Smith v 600 Machinery Australia Pty Ltd - [1996] FCA 1029

CATCHWORDS

COSTS - Federal Court Rules, Order 23 rule 11 - offer of compromise - offer inclusive of costs of proceeding - acceptance before trial - delay in acceptance - whether offeror entitled to tax costs for work performed after offer.

Federal Court Rules O 23 rr 2, 3, 4 and 11

Henderson v Simon Engineering (Australia) Pty Ltd (1988) VR 867, discussed

Whitehead v Maas (1991) 56 SASR 362

Maitland Hospital v Fisher [No2] (1992) 27 NSWLR 721

Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349, discussed

Henderson v Amadio Pty Ltd (Heerey J, 22 March 1996, unreported, Judgment 184 of 1996)

Wills v Bigmac Pty Ltd (Heerey J, 9 December 1994, unreported, Judgment 949 of 1994), applied

No SG 3201 of 1995
IN THE MATTER OF AUSTRALIAN COMPANY NUMBER 007 764 249
(IN LIQUIDATION)

ANTHONY STEVENS SMITH v 600 MACHINERY AUSTRALIA PTY LTD
(ACN 000 161 106)

Mansfield J
Adelaide
19 November 1996

IN THE FEDERAL COURT OF AUSTRALIA )
  )
SOUTH AUSTRALIA DISTRICT REGISTRY )    No SG 3201 of 1995
  )
GENERAL DIVISION                 )

IN THE MATTER OF
  AUSTRALIAN COMPANY NUMBER
  007 764 249
  (IN LIQUIDATION)

BETWEEN:

ANTHONY STEVENS SMITH

Applicant

- and -

600 MACHINERY AUSTRALIA
PTY LTD (ACN 000 161 106)

Respondent

REASONS FOR DECISION

CORAM:    Mansfield J
PLACE:    Adelaide
DATE:     19 November 1996

The point at issue is a short but difficult one arising under O23 of the Federal Court Rules ("the Rules").

The applicant, as liquidator of Australian Company Number 007 764 249 ("the Company"), sought to recover from the respondent $30,617.32 paid to it as a creditor of the Company within the six month period prior to its liquidation pursuant to s588FF of the Corporations Law ("the Law"), together with interest and costs. The proceedings commenced on 31 October 1995. They were defended. Certain affidavits proposed to be relied on at trial had been filed and served. On 8 July 1996 directions were given extending to 22 July 1996 the time for the exchange of any further affidavits for use at trial; certain further affidavits were then filed and served. The matter was then listed for hearing, ultimately on 10 October 1996. The parties reported that the matter had resolved under O23 by the acceptance by the respondent of an offer made by the applicant, but subject to an issue as to costs.

The offer was made on 4 June 1996 in the following terms:

"The Applicant will accept the sum of $30,617.32 together with interest of $3,574.01 (from 5 April 1995 to 4 June 1996 at the rate of 10% per annum) plus costs of $3,000.00 in satisfaction of its claim against the respondent.

THIS OFFER is made pursuant to Order 23 of the Federal Court Rules."

The acceptance was given on 8 October 1996 in the following terms:

"The Respondent accepts the Offer filed by the Applicant dated 4 June 1996.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1996] FCA 1029
Decision Date: 19 NOVEMBER 1996

CaseChat Overview and Summary

The case of Smith v 600 Machinery Australia Pty Ltd involved the liquidator of a company seeking to recover a sum of money paid to the respondent within six months prior to the company's liquidation, pursuant to s588FF of the Corporations Law. The respondent accepted an offer made by the applicant under Order 23 of the Federal Court Rules, but the applicant sought to recover further costs incurred after the date of the offer. The central legal issue was whether the applicant could tax costs for work performed after the acceptance of the offer.

The court considered the relevant provisions of the Federal Court Rules, particularly Order 23 rules 2, 3, 4, and 11. The court examined the language and purpose of the rules, emphasizing the objective of encouraging compromise and the flexibility provided by the rules to include costs in such offers. The court also looked at previous case law to understand how similar rules were interpreted in other jurisdictions.

In its reasoning, the court found that the offer made by the applicant was inclusive of the costs of the proceeding, and therefore, under Order 23 rule 11, the applicant was not entitled to tax its costs for work performed after the acceptance of the offer. The court concluded that the offer's terms were clear and unequivocal, and the acceptance was made on the basis of the offer being inclusive of costs. Consequently, the applicant could not recover further costs beyond the amount specified in the offer.

The court's final decision was that the applicant was not entitled to tax its costs for work performed after the acceptance of the offer. This decision was based on the interpretation of the Federal Court Rules and the principle that offers of compromise should be able to address the question of costs in a clear and unequivocal manner.

Orders