Varandra Holdings Pty Ltd v Bevan (No 2)
[2024] QSC 231
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- Notable Unreported Decision
- Varandra Holdings Pty Ltd v Bevan (No 2)[2024] QSC 231
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Varandra Holdings Pty Ltd v Bevan (No 2)[2024] QSC 231
Varandra Holdings Pty Ltd v Bevan (No 2)[2024] QSC 231
SUPREME COURT OF QUEENSLAND
CITATION: | Varandra Holdings Pty Ltd v Bevan (No 2) [2024] QSC 231 |
PARTIES: | Varandra Holdings Pty Ltd (Applicant) v Adam John Bevan (Respondent) |
FILE NO/S: | 9161 of 2024 |
DIVISION: | Trial Division |
PROCEEDING: | Application – Costs |
ORIGINATING COURT: | Supreme Court of Queensland |
DELIVERED ON: | 27 September 2024 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 15 August 2024 |
JUDGE: | Ryan J |
ORDER: | The Applicant, Varandra Holdings Pty Ltd, is to pay the Respondent, Adam John Bevan’s, costs of the application to set aside the statutory demand, filed 15 July 2024, on an indemnity basis. |
CATCHWORDS: | PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – RELEVANT CONSIDERATIONS GENERALLY – where the applicant was unsuccessful in bringing its application to set aside a statutory demand – where the dispute about the debt was not genuine or bona fide – where costs sought by the respondent on an indemnity basis – whether an indemnity costs order ought to be made. Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 LPD Holdings (Aust) Pty Ltd & Anor v Phillips, Hickey and Toigo & Ors [2013] QCA 305 Varandra Holdings Pty Ltd v Bevan [2024] QSC 203 |
COUNSEL: | M Hall (solicitor) for the applicant W Attoh for the respondent |
SOLICITORS: | Hall Lawyers for the applicant Legal Made Easy for the respondent |
- [1]On 5 September 2024, I delivered judgment in this matter. I dismissed the applicant’s application to set aside the respondent’s statutory demand on the basis that the dispute about the debt raised by the applicant was not a genuine dispute and was not made bona fide. In dismissing the application, I invited the parties to make written submissions as to costs.
- [2]Written submissions were received from the respondent on 19 September 2024, seeking costs on an indemnity basis. The respondent relied upon: (a) its success in the application; (b) the “futile or hopeless” nature of the applicant’s case; and (c) the applicant’s unreasonable rejection of an earlier offer by the respondent, which necessitated the proceedings. The respondent alternatively seeks costs on an indemnity basis from 7 May 2024 when the offer was made, with standard costs prior to this date; or in the further alternative, costs on a standard basis.
- [3]The applicant did not file written submissions. An email from the applicant’s solicitor was received by my Associate on 20 September 2024, stating only that “no detailed submissions will be provided Costs should follow the event and that in the circumstances an award of party and party costs is appropriate.”
- [4]The detailed facts that gave rise to the application are set out in the judgment of 5 September 2024. Briefly, the respondent’s written Costs submissions revealed the following chronology:
- On 18 June 2021, the parties signed a Share Sale and Purchase Agreement, whereby the applicant agreed to buy all of the respondent’s shares in Trade Wind Capital Markets Pty Ltd for $140,000, to be paid in three instalments. These payments were never made.
- On or around 8 November 2023, the applicant sent a letter to the respondent which contained an account for the Spring Hill premises which the respondent and his associated businesses leased from the applicant. The letter also contained an acknowledgment of the debt. The applicant calculated the respondent’s proportion of rent, outgoings and expenses including car parking, electricity and internet over a 21-month period as $186,030 and contended that $46,030 was the amount due and payable – having deducted from the $186,030 the $140,000 payment which had not been made for the shares, and thereby acknowledging the debt.
- On or around 5 April 2024, the respondent served a statutory demand on the applicant (the first statutory demand), seeking $140,000 for the shares.
- On 12 April 2024, the applicant’s previous lawyers wrote to the respondent’s lawyers stating that the applicant had an offsetting claim for purported rent, outgoings and expenses in relation to the Spring Hill premises and requesting that the respondent withdraw the statutory demand. The first statutory demand was withdrawn. There was no mention in this letter of a dispute as to the existence of the debt due to misrepresentation on the part of the respondent. This letter also re-iterated the contents of the 8 November 2023 letter, stating that “$46,030 remains due and payable by [the respondent] to [the applicant] as a result of the set off.”
- On 7 May 2024, the respondent made an offer to the applicant proposing to accept $135,000 for the Trade Wind Capital shares rather than $140,000.
- On 7 May 2024, the respondent sent a further letter to the applicant asking it to substantiate its offsetting claim.
- The applicant responded to the 7 May 2024 letter on 5 June 2024. This letter, sent by email, contained several attachments, including the 8 November communication acknowledging the existence of the debt. This letter did not substantiate the offsetting claim (subsequently abandoned at the hearing on 15 August 2024), except by attaching the Rental Appraisal of the Spring Hill premises and an Excel spreadsheet outlining expenses paid by the applicant on behalf of the respondent’s business from February 2022 to October 2023. The letter made no reference to the respondent’s offer of 7 May 2024.
- On 28 June 2024, the respondent issued a fresh statutory demand (the second statutory demand), seeking $140,000 for the shares.
- On 15 July 2024, the applicant commenced proceedings in this Court under ss 459G and 459H of the Corporations Act 2001, to have the statutory demand set aside on the basis that there was a genuine dispute about the existence of the debt due to misrepresentation on the part of the respondent, and also that it had an offsetting claim.
- [5]In the judgment, I found that the applicant knew of the alleged misrepresentation as early as July 2021, one month after the Agreement was made, but took no steps in response to it until it was served with the second statutory demand. Nor was misrepresentation raised by the applicant in its response to the first statutory demand of 5 April 2024, as the material tendered on the Costs argument shows. No dispute was raised prior to the application to this Court. Moreover, the applicant acknowledged the existence of the debt on several occasions. This led me to a finding that there was:
“… little more than a bare assertion that the applicant disputed the debt on the basis of a misrepresentation, upon which it relied, and without which it would not have entered into the Agreement – which was contradicted by the applicant’s conduct and its admission. … And it was only in response to the pressure of being confronted with the statutory demand that it decided to raise a dispute about its existence.” (Varandra Holdings Pty Ltd v Bevan [2024] QSC 203, [104], [109]).
In my view, this amounted to “a ‘constructed’ – not a genuine – dispute.” ([109]).
Costs
- [6]Costs are awarded at the discretion of the Court. The general rule that costs follow the event is grounded in the principle that those who bring a weak or futile case or mount an unsuccessful defence, should have to pay the costs of the proceeding. Without question, the general rule should be applied in a case such as this where the respondent has been wholly successful in the application.
- [7]The respondent submits that indemnity costs should be awarded in this case for two reasons: (i) the applicant’s conduct of a “hopeless case”; and (ii) the rejection of the respondent’s “Calderbank” offer of 7 May 2024 seeking $135,000 rather than $140,000 for the shares. The respondent submits the case was hopeless given my finding that the applicant “constructed” a dispute that was “neither genuine nor bona fide”.
- [8]The question for me is whether, given my factual findings summarised above, indemnity costs should be awarded. With regard to the alternatives put to me by the respondent, I can only consider costs in relation to the proceedings before me which commenced with the application filed on 15 July 2024.
- [9]The applicable principles for the awarding of indemnity costs have been summarised in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. However, the categories in which the discretion may be exercised are not closed (LPD Holdings (Aust) Pty Ltd & Anor v Phillips, Hickey and Toigo & Ors [2013] QCA 305 at [21]). In that case, Boddice J (as his Honour then was) noted that “misconduct, unreasonableness and the commencing and continuing of a hopeless case were but examples of the relevant conduct in which the discretion to award costs may be exercised” (at [23]).
- [10]In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401, it was held that indemnity costs may be awarded where it appears to the court “that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success”. In such cases, the action “must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.”
- [11]These principles may be applied in the present case given the lack of bona fides on the part of the applicant in bringing the application. Given my factual findings as to the “constructed” nature of the dispute, and the absence of any submissions from the applicant explaining why I ought not to order costs on the indemnity basis in the face of my finding that the contention made by the applicant in support of its application was not bona fide, I consider it appropriate, in the exercise of my discretion, for the costs of the application to set aside the statutory demand be awarded on an indemnity basis.