Kapeleris, Theo & Ors v Bytenet Pty Ltd [1997] FCA 1005

FEDERAL COURT OF AUSTRALIA COMPANIES - offer of compromise - character of a winding up application - whether Court can take account of the interests of the general body of creditors. Federal Court Rules - O 23

THEO KAPELERIS, CHRISTOPHER JOSEPH MILLEDGE, IAN FRANCIS NAPIER, BRUCE MICHAEL WOOD and DESMOND GARRY LEE v BYTENET PTY LIMITED

NG 3126 of 1997

JUDGE: BEAUMONT J

DATE: 4 september 1997

PLACE: SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 3126 of 1997

BETWEEN: THEO KAPELERIS, CHRISTOPHER JOSEPH MILLEDGE,

IAN FRANCIS NAPIER, bruce michael wood AND desmond garry lee

Applicants

AND: BYTENET PTY LIMITED

Respondent

JUDGE: BEAUMONT J

DATE: 4 september 1997

PLACE: SYDNEY

ORDERS: 1. Application stood over to 13 October 1997. 2. Costs reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 3126 of 1997

BETWEEN: THEO KAPELERIS, CHRISTOPHER JOSEPH MILLEDGE,

IAN FRANCIS NAPIER, BRUCE MICHAEL WOOD and DESMOND GARRY LEE

ApplicantS

AND: BYTENET PTY LIMITED

Respondent

JUDGE: BEAUMONT J

DATE: 4 SEPTEMBER 1997

PLACE: SYDNEY

REASONS FOR JUDGMENT For the reasons I gave on 5 August 1997, the present application for the winding up of the company Bytenet Pty Limited was stood over until today. Today I was informed that the parties had agreed that the proceedings should be further adjourned until 13 October. I was informed that the reason for the adjournment was that there was a prospect of the conclusion of the arrangement for the sale of assets, which it is hoped would have the consequence that funds would become available to the company for the payment of its creditors, including the applicants. I adjourn the proceedings accordingly. In my reasons published on 5 August 1997, and in my earlier reasons, dated 4 August 1997, on an interlocutory question concerning the proper parties to the proceedings, I dealt with the question of costs incurred up to that point of time. In my reasons dated 4 August 1997, I ordered that the applicants at that time pay the then first respondent's costs, that is, the costs of Bytenet Pty Limited, of the proceedings up to 4 July 1997, except for certain costs reserved on 16 June 1997 by Einfeld J. In my reasons dated 5 August 1997, having referred to the order for costs made on 4 August 1997, I went on to say that the costs involved since 4 July 1997 were, no doubt, substantial. But I expressed the view that, at that stage, I believed that it was proper that I should deprive the applicants of their costs since 4 July, notwithstanding that, in substance, they had succeeded to some extent. I have heard argument today on behalf of the applicants seeking an order for costs. In particular, reliance is placed upon an offer of compromise, dated 22 July 1997, filed on behalf of the applicants, pursuant to O 23 of the Federal Court Rules. The offer of compromise is in the following terms: "1. The Applicants will adjourn the hearing of their application until 18 November, 1997 at 10.00 a.m. 2. In the event that the First Respondent has not completed the sale of its' Vietnam Assets on or before 17 November, 1997 the First, Second and Third Respondents consent to the orders sought by the Applicants in the Amended Application to Wind Up a Company under Section 459P of the Corporations Law, filed 4 July, 1997, being made by the Court on 18 November, 1997. 3. The First Respondent pay the Applicants' costs up to the date of this offer, as agreed or assessed. 4. The First, Second and Third Respondents pay their own costs." In my opinion, this "offer" is not an offer of compromise within the meaning of O 23. By O 23 r 2, it is provided as follows: "RULE 2 APPLICATION 2(1) [Party may make an offer to compromise by notice] In any proceeding, a party may make to another party an offer to compromise any claim in the proceeding on the terms set out in the notice of offer. 2(2) [Where single notice and separate claims] If an offer to compromise the separate claims of several parties to the proceedings is in a single notice of offer, the notice of offer must specify separately the offer made to each party." By O 23 r 1, a "claim in the proceeding" is defined so as to include a claim in relation to costs. By O 23 r 1, "proceedings" means: "a proceeding in the Court (except an interlocutory application), not being an application that is capable of: (a) substantially disposing of the proceedings or of the whole or any part of any claim for relief in the proceeding; or (b) rendering unnecessary any trial or further trial in the proceeding or of the whole or any part of any claim for relief in the proceeding;" By O 23 r 11(4), it is provided as follows: "11(4) [Costs orders where non-acceptance by respondent and applicant obtains particular judgment] If: (a) an offer is made by an applicant and not accepted by the respondent; and (b) the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer; then, unless the Court otherwise orders, the applicant is entitled to an order against the respondent for costs incurred in respect of the claim: (c) up to and including the day the offer was made - taxed on a party and party basis; and (d) after that day - taxed on an indemnity basis." The present "proceedings" are constituted by an application to wind up a company. It is difficult to see how it may be said that such an application may be "a compromise". It is, of course, possible that an application to wind up may be discontinued or withdrawn with the leave of the Court. It is also possible that the Court may order that an application for winding up be adjourned from time to time. But the whole matter, that is to say, the whole issue involved, namely, whether an order for winding up ought or ought not be made at a particular time, is a matter for the exercise of the judicial discretion conferred upon the Court by the relevant legislation and subject to the conditions imposed by that legislation. In the exercise of that discretion, it is, as I have indicated in my reasons given on 5 August 1997, quite legitimate for the Court to take into account the interests of the general body of creditors "as an important discretionary consideration". The nature of the Court's jurisdiction and its special character, I think, serves to emphasise that the whole notion of an offer of compromise which underlies O 23, is peculiarly adapted to the case of truly private litigation. I do not see an application for winding up easily assuming that character. Whether or not it may be open to argue that an offer of compromise, for instance, is in respect of the amount of the debt claimed by an applicant for winding up, is another matter which does not arise for present determination. The offer made in the instant case was an indication, as I would see it, that the applicants would not oppose any request made on behalf of the company that the hearing of the winding up application be adjourned until 18 November 1997. In my view, such an indication, which, of course, could never bind the Court, cannot be characterised as an offer of compromise for the purposes of O 23. Therefore, I hold that the provisions of that order are not applicable in the present case. I should add for completeness' sake that, given the present status of the matter, I propose to say nothing further about the question of costs generally until the matter is before the Court again. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont.