In the matter of Captcha Property No 3 Pty Ltd

By Originating Process filed on 7 November 2025, the Plaintiff, Captcha Property No 3 Pty Ltd (“Captcha”) applied to set aside a creditor’s statutory demand (“Demand”) issued by the Defendant, Hilston Constructions Pty Ltd (“Hilston”), on the several grounds that the Demand was defective; the alleged debt was not owing and was the subject of a bona fide dispute; there was no valid contract between the parties by which Hilston claimed payment was due; and Captcha had a valid claim against Hilston. By consent of the parties, on 2 February 2026, the Court noted that the Demand was withdrawn and the proceedings were dismissed by consent.

Notwithstanding the dismissal of the proceedings without a determination on the merits, Captcha sought an order for costs and the parties served evidence and made submissions on the basis that the question would be determined in Chambers.

In support of its costs application, Captcha relies on an affidavit dated 4 February 2026 of its solicitor, Mr Beckers, and also relied on a voluminous exhibit to that affidavit. Mr Beckers addressed service of the Demand and referred to an earlier adjudication application made by Hilston in January 2025 under the Building and Construction Industry Security of Payment Act 1999 (NSW). He referred to correspondence and communications between the solicitors and to Captcha’s filing of the application to set aside the Demand. Mr Beckers also referred to an affidavit dated 7 November 2025 of Mr Goodacre, which was not in evidence, to support a contention that Captcha would have made had the matter gone to hearing, that it was not a party to the contract on which Hilston relied for the debt claimed against it. Mr Beckers also referred to the evidence on which Hilston relied in the proceedings and to evidence led by Captcha in reply. Mr Beckers expressed his opinion that Captcha would have been successful with its application to set aside the Demand had it gone to hearing, apparently on the basis that the Demand had been issued to the incorrect party. Captcha also relies on an affidavit dated 27 January 2026 of Ms Simmons, who may be a director of Captcha, which refers to an affidavit of Mr Hilal and Mr Sassen filed in the proceedings, but not read in this application, and to matters in dispute which would have been determined had the matter gone to hearing.

Hilston relies on an affidavit dated 12 December 2025 of Mr Sassen, who was previously a director of Captcha, which also goes to the merits of the dispute which will not now be determined by the Court

I reviewed the relevant case law in my judgment in Re Kaloriziko Pty Ltd [2021] NSWSC 1276 (“Kaloriziko”) and again in Re Aussie Strength Pty Ltd [2021] NSWSC 1594, and have drawn on that review below.

In Re The Minister for Immigration and Ethic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624–625 (“Lai Qin”), McHugh J observed that:

In the context of applications to set aside a creditor’s statutory demand, in Felkro Nominees Pty Ltd v Austissue Pty Ltd (1993) 11 ACSR 607; [1993] FCA 455, the applicant sought costs where a statutory demand was set aside by consent. Heerey J noted that:

In Ayrton Investments Pty Ltd v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55 at [26], Higgins J observed that a person who issued such a demand faces “a risk as to costs, not an inevitability”. His Honour there expressed the view that:

In Soudan Lane Pty Ltd v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772 at [3]–[4], White J referred to the principles set out in Lai Qin above and observed that these principles apply to proceedings to set aside a statutory demand, but that special features of such proceedings also need to be taken into account in judging the reasonableness of the parties’ conduct. His Honour observed that:

In Dynamics Co Pty Ltd v G & M Nicholas Pty Ltd [2012] NSWSC 206 at [26], I noted several of these authorities and expressed the view that:

In Re Telegraph Point Sports & Recreation Club Ltd [2020] NSWSC 616, I made no order as to the costs of an application to set aside a creditor’s statutory demand where I found (at [13]) that:

I similarly made no order as to costs in Re Ming Tian Real Property Pty Ltd [2021] NSWSC 386, where genuine issues had been raised but were not determined when the demand was not pressed. On the other hand, in Kaloriziko, I made an order for costs in favour of the plaintiff which obtained an order to set aside a creditor’s statutory demand, where the other party, after litigating for some time although it led no substantive evidence, effectively surrendered to the plaintiff’s claim to set aside that demand.

Turning now to the parties’ submissions, Mr Allen, who appears for Captcha, submits that Captcha invited Hilston to withdraw the Demand and bring proceedings for the claimed debt, and that Hilston capitulated and withdrew the Demand before a hearing on the merits. Putting aside the use of the pejorative term “capitulated”, this submission does no more than note the obvious, namely that the matter did not proceed to a determination on its merits. Mr Allen in turn identifies matters which would have had to be determined at a hearing on the merits, including that the Demand refers to a single invoice and the affidavit in support refers to a debt comprising more than one invoice; refers to correspondence between the parties which does not prove the relevant facts; and asserts that Hilston’s contention that Captcha’s commencement of these proceedings was not authorised by its board is disputed, a matter which has also not been determined where there has been no hearing on the merits.

Mr Karam, with whom Mr de Mestre appears for Hilston, responds that there should be no order as to costs. He contends that the evidence led by Hilston would have established the proceedings were commenced in Captcha’s name without the authority of its board. Mr Karam rightly notes that there has here been “no event” within the meaning of r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) because there has been no hearing on the merits and submits that the Court will not try a hypothetical action between the parties in order to determine a question as to costs. Mr Karam also submits that, absent a hearing on the merits, the Court cannot assess the likely outcome of Captcha’s application or the cogency of its evidence; that evidence has not been read or tendered at a substantive hearing, or any witnesses cross-examined; and that the Court is not in a position to find whether a genuine dispute or off-setting claim exists. Mr Karam also submits that Hilston’s decision to issue the Demand was reasonable, where Hilston contends that the debt owed to it was acknowledged by a director of Captcha (Mr Sassen) prior to the issue of the Demand, and a dispute as to the debt was raised by Captcha only after the Demand was served. That matter has also not been determined on the merits at a substantive hearing.

Here, the Court cannot find the Demand was not reasonable served without determining the contested issue as to whether Captcha had previously acknowledged liability for the debt claimed. It also seems to me that the Court cannot determine whether the proceedings were not properly authorised by Captcha’s directors, as Hilston contends, or whether the application to set aside the Demand would have succeeded had it gone to a hearing on the merits. For these reasons, I make no order as to the costs of the proceedings up to and including 2 February 2026. Captcha has unsuccessfully sought its costs in the proceedings and put Hilston to the costs of responding to its costs application and should pay the costs of that application.

I make the following orders: