In the matter of Settlement Holdings Pty Ltd

1. [1]

   By Originating Process filed on 15 September 2025, Settlement Holdings Pty Ltd (“SHPL”) applied to set aside creditor’s statutory demands dated 26 August 2025 (“Demands”) served on it by Mr and Ms Hinson. It appears that the Demands served by Mr and Ms Hinson claimed an amount of $6,250 being allegedly unpaid interest under a Bill Facility Agreement dated 5 May 2025 (“BFA”) and an amount of $1 million asserted to be immediately repayable following an event of default on termination of the BFA. SHPL filed an affidavit dated 15 December 2025 of Mr Sutherland, a director of SHPL, in support of the application to set aside the Demands. It appears that SHPL’s bank froze the accounts into which those amounts were paid and, on 4 December 2025, SHPL’s bank repaid amounts of $1 million each to Mr and Ms Hinson respectively.

2. [2]

   On 2 February 2026, I made orders, by the consent of the parties, noting that the debts under the Demands issued by the Defendants had been satisfied and dismissing the proceedings. At the parties’ request, I reserved the opportunity to make submissions as to costs, with the question of costs to be determined on the papers.

Applicable principles

1. [3]

   I reviewed the relevant case law in my judgment in Re Kaloriziko Pty Ltd [2021] NSWSC 1276 (“Kaloriziko”), Re Aussie Strength Pty Ltd [2021] NSWSC 1594 and again in Re Captcha Property No 3 Pty Ltd [2026] NSWSC 60, and have drawn on that review below.

2. [4]

   In Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624–625; [1997] HCA 6 (“Lai Qin”), McHugh J observed that:

3. [5]

   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) 11 ACLC 1142, the applicant sought costs where a statutory demand was set aside by consent. Heerey J noted (at 608) that:

4. [6]

   In Ayrton Investments Pty Ltd v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55 at [19], Higgins J observed that a person who issued such a demand faces “a risk as to costs, not an inevitability”. His Honour expressed the view (at [26]) that:

5. [7]

   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 (at [4]–[6]) that:

6. [8]

   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:

7. [9]

   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:

8. [10]

   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.

9. [11]

   SHPL also refers to the effect of r 42.20 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). That rule provides that, if the Court makes an order for the dismissal of proceedings, then, unless the Court orders otherwise, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which they have been dismissed. In McNamara v San [2010] NSWSC 809 at [12], Hallen AsJ (as his Honour then was) summarised the principles applicable to this rule as including that:

10. [12]

    That summary was cited with approval by Kunc J in Spatt v Benson [2019] NSWSC 1195 at [64], and I have followed it in cases including Davis v Certain Lloyd’s Underwriters [2022] NSWSC 131 at 9[ff].

11. [13]

    In submissions in reply, Mr and Ms Hinson in turn drew attention to Stevenson J’s summary of applicable principles, drawing on Lai Qin, in Dymocks Franchise Systems (NSW) Pty Ltd v Chapter 3 Pty Ltd [2022] NSWSC 35 at [1]–[2] (“Dymocks”) as follows:

Submissions and determination

1. [14]

   SHPL submits that the parties should each pay their own costs of the proceedings. It outlines, in submissions, the circumstances of the entry into the BFA and notes that the relevant funds were paid into a bank account which was then frozen by SHPL’s bank, although the evidence as to these matters was not read in the proceedings. SHPL acknowledges that it was not able to return the funds to Mr and Ms Hinson or pay interest on them in July 2025 because, it contends, the funds were in the frozen account, although the evidence as to that matter was also not read in the proceedings. SHPL also referred to without prejudice correspondence, which addressed the position in respect of the frozen bank accounts, but did not have the effect that Mr and Ms Hinson would be repaid the relevant funds.

2. [15]

   SHPL in turn submits that there are good reasons for departing from the ordinary position here, because it took steps to have the Demands set aside but was prepared to return the deposit or take steps within its power to do so. The difficulty with that submission is, of course, that SHPL had no power to repay the deposit if, as it contends, the account in which it was held was frozen. SHPL also contends that the actions of its bank in freezing the account were outside its control, but that contention depends on evidence that was not read in the proceedings and does not answer SHPL’s inability to repay the funds. SHPL submits that the return of the funds by SHPL’s bank to Mr and Ms Hinson brought an end to the proceedings or removed the subject matter of the dispute and supports a contention that the money was never in SHPL’s possession. SHPL submits that, in the language of Dymocks, this is a case where “no party can be said to have won”; SHPL has not acted “so unreasonably” in respect of the proceedings; and “the proper exercise of the Court’s discretion would usually mean there should be no order as to costs.”

3. [16]

   Mr and Ms Hinson in turn submit that r 42.20 of the UCPR should apply and SHPL should pay the costs of the proceedings. They in turn outline the history of the proceedings and acknowledge that they each received the amount of $1 million into their accounts directly from SHPL’s bank on 4 December 2025, but contend that a relatively small amount remained payable to them under the Demands. They note that that amount was deposited into their solicitor’s trust account on 30 January 2026, before the Court made orders to dismiss the proceedings by consent. They submit that these events indicate that SHPL accepted that the debt was owed to them. In submissions in reply, SHPL in turn took issue with aspects of Mr and Ms Hinson’s submissions.

4. [17]

   The complexity of these matters seems to me to be sufficient to displace the proper application of UCPR r 42.20. The nature of the dealings between Mr and Ms Hinson and SHPL are by no means clear; the bulk of the evidence led in the proceedings has not been read; and the Court has not reached a determination as to the merits. The proceedings appear to have been mooted, in large part, by the payment made by SHPL’s bank to Mr and Ms Hinson in early December 2025, although they continued, in respect of the relatively small additional amount claimed by Mr and Ms Hinson, until consent orders were made on 2 February 2026. The effect of the payment made by SHPL’s bank would have likely been that, at the least, the Demands issued by Mr and Ms Hinson would have been varied, to reduce the substantiated debt from a large amount to a relatively small amount. This is not a case where SHPL has surrendered to Mr and Ms Hinson, where the payment of the relevant funds by its bank to Mr and Ms Hinson has undermined the factual basis of the proceedings.

5. [18]

   For these reasons, I will make no order as to the costs of the proceedings. Mr and Ms Hinson sought an order for costs on a gross sum costs basis and relied on an affidavit dated 23 February 2026 of its solicitor, Mr Hedge, in that respect. That question does not arise where no costs will be ordered in their favour.