, it was not in any respect unreasonable for Liberty to raise, as a plausible contention requiring investigation, its claim that Golden Roo had not supplied the dispensers.

67    In relation to Essco, it was not unreasonable for Liberty to contend that the goods the subject of the invoices identified in the Essco statutory demand had not been ordered in accordance with the required procedure. That was at the very least a plausible contention requiring investigation. As events transpired, there was a complete absence of any documentary record concerning the ordering of the goods that were the subject of six of the 14 invoices. There was therefore a genuine dispute as to whether had Liberty ordered, and was required to pay for, those goods.

CONCLUSION AND DISPOSITION

68    Orders setting aside the statutory demands served by Golden Roo and Essco were ultimately not opposed.

69    Golden Roo and Essco should pay Liberty’s costs in relation to its ultimately successful applications that the statutory demands be set aside.

70    While there was no hearing on the merits, the circumstances in which Golden Roo and Essco ultimately did not oppose orders setting aside the statutory demands support the conclusion that they effectively capitulated or surrendered. Moreover, it is readily apparent from the evidence as filed that, had Golden Roo and Essco not capitulated, Liberty was in any event almost certain to succeed in its applications. That conclusion can be arrived at without considering or resolving the factual issues raised by the evidence. Likewise, the uncontested or ineluctable facts support the conclusion that Golden Roo and Essco acted unreasonably in continuing to oppose Liberty’s applications in circumstances where it was readily apparent that Liberty had raised plausible grounds for disputing the debts in the statutory demands.

Associate:

Dated:    15 July 2024