Aero Marine Consulting Pty Ltd - [2003] FCA 1016

FEDERAL COURT OF AUSTRALIA
Aero Marine Consulting Pty Ltd [2003] FCA 1016
CORPORATIONS – company in administration – voluntary administrator appointed – property of company subject to a fixed and floating charge in favour of vendor of the company – chargee appointed receiver and manager of company pursuant to the charge – whether appointment of receiver and manager rendered charge void from its inception by virtue of s 267(1) of the Corporations Act 2001 (Cth) – whether chargee a “relevant person” for the purposes of s 267(7) – whether a director and secretary of a company can unilaterally resign orally where company constitution provides that resignation be in writing – whether unilateral oral resignation accepted by the company – whether administration subject to the powers of the receiver and manager pursuant to s 442D – whether charge enforced within relevant period for the purposes of s 441A(1) – whether service of a notice of default under the charge amounted to the charge being “enforced”.
Transport (Limited) v Schonberg (1905) 21 TLR 305 at 307, applied
Glossop v Glossop [1907] 2 Ch 370, applied
POW Services Ltd v Clare [1995] 2 BCLC 435, applied
Latchford Premier Cinema Limited v Ennion [1931] 2 Ch 409, applied
Marks v Commonwealth (1964) 111 CLR 549, applied
Knight v Bulic (1994) 13 ACSR 553, referred to
400 Lonsdale Nominees Pty Ltd v Southern Cross Airlines Ltd (In Liq) (1993) 10 ACSR 739, considered
Re Scandees Danish Home Ice Cream Pty Ltd (1995) 16 ACSR 777, referred to
BBC Hardware Limited v G T Homes Pty Ltd [1997] 2 Qd R 123, referred to
Australian Innovation Ltd v Dean‑Willcocks and Purchase (2001) 40 ACSR 521, applied
IN THE MATTER OF AERO MARINE CONSULTING PTY LTD (ACN 009 374 985)
(Administrator Appointed) (Receiver and Manager Appointed)
WILLIAM LEONARD CAIN v AERO MARINE CONSULTING PTY LTD
(ACN 009 374 985) (Administrator Appointed) (Receiver and Manager Appointed) and DAVID GREGORY YOUNG (as Administrator of AERO MARINE CONSULTING PTY LTD) (ACN 009 374 985) (Administrator Appointed) (Receiver and Manager Appointed)
V 3185 of 2003
IN THE MATTER OF AERO MARINE CONSULTING PTY LTD (ACN 009 374 985)
(Administrator Appointed)
DAVID GREGORY YOUNG (as Administrator of AERO MARINE CONSULTING PTY LTD) (ACN 009 374 985) (Administrator Appointed) v WILLIAM LEONARD CAIN and BARRY KEITH TAYLOR
V 3189 of 2003
GOLDBERG J
25 SEPTEMBER 2003
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 3185 of 2003

IN THE MATTER OF AERO MARINE CONSULTING PTY LTD (ACN 009 374 985)

(Administrator Appointed) (Receiver and Manager Appointed)

BETWEEN:

WILLIAM LEONARD CAIN
Plaintiff

AND:

AERO MARINE CONSULTING PTY LTD (ACN 009 374 985)
(Administrator Appointed) (Receiver and Manager Appointed)

First Defendant

AND:

DAVID GREGORY YOUNG (as Administrator of
AERO MARINE CONSULTING PTY LTD) (ACN 009 374 985) (Administrator Appointed) (Receiver and Manager Appointed)

Second Defendant

V 3189 of 2003

IN THE MATTER OF AERO MARINE CONSULTING PTY LTD (ACN 009 374 985)

(Administrator appointed)

BETWEEN:

DAVID GREGORY…

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: [2003] FCA 1016
Decision Date: 25 SEPTEMBER 2003

CaseChat Overview and Summary

Aero Marine Consulting Pty Ltd, a company engaged in aircraft maintenance and charter flying, found itself in financial difficulty, leading to its administration. The core issues in the proceedings involved whether Mr Cain, a former director and secretary of AMC, had resigned from his positions and whether he had exercised a right, power, or remedy connected to a charge he held over AMC's assets. These questions were pivotal as they determined the validity of Mr Cain's appointment of Mr Taylor as a receiver and manager of AMC's assets and undertaking, as well as the applicability of the charge to AMC's administration. If Mr Cain had resigned and enforced the charge within the specified timeframe, his appointment would be valid, and the administrator's functions would be subject to the receiver and manager's powers. Conversely, if he had not, further issues, including the grant of leave to Mr Cain to enforce the charge, would need to be resolved.

The court had to determine the validity of Mr Cain's resignation and the enforcement of the charge. Mr Cain contended that he had resigned by 29 September 2002 and enforced the charge between 22 July 2003 and 6 August 2003. The court examined the evidence to ascertain whether these assertions were correct. If Mr Cain had indeed resigned and enforced the charge, section 441A of the Act would apply, making section 442D applicable, thereby subjecting the administrator's functions and powers to those of the receiver and manager. Conversely, if either condition was not met, the court would need to consider additional issues, including whether leave should be granted to Mr Cain to enforce the charge.

The court found that Mr Cain had enforced the charge within the required timeframe, satisfying the conditions of section 441A(1)(b) of the Act. This enforcement occurred before the end of the decision period, which ran from 23 July 2003 to 6 August 2003. Consequently, the provisions of section 442D applied, subjecting the administrator's functions and powers to those of the receiver and manager. The court concluded that the charge created on 29 March 2003 was valid and enforceable, Mr Taylor's appointment as receiver and manager was valid, and the administrator's powers and functions were subject to those of the receiver and manager. The court determined that it was not necessary to consider whether leave should be granted to Mr Cain to enforce the charge, as section 441A(3) of the Act precluded such a requirement. The court directed that the parties be heard regarding the form of the orders to be made.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Although a number of issues are raised for determination there are two core questions which must be resolved:(a)Did Mr Cain resign as a director and secretary of AMC on 16 September 2002 or, at the latest, by 29 September 2002?(b)Did Mr Cain, between 22 July 2003 and 6 August 2003, exercise a right, power or remedy existing because of the charge he had been given by AMC?If the answer to these questions is in the affirmative, then Mr Cain’s appointment of Mr Taylor as a receiver and manager of the assets and undertaking of AMC is valid and effective and the administration of AMC is subject to that charge and to the powers of the receiver and manager. If the answer to either question is in the negative, then further issues must be determined, including whether leave should be granted to Mr Cain to enforce the charge pursuant to s 267(3) or orders made under s 1322(4) of the Act.Background to the proceedings AMC was established by Mr Cain in 1989. It carried on the business of aircraft maintenance and charter flying as well as documentation control in respect of aircraft for the Australian aviation industry. Since 1995 AMC has held an Air Operators Certificate (“AO certificate”) in relation to Boeing 727 aircraft, which an operator of that type of aircraft must have before it can operate commercially in Australia, and a Certificate of Approval which licenses an organisation to perform maintenance on Australian aircraft. These certificates were issued by the Civil Aviation Safety Authority (“CASA”) which regulates the Australian aviation industry. The AO certificate was AMC’s principal asset. AMC also owned one third of the share capital in a company called Flight Simulators International Pty Ltd. TransWorld Aircraft Leasing Services Pty Ltd (“TWA”) was the lessee of two Boeing 727 aircraft and it engaged AMC to perform certain work on the aircraft. Work on one aircraft commenced in February 2002 and was completed in late April 2002. Work on the second aircraft commenced around late April or early May 2002 and, as at 29 July 2002, had not been completed. According to Mr Cain, $1.8 million was outstanding for the works performed and, due to TWA’s failure to pay a number of invoices submitted by AMC, AMC had stopped work on the second aircraft. On 26 July 2002 Mr and Mrs Cain, AMC, another related company Air Cargo Australia Pty Ltd (“ACA”) and TransAustralian Operations Pty Ltd (“TAO”) entered into Heads of Agreement by which it was agreed that TAO would manage AMC and ACA from 29 July 2002. TAO is a wholly owned subsidiary of TransAustralian Air Pty Ltd (“TAA”), which is a wholly owned subsidiary of TWA, the lessee of the aircraft which had engaged AMC to perform works. TAO, TAA and TWA have common directors. It was also agreed that Mr Cain would grant a call option to TAO to purchase the shares he held in AMC and ACA, and a put option would be granted by TAO to Mr Cain to sell those shares for $4.5 million (less certain liabilities) on certain conditions. If the options were exercised, Mr Cain, AMC, ACA and TAO agreed to enter into a sale of shares agreement, which agreement was to provide for an initial payment to Mr Cain of $1 million and for the payment of the balance, $3.5 million (less certain liabilities), to be made by thirty‑six equal monthly instalments. Security was to be given to Mr Cain in respect of the amount which would remain owing to him by way of a fixed and floating second ranked mortgage debenture charge over the whole of the assets and undertaking of AMC and ACA.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GOLDBERG J

As a consequence, s 441A of the Act applies in relation to the present administration of AMC. By virtue of s 442D(1) the administrator’s functions and powers are subject to the functions and powers of Mr Cain as chargee and Mr Taylor as receiver and manager. The prohibition on enforcement of the charge during the administration without the administrator’s written consent or the leave of the Court contained in s 440B of the Act does not apply by virtue of s 441A(3) of the Act. It is therefore not necessary to consider what matters ought to be taken into account in determining whether the Court should grant leave to Mr Cain to enforce the charge. Such leave is not required. Accordingly no issue as to the solvency of AMC at the time of the creation of the charge arises.Conclusion It is therefore appropriate to declare that the charge created on 29 March 2003 is valid and enforceable, that Mr Taylor’s appointment as receiver and manager was valid and that the administrator’s powers and functions are subject to the powers and functions of the receiver and manager. I will hear the parties as to the form of the orders which should be made.

Ratio Decidendi

Legal Principle Established

Established by: GOLDBERG J

As the charge is not void I turn to the issue of whether the administration of AMC is subject to the powers of the receiver and manger.Is the administration subject to the powers of the receiver and manager? Mr Young contended that his powers and functions as administrator were not subject to those of the receiver and manager because the provisions in s 441A of the Act were not satisfied, and accordingly s 442D, which operates to subject an administrator’s functions and powers to that of a receiver, did not apply. Therefore, Mr Cain had no right to enforce the charge by appointing Mr Taylor as receiver and manager without first obtaining the administrator’s written consent or leave of the Court by virtue of s 440B of the Act. Section 442D of the Act provides:“(1)Where section 441A applies, the administrator’s functions and powers are subject to the functions and powers of a person as:(a) the chargee; or(b)a receiver or person of a kind referred to in paragraph 441A(3)(b) (even if appointed after the decision period).…(3)Where section 441B, 441F or 441G applies, then, so far as concerns the property referred to in subsection 441B(1), 441F(1) or 441G(1), the administrator’s functions and powers are subject to the functions and powers of the chargee, receiver or other person.”Section 441A of the Act provides that:“(1) This section applies where:(a)the whole, or substantially the whole, of the property of a company under administration is subject to a charge; and(b)before or during the decision period, the chargee enforced the charge in relation to all property of the company subject to the charge, whether or not the charge was enforced in the same way in relation to all that property.…(3)Nothing in section 437C or 440B, or in an order under subsection 444F(2) prevents any of the following from enforcing the charge, or any of the charges: (a) the chargee;(b)a receiver or person appointed as mentioned in paragraph (a), (b) or (d) of the definition of enforce in section 9 as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period).”The “decision period” is relevantly defined in s 9 of the Act as:“the period beginning on the day when:(a)if notice of the appointment of the administrator must be given to the chargee under subsection 450A(3) – such notice is so given; or(b) otherwise – the administration begins:and ending at the end of the tenth business day after that day.”Section 440B of the Act provides that:“During the administration of a company, a person cannot enforce a charge on property of the company, except: (a) with the administrator’s written consent; or (b) with the leave of the Court.” The parties agreed that notice of the appointment of the administrator had to be given to Mr Cain as the charge fell within s 441A(1)(a). Such notice was given to Mr Cain on 23 July 2003 by letter dated 22 July 2003. The decision period therefore commenced on 23 July 2003 and concluded at the end of 6 August 2003. Thus in order to satisfy s 441A(1)(b) of the Act, so that s 442D of the Act could apply to subject the functions and powers as administrator to those of the receiver and manager, Mr Cain was required to have “enforced the charge” on or before 6 August 2003.When did Mr Cain “enforce” the charge?

V 3185 of 2003 IN THE MATTER OF AERO MARINE CONSULTING PTY LTD (ACN 009 374 985) (Administrator Appointed) (Receiver and Manager Appointed)
BETWEEN:	WILLIAM LEONARD CAIN Plaintiff
AND:	AERO MARINE CONSULTING PTY LTD (ACN 009 374 985) (Administrator Appointed) (Receiver and Manager Appointed) First Defendant
AND:	DAVID GREGORY YOUNG (as Administrator of AERO MARINE CONSULTING PTY LTD) (ACN 009 374 985) (Administrator Appointed) (Receiver and Manager Appointed) Second Defendant
V 3189 of 2003 IN THE MATTER OF AERO MARINE CONSULTING PTY LTD (ACN 009 374 985) (Administrator appointed)
BETWEEN:	DAVID GREGORY…