GlobalTel v MCI WorldCom [2002] NSWSC 748

New South Wales Supreme Court

CITATION : GlobalTel v MCI WorldCom [2002] NSWSC 748 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50099/01 HEARING DATE(S) : 22/08/02, 23/08/02 JUDGMENT DATE : 23 August 2002

PARTIES : GlobalTel Australia Pty Ltd - Plaintiff MCI WorldCom Australia Pty Ltd - Defendant JUDGMENT OF : Barrett J

COUNSEL : Mr M J Cohen - Plaintiff Mr R J Brender - Defendant SOLICITORS : Dilanchian - Plaintiff Baker & McKenzie - Defendant CATCHWORDS : CORPORATIONS - winding up - application by contingent or prospective creditor for leave to apply for winding up in insolvency - amount subject to prospective or contingent claim tendered and paid into court - discretionary considerations against grant of leave LEGISLATION CITED : Corporation Act 2001 (Cth) CASES CITED : Nationwide Produce Holdings Pty Ltd v Franklins Ltd (2001) 20 ACLC 309 DECISION : Application for leave dismissed

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BARRETT J

FRIDAY 23 AUGUST 2002

50099/01 - GLOBALTEL AUSTRALIA PTY LTD v MCI WORLDCOM AUSTRALIA PTY LTD

JUDGMENT - On notice of motion

1 By notice of motion currently before the court in these Commercial List proceedings, the plaintiff GlobalTel Australia Pty Ltd (which I shall call "GlobalTel") seeks leave under s.459P(2) of the Corporations Act 2001 to make an application for the winding up in insolvency of the defendant, MCI WorldCom Australia Pty Ltd, which I shall call "MCI". 2 Such leave was sought because, when the application was made, GlobalTel was, at best, a contingent or prospective creditor of MCI. There were made in favour of GlobalTel, at an earlier stage of the proceedings, two orders for costs. Those costs are unassessed and there has been no agreement of the parties as to quantification. I do not think that it was seriously contended that the claims GlobalTel is agitating in a substantive way in the principal proceedings caused it to be a contingent or prospective creditor, given that those claims are of an unliquidated nature. It was really on the basis of the costs orders alone that the status as a contingent or prospective creditor was asserted. 3 In the course of yesterday afternoon, I was asked by MCI to make, and did make, an order allowing MCI to pay into court an amount of almost $53,000, which was the amount that GlobalTel and its solicitors had calculated as being costs to be paid by MCI pursuant to the costs orders previously made in favour of GlobalTel. The order I made was to the effect that MCI should pay that amount into court in respect of the unassessed and unsatisfied liability of MCI for costs and that the sum of almost $53,000 should remain in court pending quantification through the costs assessment process. The order for the payment of money into court followed tender by MCI to GlobaTel and was to facilitate the mechanics of MCI's clearly expressed desire to achieve satisfaction in respect of any contingent or prospective debt represented by the costs order. 4 It seems to me that, for reasons I went into in Nationwide Produce Holdings Pty Ltd v Franklins Ltd (2001) 20 ACLC 309, the payment into court following the tender of the sum in question should be regarded as having removed any status of GlobalTel as a contingent or prospective creditor of MCI. 5 It has been suggested this morning that because that status existed when the application was initiated and when I began to hear it, the application should nevertheless proceed. I do not see matters that way. The tender and payment into court have, to my mind, not only removed the entitlement of GlobalTel to be an applicant for leave under s.459P(2), but also introduced into the equation a factor which operates very powerfully in relation to the discretion which the court exercises in granting or withholding leave under that section. 6 Even if, contrary to the view I hold, it could be said that contingent or prospective creditor status continued, or that it was sufficient for that status to be shown in a formal sense at commencement with any subsequent removal of it being irrelevant, there would still be the question of the correct exercise of the undoubted discretion arising under the section. 7 Section 459P(3) empowers the court to grant leave under s.459P(2) if it is satisfied that there is a prima facie case that the company is insolvent. It does not in any way constrain the court in the exercise of its discretion beyond that specific direction. I take the view that the tender and the payment into court would, as I have said, be a powerful factor in the determination of the proper exercise of the discretion. If, after tender and payment into court, GlobalTel sought to press on with the application, there would be an indication that, because GlobalTel no longer really had the interest it sought to assert by reference to the costs orders, its motives were unrelated to the proper pursuit of creditor remedies of the kind provided for in Pt 5.4 of the Corporations Act. 8 There is still a major unresolved controversy between these parties, but that controversy needs to be dealt with on its merits and in the normal way. To the extent that any move by GlobalTel to seek leave to apply for the winding up of MCI was motivated by desire to gain some advantage in the wider controversy, that would be a factor that went to the exercise of the discretion conferred by section 459P(2) in that it would indicate that the application for leave under that section was being pursued for a purpose unrelated to that which the leave and the substance of section 459P generally is designed to serve. 9 For those reasons, the appropriate course now is that the application for leave by GlobalTel be dismissed. I so order.