In the matter of Project Volar Creditor's Trust established in the administration of each of Virgin Australia Holdings Ltd and Ors

[2022] NSWSC 307

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Project Volar Creditor’s Trust established in the administration of each of Virgin Australia Holdings Ltd & Ors [2022] NSWSC 307

Hearing dates:

8 March 2022

Date of orders:

22 March 2022

Decision date:

22 March 2022

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Proceedings dismissed with costs.

Catchwords:

EQUITY — Trusts and trustees — Court’s supervision of — Administration of trust — review of decision by trustees of a creditor’s trust to reject proof of debt — extension of time to appeal trustees’ decision — where employee’s insurance policy was not maintained — whether there would have been a valid claim under the insurance policy had it been maintained — whether loss suffered

Legislation Cited:

Civil Aviation Safety Regulations 1998 (Cth), reg 67.270

Corporations Act 2001 (Cth), Pt 5.6 Div 6

Corporations Regulations 2001 (Cth), reg 5.6.54

Fair Work Act 2009 (Cth), ss 545 and 546

Trustee Act 1925 (NSW), s 81

Cases Cited:

- 5G Developments Pty Ltd (in liq) v Massie, in the matter of 5G Developments Pty Ltd (in liq) [2021] FCA 791

- Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA

- Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (the Hutchison Ports Appeal) [2019] FCAFC 69

- Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120

- Re Alora Davies Developments 104 Pty Ltd [2021] NSWSC 1583

- Re Bevillesta Pty Ltd [2011] NSWSC 1378

- Re Bevillesta Creditors Trust [2013] NSWSC 162

- Re Creditors’ Trust Deed Established in the Administration of Bevillesta Pty Ltd [2013] NSWSC 1258

- Re DH International Pty Ltd (in liq) (2017) 121 ACSR 58; [2017] NSWSC 870

- Re Project Volar Creditors' Trust established in Administration of Virgin Australia Holdings Ltd (2021) 152 ACSR 540; [2021] NSWSC 425

- Re St Gregory’s Armenian School Inc (2015) 109 ACSR 27; [2015] NSWSC 1465

- Westpac Banking Corp v Totterdell (1998) 20 WAR 150; 29 ACSR 448

Category:

Principal judgment

Parties:

Ian Geoffrey Boyd (Plaintiff)
Vaughan Strawbridge, John Greig Salvatore and Richard Hughes as Trustee of the Project Volar Creditors Trust Deed (Defendants)

Representation:

Counsel:
J T Johnson (Plaintiff)
D Krochmalik (Defendant)

Solicitors:
Al Sarray Lawyers (Plaintiff)
Clayton Utz (Defendants)

File Number(s):

2021/319460

Judgment

1. By Originating Process filed on 4 November 2021, the Plaintiff, Mr Ian Boyd, seeks a review of a decision to reject his proof of debt made by the Defendants as trustees (“Trustees”) of the Project Volar Creditors Trust (“Trust”), as established by the Project Volar Creditor’s Trust Deed in respect of Virgin Australia Holdings Limited and certain subsidiaries. In particular, Mr Boyd seeks an order that the Trustees’ decision be set aside or varied to permit him to participate as an employee creditor under the Trust for $287,000 or such other amount as the Court considers appropriate in the circumstances, and an extension of time to bring the application. The application is brought under, inter alia, s 90-15 of the Insolvency Practice Schedule (Corporations) although any jurisdiction of the Court to entertain the application likely arises under the Trustee Act 1925 (NSW).

Chronology and affidavit evidence

2. I first set out a chronology of events before turning to the affidavit evidence. Mr Boyd commenced employment with Virgin Australia Regional Airlines Pty Ltd (“VARA”) (then known as Sky West Airlines (Australia) Pty Ltd) as a captain flying a particular aircraft in early 2012. By 2015, Mr Boyd’s employment was subject, inter alia, to the Virgin Australia Regional Airlines Pilots Enterprise Agreement 2015 (“2015 Enterprise Agreement”) between VARA and all pilots employed by VARA other than Management Pilots (as defined). The 2015 Enterprise Agreement had a nominal expiry date of 1 July 2018, but it is common ground that it continued beyond that nominal expiry date unless terminated and it was in place at least until voluntary administrators were appointed to VARA and Virgin Australia Airlines Pty Ltd (“VAA”). Clause 71.1 of the 2015 Enterprise Agreement relevantly provided that VARA will provide loss of licence insurance at no cost to the pilots, and make a copy of the policy document available to them, and specified that the policy shall at a minimum provide a level of cover of twice the annual base salary for pilots aged 50 years and over, such as Mr Boyd. Clause 71.2 provided that VARA would reimburse a pilot up to the amount detailed in Appendix A for the provision of loss of licence insurance in lieu of that cover, if requested to do so by the pilot, or, for pilots over 65 years of age, where insurance was not able to be obtained by VARA under the Virgin Australia Group Policy on reasonable terms consistent with those applying in respect of other pilots. The amount detailed in Appendix A is $1,330.82, presumably quantified by reference to the cost of obtaining cover. There is no suggestion that Mr Boyd made a request for reimbursement of that amount in lieu of that cover, or that he was over 65 years of age at the relevant time so as to trigger the application of the latter provision, although there is evidence that Mr Boyd was in fact paid that amount, from the point at which cover was not maintained for him from 1 May 2019. Appendix B to that Agreement in turn specifies that salaries will vary for pilots of specified aircraft of varying seniority.

3. The Virgin Australia Group in turn held a Loss of Licence Insurance Policy (“Policy”) issued by Accident and Health International Underwriting Pty Ltd which identified the insured as VARA and the period of insurance as, relevantly, between 1 May 2019 and 1 May 2020. The maximum loss of licence benefit payable for each insured person was $700,000, although an endorsement indicated that the amount payable in respect of loss of licence for a person aged between 55 and 67 was the lesser of $700,000 or twice annual salary, consistent with the 2015 Enterprise Agreement. The Policy in turn defined the extent of cover as follows:

“If, as a result solely and directly of:

1    Injury, You incur a Loss of Licence or Temporary Total Disablement;

2   Sickness, You suffer from Loss of Licence or Temporary Total Disablement;

We will pay the compensation set out in the Table of Benefits. …”

4. There is no suggestion that Mr Boyd suffered an Injury (as defined) for the purposes of the Policy. The term “Sickness” was defined as “illness or disease which is not a pre-existing condition and which must continue for a period of not less than seven (7) days from the date You first sought treatment for the Sickness from a legally qualified medical practitioner”. The term “Loss of Licence” was defined as follows:

“LOSS OF LICENCE means if during the Period of Insurance the Licence of an Insured Person is Cancelled as the direct result of the Insured Person’s inability to satisfy the medical requirements of the Licence due to Injury or Sickness, then that Insured Person will, subject to the terms and conditions of the Policy, become entitled to payment by the company of the appropriate Sum Insured stated in the Table of Benefits in the Schedule.”

5. The term “Cancelled” was defined as a cancellation of the insured person’s Licence during the Period of Insurance (as defined), or where suspension occurs during the Period of Insurance and a continuous suspension results in cancellation within 12 months of the date of suspension, or the insured person is refused renewal of a licence during the Period of Insurance. The term “Licence” was defined as a Pilot’s Licence (including a rating, endorsement or qualification) issued by the Civil Aviation Safety Authority (“CASA”) in accordance with relevant statutory or regulatory provisions. The term “Pre-Existing Condition” was defined, in respect of “Sickness”, as a “condition or side-effect with which [sic] the Insured Person was aware of or has sought treatment prior to the inception of this Policy”. The Table of Benefits specified that compensation to the amount of the sum insured would be paid for loss of licence. The general conditions of cover under the Policy include, significantly, several exclusions, which provide that no compensation is payable under the Policy for an Insured Event resulting from, relevantly, Sickness which, inter alia:

“results from You directly or indirectly suffering from stress, depression, anxiety or any psychosomatic, psychological, psychotic, mental or nervous disorder.”

6. Mr Boyd’s employment was transferred from VARA to VAA on 22 February 2016, and his employment with that company continued on the basis of the terms and conditions outlined in his original letter of offer from VARA and the 2015 Enterprise Agreement. Mr Boyd commenced a period of leave without pay from VAA in October 2016 and he did not later return to flying duties, although he took on a part-time administrative role with VAA for 1 – 2 days a week from late June 2017. During this period, Mr Boyd was earning an average net weekly income of approximately $417.57 (excluding leave and other entitlements) (Hughes [12]; Ex RH-1, CB 742). It is common ground that, at least from 1 May 2019, VAA failed to maintain loss of licence insurance coverage in favour of Mr Boyd, although the Trustees deny that Mr Boyd suffered any loss by reason of the insurance no longer remaining in place.

7. It appears that a Virgin Australia Regional Airlines Pilots Enterprise Agreement 2019 was subsequently approved by the Fair Work Commission and continued a corresponding obligation to cl 71 of the 2015 Enterprise Agreement. However, it is common ground between the parties that the 2015 Enterprise Agreement continues to apply in respect of Mr Boyd.

8. Mr Boyd was found to be unfit to fly at a further medical examination in mid 2019 and CASA then advised Mr Boyd, by letter dated 16 October 2019 (Ex IGD-4) (“CASA Letter”) headed “Further Clearance Required”, that, inter alia:

“CASA has been notified by your DAME [Designated Aviation Medical Examiner] and [specified doctor] that you have been diagnosed with depression and are currently unfit to exercise the privileges of your licence.

In view of your medically significant condition the purpose of this letter is to remind you of your obligation not to do any act otherwise authorised by your flight crew licence while your medical condition impairs your ability to do so. Please note that this is an objective rather than subjective assessment.

We also specifically draw to your attention regulation 67.270 of the Civil Aviation Safety Regulations 1998 (CASR) which makes it an offence to do any act under your flight crew licence while impaired due to a medically significant condition.”

9. The letter went on to specify the steps which Mr Boyd would need to take “before resuming flying activities”, which would require him to obtain a certificate from a designated aviation medical examiner that his “normal ability is no longer impaired”. The letter also noted that:

“Accordingly, CASA expects that you will not exercise the privileges of your licence until you obtain a clearance certificate from your DAME or CASA.”

10. By a letter dated 20 March 2020 to a human resources manager with VAA, Mr Boyd raised matters as to the Policy, referred to the events which had affected his family and advised that:

“I initially took time off work to care for my wife, but after being at home, I started to feel despondent as the enormity of the situation sunk in. Whilst work had been a distraction from what was occurring at home I knew that flying under these circumstances was wrong …

As a Duty of Care, I self-reported to Virgin my decision to refrain from flying while I was experiencing feelings of situational trauma and despair. …”

11. By a further letter dated 8 April 2020 to the chief executive officer and managing director of the Virgin Australia Groups, Mr Boyd followed up on the matters raised in his earlier letter to VAA.

12. Later in April 2020, each of the Virgin companies including VARA and VAA were place in voluntary administration (Hughes [3(a)]).

13. By an email dated 29 June 2020, an employee of VAA advised Mr Boyd as follows (Ex IGD7, CB 29):

“I have found that the business has responded to your request for confirmation that you are covered by Virgin Australia’s Loss of Licence Insurance Policy.

From our records it appears that following you contacting the Insurance Team on 24 October 2019 [named person] advised you in writing on 25 October 2019 that you were not at that time covered by Virgin Australia’s Loss of Licence Insurance Policy. This was later confirmed by [named person] around 10 March 2020 by telephone and on 19 March 2020 in writing.”

14. By an application filed in the Federal Circuit Court of Australia on 1 July 2020, while VARA and VAA were under voluntary administration, Mr Boyd commenced proceedings under the Fair Work Act 2009 (Cth) in respect of the matters now agitated in this application. He brought that claim under ss 545 and 546 of the Fair Work Act and the 2015 Enterprise Agreement, and there alleged that VARA had failed to comply with cl 71 of the 2015 Enterprise Agreement. That claim was brought on the basis that the CASA Letter had revoked Mr Boyd’s pilot’s licence effective from 25 July 2019 and that he was eligible to claim against the loss of licence insurance that should have existed for him at that time. The date of 25 July 2019 reflects the date on which a medical specialist had determined that Mr Boyd was unfit to carry out flying duties, although Mr Boyd there also claimed that that specialist did not submit a report of his unfitness to fly to CASA until three months later, and that CASA did not “revoke” his pilot’s licence until 16 October 2019. I will find below that the CASA Letter did not in fact revoke Mr Boyd’s pilots licence. Mr Boyd there identified the benefits that he was entitled to be paid under the Policy as including two years base salary as confirmed in cl 71 of the 2015 Enterprise Agreement. He also referred to subsequent correspondence with the Virgin Australia Group in March and April 2020, to which I have referred above. Mr Boyd did not seek leave to pursue these proceedings while the Virgin Australia companies were in voluntary administration and the voluntary administrator did not consent to their continuing and they were subsequently dismissed for want of prosecution.

15. Following a meeting of creditors of companies within the Virgin Australia Group including VAA held on 4 September 2020, those companies executed a Deed of Company Arrangement (“DOCA”) on 25 September 2020. By cl 6.4 of the DOCA, each creditor agreed that, on completion, its Claims (as defined) were extinguished and released. Clause 6.6 provided for the conversion of such claims, on the basis that each Trust Creditor (as defined) who had a Claim (as defined) would be entitled to make a claim against the Trust Fund (as defined), in accordance with the Trust Deed, which is equal in amount to their released Claim. The term “Claim” was defined to include all claims against a Deed Company (as defined), present or future, certain or contingent, ascertained or sounding only in damages, which would be admissible to proof against a Deed Company in accordance with Pt 5.6 Div 6 of the Corporations Act, if the Deed Company had been wound up and the winding up was taken to have commenced on the Appointment Date (as defined). The Deed Companies included, relevantly, VAA and VARA.

16. On or about 27 September 2020, Mr Boyd’s contract of employment with VAA was terminated due to redundancy (Hughes [15]; Ex RH-1 Tab 6) and he has been paid out his consequential employee entitlements from the funds constituted by the Trust, other than for any monies payable in respect of the Policy.

17. The Project Volar Creditor’s Trust Deed dated 17 November 2020 (“Trust Deed”) (EX IGD-2) in turn provides (cl 7.1) for admissibility of claims against the Trust as follows:

“… each claim of a Trust Creditor against a Deed Company will convert to and become a claim against the Trust Fund under this Deed, equal in amount to the Trust Creditor’s entitlement to a distribution in respect of the Trust Creditor’s released Claim in accordance with clause 5.2 of this Deed.”

The term “Claim” in the Trust Deed has the same definition as that term in the DOCA for the relevant Deed Company, and there is no dispute that Mr Boyd’s claim would, if valid, fall within that definition. Clause 7.3 of the Trust Deed in turn applies certain provisions of Pt 5.6 Div 6 of the Corporations Act 2001 (Cth) and certain regulations to the Claim, but those provisions and regulations do not establish a statutory right of appeal against a determination by the Trustee in respect of a claim. Clause 7.3(f) provides that, if the Trustees propose to reject a Claim, they must give a claimant 14 days’ notice, within which to make an application to the Court to determine the questions relating to the Claim, and that provision plainly assumes the ability to bring such an application. Clause 7.7 in turn provides that a trust creditor will have abandoned all Claims (as defined) and all other entitlements in the Trust Fund which have been rejected by the Trustees and which are not the subject of any appeal or application to the Court within the time allowed under cl 7.3(f).

18. On 27 July 2020, Mr Boyd lodged a claim in the amount of $287,000.00 as a creditor of VARA (Hughes [21]), which has properly been treated by the Trustees as a claim under the Trust. By letter dated 10 August 2021, Mr Hughes advised Mr Boyd that that claim had been rejected and enclosed a Form 537 “Notice as to Rejection of Proof of Debt or Claim”. That letter also indicated that:

“If you are dissatisfied with the determination as set out in the enclosed Form 537, you may appeal against it, no later than fourteen (14) days after the service of this letter, or if the Court allows within any further period, to the Federal Court of Australia or the Supreme Court of any State or Territory.”

The terms of that advice appeared to reflect the position if the notice requirement in reg 5.6.54 of the Corporations Regulations 2001 (Cth) applied in respect of a claim against the Creditor’s Trust, although there is no suggestion that is the case.

19. The attached Notice as to Rejection of Formal Proof of Debt or Claim identified the Trustees’ grounds for rejection of the claim as follows:

“In my opinion, the fact that your loss of Licence Insurance Policy – Product Disclosure Statement (the Policy) was cancelled prematurely does not of itself entitle you to compensation pursuant to clause 71.1 of the [2015 Enterprise Agreement]. While I acknowledge that the cancellation of the Policy is a technical breach of clause 71.1 of the [2015 Enterprise Agreement], any entitlement to compensation is dependent on a valid claim under the Policy, and your claim does not demonstrate that you have suffered loss by reason of the cancellation of the Policy.

In this regard, I am of the opinion that you do not have a provable claim in the Project Volar Creditor’s Trust.”

That notice also identified Mr Boyd’s ability to appeal to the Court against that determination within 14 days or such further period as the Court allowed, although it did not indicate the basis for such an appeal in the Trust Deed or otherwise.

20. Turning now to the affidavit evidence, Mr Boyd relies on his affidavit dated 2 November 2021. Mr Boyd’s evidence is that he was an employee of a company within the Virgin Australia Group with the position of “ATR Captain” and was about 64 years old as at October 2019. Mr Boyd refers to his lodgement of his proof of debt with the Trustees and to notice of rejection of that claim on 10 August 2021. He also refers to the terms of the 2015 Enterprise Agreement which I have addressed above. He refers to his extended absence from flying duties, commencing in about September 2016, as a consequence of matters affecting his family, and indicates that he was not advised that the insurance cover for loss of his licence had not been renewed by VAA or of any other financial benefits to which he may have been entitled under that Policy. He also indicates that he had self-reported his unfitness to fly due to stress and other symptoms and had reported the aspects of his personal situation which were causing that stress. He also addresses the matters which led to a delay in commencing these proceedings within 14 days after the date of service of the notice of rejection of his claim on 10 August 2021, including his family’s limited financial resources.

20. By a second affidavit dated 21 December 2021, Mr Boyd exhibited further documents and indicates that he was not advised that he was not covered by the insurance policy for pilots under the 2015 Enterprise Agreement, or that he was entitled to make a claim under that policy if it had been maintained in accordance with the 2015 Enterprise Agreement, or of the terms of the relevant policy. Nothing turns on those matters for the purposes of this application, where I find below that the Policy would not have responded to a claim by Mr Boyd in any event.

21. The Trustees in turn rely on the affidavit dated 4 February 2022 of Mr Richard Hughes, who was one of the joint and several voluntary administrators of each of the Virgin Australia companies, then one of the joint and several deed administrators of those companies, and subsequently one of the Trustees of the Trust. Mr Hughes sets out Mr Boyd’s employment history in terms which appear to be uncontroversial. Mr Hughes’ evidence, which was not the subject of objection and as to which he was not cross-examined, is that the records of the Virgin Australia companies indicate that Mr Boyd was diagnosed with depression about July 2019. Mr Boyd indicates that the Trustees have not seen or been provided with any document that records or refers to a cancellation by CASA of Mr Boyd’s pilot licence. Mr Hughes indicates that Mr Boyd’s contract of employment with VAA was terminated due to redundancy on 27 September 2020, where the aircraft of which he was a pilot were no longer part of the fleet of aircraft used by the Virgin companies. Mr Hughes also refers to the terms of the 2015 Enterprise Agreement and to Mr Boyd’s lodgement of a proof of debt and the basis on which the Trustees rejected that proof of debt.

The nature of the appeal and the extension of time application

23. The correspondence from the Trustees to creditors to which I have referred above assumed the existence of a right of appeal from the rejection of a proof of debt, corresponding to the right of appeal which would arise against the rejection of a proof of debt by a liquidator in a winding up under s 90-15 of the Insolvency Practice Schedule (Corporations), and Mr Boyd in turn invokes, inter alia, that provision in bringing his appeal from the Trustees’ decision. However this application is not an appeal from a decision made by a liquidator, deed administrator or administrator, and the Court’s jurisdiction to determine it does not arise under that section, but in any equitable jurisdiction to adjudicate a dispute between a trustee and a beneficiary or a person claiming to be a beneficiary of the Trust: Re Bevillesta Pty Ltd [2011] NSWSC 1378 at [21]-[23]; Re Creditors’ Trust Deed Established in the Administration of Bevillesta Pty Ltd [2013] NSWSC 1258 at [4].

24. Mr Boyd seeks an extension of time to appeal from the rejection of his proof of debt and I have referred to his affidavit evidence providing some explanation of the delay in lodging a proof of debt. Mr Johnson, who appears from Mr Boyd, did not address the question of an extension of time in his opening written submissions for Mr Boyd.

25. Mr Krochmalik, who appears for the Trustees, points out that the rights of a creditor who claims its debt against the Trust to appeal from a rejection of that proof of debt by the Trustees is recognised by cll 7.3 and 7.7 of the Trust Deed, to which I referred above. Mr Krochmalik points out that reg 5.6.54(2)-(3) of the Corporations Regulations, which allow the Court to extend the time for an appeal from a rejection of a proof of debt or claim are not imported into the Trust Deed, which also does not provide any general power to extend or abridge a time specified in the Deed. Mr Krochmalik in turn submits:

“It may be seen from these provisions that the claims of persons claiming to be beneficiaries of the Trust are taken to have been abandoned upon the passage of 14 days from the notice proposing to reject the claimant’s ‘Claim’ (as defined broadly by the DOCA). The terms of the Trust Deed are clear, and the 14-day time period was reiterated in the Rejection Notice given to Mr Boyd by the Trustees on 10 August 2021 (albeit it also referred to the possibility of the Court allowing a further period).”

26. Mr Krochmalik fairly acknowledges that the Court may make orders under s 81 of the Trustee Act that override the terms of the Creditors Trust, where the statutory pre-conditions to that provision are satisfied, and he refers to my decision in Re Project Volar Creditors' Trust established in Administration of Virgin Australia Holdings Ltd (2021) 152 ACSR 540; [2021] NSWSC 425 at [8]-[14] for my summary of the relevant case law. He recognises that, in Re Bevillesta Creditors Trust [2013] NSWSC 162, Gzell J held that it was reasonably arguable that orders could be made under s 81 of the Trustee Act permitting beneficiaries to seek relief from the Court in the nature of an appeal from a trustee’s rejection of a proof of debt, notwithstanding that the timing of the application was beyond that permitted by the trust deed. He fairly points out that that conclusion was reached in a summary dismissal application, and involved a finding that that proposition was “highly arguable” rather than a final determination of it. He also seeks to distinguish that decision, pointing to the provision for abandonment of a claim not brought within time in cl 7.7 of the Trust Deed.

27. Mr Krochmalik also questions why it would be “expedient” in the management or administration of the trust property to extend the time for Mr Boyd to bring such a claim, and that submission is reinforced by the difficulties with the substantive merit of the claim, which I address below. It is not necessary to decide whether the Court has power to extend the time to bring the claim, in the relevant circumstances, given the findings I reach below, and it is preferable that that question be deferred to a matter in which it is necessary to decide it.

28. The Trustees’ reliance on cll 7.3 and 7.7 of the Trust Deed to exclude a power to extend the time for an appeal would have the obvious difficulty that they represented to Mr Boyd, in their correspondence and in their notice of rejection of his proof of debt, that the Court had power to extend the time for an appeal from a rejection of his claim. Mr Johnson submits that that representation would give rise to an estoppel; Mr Krochmalik points out that there is no evidence led by Mr Boyd that he relied on that representation to delay lodging a proof of claim; and neither party made submissions as to whether any estoppel might have been established without evidence of reliance by Mr Boyd. It is not necessary to determine whether the Trustees are estopped from relying on the terms of the Trust Deed to deny the Court’s power to extend the time for his appeal, or whether such an estoppel can give rise to a power to allow a claim outside the 14 day period which the Trust Deed does not. I will assume, without deciding, in Mr Boyd’s favour that the Court has power to extend the time to allow a claim and that its doing so would bind the Trustees to act in accordance with its determination of that claim.

29. Mr Krochmalik in turn submits that Mr Boyd’s application for an extension of time to bring his claim against the Trust is a matter in respect of which Mr Boyd again bears the onus, and that his explanation for his delay is “far from compelling” where he had been agitating his claim for some time before the process culminating in the rejection of his proof of debt, and that delay was from 24 August 2021 (14 days after the Rejection Notice was issued) to 4 November 2021 (when the Originating Process was filed) and “[t]he length of that delay is unaddressed by Mr Boyd’s evidence.”

30. In determining whether to extend the time for Boyd’s appeal, I would have regard not only to the personal circumstances to which Mr Boyd refers as having delayed the lodgement of his claim, but also to the underlying merit of the claim. Assuming, without deciding, that Mr Boyd’s personal circumstances contributed to the delay in appealing from the Trustees’ decision, and notwithstanding that he must have known the relevant issues where he had previously agitated the same or substantially the same claim before the Federal Circuit Court, I would not have extended the time to bring the claim where I am not satisfied that it is seriously arguable, for the reasons set out below.

The merits of Mr Boyd’s claim

31. Mr Krochmalik submits and I accept that, by analogy with appeals from an external administrators’ ruling on a proof of debt or claim, Mr Boyd bears the onus of proof of establishing that the Trustees erred in rejecting his proof of debt: Westpac Banking Corp v Totterdell (1998) 20 WAR 150; 29 ACSR 448 at 451; Re St Gregory’s Armenian School Inc (2015) 109 ACSR 27; [2015] NSWSC 1465 at [35]; Re DH International Pty Ltd (in liq) (2017) 121 ACSR 58; [2017] NSWSC 870 at [83]. He also refers to Re Alora Davies Developments 104 Pty Ltd [2021] NSWSC 1583 at [22] where Williams J observed that:

“In order to demonstrate that the Liquidator’s decision was wrong, the plaintiff must adduce evidence establishing that the debts in question were true liabilities of the Company as at the date of winding up. The Court must be satisfied of this on the balance of probabilities before the Liquidator’s decision rejecting the proof of debt will be set aside. That requires the Court to feel actual persuasion that the alleged debts were true liabilities of the Company ...”

32. In 5G Developments Pty Ltd (in liq) v Massie, in the matter of 5G Developments Pty Ltd (in liq) [2021] FCA 791, Stewart J similarly observed (at [150]) that “the fundamental question is whether the claim sought to be proved is a true liability of the company enforceable against it according to law.”

33. Mr Johnson in turn submits that Mr Boyd is an employee creditor under the DOCA and the Trust Deed, being a “Pool A Creditor” entitled to participate in the corresponding fund and fund amount under the Trust. That is common ground between the parties so far as Mr Boyd’s employee entitlements are concerned, but not in respect of any claim arising from the lapse of cover under the Policy in respect of Mr Boyd. Mr Johnson put Mr Boyd’s case on the basis that the CASA Letter “cancelled the licence to fly aircraft” held by Mr Boyd, having the effect that “for practical purposes his licence was cancelled”. On that basis, Mr Johnson contends that Mr Boyd has lost the payout he would have received under the Policy, had VAA not allowed it to lapse in respect of Mr Boyd.

34. In opening written submissions, Mr Krochmalik responded that the Trustees do not dispute (and have not at any time disputed) that VAA did not maintain the relevant policy of insurance for Mr Boyd’s benefit for the full time required under the 2015 Enterprise Agreement. Mr Krochmalik contended that the real question is whether VAA’s breach of the requirement under cl 71 of the 2015 Enterprise Agreement to maintain the Policy for Mr Boyd’s benefit gave rise to any loss on his part, and he pointed out that that depends on whether Mr Boyd would have had a claim to which the policy, had it been maintained for him, would have responded. Mr Krochmalik put the Trustees’ position in that respect succinctly, as follows:

“In Mr Boyd’s case, having regard to the terms of the policy of insurance, there was no such available claim under the policy because no insured event occurred and, separately and in any event, a specific exception to coverage would have applied under the policy. Accordingly, no loss was caused by the breach by VAA (or, alternatively, VARA) of the terms of the relevant Enterprise Agreement that covered Mr Boyd.”

35. Mr Krochmalik in turn recognises that, in his application in the Federal Circuit Court, Mr Boyd made a claim for compensation under ss 545 and 546 of the Fair Work Act and characterises his claim against VAA as for “compensation for loss that [he] has suffered because of the contravention” under s 545(2)(b) of the Fair Work Act. Mr Krochmalik submits and I accept that an order for compensation relying on that provision requires that Mr Boyd establish both loss (“loss that a person has suffered”) and causation (“because of the contravention”) and he refers to case law adopting that approach in Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120 at [28]-[29] and Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (the Hutchison Ports Appeal) [2019] FCAFC 69 at [132].

36. Mr Krochmalik in turn submits that Mr Boyd suffered no loss caused by the failure to maintain the Policy in his favour, because he would not have had a claim to which the Policy would respond. First, Mr Krochmalik submits that no relevant event occurred to which the Policy would have responded on the basis that Mr Boyd’s licence was not cancelled. Mr Krochmalik refers to the terms of the Policy, including the nature of the “Insured Events”, the definitions of “Loss of Licence” and “Cancelled” to which I have referred above, and submits that:

“There is no relevant constructional choice raised by the language of Policy, read in its commercial context and the objects which it is intended to secure. The Policy is only activated if the insured pilot’s licence is cancelled or refused renewal.

The evidence is clear that Mr Boyd’s pilot’s licence was not cancelled:

(a)   The CASA Letter says nothing about the cancellation of Mr Boyd’s licence. It merely directs him not to exercise the privileges of his licence (that is, flying airplanes) while he remained unwell and until he received a clearance certificate. Thus, the terms of the CASA Letter pre-suppose that Mr Boyd’s licence had not been cancelled.

(b)   The Trustees have not seen or been provided with any document from the books and records of the Virgin Companies that records or refers to the cancellation of Mr Boyd’s pilot licence by CASA; moreover, at no stage during the administrations and deed administrations of the Virgin Companies, or during the trusteeship of the Trust, has it been suggested to the Trustees (other than the assertion by Mr Boyd himself) that Mr Boyd’s pilot licence was cancelled by CASA ...

(c)   The regulatory regime with respect to a possible cancellation of a pilot’s licence requires a number of steps to be satisfied (for example, a show cause notice to be issued to the licence holder)). The relevant provisions are set out in the note in Annexure A of these submissions. The short point, however, is that there is no evidence of the statutory requirements having been satisfied and they were certainly not the subject of the contents of the CASA Letter.

(d)   Mr Boyd bears the relevant onus of proof and the Court would conclude that he readily has access to details and documents recording the status of his pilot’s licence (including relevant communications from CASA). No such evidence has been led by Mr Boyd in support of his claim. The Court may therefore more readily draw an inference that no such material exists to support the position that his licence has been cancelled.

Thus, there was no “Insured Event” that would have been triggered under the Policy had it been maintained in favour of Mr Boyd. Therefore, Mr Boyd would never have had a claim under the Policy had it been maintained in his favour. Accordingly, he suffered no loss “because of the contravention” of the 2015 Enterprise Agreement.”

37. I am satisfied that the CASA Letter did not terminate Mr Boyd’s pilot’s licence as he contended. First, the heading of that letter indicated that what was required before Mr Boyd commenced flying was “further clearance” in the manner set out in that letter, which assumed the continuance of his licence. The letter referred to his current unfitness to exercise the “privileges of your licence”, without any suggestion that those privileges did not continue or that licence did not continue. The letter referred to an obligation “not to do any act otherwise authorised by your flight crew licence”, which assumed the continued authority to do such acts conferred by that licence, and the continuance of that licence. The reference to reg 67.270 of the Civil Aviation Safety Regulations 1998 (Cth) necessarily assumed that Mr Boyd’s licence remained on foot, although he was prohibited by that regulation from taking acts under it while impaired due to a medically significant condition. The description of the steps that Mr Boyd needed to take before “resuming flying activities”, which involved only a medical clearance, also assumed that the licence remained on foot. Mr Johnson fairly accepted that there was nothing in that letter that specifically indicated that the licence was cancelled and he did not, as I understood it, advance any substantive explanation of how such an implication could be drawn from it. Mr Krochmalik also points out, and I accept, that it is notable that Mr Boyd has not led evidence that CASA has in fact cancelled his licence by taking any of the requisite statutory steps necessary to do so, including giving him a show cause notice before doing so. As Mr Krochmalik points out, this finding is ultimately determinative of Mr Boyd’s appeal against the Trustee’s determination, and I will return to that matter below.

38. Second, Mr Krochmalik points out that the Policy excluded cover in respect of a licence cancellation arising from stress, depression, anxiety or any “mental or nervous disorder” and points out that the CASA Letter itself indicated that CASA position was taken in response to Mr Boyd’s diagnosis of depression. Mr Krochmalik submits that Mr Boyd would not have been able to claim on the Policy by reason of that exclusion, and suffered no loss because of any failure to maintain the policy in his favour, or any associated contravention of the 2015 Enterprise Agreement. I am also satisfied that, to the extent that CASA indicated its expectation that Mr Boyd could not fly until he obtained medical clearance to do so, that event resulted directly from his suffering stress, depression or anxiety. The CASA Letter itself indicated that CASA’s position was taken by reason of Mr Boyd’s depression and Mr Boyd’s correspondence with the Virgin Australia Group, and the documents that he lodged in the Federal Circuit Court, made clear that he was suffering from stress, depression or anxiety as a result of the events which had affected his family. I note, for completeness, that the Policy provided that the insurer would make weekly disability benefit payments for depression, with a maximum benefit period of 26 weeks, but Mr Boyd made no claim in respect of that benefit in his proof of debt or in these proceedings.

39. In oral submissions, Mr Johnson submitted that the Trustees were estopped from raising any question that the Policy would not have responded in the relevant circumstances, by reason of an estoppel of the kind recognised by the High Court in Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39, apparently on the basis that the Trustees had previously not exposed the detail of that proposition to Mr Boyd. I do not accept that submission. First, the Trustees had identified the basis of the rejection of Mr Boyd’s proof of debt by their rejection notice dated 10 August 2021, and the reference to Mr Boyd having suffered no loss in that notice should sufficiently have indicated to Mr Boyd, and his legal advisers, that a point was taken as to whether Mr Boyd had been deprived of any payment that he would have received under the Policy, had it been maintained. Second, the Trustees do not here seek to raise any affirmative defence, but merely to point out that Mr Boyd has not established the essential elements of his claim against the Trust. It does not seem to me that there is anything unconscionable about their doing so, or about the Court deciding Mr Boyd’s appeal on its merits, rather than on the artificial basis that Mr Boyd had suffered a loss which he has not in fact established.

37. For completeness, I note that Mr Krochmalik also addressed the question of the quantum of Mr Boyd’s annual salary, for the purposes of the Policy, but it is not necessary to address that question given the conclusion which I have reached on other grounds.

Orders and costs

41. For these reasons, the proceedings are dismissed with costs as agreed or as assessed.

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Decision last updated: 24 March 2022