In the matter of Skypac Aviation Pty Ltd (in liq)

Case •

[2020] NSWSC 1697

•

01 December 2020

No judgment structure available for this case.

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: In the matter of Skypac Aviation Pty Ltd (in liq) [2020] NSWSC 1697
Hearing dates: 20 November 2020
Date of orders: 1 December 2020
Decision date: 01 December 2020
Jurisdiction:Equity - Corporations List
Before: Gleeson J
Decision:

(1) Declare that the payment made by Skypac Aviation Pty Ltd to Hope Estates Pty Ltd on 16 October 2015 in the sum of $57,860 is not void by reason of s 468(1) of the Corporations Act 2001 (Cth).

(2) Order that the plaintiffs pay the second defendant’s costs of the proceedings from 14 February 2020, limited to the plaintiffs’ claim to recover the amount of $57,860 under s 468(1) of the Corporations Act.

Catchwords:

CORPORATIONS – winding up – where company in liquidation – where company hired aircraft from creditor – where payment made by company to creditor after commencement of winding up – whether payment a void disposition – Corporations Act 2001 (Cth) s 468(1) – whether exemption in s 468(2)(b) applied – whether Court should exercise discretion to declare payment is not void

Legislation Cited:

Companies Act 1961 (Cth), s 227

Companies and Securities Legislation (Miscellaneous Amendments) Act 1985 (Cth), s 101

Companies (New South Wales) Code, ss 368, 368(1A)(b)

Corporations Act 2001 (Cth), ss 436A, 468(1), 462(2)(b), 513A(b), 513C, 556

Cases Cited:

Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15

Carringbush Corporation Pty Ltd v Australian Securities and Investments Commission [2018] FCA 474

Jardio Holdings Pty Ltd v Dorcon Constructions Pty Ltd (1984) 3 FCR 311

Re Atlas Truck Service Pty Ltd (1974) 4 ACTR 19

Re Brash’s Pty Ltd (1994) 15 ACSR 477

Re Gray’s Inn Construction Co Ltd [1980] 1 All ER 814

Re Klaus Maertin Pty Ltd (in liq); Maertin v Klaus Maertin Pty Ltd [2009] NSWSC 618

Re Loteka Pty Ltd (in liq) (1989) 15 ACLR 620

Re Mal Bower’s Macquarie Electrical Centre Pty Ltd (in liq) (1974) NSWLR 254

Re Rampton Holdings Pty Ltd (in liq) (1980) 2 ACSR 547

Re Steane’s (Bournemouth) Ltd [1950] 1 All E R 21

Tellsa Furniture Pty Ltd (in liq) v Glendave Nominees Pty Ltd (1987) 9 NSWLR 254

Category:Principal judgment
Parties: Christopher John Palmer (First plaintiff)
Skypac Aviation Pty Ltd (in liq) (Second plaintiff)
Hope Estates Estate Events Pty Ltd (Second defendant)
Representation:

Counsel:
Mr A Narayan (solicitor) (Plaintiffs)
Mr D Parish (Second defendant)

Solicitors:
Craddock Murray & Neumann Lawyers (Plaintiffs)
Aubrey Brown Lawyers (Second defendant)
File Number(s): 2018/312649

Judgment

  1. GLEESON J: Application is made by Christopher John Palmer, the liquidator of Skypac Aviation Pty Ltd (in liq) (Skypac) for a declaration that a payment made to Hope Estates Events Pty Ltd (Hope Estates) on 16 October 2015 in the sum of $57,860 was a disposition of property of Skypac made after the commencement of the winding up of Skypac and therefore void under s 468(1) of the Corporations Act 2001 (Cth), and for an order that Hope Estates should pay that amount to Skypac with interest. Skypac was wound up in insolvency by order of the Court on 19 November 2015. Immediately before the court ordered winding, Skypac was under administration. Accordingly the winding up of Skypac is taken to have begun or commenced on 15 October 2015, being the date of the appointment of the administrators: ss 513A(b) and 513C, Corporations Act.

  2. At the hearing, Hope Estates filed, without objection, an interlocutory process returnable instanter seeking an order that the Court ought to order otherwise and validate the payment of $57,860, if it was not an exempt disposition within s 468(2)(b) of the Corporations Act.

Circumstances of the payment

  1. The evidence concerning the circumstances of the payment is rather sparse. Nevertheless, the primary facts relating to the contractual arrangements between Skypac and Hope Estates are not in dispute.

  2. On about 13 January 2014, Hope Estates entered into an Aircraft Operational Services agreement with Skypac for the hire of a Cessna Citation II VH-FYP owned by Hope Estates for the period of the agreement. The terms of the agreement included:

  • the commencement date of the agreement was 1 December 2013 (cl 2.2); and the term of the agreement was three months and could continue after three months on a month-to-month basis until a new agreement was in place (cl 2.1);

  • a table of charges in cl 4.1 specified a Ferry Rate (wet) of $2,600 per flight hour, and a Normal Rate (wet) “Below 20 hours p/m $3,060 per flight hour. Above 20 hour p/m $2,800 per flight hour”. There were additional charges for the provision of a captain / co-pilot and other services such as parking and hangerage at Bankstown Airport;

  • whilst the aircraft is based at Bankstown Airport and the agreement is in place, Hope Estates shall invoice Skypac usage fees pursuant to cl 4.1 with a minimum charge of 15 charter hours per month and any unused hours can be carried forward for future use without penalty (cl 4.4);

  • clause 5 headed “Payment” provided:

5.1   At the end of each month’s an owner’s report will be generated through Almaestro. The balance of charges will be calculated by the 7th day after end of Month. The balance payment shall be made within 21 days after end of Month by the company which has the outstanding balance.

  1. The agreement was varied in April 2014 by reducing the hire fee to $2,000 per hour (excluding GST) as a “dry” hire, meaning that the fuel was supplied by Skypac.

  2. The aircraft held seven passengers and two pilots and was stored in Skypac’s hangar at Bankstown Airport, other than occasionally when Hope Estates requested it back to fulfil other requirements. Skypac used the aircraft to fulfil its charter obligations under a contract with the New South Wales Police Force to transport prisoners throughout New South Wales.

  3. Mr Michael Hope, the sole director of Hope Estates, gave evidence, which I accept, that Skypac would send him the electronically generated records, referred to as the Aircraft Utilisation Record, which recorded the hours flown by the aircraft during each month and he would then raise an invoice based on those hours. Although not included in his affidavit, an invoice to Skypac dated 31 May 2015 for $57,860 was tendered in evidence by Hope Estates as a business record (Ex 4). There was no real contest in cross-examination of Mr Hope that the invoice was genuine. This was consistent with the admission by the liquidators on the “pleadings” that Hope Estates provided valuable consideration for the payment: see points of defence, par [28] and the reply, par [11].

  4. On 15 October 2015, Graeme Beattie and Christopher Darin were appointed administrators of Skypac pursuant to s 436A of the Corporations Act. On the following morning, Mr Beattie issued a circular to all known banks in Australia, including Westpac Banking Corporation (Westpac), requesting an immediate freeze of all accounts of Skypac. Despite that request, on 16 October 2015 Skypac’s account with Westpac was debited with a payment to Hope Estates in the amount of $57,860. According to Mr Beattie, it is likely that this payment had been made by an authorised person of Skypac between one and two days prior to 16 October 2015, given the clearance times for electronic funds transfers. Mr Darin gave unchallenged evidence, which I accept, that neither of the administrators consented to, or authorised, the payment of $57,860.

  5. Hope Estate’s terms of payment were 30 days but, as Mr Hope said in cross-examination, Skypac was generally late in paying invoices by about 3 months. All invoices up to April 2015 had been paid before the appointment of the administrators on 15 October 2015.

  6. Mr Hope became aware of the appointment of the administrators during a telephone call from Mr Rick Pegus, the director of Skypac, on or around 15 October 2015 in which Mr Pegus said to him words to the effect:

Skypac has gone into administration, but you don’t need to worry. The business will keep trading and NSW Police will continue to use your jet. The administrator will arrange for invoices to be paid.

  1. There was no challenge to Mr Hope’s evidence, which I accept, that he had no suspicion that Skypac was insolvent until he received the telephone call from Mr Pegus. Mr Hope agreed in cross-examination that from the date of this conversation he was well aware that Skypac was insolvent.

  2. On 30 October 2015, Mr Hope sent an email to administrators in which he requested confirmation of his conversation that day with Mr Jeremy Mudford of the administrators’ staff, that the aircraft had been used since administration, would continue to be used to fill Skypac’s obligations, and making payment on a weekly basis a condition of Hope Estates permitting continued use of the aircraft. The email stated:

Jeremy, given my exposure to Westpac I cannot consent to the use of the aircraft until I receive an undertaking from yourselves that all usage will be paid on a weekly basis and that no PO [purchase order] is required.

If you are unable to provide this I will relocate the aircraft back to Cessnock Airport.

  1. This was confirmed by Mr Beattie in his email to Mr Hope on 3 November 2015 which said:

I confirm that any invoicing for the usage of the aircraft post our appointment should be sent to our office for payment and a purchase order is not required for each use so that Skypac can continue to have use of the aircraft to fulfil their charter contracts.

  1. On 4 November 2015, Mr Pegus sent an email to Mr Hope attaching the aircraft owner’s report for October 2015 recording a total of 14.9 hours use between 5 October 2015 and 26 October 2015 and asked that the invoices be sent to him and he would take them to the administrators “on Friday”, being 6 November 2015.

  2. On 2 December 2015, Amanda Pegus sent an email to Mr Hope attaching the aircraft owner’s report for November 2015 recording a total of 24.2 hours use between 3 November 2015 and 27 November 2015.

  3. On 16 December 2015, Mr Pegus sent an email to Mr Hope attaching the aircraft owner’s report for the period 20 November 2015 to 10 December 2015 which recorded a total of 10.5 hours.

  4. Hope Estates issued an invoice to “Skypac (Administrators appointed)” dated 18 November 2015 for $53,020 for use of the aircraft from 15 October 2015 to 18 November 2015, being a total of 24.1 hours (the November invoice).

  5. Hope Estates issued an invoice to “Skypac (Liquidators appointed)” dated 22 December 2015 for $23,100 for use of the aircraft from 20 November 2015 to 10 December 2015, being a total of 10.5 hours.

  6. Mr Hope gave evidence, which I accept, that the November and December invoices were not paid.

  7. Subject to the qualification that the reference in par [14] of Mr Hope’s affidavit to “conversations” is to be understood as a reference only to the conversation with Mr Mudford on 30 October 2015, I accept Mr Hope’s evidence, which was not challenged, that in his conversations with the representatives of the administrators regarding the use of the aircraft, he was never told that he would not receive payment for the use of the aircraft and that if he had been told that, or suspected that the costs of the use of the aircraft would not have been paid, he would not have allowed the administrators to continue to use the aircraft and he would have recovered possession of the aircraft earlier than he did. This evidence is corroborated by the contemporaneous statement in Mr Hope’s email of 30 October 2015 which is set out at [12] above.

  8. Nor was Mr Hope challenged on his evidence in par [22] of his affidavit, which I also accept, that he would never have agreed to the administrators continuing to use the aircraft had he known that the liquidator would attempt to claw back the payment and that the administrator would not pay the invoices for the use during the time of the administration. The evidence is silent as to why the administrators did not pay the November invoice, relating to the period Skypac was in administration.

  9. The liquidator gave unchallenged evidence that there are six unsecured creditors who have lodged proofs of debt in the liquidation of Skypac totalling $656,487.91 and, that absent further recoveries in these proceedings, ordinary unsecured creditors of Skypac will not receive any dividend in the liquidation.

Section 468

  1. Section 468(1) of the Corporations Act provides that any disposition of property of the company, other than an exempt disposition, made after the commencement of the winding up by the Court is, unless the Court otherwise orders, void.

  2. The expression “exempt disposition” as defined in s 468(2) covers four particular types of disposition, of which only one was ultimately relied upon by Hope Estates, relevantly:

…

(b)   a payment of money by an Australian ADI out of an account maintained by the company with the Australian ADI, being a payment made by the Australian ADI:

(i)   on or before the day on which the Court makes the order for the winding up of the company; and

(ii)   in good faith and in the ordinary course of the banking business of the Australian ADI.

  1. The purpose of the prohibition in s 468(1) is primarily to promote the statutory scheme of rateable division among creditors of an insolvent company by preserving the property of the company from the time when the winding up by the Court commences: Re Loteka Pty Ltd (in liq) (1989) 15 ACLR 620 at 622 (McPherson J), in relation to the predecessor provision in the Companies (Qld) Code, s 368(1).

Issues

  1. It is common ground that the payment of $57,860 to Hope Estates on 16 October 2015 was a disposition of property of Skypac within s 468(1). It follows that there are only two questions for decision:

  1. whether the payment by Skypac of $57,860 on 16 October 2015 is an “exempt disposition” within s 468(2)(b) of the Corporations Act;

  2. if not, whether the Court should exercise its discretion to order that the payment is not void?

A. Exempt disposition: s 468(2)(b) – payment made by an Australian ADI

  1. The onus of establishing that the disposition comes within an exception in s 468(2) falls on the disponee. Hope Estates says that the exception in s 468(2)(b) applies because that the payment was made from an account maintained by Skypac with Westpac being an Australian ADI.

  2. The liquidator accepted that the payment was made from Skypac’s account maintained with Westpac, being an Australian ADI, but submitted that the payment was not a payment by an Australian ADI, rather it was a payment made by Skypac from moneys held in its bank account with Westpac and thus did not come within the exception in s 468(2)(b). Reference was made to Re Rampton Holdings Pty Ltd (in liq) (1980) 2 ACSR 547 at 548-549 (Pidgeon J).

  3. Rampton involved a payment made by the company’s bank three weeks after the company went into liquidation. The recipient of the payment argued that the disposition was an exempt disposition under s 368(1A)(b) of the Companies (WA) Code, a predecessor provision to s 468(2)(b). Pidgeon J rejected the disponee’s submission that as the bank had paid the cheque it was a payment of money by a banking corporation out of an account maintained by the company which engaged the exception in s 368(1A)(b). Pidgeon J observed at 548 that the intent of the exemption was to cover the situation referred to in Re Gray’s Inn Construction Co Ltd [1980] 1 All ER 814 at 818 and then said:

Payments out a company’s bank account to third parties are dispositions of the company as such.

  1. As to the purpose of the exception, Pidgeon J said at 548-549 that the intent of the exemption granted by this provision:

… is to avoid the necessity of the bank being required to seek an order of validation in respect of cheques it pays and of the bank being liable to account to the liquidator in respect of any cheque paid by it. I do not consider it is intended to apply to payments received by recipients. It is limited to a payment of money by the banking corporation. In other words, it is limited to payments made as distinct from payments received.

  1. Hope Estates submitted that Rampton should not be followed. According to the submission, the amendment which first introduced s 368(1A)(b) into the Companies Code in 1985 must have been intended to do more than state what the liquidator contended was the existing law in New South Wales at the time, referring to the decision in Re Mal Bower’s Macquarie Electrical Centre Pty Ltd (in liq) (1974) NSWLR 254. To address this submission, a brief excursus into history is necessary.

  2. The exception in s 468(2)(b) was first introduced as s 368(1A)(b) of the Companies Code in 1985 by the Companies and Securities Legislation (Miscellaneous Amendments) Act 1985 (Cth), s 101. As McPherson J noted in Re Loteka at 627, s 368(1A)(b) may well have been adopted to resolve doubts which were thought to have arisen as a result of the decisions in ReGray’s Inn Construction Co Ltd and Re Mal Bowers.

  3. In Re Mal Bowers cheques were, after presentation of a petition to wind up, drawn on the company's account which was in credit at the time the cheques were met, some of them being presented and paid after the winding up order. Street CJ in Eq held at 258 that no “disposition” of company property had taken place in favour of the bank for the purposes of s 227 of the Companies Act 1961 (NSW). Paying a company cheque presented by a “stranger” did not, his Honour considered, “involve the bank in a disposition of the property of the company so as to disentitle the bank to debit the amount of the cheque to the company's account”: at 258. The word “disposition”, his Honour said at 258:

… connotes in my view both a disponor and a disponee. The section operates to render the disposition void so far as concerns the disponee. It does not operate to affect the agencies interposing between the company, as disponor, and the recipient of the property, as disponee.

  1. Applying this approach, Street CJ in Eq held that it was not the bank, but the creditor receiving the benefit of the proceeds of the cheques who was the “disponee”.

  2. Re Gray’s Inn Construction Co involved a different fact situation, because the company’s bank account was in overdraft, and the liquidator’s primary claim was to recover all payments into the overdrawn account, alternatively the liquidator sought a declaration that all amounts debited to the account between the relevant dates “and/or the payments to which they related” constituted dispositions of property to which the section related, and as Buckley CJ noted at 724, the liquidator “moderated” his demands on appeal, and he recovered only part of the claim for amounts paid out of the account. Buckley LJ held that a sum of money or a cheque paid into an overdrawn account is a disposition by the company to the bank of the amount of the cash or the cheque. That is undoubtedly correct, since the payment into an overdrawn account goes to reduce the company’s debt to the bank.

  3. McPherson J observed in Re Loteka at 624-625:

Having said that, Buckley LJ continued:

Mr Heslop does not dispute that all payments out of the company's account to third parties, not being payments to agents of the company as such, are dispositions of the company's property; but he contends (as I understand his argument) that they are only relevant for the purposes of s 227 to the extent that payments out during the relevant period exceed payments in. That all such payments out must be dispositions of the company's property is, I think, indisputable, but I cannot accept Mr Heslop's contention. The section must, in my judgment, invalidate every transaction to which it applies at the instant at which that transaction purports to have taken place. I cannot see any ground for saying that the invalidation can be negatived by any subsequent transaction.

It follows, in my judgment, that unless validated under the section all the payments into and all the payments out of the company's account during the period 3 August to 9 October 1972, were invalid.

It will be seen that, although it may not have been strictly necessary for the decision in hand, his Lordship treated payments out of the liquidating company's (1989) 15 ACLR 620 at 625 bank account as constituting “dispositions” within the meaning of the relevant statutory provision. In Ramsay v National Australia Bank Ltd [1989] VR 59 at 69 the Full Court of Victoria referred with approval to both passages in the judgment in Re Gray’s Inn Construction Co, although in the end their Honours held that no disposition of company property had taken place in that case: see [1989] VR 59 at 70.

  1. The Explanatory Memorandum to the Companies and Securities Legislation (Miscellaneous Amendments) Bill 1985 confirms that the purpose of s 368(1A)(b) was to clarify the difference of view between Re Mal Bowers and Re Gray’s Inn Construction Co, where a bank paid cheques drawn by the company, whether the account is in credit or overdrawn. The Explanatory Memorandum stated in pars [436]-[438]:

[436] The case law on the precursors to CA s 368 is such that it is not clear precisely how this provision operates upon the involvement of the banker to the company being wound up in honouring cheques drawn by the company.

[437]   Proposed amendment. It is proposed that CA s 368 be amended to ensure that a banking corporation is not liable to repay to a liquidator the amount of any cheques of the company which it has honoured, whether the account is in credit or overdrawn.

[438]   The proposed amendment will enable a banking corporation to make a payment out of an account maintained by a company after the commencement of winding up of the company by the Court without being involved in any void disposition within the terms of CA s-sec 368(1), so long as the banking corporation is acting in good faith and in the normal course of its banking business. Banking corporations will not, however, be exempted from the consequences of statutory avoidance under CA s 368 where payments are made into an overdrawn account.

  1. Acceptance of Hope Estates’ submission requires persuasion that the decision in Rampton is plainly wrong, being a decision of a first instance judge of an equivalent court on predecessor uniform national legislation, which is in similar terms to s 468(2)(b): Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492; [1993] HCA 15; Re Brash’s Pty Ltd (1994) 15 ACSR 477 at 483. I am not convinced that Rampton is plainly wrong. On the contrary, I respectfully agree with the reasoning in Rampton which is equally applicable to s 468(2)(b) of the Corporations Act.

  2. Here, Skypac’s bank account was in credit both before and after the payment to Hope Estates on 16 October 2015. The exemption in s 468(2)(b) clarifies that s 468(1) does not operate to affect the agencies interposing between the company, as disponor, and the recipient of the property as disponee, where a payment is made out of the company’s account, whether the account is in debit or credit. The exemption in s 468(2)(b) does not apply in the present case.

B. Discretion to otherwise order

  1. Hope Estates submitted in the alternative, if the exception in s 468(2)(b) did not apply, that the Court should make an order otherwise that the disposition is not void. The onus rests on Hope Estates, as the disponee, to make out a case for a favourable exercise of the discretion: Re Atlas Truck Service Pty Ltd (1974) 4 ACTR 19 at 23 (Fox J).

  2. It is well-established that the words “unless the Court otherwise orders” give the Court a wide general discretion which is not to be limited by any attempted classification of those cases which do and those which do not, fall within them: Jardio Holdings Pty Ltd v Dorcon Constructions Pty Ltd (1984) 3 FCR 311 at 316 (Woodward, Neaves and Beaumont JJ), cited with approval by the Court of Appeal in Tellsa Furniture Pty Ltd (in liq) v Glendave Nominees Pty Ltd (1987) 9 NSWLR 254 (Hope JA at 261) (Priestley JA, Mahoney JJA agreeing). See also Re Atlas Truck Service Pty Ltd at 20.

  3. The principles guiding the exercise of discretion under s 468(1) have been referred to in many cases. It has been said that the discretion is to be exercised for “the promotion of the interests of [the] creditors as a whole” and is to take the form of “a commercial or economic [inquiry], calling for a balancing of the anticipated net gains or losses from the transaction for which approval is sought”: Jardio Holdings Pty Ltd v Dorcon Constructions Pty Ltd at 317.

  4. In Carringbush Corporation Pty Ltd v ASIC [2008] FCA 474, a case involving an application for retrospective approval of a transfer of shares in Rothwells Limited almost 15 years earlier, Greenwood J said at [23] that ordinarily the discretion will not be exercised in favour of an order unless the court is satisfied that the order serves the interests of the company or its creditors. Austin J agreed with this summary in Re Klaus Maertin Pty Ltd (in liq); Maertin v Klaus Maertin Pty Ltd [2009] NSWSC 618 at [30].

Submissions

  1. The liquidator submitted that the Court should not exercise its discretion to order that the payment is not void essentially for the following reasons:

  1. Hope Estates was aware as at the date of the payment that the administrators had been appointed and otherwise had a suspicion that Skypac was insolvent, pointing to the evidence given by Mr Hope;

  2. the payment was made in respect of pre-existing debt owed by Skypac to Hope Estates, was not required for the purposes of continuing the business of Skypac, and did not result in any commensurate benefit to Skypac and only resulted in a reduction in the assets of Skypac;

  3. if an order is made that the payment is not void, that will have the effect of Hope Estates receiving more in the winding-up of Skypac compared to all unsecured creditors; and

  4. there is no evidence that the payment was made in good faith and with honest intentions. Reference was made to Re Steane’s (Bournemouth) Ltd [1950] 1 All E R 21 at 24.

  1. Hope Estates submitted that the following factual matters point to an exercise of the discretion in its favour:

  1. the parties acted in good faith and with honest intentions and Hope Estates understood that (future) payments for use of the aircraft would continue to be made so that Skypac could continue to trade and meet its contract to New South Wales Police;

  2. Hope Estates was not aware of any winding-up application and Mr Hope was aware of the administrator being appointed only after the payment had been made, but before it was received. Further, Mr Hope was told by the administrators that the company would keep trading and that the administrator would arrange for the invoices to be paid;

  3. the payment was needed to continue the business of Skypac because Hope Estates would not have agreed to the continuing use of the aircraft if it had known that the payment would later be clawed back;

  4. there was a countervailing benefit to Skypac because the payment, along with assurances from the administrator that invoices would continue to be paid, was the reason that Hope Estates permitted the continued use of the aircraft. That the administrator did not in fact pay the later invoices as he had undertaken to do is said by Hope Estates to be irrelevant given the effect of the payment was that Hope Estates continued to permit the use of its aircraft to allow Skypac to trade and generate an income for the benefit of all creditors.

Decision

  1. Accepting that the Court has a wide general discretion under s 468(1) which is to be exercised in the interests of the creditors as a whole, there is an initial question whether the focus of the inquiry is the transaction in isolation, or viewed as part of the whole series of transactions after the commencement of the winding up on 15 October 2015.

  2. Tellsa (Priestley JA, Hope and Mahoney JJA agreeing) at 246G is authority for the proposition that there will be cases where it is unfair to look at the transaction in isolation and it is necessary to consider “what was the result in fact of the subject transaction or transactions on the operation and position of the company.”

  3. In Tellsa, the price of the goods delivered to the company after the date of the commencement of the winding up on 12 November 1982 was of the order of $64,000 and the payments made after the date of commencement of the winding up was $91,914.58. The order of Young J that the payment by Tellsa to Glendave of $91,914.58 was not void was upheld on appeal, notwithstanding that a payment made on about 22 November 1982 of $27,481.20 was viewed, in substance, as paid in respect of the goods delivered in September 1982, being before the deemed commencement of the winding up.

  4. Mahoney JA said at 256-257:

I do not think that the Court, in the exercise of its power, is restricted by the precise details of deliver and payment; to adapt what was said by Harman LJ in Re Clifton Place Garage Ltd (at 491), the Court may, in the exercise of its power, ensure that its officer, the liquidator, acts fairly and like a gentleman.

and continued at 257:

In the exercise of this power, the Court will take into account whether the payment, and the transaction of which it is part, was or was apt to be for the benefit of the creditors in question. It will, in general, see the continuation of the company’s business as, in the proper case, for their benefit.

  1. Mahoney J concluded at 257 that the inference to be drawn from the evidence was that had the payment not been made on or about 22 November 1982, the company would probably not have received the deliveries of goods which took place thereafter in November, December and the following January and February. His Honour found that it was at least proper to view the payment in November as part of an ongoing relationship between the parties which was essential to the continuation of the company’s business or the relevant part of it and in the circumstances it was proper that the Court’s order validating the payments extend to the balance of the payments made in December 1982 to February 1983.

  2. Priestley JA observed at 265 that the creditor was paid $63,597.85 for goods sold to Tellsa after 12 November 1982 and was paid an approximate further $28,000 for goods delivered to Tellsa before 12 November 1982. As to the amount of $63,597.85, Priestley JA noted that Tellsa “got full value” for this payment, being the goods delivered after 12 November 1982. As to the amount of approximately $28,000 for goods delivered to Tellsa before 12 November 1982, Priestley JA said at 266 that the creditor received payment for goods delivered before the deemed commencement of the winding up with no knowledge of any sign that Tellsa might be insolvent or approaching insolvency and from the creditor’s point of view receipt of the payment was in the ordinary course of its business and all goods delivered after the deemed commencement of the winding up were for the benefit of unsecured creditors generally in that they were used for keeping the business of Tellsa going and for use in its manufacture of goods that were then resold. Priestley JA continued at 266:

… the best inference open on the evidence that the business would not have continued in that way and the benefit of continued manufacture and sale of Tellsa’s goods would not have persisted as long as it did had the payment not been made which was made towards the end of November; thus, although the payment may be categorised as for goods delivered pre-commencement winding up, it was one which I think should be inferred to have contributed towards the continued existence of the company as a going concern with the actual and possible benefits to the relevant parties that I have described.

  1. There is one distinguishing feature between Tellsa and the present case. In Tellsa there was no challenge to the finding that the recipient of the payment had no knowledge of the winding up proceedings against the company or that it was in financial difficulties until in May 1983, when it received a circular concerning a proposed scheme of arrangement (at 257). As a consequence, from the recipient’s point of view receipt of the payment was in the ordinary course of business (at 266).

  2. In contrast to Tellsa, Hope Estates was aware of the appointment of the administrators to Skypac and its insolvency immediately prior to receipt of the payment, and from its point of view receipt of the payment was not in the ordinary course of business. The payment was in respect of a past debt, and given its timing, can be taken to have been made from funds generated before the appointment of the administrators. These factors tend against a favourable exercise of discretion.

  3. Nevertheless, I reject the liquidator’s submission that the payment was not made in good faith and honest intentions. On the evidence of Mr Beattie, it is likely that the payment was authorised by a person on behalf of Skypac on 14 October 2015, before the administrators were appointed. The timing of the payment was broadly consistent with Skypac making payment of monthly invoices about a three-months after the due date for payment.

  4. I accept Hope Estates’ submission that it is unfair to view the payment in isolation. Whilst receipt of the payment was not made a condition of ongoing hire of the aircraft to Skypac, the inference should be drawn that had the payment not been made for the May 2015 invoice, Hope Estates would not have allowed Skypac to retain use of the aircraft in circumstances where administrators had been appointed and immediately prior to the payment, at least four months’ invoices from May to August 2015 were more than 30 days overdue. Further, I find, based on Mr Hope’s evidence, that Hope Estates would not have continued to provide the aircraft if Mr Beattie had not confirmed to Mr Hope on 3 November 2015 that invoices for the period after the administration commenced should be sent to the administrators’ for payment and no purchase order was required.

  5. The benefit to Skypac of the cost of the hire of the aircraft during the administration from 15 October 2015 to 18 November 2015 was $53,020 as recorded in the November invoice. Contrary to the liquidator’s submission, the payment resulted in a broadly commensurate benefit to Skypac in continuing its business during the period of the administration. Thus the payment served the interests of Skypac and its creditors in obtaining the use of the aircraft during the administration, which I infer included using the aircraft to fulfil charter contracts for value.

  6. That the cost of the hire in the November invoice is slightly less than the payment is not a sufficient reason not to validate the whole payment. In Tellsa the payment of $91,914.58 after the deemed commencement of the winding up was validated notwithstanding that the price of new goods delivered after that date was in the order of $64,000.

  7. The continued hire of the aircraft for the short period from 19 November to 10 December 2015, whilst Skypac was in liquidation, is to be looked at differently to the hire during the administration. There is no evidence that Mr Hope assumed that further invoices from 19 November 2015 when Skypac was in liquidation would be paid by the liquidator. Nor is there evidence that the liquidator made any promise or statement to Mr Hope in this regard, or that but for such a promise or statement Mr Hope would have taken steps to repossess the aircraft before 10 December 2015. Further, although not addressed in argument, the December invoice would seem to be an expense of carrying on the business whilst Skypac was in liquidation, which is a priority claim in the liquidation under s 556(1)(a) of the Corporations Act. The transactions after 19 November 2015 do not bear upon the exercise of discretion to make an order otherwise.

  8. I conclude that an order otherwise should be made that the payment of $57,860 by Skypac to Hope Estates on 16 October 2015 is not void under s 468(1).

Costs

  1. As to costs, the contention by Hope Estates that the Court should exercise its discretion to order otherwise was not raised until the amended points of defence filed 14 February 2020. Accordingly, the plaintiffs should only be subjected to a costs order from that date.

Orders

  1. The Court makes the following declaration and order:

  1. Declare that the payment made by Skypac Aviation Pty Ltd to Hope Estates Pty Ltd on 16 October 2015 in the sum of $57,860 is not void by reason of s 468(1) of the Corporations Act 2001 (Cth).

  2. Order that the plaintiffs pay the second defendant’s costs of the proceedings from 14 February 2020, limited to the plaintiffs’ claim to recover the amount of $57,860 under s 468(1) of the Corporations Act.

**********

Amendments

31 May 2021 - [38] - line 1, delete "the liquidator's" and insert "Hope Estates'"

Decision last updated: 31 May 2021

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0