Smits v B & B Legal Pty Ltd t/as Borthwick & Butler

1. [1]

   THE COURT: By summons filed on 17 November 2025, the applicant seeks leave to appeal from the judgment and orders in In the matter of B & B Legal Pty Ltd t/as Borthwick and Butler Solicitors [2025] NSWSC 587 (PJ) and In the matter of B & B Legal Pty Ltd t/as Borthwick and Butler Solicitors [2025] NSWSC 656.

2. [2]

   The proceedings below involved an application by the respondent (B & B Legal) to set aside a statutory demand dated 11 December 2024 that was issued by the applicant (Mr Smits). The statutory demand related to an amount of $218,756.16, being a debt allegedly owed to Mr Smits as a legal assignee. The primary judge, Brereton J, set aside the statutory demand and ordered that Mr Smits pay the costs of B & B Legal on the ordinary basis.

3. [3]

   Mr Smits requires leave to appeal under s 101(2)(p) of the Supreme Court Act 1970 (NSW) because the judgment and orders below relate to an application made under s 459G of the Corporations Act 2001 (Cth).

4. [4]

   Also before the Court is a notice of motion filed on 30 January 2026 by B & B Legal. B & B Legal seeks leave to file and serve an amended response under r 51.13 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and also seeks leave (to the extent necessary) to rely upon a deed of re-assignment dated 22 September 2025 in relation to the question of leave to appeal.

5. [5]

   For the reasons that follow, the orders sought in the respondent’s notice of motion should be made and leave to appeal should be refused, with costs.

Procedural history

1. [6]

   It is appropriate to say something about some procedural matters. As noted above, the summons seeking leave to appeal was filed on 17 November 2025. The respondent filed its notice of motion on 30 January 2026, together with the supporting affidavit of Mr M J Cameron.

2. [7]

   On 2 February 2026, the summons seeking leave to appeal was listed for hearing on 20 April 2026, with an estimated hearing time of one hour.

3. [8]

   Various other case management orders relating to the hearing of both the summons and the respondent’s motion were made by the Registrar on 2 February 2026, 4 March 2026 and 16 March 2026, including listing the respondent’s motion for hearing also on 20 April 2026.

4. [9]

   Both parties filed detailed written submissions, including an undated statement of argument from the applicant and submissions dated 15 December 2025 (respondent), 30 January 2026 (one set from each party), 16 February 2026 (respondent) and 13 March 2026 (applicant). The White Folder comprised two lever arch folders totalling in excess of 700 pages.

5. [10]

   On 16 April 2026, the respondent’s solicitor wrote to the Registrar with the applicant’s consent. The email related to the applicant’s application for the hearing on 20 April 2026 to be vacated on the basis of the applicant’s ill health. The respondent consented to the foreshadowed application and indicated that the parties agreed that the leave only hearing on 20 April 2026 should be vacated and the proceedings listed for directions on 6 May 2026.

6. [11]

   The respondent attached to its email dated 16 April 2026 three medical documents which it had received from the applicant concerning the adjournment application. The first is a one page report dated 25 March 2026 signed by Dr Christopher Raffel and addressed to the applicant’s general practitioner, Dr Rao Hameed from the Carrara Medical Practice. The report refers to cardiological procedures conducted on the applicant at Pindara Private Hospital on 16 March 2023, which involved the insertion of stents on that day. The report continued with Dr Raffel, a cardiological surgeon, informing Dr Hameed that he would “leave ongoing follow up locally”.

7. [12]

   The second report is dated 15 April 2026 and is a brief medical certificate issued by Dr Hameed. Dr Hameed certified that the applicant (whose date of birth is given as xx April 2052 [sic]) “is currently undergoing investigation for complex medical issues” and that, due to his medical condition, the applicant was not fit to either travel interstate or “[e]ngage in stressful activities” for the period from 15 April 2024 to 24 April 2026 inclusive.

8. [13]

   The third document is a brief medical certificate signed by Professor Rohan Jayasinghe. It is dated 15 April 2026 and certifies that the applicant is receiving medical treatment for the period 16 April 2026 to 23 April 2026 inclusive. It states that the applicant will be unfit for travel or to be involved in any work involving stress during this period (noting that those dates differ from those in the medical certificate of Dr Hameed). It adds that the applicant was scheduled to have an angiogram at Pindara Hospital on 16 April.

9. [14]

   Following receipt of this correspondence, the Registrar emailed the parties on Thursday 16 April 2026 asking whether the parties consented to the summons and notice of motion being determined on the papers.

10. [15]

    On Friday 17 April 2026, the respondent emailed the Registrar indicating that the applicant did not consent to the matter being determined on the papers but that the respondent did.

11. [16]

    Shortly thereafter, the Registrar emailed the parties stating that the matter remained listed on 20 April 2026.

12. [17]

    On the morning of Monday 20 April 2026, the applicant emailed the Registrar, copying in the respondent’s legal representatives. He referred to the medical certificates of Dr Hameed and Professor Jayasinghe outlined above and added further claims concerning his medical conditions. He said that he was not fit to contest the leave application and added that the hearing should have been vacated on 16 April 2026.

13. [18]

    In his email, the applicant also pointed to several other factors in his life which he submitted were causing him “on-going emotional distress" and risked “further damage to [his] recovery”.

14. [19]

    When the matter was called for hearing at 10:16am on 20 April 2026, Mr R J May of counsel appeared for the respondent. There was no appearance by the applicant.

15. [20]

    After explaining the long history of the matter and after referring to the correspondence outlined above, the Court invited Mr May to indicate whether he wished to supplement by oral submissions the various written submissions filed by the respondent in relation to the application for leave to appeal and the notice of motion. The Court proposed that a copy of the transcript be sent to Mr Smits as soon as it was available and that the hearing of the two matters would be adjourned to 9am on Tuesday 28 April 2026. Mr Smits could appear at that time either in person, by a legal representative or via AVL. The Court also indicated that any further application for an adjournment of the hearing by the applicant needed to be supported by affidavit evidence from a medical practitioner.

16. [21]

    Mr May raised no objection to this proposed course. Mr May had also indicated earlier that the respondent did not wish to supplement its written submissions, emphasising that it had been content for the matter to be heard on the papers.

17. [22]

    When the hearing resumed on Tuesday 28 April 2026, Mr Smits appeared via AVL. He tendered a deed of acknowledgment and replication of assignment dated 9 January 2026 between Mr and Mrs Edmonds and himself. Recital B stated that the purpose of the deed is to “confirm and acknowledge the intention of the parties that the Assignee is the holder of the Deposit Debt described in Schedule A, despite any other transaction, instrument, action, step or proceeding”. There are 11 items in the schedule, including item 11 which refers to “Any document filed or referred to in Supreme Court of NSW Winding Up Proceedings No. 2025/00184474” on or after 15 May 2025. Presumably, this was intended to include the deed of re-assignment dated 22 September 2025 but it should also be noted that the parties to that deed are not the same as the parties identified in the deed of acknowledgement and replication of assignment dated 9 January 2026 with reference to item 11.

Background and primary judgment summarised

1. [23]

   On 24 December 2024, B & B Legal commenced proceedings in the Corporations List in the Equity Division of the Supreme Court seeking to set aside the statutory demand.

2. [24]

   The $218,756.16 debt which is the subject of the statutory demand was said to arise from the payment of a $130,000 deposit to B & B Legal’s trust account. The difference between the two amounts is claimed to be attributable to interest.

3. [25]

   The $130,000 deposit was paid to B & B Legal as stakeholder under a contract for the sale of land dated 21 February 2018 between Ms Sandra Edmonds and Mr David Edmonds (vendors) and Bayfoyle Pty Ltd (purchaser). Mr Smits contended that B & B Legal had misappropriated the deposit and consequently owed the vendors that amount. By virtue of a deed which purported to assign the rights of the vendors under the contract for sale to Mr Smits, Mr Smits alleged that he was entitled to the deposit plus interest, which added to $218,756.16.

4. [26]

   In the proceedings below, Mr Smits contended that the application to set aside the statutory demand should be dismissed (PJ at [5]) because:

   1. (1)

      the originating application and supporting affidavit were not served within the statutory period (21 days) after service of the statutory demand, as required by s 459G(2) of the Corporations Act; and

   2. (2)

      the originating process was fatally flawed due to the absence of the endorsement or statement required under UCPR r 10.3(3).

5. [27]

   The primary judge rejected both contentions. His Honour explained at some length why Mr Smits was served both physically and electronically within the statutory period: PJ at [13]-[16], [17]-[23]. The primary judge also found that the omission of the required statement under UCPR r 10.3(3) did not mean that B & B Legal failed to make an application in accordance with s 459G of the Corporations Act: PJ at [24]-[31].

6. [28]

   The primary judge then turned to the question whether the statutory demand should be set aside on the basis that “there is some other reason why the demand should be set aside”: Corporations Act s 459J(1)(b). His Honour found that the affidavit accompanying the statutory demand sworn by Mr Smits did not comply with r 5.2 of the Supreme Court (Corporations) Rules 1999 (NSW) because it did not contain a statement as to the belief of Mr Smits that there was no genuine dispute about the existence or amount of the debt. On this basis, the primary judge set aside the statutory demand: PJ at [33]-[41].

7. [29]

   Further, the primary judge found that there was a genuine dispute regarding the alleged debt in light of:

   1. (1)

      B & B Legal’s denial that it was liable for the deposit on the grounds that the deposit was duly paid out on settlement in accordance with an express consent (PJ at [45]); and

   2. (2)

      the existence of a deed of settlement and release dated October 2018 which contained various releases and supposedly made provision for how the deposit would be applied on settlement, including that there would be no amounts to be paid to the vendor having regard to their indebtedness (PJ at [46]).

8. [30]

   These circumstances, in the primary judge’s view, each provided a sufficient basis to set aside the statutory demand.

Should leave be granted to file and serve an amended response and to rely upon a deed of re-assignment?

1. [31]

   It is convenient to first address B & B Legal’s notice of motion.

2. [32]

   As already noted, B & B Legal seeks leave to file and serve an amended response under UCPR r 51.13 and also seeks leave (to the extent necessary) to rely upon a deed of re-assignment dated 22 September 2025 in relation to the question of leave to appeal.

3. [33]

   The amended response contains a new section summarising B & B Legal’s arguments in response to each of the draft grounds of appeal, so as to comply with UCPR r 51.13(2)(b)(i). The amended response also raises, as an additional reason why leave should not be granted, the fact that Mr Smits no longer had any disputed debt owing to him by B & B Legal at the time he filed the summons seeking leave to appeal. B & B Legal seeks leave (if necessary) to rely on a deed of re-assignment to make good this argument. Further, the amended response annexes a draft notice of contention pursuant to UCPR r 51.13(4).

4. [34]

   B & B Legal contends that leave should be granted to file and serve its amended response in circumstances where the amendments were timely, would not prejudice Mr Smits, and the reason for the amendments is that counsel was only briefed shortly before the deadline for the filing of the response (with the consequence that the response did not address all of the matters that B & B Legal wished to raise).

5. [35]

   Mr Smits opposes leave being granted and urges the Court to reject B & B Legal’s attempt to rely on the deed of re-assignment. Mr Smits contends that the amended response is an “attempt to re-frame the case” after the filing deadline and would “introduce a novel contention, new arguments and fresh materials which fundamentally alter the conduct and issues on appeal”. He also submits that to “introduce a notice of contention at this late stage is procedurally improper and unfairly prejudicial”. He further argues that B & B Legal should not be permitted to rely upon the deed of re-assignment as it did not exist at the time of the trial and “appeal proceedings are not an opportunity for parties to introduce newly created instrument [sic], evidence and rights, which are designed to change materially the legal landscape after judgment”.

6. [36]

   Mr Smits’ submissions are not accepted. No demonstrable prejudice would be occasioned to Mr Smits by the grant of leave sought in the notice of motion, in circumstances where it was filed by B & B Legal 11 weeks prior to the hearing of the application for leave to appeal. It is desirable in the interests of justice to have all relevant issues in dispute heard and determined by the Court.

Should leave to appeal be granted?

1. [37]

   Turning to whether leave to appeal should be granted, it is well-established that the grant of such leave generally requires the identification of an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable: see eg Cheng v Motor Yacht Sales Australia Pty Ltd (2022) 108 NSWLR 342; [2022] NSWCA 118 at [15] per Bell CJ, Ward P and Basten AJA agreeing.

2. [38]

   In a draft notice of appeal annexed to Mr Smits’ affidavit sworn on 4 October 2025 (which was incorrectly filed in Supreme Court proceeding 2025/00381643), six grounds of appeals are identified. Those grounds may be summarised as follows:

   1. (1)

      The primary judge erred in proceeding on the basis that there was a valid application under s 459G of the Corporations Act so as to enliven the Court’s jurisdiction to set aside the statutory demand.

   2. (2)

      The primary judge erred in finding that the application under s 459G of the Corporations Act had been validly served so as to enliven the Court’s jurisdiction to set aside the statutory demand.

   3. (3)

      The primary judge erred in finding that there was a genuine dispute as to the amount or existence of the debt claimed in the statutory demand.

   4. (4)

      The primary judge erred in finding that the deed of settlement and release provided the basis for a genuine dispute about the debt.

   5. (5)

      The primary judge erred in finding that the statutory demand should be set aside under s 459J(1)(b) of the Corporations Act due to the absence of a “no genuine dispute” clause in the supporting affidavit.

   6. (6)

      The primary judge erred in awarding costs to the plaintiff in view of its proportional success.

3. [39]

   B & B Legal submits that leave to appeal should not be granted because the application for leave to appeal has been brought out of time, hence an extension of time is required and no explanation has been provided by Mr Smits for the delay. B & B Legal also submits that the statutory demand is now stale, no issue of principle or question of general public importance or injustice is raised by the appeal, and Mr Smits has no real interest in prosecuting the appeal because he has reassigned the debt which is the subject of the statutory demand.

4. [40]

   The primary judge delivered the principal judgment on 6 June 2025 and the costs judgment on 24 June 2025. These were relevantly the “material dates” for the purposes of filing a summons for leave to appeal or a notice of intention to appeal. Mr Smits filed a notice of intention to appeal against the costs judgment on 2 July 2025. This was within the 28 day period in UCPR r 51.8. He filed an amended notice of intention to appeal against the principal judgment on 13 July 2025. Even if the amended notice of intention to appeal was regarded as having been filed within time, any summons for leave to appeal was still required to be filed within 3 months of the relevant material date, which is 6 September 2025 for the principal judgment and 24 September 2025 for the costs judgment: UCPR r 51.6.

5. [41]

   The summons for leave to appeal was not filed until 4 October 2025, which was more than three months after the relevant dates for the principal judgment (6 June 2025) and the costs order (24 June 2025). Accordingly, Mr Smits required an extension of time. As Mr May submitted, Mr Smits provided no explanation for the delay in filing the summons for leave (other than “inadvertence”, which Mr Smits volunteered in oral submissions in reply) or any reason, beyond the asserted merits of the summons for leave to appeal, why time ought be extended. We accept this submission. For reasons which we will develop, we are not persuaded that the merits of the summons are sufficiently arguable so as to justify an extension of time.

6. [42]

   The absence of any issue of principle, question of public importance or reasonably clear injustice going beyond something which is merely arguable raised by the draft grounds of appeal is sufficient to dispose of this application for leave to appeal. As Kirk and McHugh JJA noted in Mohareb v Local Court of New South Wales [2024] NSWCA 235 at [34]:

7. [43]

   Grounds 1-2 may be dealt with together. Those grounds contend that the primary judge did not have jurisdiction to set aside the statutory demand under s 459G of the Corporations Act. That section relevantly provides:

8. [44]

   Gummow J (Brennan CJ, Dawson, Gaudron and McHugh JJ agreeing) held in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; [1995] HCA 43 that “the temporal requirements in sub-ss (2) and (3) of s 459G operate to define the jurisdiction of the court in respect of an application to set aside a statutory demand”: at 276. His Honour continued to observe at 276-7 that (emphasis added):

9. [45]

   Referring to these remarks, Parker J (Scott and Anderson JJ agreeing) held in Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306; [2002] WASCA 51 at [18] that:

10. [46]

    Similarly, in Re MHC Pathology Pty Ltd (2020) 356 FLR 222; [2020] VSC 789, Hetyey AsJ observed at [12] that:

11. [47]

    Mr Smits contends that the failure to include in the originating process the statement required by UCPR r 10.3 meant that there was no valid application made under s 459G, such that the Court had no jurisdiction to set aside the statutory demand. Rule 10.3(3) provides:

12. [48]

    The originating process here was served in Queensland and it did not include a statement as specified in r 10.3(3).

13. [49]

    An analogous argument was made in Predella. Financial Solutions contended that the affidavit in support of Predella’s application to set aside a statutory demand failed to meet essential requirements of the then-applicable Supreme Court rules, such that it was not valid or effective as an affidavit supporting the application: at [39]-[40]. However, Parker J (Scott and Anderson JJ agreeing) reasoned at [41] that:

14. [50]

    His Honour proceeded to add at [45] that:

15. [51]

    Similarly, there is nothing here to suggest that an originating process must comply with UCPR r 10.3 in order for it to constitute a valid application under s 459G of the Corporations Act. All the more so where express provision is made in r 10.3(4) for the Court to grant leave for the plaintiff to proceed otherwise than in accordance with the requirements in sub-rule (3). Mr Smits has not explained why the contrary position should be taken. No arguable error has been demonstrated in the primary judge’s finding that non-compliance with r 10.3 was not fatal.

16. [52]

    Mr Smits further submits that the primary judge’s findings as to the effective service of the originating process were in error such that the Court below lacked jurisdiction to determine the application to set aside the statutory demand. However, no error which rises beyond the merely arguable, much less one which gives rise to a reasonably clear injustice, has been demonstrated in respect of the primary judge’s analysis regarding physical or electronic service, which were alternative bases supporting his Honour’s finding as to the satisfaction of the requirement in s 459G(3)(b) of the Corporations Act. Nor has Mr Smits identified any issue of principle or question of public importance arising from the primary judge’s findings and analysis on the subject of service.

17. [53]

    Grounds 3-4 challenge the primary judge’s finding that there was a genuine dispute about the sum or existence of the debt claimed in the statutory demand. Mr Smits submits that “the plaintiff simply made up a dispute which did not exist in fact” and that the primary judge’s finding of a genuine dispute about the debt:

    1. (1)

       proceeded “upon the erroneous basis that the … deposit … was appropriated by [B & B Legal] as authorised by the vendors on 5 February 2019 in or towards reduction of the mortgage debt of $1,215,000 … when in fact there was no such appropriation” (see PJ at [45]); and/or

    2. (2)

       was in error because “any such appropriation was not subject to a release under clause 3(e) of the [deed of settlement and release], when [B & B Legal] was not a releasee under the deed, appropriation of the deposit provided no foundation for any disputed debt under the deed and the release was not enlivened” (see PJ at [46]).

18. [54]

    These submissions appear to proceed on a misapprehension of the primary judge’s reasons. The primary judge did not and was not required finally to determine whether the deposit was paid out of B & B Legal’s trust account with authority conferred by the vendor’s solicitor such that there was no debt. Nor did his Honour finally determine whether the debt claim was barred by the deed of settlement and release. The primary judge’s findings on both these issues were confined to determining whether they gave rise to a genuine dispute about the existence of the debt. His Honour found that they did, noting that the genuine dispute threshold is “by no means at all a difficult or demanding one” and that “[a] finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted”: PJ at [43], quoting from Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 at [8] (Barrett AJA, McColl and Meagher JJA agreeing). No error which goes beyond something which is merely arguable has been demonstrated in the primary judge’s reasons in this respect.

19. [55]

    Ground 5 contends that the primary judge erred by setting aside the statutory demand on the basis that there was an “omission of a denial of existence of a genuine dispute from the supporting affidavit sworn by [Mr Smits] on 11 December 2024” accompanying the statutory demand (see PJ at [33]-[41]).

20. [56]

    The primary judge referred to Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262, where the question before the Court was “whether a statutory demand should be set aside because the affidavit that accompanied it did not contain a statement” as to the deponent’s belief that there was “no genuine dispute about the existence or amount of the debt”: at [1]. The primary judge quoted from the judgment of Barrett JA (Beazley P and Gleeson JA agreeing) at [33]-[34], where his Honour observed that:

21. [57]

    Barrett JA consequently concluded that the primary judge erred when he treated the absence of the “no genuine dispute” clause from the affidavit “as somehow offset or compensated for by particular factual matters”: Kisimul at [35]. The Court set aside the statutory demand: at [37], [39].

22. [58]

    Mr Smits submits that there is an issue as to “whether Kisimul was decided correctly, particularly in relation to s 459J, [insofar as] it upheld the principle that omission of the denial of genuine dispute from the supporting affidavit was substantive, incurable, and rendered the alleged demand invalid”. No further explanation was given as to why the reasoning in Kisimul was said to be erroneous or why there are compelling reasons to depart from that decision.

23. [59]

    No error which rises beyond the merely arguable is disclosed by ground 5.

24. [60]

    Ground 6 contends that the primary judge erred in awarding costs to B & B Legal because it had only enjoyed “mixed success”: “it only succeeded on two dubious issues … and lost seven substantive grounds raised”.

25. [61]

    "[T]he issue of awarding costs is an invariable one in litigation, and it is trial judges who are generally best placed to weigh up the interests involved in such awards”: Mendonca v Tonna [2025] NSWCA 82 at [6] (Kirk JA and Price AJA). Because an award of costs is generally discretionary, “[a]ny challenge to such a costs order must … seek to establish an error of the kind described in House v R (1936) 55 CLR 499 at 505; [1936] HCA 40”: John Anthony Arena Pty Ltd v Franpina Developments Pty Ltd [2022] NSWCA 139 at [17] (Kirk JA, Macfarlan JA agreeing).

26. [62]

    No such error has been identified much less demonstrated here. Mr Smits’ characterisation of the outcome of the proceedings below must be rejected: B & B Legal was wholly successful in obtaining the substantive relief that it sought and it was appropriate for costs to follow the event.

27. [63]

    For completeness, there also appears to be force in B & B Legal’s submissions that the statutory demand is now stale and Mr Smits was not an alleged creditor of the respondent at the time when the summons seeking leave to appeal was filed. The deed dated 9 January 2026 does not alter this fact given that it postdates the filing of the summons seeking leave to appeal. In any event, it is difficult to understand the relevance of the deed having regard to the identification of relevant parties in item 11, which differ from the parties to the deed of re-assignment dated 22 September 2025. These considerations further militate against the Court exercising its discretion to grant leave to appeal.

Conclusion

1. [64]

   For these reasons, the Court makes the following orders:

   1. (1)

      Under s 64 of the Civil Procedure Act 2005 (NSW), grant leave to the respondent to file and serve an amended response under r 51.13 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) in the form annexed to the affidavit of Mr Malcolm John Cameron affirmed on 30 January 2026 (Cameron Affidavit).

   2. (2)

      To the extent that leave is required, grant leave to the respondent under r 51.51 of the UCPR to adduce in evidence the deed of re-assignment which is Annexure C to the Cameron Affidavit.

   3. (3)

      Refuse to extend time to file the summons seeking leave to appeal.

   4. (4)

      Dismiss the summons seeking leave to appeal.

   5. (5)

      The applicant is to pay the respondent’s costs of the summons and the notice of motion filed on 30 January 2026.