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Misuse of statutory demand yields costs against solicitor personally

November 23rd, 2009 · No Comments

Gippreal Pty Ltd v Kurek Investments [2009] VSC 344 is yet another decision of Justice Pagone of interest to this blog.  I appreciate His Honour’s concision.  In this case, a creditor served a statutory demand knowing full well that there was an offsetting claim for more than the debt the subject of the demand.  The creditor’s solicitor knew too, and Justice Pagone ordered that the costs of the successful application to set aside the demand be paid by the solicitor personally.  The offsetting claim was a formal one, being:

‘a claim in pending proceedings which had been issued in this Court in a statement of claim signed by senior counsel. Rule 13.01 requires pleadings settled by counsel to be signed and that requirement is not a mere formality. The signature by counsel of a pleading has been described as a voucher that the case is not a mere fiction[4] and reflects the duties imposed upon counsel to be satisfied that proceedings have a cause of action sufficient to invoke the Court’s jurisdiction and sufficient to warrant exposing an opposing party to the risk of orders and Court sanction. The claim by [the debtor] against [the creditor] was on foot, the pleadings had not been struck out, the particulars had not been struck out, its existence had been reaffirmed on 3 March 2009 and, however imprecise the claim may have been, on no view could it be said that [the debtor] was asserting a claim it did not seriously maintain. [The creditors’ solicitors]  were aware of that claim as the solicitors on the record for [the creditor]. They knew that the proceeding was on foot when the statutory demand was issued. The assertion that the quantum of the claim was in excess of $80,000 may not be backed up by supporting material but it is not controverted with any opposing evidence. Furthermore, the nature of the claims made are essentially legal costs which it may be assumed that [a deponent] is well placed to estimate.

[4] Great Australian Gold Mining Co v Martin (1877) 5 Ch D 1, 10 (James LJ).’

His Honour noted that:

‘the mere insistence by a client that his, her or its legal practitioner undertake conduct which would otherwise expose a solicitor to an order for costs [a circumstance not present in this case] does not of itself justify the solicitor acting upon the client’s insistence. A solicitor is not always justified in acting as a client might insist.[5]

[5] Lemoto v Able Technical Pty Ltd [2005] NSWCA 153; (2005) 63 NSWLR 300; Re Cooke (1889) 5 TLR, 408 (Lord Esher MR).’

See also:

Tags: Wasted costs