Re: Nardell Coal Corporation (in liq) v Hunter Valley Coal Processing - [2003] NSWSC 642

No judgment structure available for this case.

Reported Decision:
(2003) 46 ACSR 467
(2003) 21 ACLC 1505

Supreme Court

CITATION: Re: Nardell Coal Corporation (In Liq) v Hunter Valley Coal Processing [2003] NSWSC 642

HEARING DATE(S): 11 June 2003 & 3 July 2003

JUDGMENT DATE:
25 July 2003

JURISDICTION:
Equity

JUDGMENT OF: Campbell J

DECISION: Receivers liable to pay amount of indemnity for GST attributable to rent unless relieved. Receivers relieved from liability to pay rent, and amount of indemnity for GST attributable to rent.

CATCHWORDS: CORPORATIONS - RECEIVERS, MANAGERS AND CONTROLLERS - liability of receivers under s 419A(2) Corporations Act to pay rent or other amounts for leased third party property - circumstances in which receivers have such a liability - scope of "rent or other amounts" - whether amount payable under lessee's covenant to indemnify lessor for GST is "rent or other amounts" - factors affecting the courts discretion under s 419A(7) Corporations Act to excuse receivers from liability - ability of the court to excuse liability that accrued in the past under s 419A(7) - PROCEDURE - costs - of court application seeking an indulgence - WORDS AND PHRASES- "excuse"

LEGISLATION CITED: Acts Interpretation Act 1901 (Cth)
Companies Act 1936
Companies Act 1961
Companies (NSW) Code 1981
Conveyancing Act 1919 (NSW)
Corporate Law Reform Act 1992 (Cth)
Corporations Act 2001 (Cth)
Corporations Law
Trustee Act 1925 (NSW)

CASES CITED: Associated Newspapers Ltd v Grinston (1949) 66 WN (NSW) 211
Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; (2000) 34 ACSR 158
In Re; Botibol [1947] 1 All ER 26
British Investments and Development Co Pty Ltd (1979) CLC 40-522
Commonweath Bank of Australia v Butterell (1994) 14 ACSR 343; (1994) 35 NSWLR 64
Consolidated Entertainments Ltd v Taylor [1937] 4 All ER 432
FAI Insurances Ltd v Winneke (1982) 151 CLR 342
Featherby v Read [2002] WASC 251
Re Freightlines Northern Territory Pty Ltd (In liq) [1999] QSC 209; (2000) 2 QdR 384
Golski v Kirk (1987) 14 FCR 143
Gosling v Gaskell [1897] AC 575
Hawkins v Bank of China (1992) 26 NSWLR 562
Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247
Langley v Foster (1909) 10 SR(NSW) 54
Re NRMA Limited [2000] NSWSC 82; (2000) 34 ACSR 158
Oshlack v Richmond River Council (1998) 193 CLR 72
Russell Halpern Nominees Pty Ltd v Martin [1987] WAR 150
Shepherd v Australia and New Zealand Banking Group Ltd (1996) 20 ACSR 81
Re Teller Home Furnishers Pty Ltd (In liquidation); Electronic Industries v Horsburgh [1967] VR 313

PARTIES :
Alan Edward Lewis and Andrew John Love in their capacity as Receiver & Managers of Nardell Coal Corporation Pty Limited (Receivers & Managers Appointed) (In Liquidation) - Plaintiff
Hunter Valley Coal Processing Pty Limited - Defendant

FILE NUMBER(S): SC 2729/03

COUNSEL: AJ Meagher SC; JE Thomson - Plaintiff
BA Coles QC; M Tyson - Defendant

SOLICITORS: Minter Ellison - Plaintiff
Bowring Stone - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

25 JULY 2003

2729/03 ALAN EDWARD LEWIS AND ANDREW JOHN LOVE IN THEIR CAPACITY AS RECEIVERS & MANAGERS OF NARDELL COAL CORPORATION PTY LIMITED (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) v HUNTER VALLEY COAL PROCESSING PTY LIMITED

JUDGMENT

HIS HONOUR:

Nature of the Case

1 Nardell Coal Corporation Pty Limited (“Nardell”) operated a coal mine. It was the lessee of a coal preparation plant (“the Plant”) from Hunter Valley Coal Processing Pty Ltd (“HVCP”). The lease made provision for the lessee to pay both rent, and the GST which was payable on that rent.

2 On 20 February 2003 a secured creditor of Nardell appointed receivers and managers of all Nardell’s property. That property included Nardell’s rights under the lease of the Plant.

3 Central to this case is section 419A Corporations Act 2001. It provides:

“(1)

the third party property

(b) the controller is controller of the third party property.

(2)

(a) that begins more than 7 days after the control day; and

(b) throughout which:

(i) the corporation continues to use or occupy, or to be in possession of, the third party property; and

(ii) the controller is controller of the third party property.

(3)

(4)

(5)

(a) the controller revokes it by writing given to the owner or lessor; or

(b) the controller exercises, or purports to exercise, a right in relation to the third party property as controller of the property, whether on behalf of the corporation or anyone else.

(6)

(a) also uses the property; or

(b) asserts a right, as against the owner or lessor, so to continue.

(7)

(8)

(a) to have adopted the agreement; or

(b) to be liable under the agreement otherwise than as mentioned in subsection (2).”

4 Pursuant to definitions in section 9 Corporations Act 2001 (Cth), a “controller” of property of a corporation includes a receiver and manager, and the “control day” means, in this case, the day when a receiver and manager was appointed.

5 The receivers of Nardell did not serve a notice under section 419A(3) Corporations Act 2001 on HVCP within seven days after the day when they were appointed. The receivers ask the Court to make an order under section 419A(7) Corporations Act 2001 excusing them from liability to pay rent, and GST, under the lease. There is a dispute about:

· whether the receivers should be excused at all,

· if they should be excused, as from what date they should be excused,

· whether, absent any excusing, the receivers are liable to pay rent which accrues during the first seven days after their appointment,

· whether, if they are not excused, the receivers are liable to pay the amounts of GST,

· the principles which should be applied concerning costs orders of an application of this type, and

· how the appropriate principles concerning costs orders should be applied in the present case.

The Lease

6 The lease of the Plant was entered on 21 August 2000. It was for a term which commenced on the date of acceptance of the Plant, and ran for a term of 39 months thereafter. The Plant was accepted on 31 May 2001; thus the term expires on 31 August 2004. The lease contains the following provisions:

“1.1 In this lease (including the recitals) unless the contrary intention appears:

“Business day”

“Rent”

2. Lease

Subject to clauses 3 and 4 hereof, on and from the commencement date the lessor shall lease to the lessee and the lessee shall take on lease from the lessor the plant for the term at the total rent and on the terms and conditions in this lease.

5. Ownership of the plant

5.1 Lessor retains title to plant

The lessor retains full title to the plant notwithstanding;

(a) the delivery of the plant to the lessee;

(b) the possession and use of the plant by the lessee; and

(c) any attachment of the plant to any land or buildings to facilitate use of the plant,

subject only to the rights of the lessee as a mere bailee of the plant with a right only to use them in accordance with, and under, this lease.

7.1 Amounts payable by the lessee

(a) The lessee must pay:

(i) Rent: the first instalment of rent within 20 business days after the commencement date and subsequently within 20 business days after each rent payment date; and

12.3 Tax indemnity by lessee

(a) The lessee indemnifies and will keep indemnified, protected, saved and harmless the lessor against any liability or additional liability the lessor may incur under the A New Tax System (Goods and Services Tax) Act (Cth) by reason of use of the plant by the lessee for any purpose.

(b) Goods and Services Tax

(i) Definitions

In this clause:

“GST” means a tax, levy, duty, charge or deduction, together with any related additional tax, interest, penalty, fine or other charge, imposed by or under a GST law.

“GST law” means:

i. A new Tax System (Goods and Services Tax) Act 1999 (Cth); or

ii. an Act imposing, or relating to the imposition or administration of such a tax.

“Tax invoice” means a tax invoice under the GST law.

“Supply” means the same as in the GST law.

(ii) Application

This clause applies to the Supply made by the lessor under this Agreement (“the taxable supply”) to another party to this agreement (“the lessee”).

(iii) Payment of GST

In additional to any amounts payable by lessee to the lessor under this Agreement, the lessee must pay to the lessor the amount of GST payable on the taxable supply. The GST is payable at the same time as paying the amount on which the GST is calculated

13.1 Right to terminate

The lessee has the right, subject to the conditions set out in clause 13(2), to terminate this lease during the term in respect of all of the plant on any rent payment date (the “proposed termination date”). The lessee may exercise this right by serving a notice on the lessor at least ninety (90) days prior to the proposed termination date stating that the lessee wishes to terminate this lease in respect of all or such part of the plant on the proposed termination date.

13.2 Conditions of termination

This lease may only be terminated or partially terminated under clause 13(1) if:

(a) on both the date of service of the notice under clause 13(1) and the proposed termination date:

(i) no event of default or event which, with the giving of notice or the lapse of time or both, would become an event of default has occurred and, having occurred, is continuing to subsist; and

(ii) the lessee has not repudiated this lease; and

(b) the lessee returns the plant or the specified part of the plant, at the lessee’s expense, appropriately protected and in the condition required by clause 10(1), to the lessor at the return address; and

(c) the lessee pays to the lessor on the proposed termination date the balance due in respect of all the plant as at that date.

15.1 Events of default

Each of the following events is an event of default, namely: …

(e) if a receiver or receiver and manager or provisional liquidator of the undertaking or any part of the undertaking of the lessee or any related body corporate is appointed;

15.2 Consequences of default

If an event of default occurs the lessor at its option may: …

(b) Termination: terminate this lease and the lessee’s right to possession of the plant by notice in writing to the lessee. Upon service of such notice all rights of the lessee to or in the use of the plant will terminate and the lessor may, directly or by its agent, take possession of the plant. Any damages reasonably occasioned by the lessor taking possession are expressly waived by the lessee.

SCHEDULE 2 – RENT INSTALMENTS

DATE	PAYMENT (AUD)	GST
Commencement date	$20,000.00	$2,000.00
1 month anniversary of commencement date	$30,000.00	$3,000.00
2 month anniversary of commencement date	$45,000.00	$4,500.00
3 month anniversary of commencement date	$60,000.00	$6,000.00
4 month anniversary of commencement date	$75,000.00	$7,500.00
5 month anniversary of commencement date	$90,000.00	$9,000.00

And thereafter at the rate of $110,000 per month plus $11,000.00 GST on the anniversary of the commencement date until the 37 month anniversary, at which time a final payment of $220,000.00 plus $22,000.00 GST is payable.

Note: Pursuant to Clause 7.1(a)(i), payment of rent instalments is due within twenty (20) business days after the date on which the rent instalment accrues.

7 It is a consequence of the fact that the lease is for 39 months, and of the manner of payment of rent set out in Schedule 2, that the amount which accrues on any anniversary of the commencement date is a payment in advance for the next month. HVCP had a practice of sending out invoices on the last day of each calendar month. The last such invoice which HVCP sent out prior to the receivership was sent on 31 January 2003. That invoice, for $110,000 plus $11,000 GST, was for the rent which was to accrue due during the month from 31 January to 28 February 2003 and GST on that rent. It was not payable until 20 business days after 31 January 2003, ie 1 March 2003.

The Plant

8 The Plant was used to crush the coal produced at the mine to an acceptable size, and then wash the coal to reduce ash levels in it. It consists of two sections. One is a coal crusher, which is bolted to a concrete slab and is approximately 40 metres long by 20 metres wide by 6 metres high. The other is a coal washery, which also is bolted to a concrete slab and is approximately 40 metres wide by 30 metres long by 10 metres high. It took two months to install the Plant at the mine site. If it were to be removed, it would take one or two months to remove it from the premises, and that operation would involve using several cranes and probably more than 10 semi-trailers.

9 Operation of the Plant was carried out for Nardell by Coal Management Operations & Processing Pty Ltd (“CMOP”), a company which had expert knowledge which was needed to operate the Plant.

The Receivers Cease Use of the Plant

10 On 20 February 2003 Mr Lewis and Mr Love, of Ferrier Hodgson (Newcastle), were appointed by a secured creditor as receivers and managers of Nardell. They promptly ceased production of coal, and ceased use of the Plant. Cessation of production occurred because the receivers failed to appreciate that the conditions of the coal leases required production to continue. Cessation of use of the Plant was not completely voluntary, so far as the receivers were concerned – CMOP terminated its operation of the Plant on 20 February 2003, and without CMOP, or some other organisation with similar skills, the receivers could not operate the Plant.

11 Also on 20 February 2003, the Board of Nardell appointed voluntary administrators. The administration continued until 30 April 2003, when a meeting of creditors of Nardell voted to place the company into liquidation.

12 On 21 February 2003 the receivers sent a circular to all creditors of Nardell, including HVCP, advising of their appointment, and of the appointment of the company administrator. They told the creditors:

“We have taken control of the operations of the company. The mine will move to care and maintenance as soon as safely possible.”

13 They also said that liability would not be accepted by the receivers and managers for any goods or services purchased which were not made with the written authority of certain identified people.

14 For the purpose of posting that circular to creditors, the receivers prepared a full listing of the creditors of Nardell. HVCP was shown on that list as a creditor for $121,000. It was the seventh largest creditor.

15 On 27 February 2003 the electrical engineer in charge at the mine advised one of the partners of the receivers that the Plant needed to be decommissioned pursuant to a particular statutory requirement. An order to carry out the decommissioning issued immediately. Over the course of 27 and 28 February that decommissioning occurred. The decommissioning involved disconnecting the Plant from sources of electrical power, and removing water from its internal parts. It was impossible to operate the Plant in that condition. It has not been made operational since then. I would infer that reconnecting it to power, and resupplying it with water, so as to make it operational, would be neither difficult nor expensive.

16 Once the receivers realised their error in having ceased production of coal, they recommenced production in a small way (producing approximately 1,000 tonnes per week) on 18 March 2003, and at the time of the hearing were still continuing to produce in that fashion. The coal which is produced is stored at the colliery, and not processed by the Plant.

Communication Between Receivers and HVCP about the Plant – February and March

17 Mr Scott Newton is a manager employed in the office of the receivers. He carried out many of the tasks connected with the receivership. He first inspected the Plant on 21 February 2003.

18 Upon the appointment of the receivers on 20 February 2003, Mr Lewis allocated to Mr Newton a variety of tasks, including reviewing all leases of Nardell. On or about 20 February Mr Newton asked the commercial manager of Nardell to provide him with a copy of all lease agreements. The commercial manager sent Mr Newton copies of various leases, but not a copy of the lease relating to the Plant. The commercial manager also sent Mr Newton a copy of the contract between Nardell and CMOP, concerning operation of the Plant. Nothing in the body of that document discloses that the Plant is leased, but an annexure to the agreement disclosed that “a dry hire arrangement is being entered into directly between Nardell and HVCP.” I infer that Mr Newton either did not read, or did not appreciate the significance of, that statement.

19 Terry Porter is the company secretary and financial controller of HVCP. On 26 February 2003 he telephoned Mr Newton. He told Mr Newton that the Plant was the subject of a lease. This was something of which Mr Newton had previously been unaware. Mr Porter also enquired about the present status of insurance of the Plant. Mr Newton did not know, and promised to get back to him. Mr Porter also made arrangements to meet Mr Newton, and one of the partners of the receivers, the next day. Immediately after that telephone conversation, Mr Porter faxed Mr Newton a copy of the lease of the Plant.

20 The next day, Mr Porter called at the mine site, as arranged. The mine is at Ravensworth, in the Hunter Valley. Mr Porter was accompanied by two solicitors, Mr Wijesinghe, and Mr Stone. Those three men had been attending a creditors meeting of Nardell, which the administrator had called in Singleton. They called at the mine on their way back from that meeting. As it happened, the partner of the receivers was not able to meet them, so Mr Newton spoke to them alone. By the time of this meeting Mr Porter was already aware that CMOP had withdrawn its services, and that the Plant was not being operated by the receivers and managers.

21 There is some common ground about what transpired in that meeting, and some difference in the evidence of the participants.

22 Mr Porter’s objectives in meeting Mr Newton were to find out about the insurance of the Plant, and to find out what other information he could about the receivership. The two solicitors were with him because he had asked them to accompany him to the creditors meeting, and they were travelling with him after that creditors meeting; they were not there because he had some specific task for them to perform in connection with the meeting at the mine.

23 Mr Porter asked what the position was about insurance on the Plant. Mr Newton told him that he had verbal advice that the Plant was insured until 30 April 2003, and that he would confirm it in writing later. Mr Newton said that the mine either had been, or would be, placed on a care and maintenance basis. Mr Newton told him that the receivers would not be using the Plant, as they would not be mining. Mr Porter enquired what was going to happen concerning the mine, and was told that Mr Newton believed that the mine would be offered for sale, and that it might be better for HVCP to leave the washery on site and offer it for sale to a purchaser with the mine. Mr Porter enquired about who would be preparing the documentation concerning the sale, and Mr Newton told him that he understood that Palaris Mining would be managing the process.

24 I am not persuaded that anything more has been established concerning what transpired in the conversation on 27 February. Mr Newton gave evidence that, as well, he had expressed the view that Nardell was in default of the lease, and that in response Mr Stone said that as far as HVCP was concerned they did not believe there was a default until payment was outstanding, and payment would not be outstanding until the next Monday. According to Mr Newton, Mr Stone then asked whether payment would be made on Monday, and Mr Newton said it would not be made.

25 Mr Newton also gave evidence that he said “The receivers and managers will not be exercising property rights or adopting the pre appointment lease” and that he said “the removal of the plant would be an issue for Hunter Valley Coal Processing to determine”.

26 Prior to the appointment of the receivers on 20 February 2003, Mr Newton was aware of section 419A of the Corporations Law, and the requirement to send a particular form within seven days of appointment of a receiver in order for the notice under section 419A to be effective. At Ferrier Hodgson (Newcastle) there is a procedure for dealing with section 419A notices using an audit trail checklist. The audit trail checklist has a box which says “notify owners or lessors of third party property re exercising of rights within 7 days of appointment”. However, Mr Newton did not complete that checklist within the first seven days of the receivership. On 27 February 2003 he was very busy verifying the calculation of employee entitlements, and reviewing a memorandum detailing employee entitlements which was due to be circulated the next day. In the period since the appointment of the receivers he had been receiving regular telephone calls from employees of the mine regarding their entitlements. After the meeting with Mr Porter, Mr Stone and Mr Wijesinghe on 27 February 2003 he went back to the task of verifying employee entitlements, and overlooked that 27 February was the last day for service of a notice under section 419A.

27 On 28 February Mr Newton realised that he had not sent a notice under 419A concerning the lease of the Plant. He made a file memorandum on 28 February, but which bears date 27 February 2003. It says

“At the meeting with Mr Terry Porter, a director of Hunter Valley Coal Processing Pty Limited (“HVCP”), and Mr Wijesinghe (Bowring Stone Lawyers) re Nardell Coal Corporation and HVCP, I advised that from my reading of the lease agreement between Nardell and HVCP that Nardell was in default of the lease agreement under several terms. The director stated that as far as HVCP was concerned, they were not in default until payment was outstanding, which would be Monday. The director inquired as to whether payment would be made on Monday to which I advised that it would not.

I advised those present that as Receivers and Managers we would not be exercising property rights/adopting the pre-appointment agreement and as such removal of the washery would be an issue for HVCP.

In relation to the issue of insurance which Mr Porter had raised with me previously, I stated that I was still attempting to confirm this issue and would advise as soon as the information was at hand.

The director inquired as to what the likely future for the operation was to which I advised that it was our appointor’s intention to offer the mine for sale. I inquired as to whether HVCP may be interested in leaving the washery on site and offering it for sale to any purchaser of the balance of mine assets. They stated that they would be interested in such a deal and inquired as to whether they could have the details of the party preparing the sale documentation. I advised that I would make this information available.”

28 In the course of the meeting, he had not caught Mr Stone’s name, and thought that Mr Stone was a director of Hunter Valley Coal Processing Pty Ltd – hence the opening part of the first sentence of the memorandum. In light of denials by Messrs Porter, Stone and Wijesinghe of those elements of the conversation which I have not included in the account which I accept of the conversation, and of the circumstances of preparation of the file note, I am not prepared to place on this file note the sort of reliance one would ordinarily place on a file note, as being an unselfconscious recording of events. In reaching this conclusion I have taken into account that the affidavits of Mr Porter and Mr Wijesinghe were produced following collaboration between Messrs Porter, Stone and Wijesinghe – a surprising practice for litigation solicitors to have been involved in – and the fact that none of them took notes at the meeting.

29 Even though Mr Newton realised on 28 February that he had not sent a section 419A notice concerning the Plant, he was of the view that section 419A would not require the receivers to pay the rental on the Plant, because they had not used it, and were not in possession of it. His reason for thinking the receivers were not in possession of the Plant was that, as he understood it, the title to the land on which the Plant was erected was not in Nardell. A map of who has rights in land around the site of the Nardell mine shows that there is a complex jigsaw of titles – there is no improbability in this understanding of Mr Newton. However it was an incorrect understanding. On 1 May 2003 he discovered that Nardell in fact had title to the parcel of land on which the Plant was erected, and hence that his reason for thinking that the receivers had not been in possession of the Plant was incorrect. As well, Mr Newton’s reason for thinking the receivers would not be liable under section 419A involved an error of law - section 419A can impose liability on receivers if the corporation uses occupies or is in possession of the leased plant. And, regardless of on whose land it was located, Nardell was in possession of the Plant – see paragraphs 79 and 80 below.

30 On 4 March 2003 there was a conversation between Mr Porter and Mr Russell Howarth. Mr Howarth is a mining engineer, who has worked as an independent contractor to Palaris Mining Pty Ltd at the Nardell colliery. On 4 March 2003 Mr Howarth was working on the preparation of an application to the Department of Mineral Resources to suspend operations at the mine. In carrying out this work, he was acting in his usual role as a sub-contractor to Palaris, and Palaris in turn was acting for the bank which effectively controlled the secured creditor of Nardell, and possibly also for Nardell’s parent company.

31 Mr Porter telephoned Mr Howarth, after having been given his name by someone at the receivers. A conversation to the following effect occurred.

PORTER: “It’s my understanding that you are preparing an information memorandum for the sale of the mine. Is that correct?”

HOWARTH: “That is not necessarily the case. It may be the case at some stage in the near future. Just so you know Palaris Mining has no authority at the mine. What is your situation?”

PORTER: “It is early days and we are still waiting on information from the receivers and administrators. We have two possible courses of action. Leave the plant on site to deal with any purchaser of the mine or move the plant to another site. Obviously each course comes with its own costs. As you would be aware it is not a cheap process to relocate the plant. Russell, here are my contact details [telephone number and fax number then given]. I would appreciate it if you would call me if you decide to sell the mine so that we can hold discussions with any prospective purchasers.”

32 Beginning on 11 March 2003, there was an exchange of correspondence concerning HVCP’s right to inspect not only the Plant, but also certain financial records connected with Nardell’s operations. Minter Ellison, solicitors for the receivers, made clear that HVCP could inspect the Plant, but the other inspection requests were opposed. In the course of correspondence between Minter Ellison and Bowring Stone on this topic, Minter Ellison wrote, on 14 March 2003:

Corporations Act 2001

“Our letter of 13 March 2003 did not foreshadow taking possession of the plant, nor legal proceedings. In any event, sections 440C and 440D do not preclude either of these steps with leave.”

33 On 20 March 2003 the receivers sent a letter to HVCP, which referred to the lease agreement for the Plant (though referring to it as a washery), and continued:

“We confirm that the washery was insured pursuant to the terms of the lease agreement previously held with the above company. However this insurance will expire on 30 April 2003 and insurance for the washery will not be renewed subsequent to that date. Accordingly, you should make your own arrangements for either the removal of the washery or independent insurance.”

34 Mr Porter understood the receivers to be saying, in that letter, that whether the washery stayed where it was or was moved was a matter to be decided by HVCP.

35 On 31 March 2003 Mr Wijesinghe wrote to one of the receivers saying,

“As you know, we act for Hunter Valley Coal Processing Pty Limited.

Enclosed are the tax invoices from Hunter Valley Coal Processing Pty Ltd for the coal preparation plant rental for the months of February and March 2003.

Please forward our client’s payments to our office.”

36 Enclosed with the letter were two tax invoices, each dated 31 March 2003. One of them claimed coal preparation plant rental for February 2003 in the sum of $31,428, plus GST on that sum. The other claimed coal preparation plant rental for March 2003 in the sum of $110,000 plus GST on that sum. The reader will recall that under the lease rental was accruing at the rate of $110,000 per month. The amount of $31,428, claimed for February 2003 is the amount of rental which would accrue due during eight days of February 2003 – that is, on the eight days which followed the appointment of the receivers on 20 February 2003.

37 On 2 April 2003 Mr Horseman, one of the directors of HVCP visited the mine site. He was accompanied by two men who were involved with an open-cut coalmine in Queensland. There, they met Mr Connolly, who was at the time Mine Manager. Mr Horseman and the other two men inspected the Plant. Mr Connolly assumed that the two men from Queensland were inspecting the Plant because they were considering purchasing it, but in fact Mr Horseman was showing them the Plant as an example of the kind of work his company could do. There was some discussion between Mr Connolly and Mr Horseman about future plans for the mine. Mr Connolly said that production was scaled back, an application had been lodged with the Minister for consent to suspend mining operations, and he expected production to stop and the mine to move to care and maintenance in the near future. Mr Connolly said that there were a variety of options as to what might be done with the coal which was being produced, and one of those options might involve washing it using HVCP’s plant. Mr Connolly said that the receivers were still working out what to do.

38 On 4 April 2003 the receivers wrote to Bowring Stone in relation to the tax invoices for rental of the Plant. They said:

“We also refer you to a meeting that you and your client had with Mr Scott Newton of our office at the Nardell Colliery on 27 February 2003. At that meeting Mr Newton advised that the Receivers and Managers were not adopting the agreement previously in place with the company and your client. In addition, your client inquired as to whether payment would be forthcoming under the agreement, and in response Mr Newton advised that it would not. Mr Newton then advised that it was proposed that the mine be sold and gave your client the option of allowing the coal preparation plant to stay on site for sale to any potential purchaser of the mine. An employee of your client, Mr Terry Porter, was provided with details of the party preparing the business information package, and we understand that Mr Porter has contracted that party.

We confirm Mr Newton’s earlier advice to you that we did not adopt the lease agreement previously in place with Nardell Coal Corporation Pty Limited and do not intend making payment for outstanding February and March rental invoices.”

39 Mr Porter understood that letter to be not just an assertion on the part of the receiver about what had happened at the meeting on 27 February 2003, but as indicating the attitude of the receivers on 4 April – that they did not adopt the lease agreement, did not intend to make any payments for the washery, and that HVCP was free to remove it if HVCP wanted to.

40 On 7 April 2003 Bowring Stone wrote to one of the receivers saying:

“We refer to our letter dated 31 March 2003 regarding the above matter.

s 419A

Corporations Act

This amount is now overdue. Please forward our client’s payments to our office.”

41 On 8 April 2003 the receivers wrote to Bowing Stone saying:

“We refer to your letter dated 7 April 2003 alleging that the Receivers and Managers are liable pursuant to Section 419A of the Corporations Act to your client pursuant to their lease.

Firstly, your client was advised in writing on 21 February 2003 that no liability will be accepted by the Receivers and Managers for any goods or services unless express written authority was provided to your client. No such letter of authority was issued from this office.

Secondly, you met with Scott Newton of our office on site on 27 February 2003 and you were advised among other things that we would not be using the HVCP equipment and that we would not be adopting the HVCP agreement. This was confirmed to you in writing on 4 April 2003.

Thirdly, this letter is written confirmation of notice given to your client at a meeting on site at Nardell on 27 February 2003, that:

Section 419A does not apply in circumstances where the third party equipment in this case is not used and is not required by the Receivers and Managers.

In the circumstances it would be prudent for your client to make appropriate arrangements to collect the equipment as indicated to you on 27 February 2003”

42 This letter overstates what was actually said at the meeting on 27 February 2003. It misstates the effect of section 419A – section 419A can impose a liability on a receiver who fails to give a notice if the corporation continues to use, or occupy, or be in possession of, leased property. In saying HVCP was welcome to collect the equipment, it also overlooks the complication that Nardell was in administration, as well as in receivership. Section 440C Corporations Act 2001 (Cth) provides:

“During the administration of a company, the owner or lessor of property that is used or occupied by, or is in the possession of, the company cannot take possession of the property or otherwise recover it, except:

(a) with the administrator’s written consent; or

(b) with the leave of the court.”

Events Within HVCP’s Camp – February and March

43 By 20 or 21 February 2003 Mr Porter was aware that Nardell was in receivership and administration, and he took the view that HVCP was likely not to be paid for rent falling due under the lease. He communicated this view to Mr Horseman.

44 On 25 February 2003 Mr Porter obtained from a related corporation of HVCP an estimate of the cost to relocate the Plant from the Nardell site to the premises of that related company. The estimate was a little more than $750,000. It was clear to Mr Porter that, if the Plant was removed from the Nardell site to the premises of the related company, and then sold, an additional cost, of similar order of magnitude to that $750,000, would be involved in moving it from the premises of the related company to the new purchaser.

45 For the purposes of the creditors meeting to be held on 27 February, Mr Porter lodged a document called an “Informal Proof of Debt Form”. In that form, the unsecured debt owing to HVCP by Nardell was stated to be “unknown however could be as high as $2,600,823”. That figure of 2.6 odd million dollars was derived by adding together the present value of the unpaid rental instalments under the lease, and the cost of removing the Plant from the Nardell site. HVCP voted at the meeting of creditors on 27 February in accordance with that proof.

46 Mr Porter was the person at HVCP in charge of sending out invoices in connection with the lease of the Plant. He did not send out an invoice at the end of February 2003 because he assumed it was not going to be paid. At the beginning of March, his state of mind was that he was not expecting HVCP to receive payment of rental from the company, or from the receivers.

47 It was only in mid-March 2003 that anyone connected with HVCP came to know about section 419A. Mr Stone was told about the section when he was discussing the facts of the case with an acquaintance. Bowring Stone informed Mr Porter that HVCP might be in a position to make a claim against the receivers.

48 Bowring Stone set about obtaining whatever tactical advantage they could for their client deriving from that section. On 28 March 2003 Mr Wijesinghe sent an email to Mr Stone saying:

“I suggest we send the invoices with a non descript letter to the receivers. Let them come back to us with the legislation. My reasoning is that we lose seven days from the control date under the Act and also there is an issue as the second month. By the time they get their act together, the clock will keep ticking. What do you think?”

“I agree a simple letter.

ie something like “as you know we act for HVCP and enclose invoices for Feb and March with regard to the coal washing plant. Please send our client’s payment via our office.”

49 It was that thinking which underlay Bowring Stone’s letter of 31 March 2003 (see paragraph 35 above).

Events of April and May

50 Bowring Stone replied to the receivers on 10 April 2003, disputing the receivers’ contention that section 419A did not apply, and disputing the receivers account of what had happened in the meeting on 27 February 2003.

51 On 17 April 2003 Bowring Stone wrote to Minter Ellison saying that if payments pursuant to the invoices of 31 March 2003 were not received within seven days, HVCP “reserves its right to commence legal proceedings without further notice”.

52 Minter Ellison replied to that letter on 29 April 2003 saying:

“We refer to your letter to Minter Ellison dated 17 April 2003.

Rent

Would you please advise if your client will consent to the relief set out in paragraphs 1 or 2 of the draft originating process, or in the alternative, give the receivers & managers a full release from liability for Rent by 5pm on Thursday 1 May 2003. If the matter cannot be resolved to our clients’ satisfaction within the time specified, we will apply to the Court in the manner foreshadowed in this letter, the contents of which will be relied on in any argument about the costs of the application.

In all events, can you please advise whether you have instructions to accept service on your client’s behalf?

53 Enclosed with that letter was a draft Originating Process which sought the following orders:

Corporations Act 2001

Nardell

Lease

Corporations Act 2001

54 On 1 May 2003 Bowring Stone sent to Minter Ellison a further tax invoice addressed to Nardell, relating to $110,000 rent, and $11,000 GST, which the invoice asserted related to April 2003.

55 Also on 1 May 2003 Bowring Stone wrote to Minter Ellison saying:

“We refer to your letter of 29 April 2003 and advise that our instructions are not to consent to those matters raised in paragraph 3.“

56 Also on 1 May 2003, Bowring Stone sent to Minter Ellison, by way of service, an Originating Process in proceedings number 2557 of 2003. That was an application made by HVCP against the receivers. The substance of the Originating Process was:

Corporations Act 2001

On the facts stated in the supporting affidavit, the plaintiff claims:

1. An order under section 1324(1), or alternatively, s1324(2) of the Corporations Act 2001 (Cth) requiring the defendants to pay rent under the Lease in respect of February, March and April 2003 in the amount of $276,571.

2. In the alternative to order 1, an order under section 1324(10) of the Corporations Act 2001 (Cth) that the defendants pay damages to the plaintiff in the amount of $276,571.”

57 The accompanying affidavit, by Mr Porter, filled less than one page – it annexed the lease of the Plant, deposed to the appointment of the receivers, asserted that “from 20 February 2003 to date Nardell has used and been in possession of the plant the subject of the Lease”, deposed to the lack of service of any notice under section 419A(3), the making of demands for payment of rent by the various invoices, and the failure to pay those invoices.

58 On 9 May 2003 the receivers began proceedings number 2729 of 2003. That Originating Process sought the same orders as the draft which Minter Ellison had sent to Bowring Stone on 29 April 2003 (see paragraph 53 above).

59 In early May 2003 HVCP arranged insurance for the Plant. The insurer emailed HVCP’s broker on 5 May confirming that the cover was in place from 30 April 2003 “following cessation of the lease with the Nardell Mine Co, as explained. It is noted that the washery is still situated at the mine’s premises at Nardell, subject to being relocated to a new situation, which is to be advised …”. The broker wrote to a related company of HVCP, for Mr Porter’s attention, on 7 May 2003, reporting on the insurance being arranged, and that the broker had requested an increase in the limit of liability under the insurance policy “due to my concern that this machine could end up on the premises of [HVCP’s related company]”.

60 Both sets of proceedings have been listed together whenever they have been listed before the Court. No affidavits have been filed in proceedings 2557 of 2003, after Mr Porter’s first brief affidavit. Once proceedings number 2729 of 2003 were on foot, those proceedings were treated as the ones which would effectively determine whether or not the receivers were obliged to pay rent for the Plant.

61 The matters were before Austin J on 12 May 2003, and Barrett J on 16 May 2003, for interlocutory directions. On 22 May 2003 the receivers served written submissions. Those written submissions were the first occasion when the receivers acknowledged that section 419A applied to the lease of the Plant. From the outset of the first day of hearing before me, on 23 May 2003, the receivers have put their case as one where the only issue about whether section 419A could impose a liability on the receivers concerned the covenant to pay GST – so far as rent properly so called was concerned, the case was solely one for relief under section 419A(7).

62 On 30 April 2003 a meeting of creditors of Nardell voted to place the company in liquidation. On 28 May 2003 the liquidator served on HVCP a notice of disclaimer of onerous property relating to the lease agreement for the Plant.

What Matters Guide the Court’s Discretion Under Section 419A(7)

63 Section 419A(7) confers on the Court a power to excuse a controller from liability which is in terms unconfined. In the context of discretions in terms unconfined which are conferred upon an administrative decision maker,

“… the Court will not ordinarily regard a statutory discretion the exercise of which will affect the rights of a citizen as absolute and unfettered. If parliament intends to make such a discretion absolute and unfettered it should do so by a very plain expression of its intent. The general rule is that the extent of the discretionary power is to be ascertained by reference to the scope and purpose of the statutory enactment.”

FAI Insurances Ltd v Winneke

64 In like manner the scope and purpose of legislation which confers a discretion on a court is used as an aid to discovering those criteria which are properly to be taken into account in exercise of the statutory discretion (though not, when the discretion is conferred on a superior court, as a limitation on the jurisdiction of the court). Also, from the fact that the discretion is conferred upon a court one can infer that the power “… is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent”: Oshlack v Richmond River Council (1998) 193 CLR 72 at 81 per Gaudron and Gummow JJ; see also at 121 per Kirby J.

65 Assistance might possibly be gained in working out the scope and purpose of section 419A(7) by looking at how the regime which section 419A creates differs from the previous law, extrinsic aids to construction (to the extent permissible) and a detailed examination of how section 419A as a whole operates and how section 419A(7) fits into it. I shall deal with each of these in turn, then some problems of construction of section 419A, and an analogy which has been suggested between the section 419A(7) power and disclaimer of onerous property, before returning to matters which are relevant to the discretion under section 419A(7):

The Previous Law

66 Under the general law, independent of statutory obligations, a receiver who was appointed out of court under a security which made provision that a receiver was to be the agent of the mortgagor incurred no liability either personally, or on behalf of the mortgagee, for his activities: Gosling v Gaskell [1897] AC 575. If a receiver were to adopt a contract which was entered into prior to his appointment, by a procedure of novation, the receiver could become personally liable on that contract: In re; Botibol [1947] 1 All ER 26; but a receiver was not liable on a contract to which he was not originally, and had not become, a party: Consolidated Entertainments Ltd v Taylor [1937] 4 All ER 432.

67 If the company in receivership were to go into liquidation, that liquidation would revoke the authority of the receiver to carry on the business as agent of the company, and would prevent the liquidator from binding the company to any new contracts. However, it would not stop the receiver from receiving the benefit of performance of pre-existing contracts, if the receivership extended to the benefit of those contracts. If the contract in question were a lease, the lessor would simply prove as an unsecured creditor in the liquidation for the rent which accrued due.

68 Section 419 of the Corporations Act 2001 provides:

“(1) A receiver, or any other authorised person, who, whether as agent for the corporation concerned or not, enters into possession or assumes control of any property of a corporation for the purpose of enforcing any charge is, notwithstanding any agreement to the contrary, but without prejudice to the person's rights against the corporation or any other person, liable for debts incurred by the person in the course of the receivership, possession or control for services rendered, goods purchased or property hired, leased, used or occupied.

(2) Subsection (1) does not constitute the person entitled to the charge a mortgagee in possession.

(3) Where:

controller

(b) the controller purports to have been properly appointed as a receiver in respect of that property under a power contained in an instrument, but has not been properly so appointed; and

(c) civil proceedings in an Australian court arise out of an act alleged to have been done by the controller;

the court may, if it is satisfied that the controller believed on reasonable grounds that the controller had been properly so appointed, order that:

(d) the controller be relieved in whole or in part of a liability that the controller has incurred but would not have incurred if the controller had been properly so appointed; and

(e) a person who purported to appoint the controller as receiver be liable in respect of an act, matter or thing in so far as the controller has been relieved under paragraph (d) of liability in respect of that act, matter or thing.”

69 A similar provision to section 419(1) and (2) has appeared in New South Wales corporations legislation since 1936 -- section 337(3) Companies Act 1936, section 188 Companies Act 1961, section 324 Companies (NSW) Code 1981, section 419 Corporations Law. It has the effect that if any property of a corporation is under the control of a receiver, the receiver is personally liable for any debts he incurs in the course of the receivership. Thus if the corporation needs to enter a new contract, once the receivership has started, to receive any goods or services or other valuable benefit, the receiver must pay for it. However, when a receiver carries out an existing contract which was made by the company before the receiver went into possession the receiver does not "incur debts", so as to trigger any liability under such a section: Associated Newspapers Ltd v Grinston (1949) 66 WN (NSW) 211. In particular, if a receiver continues in occupation of leased premises, under a lease which the company made before the receiver was appointed, he does not incur any debt, and so is not liable by virtue of the section to pay the rent, or any other amounts which are payable by the lessee under the lease: British Investments and Development Co Pty Ltd (1979) CLC ¶ 40-522; and cf Russell Halpern Nominees Pty Ltd v Martin [1987] WAR 150, Hawkins v Bank of China (1992) 26 NSWLR 562; Shepherd v Australia and New Zealand Banking Group Ltd (1996) 20 ACSR 81 at 89.

Extrinsic Aids to Construction of Section 419A

70 Section 419A was first introduced into the companies legislation by the Corporate Law Reform Act 1992 (Cth). It implemented some recommendations made by the General Insolvency Inquiry of the Commonwealth Law Reform Commission in 1988 (“The Harmer Report”) (The Law Reform Commission, Report No. 45, General Insolvency Inquiry, AGPS Canberra 1998). That report said:

Liability under leases

Proposal

Recommendation

recommends

71 The reference to “as in the case of the administrator” in the second last sentence in paragraph 220 is to recommendations made in the Harmer Committee Report concerning the circumstances in which an administrator should be liable for rent and similar payments:

Liability for rent and similar payments.

Conclusion

recommends

72 The dependence of section 419A on the Harmer Report is acknowledged in the Explanatory Memorandum for the Corporate Law Reform Bill 1992. That Memorandum contained the following provisions:

Proposed section 419A – Liability of controller under pre-existing agreement about property used by corporation

399. At present, a receiver is liable for debts incurred in the course of the receivership but is not liable for, or deemed to have adopted, a pre-receivership contract for the lease or hire of property merely because the company remains in occupation or retains possession of the property.

400. The Harmer Report was of the view that, although a receiver should not be considered to have adopted a lease merely because the company remains in occupation of the leased property, it does not appear equitable that a receiver should permit a company to continue to obtain the benefit of the occupation of premises or the use of chattels under a lease agreement, without being liable for the payments which the company is liable to make for that continued occupation or use. The Report proposed that a receiver be personally liable for rent or similar payments payable by the company in respect of the possession, use or occupation of property the legal title to which belongs to another person, where the company continues in that possession, use or occupation while the receiver is in control. As a safeguard for receivers, the Report proposed that this liability not apply for a period of seven days immediately after the appointment of the receiver.

401. It is also appropriate that this liability be imposed upon other persons who have control of company property under a charge (for example, mortgagees in possession) or their agents.

402. These changes are implemented in proposed section 419A. The operative provision will be subsection (2), which will make a ‘controller’ (to be defined in section 9 to mean a receiver and any other person who has control of company property under a charge, such as a mortgagee in possession) liable for rent or other amounts payable under a relevant agreement, from the seventh day after the controller is appointed or enters into possession of property of the company of which someone else is the owner or lessor (‘third party property’). The controller will be liable only in relation to third party property that is actually used or occupied or in the possession or control of the controller (proposed paragraph 419A(1)(b) and proposed subparagraph 419A(2)(b)(ii)).

403. It may be that in some circumstances, such as where the third party property consists of a chattel that is not capable of being moved within 7 days, or where an owner or lessor declines to take possession of the property, the personal liability imposed on controllers may be unduly onerous. Proposed subsections (3) and (4) will alleviate such situations by allowing a controller 7 days in which to give to the owner or lessor notice that the controller does not propose to use or occupy certain property. Where such a notice is given, the controller will be relieved of liability in respect of that property. Such a notice will, however, cease to have effect if expressly revoked by the controller or where the controller uses or exercises or purports to exercise a right in relation to the property (proposed subsections (5) and (6)).

404. Proposed subsection (7) will also allow the Court to excuse the controller from liability. This might be appropriate in a case where the controller could not have been expected to have been aware of the existence of a relevant lease or agreement until after the 7 day period had expired.

405. Subsection (8) will provide that, notwithstanding subsection (2), the controller is not to be taken to have adopted the agreement or be liable under it otherwise than as mentioned in subsection (2).”

73 The Corporate Law Reform Bill 1992 also, when passed, added to the then Corporations Law section 443B, which in some ways parallels section 419A so far as administrators are concerned. The Explanatory Memorandum concerning section 443B gave, at paragraphs 654 – 568, explanations for that section quite similar to those given for section 419A. Paragraph 567 contained one more example of the power of the court to excuse, by comparison with those given for section 419A(7):

“It might be appropriate for the Court to use this power where, for example, the books of the company were in such a disordered state that the administrator was unable, even using his or her best endeavours, to ascertain within 7 days whether the company had any assets. Any such order exempting the administrator from liability will not affect the liability of the company.”

74 These extrinsic aids were ones which the receivers drew to my attention. The use of extrinsic material in construing a Commonwealth Act is permitted within the limits set by section 15AB of the Acts Interpretation Act 1901 (Cth). It provides:

“15AB. Use of extrinsic material in the interpretation of an Act

(1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:

(a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or

(b) to determine the meaning of the provision when:

(i) the provision is ambiguous or obscure; or

(ii) the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.

(2) Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of an Act includes:

….

(b) any relevant report of a … Law Reform Commission, … that was laid before either House of the Parliament before the time when the provision was enacted;

…..

(e) any explanatory memorandum relating to the Bill containing the provision, … that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted; ….

(3) In determining whether consideration should be given to any material in accordance with subsection (1), or in considering the weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to:

(a) the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; and

(b) the need to avoid prolonging legal or other proceedings without compensating advantage.”

75 There is only one limited way in which this extrinsic material can be used. This is because there is not, it seems to me, any ambiguity or obscurity of meaning in section 419A(7) except as to whether a court “excusing the controller from liability” includes excusing a controller from a liability which has already accrued, at the time of the court order, as well as excusing the controller from a liability which will accrue after the court order. Nor does the ordinary meaning of section 419A(7), taking into account its context in the Act and the purpose or object underlying the Act, lead to a result which is manifestly absurd or unreasonable – there is nothing absurd or unreasonable in a Court hearing a wide discretion on the topic of section 419A(7).

76 Another reason why this extrinsic material can be used only to clarify the one ambiguity or absurdity I have identified is that extrinsic evidence can be used, in the circumstances set out in section 15AB, to determine the meaning of a provision. But the meaning of a statutory provision is a different thing to its purpose. That difference is recognised in the Acts Interpretations Act itself, where section 15AA provides:

“15AA. Regard to be had to purpose or object of Act

(1) In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”

77 The purpose of the introduction of section 419A is not permitted to be gathered from the Harmer Report, or the Explanatory Memorandum, save insofar as that purpose needs to be ascertained to resolve an ambiguity of meaning. Deciding what matters are appropriate to take into account in exercising the discretion under section 419A(7) does not involve clarifying any ambiguity of meaning in section 419A(7).

How Section 419A Operates

Application of section 419A(1)

78 Before section 419A applies the conditions of subsection (1) must be met. In the present case, they are met because:

· The agreement for lease of the Plant was made before 20 February 2003,

· 20 February 2003 is the “control day” (date of appointment of the receivers),

· Nardell is a corporation

· the receivers are receivers of property of Nardell,

· Nardell continued, after 20 February 2003, to use or occupy or be in possession of the Plant under the agreement for lease of the Plant,

· HVCP was someone other than Nardell, and was the owner or lessor of the Plant, and

· the receivers are receivers in relation to that Plant.

79 A sufficient reason why the element consisting of Nardell continuing after 20 February 2003 to use or occupy or be in possession of the Plant is satisfied is that, regardless of whether the Plant was used by the receiver after 20 February 2003, Nardell continued to be in possession of the Plant. Section 86 Corporations Act 2001 (Cth) says:

“A thing that is in a person’s custody or under a person’s control is in the person’s possession.”

80 The Plant was erected on land to which Nardell had a title. That the receivers were appointed receivers of that land, is enough to put the Plant into the possession of the receivers. As well, however, under the terms of the lease, Nardell was a bailee of the Plant with a right to use it (clause 5.1). This contractual right also resulted in the Plant being in the possession of Nardell.

81 Before Nardell continues, after 20 February 2003, to use or occupy or be in possession of the Plant under the agreement for lease of the Plant, it is not enough that Nardell be, as a matter of fact, using or occupying or in possession of the Plant. As well, that use, occupation or possession must be in accordance with the terms of an agreement made before the control day which confers a right to use, occupy, or be in possession of, that property. Clause 5.1 of the Lease has the effect that that requirement is satisfied in the present case.

The Liability of the Receivers Under Section 419A(2)

82 The liability which is imposed on a controller by section 419A(2) is not an absolute liability. It is a liability which is expressly made subject to two possible bases for freedom from liability. The first of those bases is that arising under subsection (4), which makes the controller not liable for rent or other amounts which accrue while a notice, of the type provided for by section 419A(3), remains in force. The second basis for freedom from the liability imposed is if the Court excuses the controller from liability, under subsection (7). Thus, it is not as though section 419A ever subjects a controller to an unconditional legal liability to pay the rent or other amounts which accrue during the period referred to in section 419A(2), and the Court is given a power to excuse the controller from that liability – instead, the liability is one which is imposed on the controller with a built-in condition of defeasance, whereby it does not apply if or to the extent that the Court excuses the controller from liability.

83 The liability which is imposed on a controller under section 419A(2) is to pay so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a particular period. Thus, the liability of the receiver under section 419A(2) for any particular period of time is equal in quantum to the liability of the corporation which is attributable to that period. There is no room, under section 419A(2) considered by itself, for a receiver to argue that, if the corporation continues to use or occupy or be in possession of the third party property, he ought pay anything less than the contractually stipulated amount, under the lease. If a receiver wished to continue to use or occupy or be in possession of the third party property, but pay less than the contractual amount of rent or other amounts payable under the agreement for the period of that use, occupation or possession, he would need to persuade the Court that it was appropriate to make an order excusing him part of the rent or other amounts payable, under section 419A(7). In saying that, I am not expressing a view that it would be an appropriate exercise of the power under section 419A(7) to permit a receiver who was using or in control or possession of the leased property to pay less than the contracted for amount of rent, just that if there is any way at all in which such a receiver could pay less than the contracted for amount of rent, during the period of his use possession or occupation, that way could only be section 419A(7).

84 Another consequence of the receivers’ liability under section 419A(2) being to pay the precise amount of rent which is payable by the corporation under the agreement made before the control day is that, once the corporation’s liability to pay rent under such an agreement comes to an end, so does the receiver’s liability under section 419A(2). Thus, a receiver would cease to be liable, under section 419A(2) for payments of rent once the term of a lease expired, if the lease contained no holding-over clause. In the present case, the liquidator of Nardell disclaimed the lease of the Plant on 28 May 2003. There is no evidence of any application to set that disclaimer aside. The evidence does not disclose the precise steps which the liquidator took under section 568 Corporations Act 2001 (Cth) to give notice of the disclaimer, or when all such steps were taken. Hence it is not possible, on the evidence, to nominate the precise day when the disclaimer takes effect. However, section 568D Corporations Act 2001 (Cth) says:

85 By once permitting a corporation of which he is receiver to use or occupy or be in possession of the leased property, after the first seven days of the receivership, a receiver does not necessarily make himself liable to pay the rent or other amounts payable under the lease for the balance of the lease term. The receiver can bring his liability to an end, under section 419A(2)(b)(i), by causing the corporation, before the end of the lease term, to cease to use or occupy of be in possession of the third party property. As well, the receiver’s liability can come to an end, short of the end of the lease term, under section 419A(2)(b)(ii) by the receiver resigning, or having his appointment terminated, or by having the particular item which is third party property removed from the scope of the assets of which he is receiver.

86 Independently of the Harmer Report and the Explanatory Memorandum, one can conclude from a comparison of the previous law on the topic with section 419A, that the mischief which section 419A is trying to cure is to do with of a corporation under the control of a controller deriving benefit from the leased property, but not paying for it. But the ways in which a lessee might derive benefits from leased property are so multifarious that the legislature has not tried to make the deriving of a benefit the criterion of liability under section 419A(2). Rather, the criterion is that the corporation continues to use or occupy or be in possession of the leased property. This is something far more readily established than whether the corporation has derived a benefit from the leased property. But it is still connected to the derivation of benefit.

87 If leased property is being actively used, that is a situation where there is a clear benefit being derived by the corporation. However, sometimes a corporation might derive benefit from leased property even if it were not being actively used – eg the emergency generator which can keep a factory operating if ever there were to be a power failure, or items on hand for the purpose of being used in a future expansion of activities of the corporation, or to replace items approaching the end of their useful life in the corporation’s operations. It is a question of fact whether the property is being “used” in such a situation, and whether such use is the type of use which was within the scope of what was intended by the original lease document.

88 To allow greater certainty than would arise from a “corporation continues to use” test, section 419A(2) provides alternative conditions of liability, that the “corporation continues to … occupy or be in possession of” the third party property. One of the fundamental rights conferred by a lease on the lessee, is a right to possession of the leased item. It is because the lessee has possession, and a right to continue in possession, that it is able to either use the leased property in some active way, or derive a benefit simply by having the property on hand and available.

89 However it does not always happen that, merely because a corporation is actually in possession of, or occupying, some leased property, it is deriving any benefit from that property. The legislation recognises this by providing the two conditions of defeasance for the obligation under section 419A(2). The way in which those conditions of defeasance operate require that it be the receiver who takes the initiative in bringing those conditions of defeasance into operation.

Escaping Liability by Service of a Notice

90 The condition of defeasance of the obligation under section 419A(2) which can arise by serving of a notice, also carries out that same policy, of preventing a corporation in receivership from deriving a benefit from the leased property without paying for it, but using objectively ascertainable criteria for the imposition of liability. The notice under subsection 3 must be one which states that the controller “does not propose to exercise rights in relation to that property as controller of the property, whether on behalf of the corporation or anyone else”. The “rights” to which that notice refers are any rights whatever which arise under the lease, including the right to possession of the leased item.

91 The words “whether on behalf of the corporation of anyone else” in that form of notice, are probably intended to deal with the fact that receivers appointed out of court are commonly appointed on the basis that they act as agent of the corporation, but that agency is terminated if the corporation goes into liquidation. Commonly, if the corporation goes into liquidation, the receivers then act as agents of their appointor. It is not clear how that phrase would apply to a receiver appointed by the court, who is no one’s agent. It may be that a receiver appointed by the court cannot serve a notice under section 419A(3), and can only escape a liability under section 419A(2) by being excused by the Court under subsection (7).

“Nardell was contracted with Hunter Valley Coal Preparation Pty Ltd (“HVCP”) to provide a modular coal washery to handle the anticipated production from the current mine plan. ROM coal for export has been processed in the HVCP CPP. Key features of the HVCP CPP include:

[List of facts concerning construction specification and processing capacity of Plant]”

123 But the continuing presence of the Plant on land which the receivers control is in no way due to any request on the part of the receivers, let alone any assertion of right on the part of the receivers. HVCP had its own significant commercial reasons, arising from the expense and difficulty of moving the Plant, for leaving it where it was, once the receivers were appointed. Most importantly, the mischief at which section 419A is aimed is the receivers getting the type of benefit to which the corporation in receivership is entitled under the lease, without paying for it. That the receivers have the kind of incidental commercial benefit of the Plant being on site in case it might prove an attractive feature to a potential purchaser, is not the kind of benefit which is within the scope of the mischief which section 419A was aiming at. The receivers would have that benefit just as much if HVCP had terminated the lease, but decided to leave the Plant where it was.

124 In the present case, even bearing in mind the extended sense in which “using” the property is relevant to section 419A, the receivers have not used the Plant.

125 Nor have the receivers asserted any right, as against the owner or lessor, to continue to be in possession or have control of the Plant. Thus, the conditions which would have caused a notice under section 419A(3) to come to an end, if one had been given, do not apply in the present case.

Circumstances of Receivers Remaining in Possession of Plant

126 In some circumstances, for receivers to remain in possession of a leased item, coupled with their failure to terminate the lease might be, at the least, an attempt to keep their options open, which counted against excusing them. In this case, however, the fact that receivers have remained in possession of the Plant does not, in the particular circumstances, count against excusing them. This is because Nardell had no contractual right, which the receivers could have exercised, to give up possession – the lease was for a fixed term. Clause 13.1 of the Lease gave the lessee a right to early termination, on any rent payment date, provided the lessee had served a notice on the lessor at least 90 days prior to the proposed termination date, stating its wish to terminate the lease. Even if the receivers had given such a notice immediately upon their appointment, the 90 day period under it would not have run during nearly all (the precise amount of time depending on just when it was that the liquidator’s disclaimer of the lease took effect) of the period which is relevant to this case. Further, under Clause 13.2 there are preconditions to the exercise of the contractual right of early termination, that on both the date of the service of the notice, and the proposed termination date no event of default had occurred. Under Clause 15.1(e) the appointment of a receiver or receiver and manager of the lessee is an event of default. Thus, after the appointment of the receivers, Nardell had no contractual right at all to early termination of the lease.

Circumstances of Lessor Choosing Not to Terminate Lease

127 Conversely, while HVCP had a right, by reason of the appointment of receivers to Nardell, to terminate the lease, and chose not to exercise that right, I do not see why Nardell’s choosing not to exercise its undoubted contractual right in that respect is a reason in favour of excusing the receivers.

Reasons for Receiver Failing to Give a Notice

128 Another factor relevant to whether the receivers should be excused is what is the reason why the receivers failed to give a notice under section 419A. Though the receivers were not actually aware until the sixth day after their appointment that the Plant was a leased item, they still knew that it was a leased item within the seven day period. Further, they had the means of knowing that the Plant was a leased item very early in their period of appointment, from the compilation of the list of creditors, and from the contract between Nardell and CMOP for operation of the Plant (paragraph 18 above). The reason why no notice was given was because the means of knowledge which the receivers had were not followed up and, once Mr Newton actually knew that the Plant was a leased item, under the pressure of other work, he simply forgot to send a notice. But this is not a case where a receiver failed to give a notice because he planned, or hoped, to gain some advantage from the lease remaining on foot – on the seventh day after appointments, the Plant was already in fact, not in operation, and steps were under way for it to be decommissioned.

Any Prejudice Caused by Making an Order

129 If the Court is to alter the certainty, concerning whether there is or is not an obligation on a controller to pay rent or other amounts, which is capable of arising from the working through of section 419A(1) to section 419A(6), it is proper to take into account whether the lessor, or anyone else, would be prejudiced. One way in which prejudice might arise is if the lessor had relied on the fact that the receiver had not given a notice within the first seven days of the receivership. In the present case, the lessor was not prejudiced by the failure of the receivers to give notice within seven days. On the sixth day, 27 February 2003, Mr Newton told Mr Porter that the receivers would not be using the Plant. No contrary information was ever given to HVCP. By the time of Mr Porter’s conversation with Mr Howarth on 4 March 2003, Mr Porter had recognised that HVCP had two alternatives in front of it – either to leave the Plant on site and seek to negotiate with any purchaser of the mine, or move the Plant to another site. The very large expense in moving the Plant, and the fact that it would take between one and two months to move, meant that it was a sensible business decision on HVCP’s part to leave the Plant where it was, at least initially. This is a decision which HVCP arrived at at a time when it was not aware of section 419A, and was of the view that its only claim for the ongoing rent would be as an unsecured creditor. Thus, at the time of deciding to leave the Plant at the mine, HVCP did not have the belief that it was entitled to be paid rent by the receiver, let alone take that decision on the basis of such a belief. As well, the appointment of the administrator to Nardell, with the consequent triggering of section 440C Corporations Act 2001 (Cth) meant that, while it was not impossible for Nardell to remove the Plant, there were preconditions imposed by section 440C to any removal of it.

130 The evidence does not enable me to make a precise finding about when it was that HVCP first became aware of section 419A. However by 20 March HVCP were probably aware of it. By their letters of 20 March 2003 (paragraph 33 above) and 4 April 2003 (paragraph 38 above) the receivers stated, more emphatically than Mr Newton had stated on 27 February, that it was a matter for HVCP whether the Plant remained on site, or not. I do not regard Mr Connolly’s remark, on 2 April 2003, that a possible future option might be to use HVCP’s Plant to wash the coal which, by then, was being produced from the mine once again, as detracting from the clear written statements which the receivers themselves were making on 20 March and 4 April. Mr Connolly made it clear that whether the Plant would be used was a matter for the receivers to decide, and there is no reason to believe that he knew that the receivers had already told HVCP that the Plant would not be used. Further, by 2 April HVCP was already engaged in its own tactical game, of doing nothing to cause the receivers to take any action which might stop rent from continuing to accrue under sections 419A(1)-(6) – HVCP did not rely in any way on what Mr Connolly said.

131 The result of excusing the receivers will be that HVCP is put in the position of being a unsecured creditor in the liquidation of Nardell. However, being in that situation is nothing more than the working through of a risk inherent in HVCP’s original decision to enter into a lease with a limited liability company, without taking security for its performance.

132 It is not suggested that anyone other than HVCP might be prejudiced as a result of making an order under section 419A(7).

Any Unwarranted Benefits Flowing from not making an Order

133 The receivers submit that if relief is not granted, then HVCP will obtain a “windfall”. HVCP says that is not a proper way of describing it. HVCP says that if relief were not to be granted, the amount which HVCP would obtain would be no more than the accruing rental and GST indemnity which Nardell had already promised to HVCP. The essential difference, if the receivers were not to be excused, is that that payment would be made by the receivers who are, presumably, able to pay it, rather than by Nardell, who might not be able to pay it in full.

134 HVCP’s submission about the quantum of payment which the receivers would make, if no order were made, is correct. However, if the corporation in receivership has not received, in practical terms, the benefit that flows from the lease being on foot, there would be a benefit accruing to HVCP, in consequence of Mr Newton having made a mistake, which was not warranted by anything HVCP had done or any benefit that HVCP had conferred on the corporation in receivership or on the receivers.

Symmetry in Application of Section 419A(7) to all Types of Receivers, and to Section 443E

135 The receivers point out that section 419A applies to all leased property of a corporation, where a “controller” is appointed of that third party property. In the present case, the “controller” in question is a receiver appointed out of court under an equitable mortgage over the assets of the corporation. However section 9 Corporations Act 2001 (Cth) provides:

““Controller” in relation to property of a corporation, means:

(a) a receiver, or receiver and manager, of that property; or

(b) anyone else who (whether or not as agent of the corporation) is in possession or has control, of that property for the purpose of enforcing a charge.”

““Charge” means a charge created in any way and includes a mortgage and an agreement to give or execute a charge or mortgage, whether on demand or otherwise.”

136 Thus, a “controller” can include not only a receiver appointed out of court, but also a receiver of a corporation’s property appointed by the Court, and a mortgagee in possession of property of the corporation. It is common, though not invariable, for a receiver appointed out of court to have a contractual indemnity from his or her appointor for liabilities incurred in the course of the receivership. Kerr on Receivers, 15th edition, page 236-237 says:

“A receiver and manager appointed by the Court is entitled to be indemnified out of the assets against all liabilities properly incurred by him in carrying on the business … . The extent of this right to indemnity is limited to the amount of the assets; if these are insufficient the receiver has no enforceable claim against the parties to the action in respect of indemnity or remuneration, even where he has been appointed under a consent order.”

137 The receivers submit that it would be desirable for the power of excusing contained in section 419A(7) to be construed and applied in a similar way to the power of excusing contained in section 443B(8) Corporations Act 2001 (Cth). Section 443B is the section, analogous to section 419A, which applies to an administrator of a company, where that company has leased property prior to the commencement of the administration, and the company continues to use or occupy or be in possession of that property during the administration. The receivers point out that the right of indemnity of an administrator under section 443E is less extensive than the contractual indemnity which receivers and managers of a corporation commonly have. They submit that the power of excusing in section 419A(7) should not be interpreted too parsimoniously, lest receivers appointed by the Court, or administrators invoking the analogous provision under section 443B(8), find themselves bearing a personal liability in relation to which they have no indemnity.

138 In considering the position of an administrator, for the purpose of this argument, one would need to bear in mind that an administrator is entitled not only to the particular indemnity contained in section 443E, but also to an equitable lien for his costs and expenses (Commonwealth Bank of Australia v Butterell (1994) 14 ACSR 343; (1994) 35 NSWLR 64).

139 In the present case, there is no evidence before me about the extent of any indemnity which Nardell’s receivers and managers might have. In that situation, I do not see how it is a factor which I can take into account.

Delay

140 HVCP submits that this is an inappropriate case for excusing the controller, because of the comparatively long delay of the controller in approaching the Court for relief. Here there has been a significant delay, from 28 February 2003 (the time Mr Newton was first aware that the time for giving a notice had passed) until 29 April (when proceedings were first threatened) or 9 May (when they were actually begun). While delay in approaching the Court would be a relevant factor to take into account, it is also relevant to take into account the reasons for the delay, and whether the lessor has been prejudiced by the delay. One relevant factor in whether the lessor has been prejudiced by the delay is whether the lessor has been misled, by the controller’s failure to serve a notice, into thinking that rental payments would continue under the lease, and what, if anything, the lessor has done on the basis of that belief. I have earlier held (paragraph 129 above) that HVCP was not prejudiced by the failure to give notice within seven days. Indeed, once Bowring Stone were aware of section 419A, they adopted a strategy of trying to postpone the time at which the receivers might make an application under section 419A(7).

141 HVCP also submits that the refusal of the receivers to concede, until 22 May, that this was a situation where the receivers would be liable unless excused, should also be taken into account. While everyone now recognises that the receivers were mistaken in asserting that section 419A did not apply, HVCP was not in the slightest misled by that mistaken assertion.

Conclusion

142 Taking into account the various matters I have listed, it is appropriate to excuse the receivers the whole of the liability to which they would otherwise be under. The fundamental reason why the receivers ought be excused is because this is not a case which is within the mischief at which section 419A was aimed. Even though the receivers have continued in possession of the Plant, and the lease has continued on foot, Nardell has received no real benefit as a consequence.

Costs

143 HVCP puts that this is a case where the receivers are seeking an indulgence, and that ordinarily anyone who approaches the Court for an indulgence pays the costs of so doing.

144 Sometimes a statute which confers on a Court power to alter what would otherwise be people’s rights expressly provides that the person who seeks such alteration is to pay the costs, unless the Court otherwise orders – for example section 88K(3) Conveyancing Act 1919 (NSW), re the Court creating an easement. However, even if, as is the case in section 419A(7) Corporations Act 2001, there is no such express statutory provision concerning costs, it is usual for a party seeking an indulgence to pay the costs of the application: Golski v Kirk (1987) 14 FCR 143 at 157; Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; (2000) 34 ACSR 158 at 160. But, it is not an invariable rule. In Langley v Foster (1909) 10 SR(NSW) 54 at 62 A H Simpson CJ in Eq said, concerning costs in an application for relief against forfeiture of a lease:

Prima facie

Quilter v Mapleson

Mitchison v Thompson

Bond v Freke

Bridge v Quick

in toto

Howard v Fanshawe

Humphreys v Morten

Quilter v Mapleson

(supra).

Hayes v Gunbola Pty Ltd

145 The usual principle, that the person seeking the indulgence pays the costs, might be inappropriate in the circumstances of a particular case. Thus, where a party who opposed relief lost, but had raised issues which were more extensive than was reasonable, the party who obtained the indulgence was ordered to pay only a proportion of the costs of that person: Re Freightlines Northern Territory Pty Ltd (In liq) [1999] QSC 209 at [29]-[31]; (2000) 2 QdR 384 at 392 (applicant seeking registration of charge out of time); Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 at 9256 (applicant seeking relief against forfeiture). Indeed, if the opposition to a grant of indulgence is unreasonable, intransigent and thorough, the person who opposes the granting of the indulgence might be ordered to pay all the costs of the person seeking it: Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; (2000) 34 ACSR 158.

146 In making a decision about costs, the Court can take into account whether it is necessary for the plaintiff who seeks an indulgence to come to court to obtain that indulgence. In Re NRMA Limited [2000] NSWSC 82 at [43]-[45]; (2000) 33 ACSR 595 at 608 Santow J considered the principles applying to payment of costs of objectors to a scheme of arrangement. His Honour summarised the principles in these terms:

“(i) The ordinary rule is that the scheme companies pay the objector’s costs and do not suffer cost orders against them.

(ii) However, this is subject to the objections not being frivolous or without substance but rather such as to be properly and justifiably advanced, even if unsuccessfully. I would add that even sensible objections should be capable of being advanced with reasonable economy of time, consistent with the summary nature of a s 411(1) application.

(iii) These principles reflect the fact that the scheme procedure unavoidably must provide an independent court forum on two separate occasions — for convening and then to approve the scheme. The court will often be assisted by having a contradictor at either stage. It must not be forgotten that the end point of most schemes, if adjudged sufficiently fair and achieving the statutory majorities, is compulsory acquisition of the member’s property and the court is no rubber stamp in that process.

(iv) Where there is a clear indication that objectors are using the tactics of technical and artificial objection so as to stall a scheme or arrangement for their own purposes, the courts will not hesitate to make costs orders against objectors to the extent warranted; those cost orders may even be indemnity cost orders in appropriate cases.

(v) Since assessment of the objections cannot be made in advance, cost orders should not be made in advance either.”

147 The receivers seek to distinguish that case, by pointing out that the only way a scheme or arrangement can be carried through is by coming to court, while it is perfectly possible for a lessor to agree with a receiver out of court that the receiver need not pay rental, even if the receiver has not served a notice under section 419A(3). That ground of distinction is a valid one.

148 In the present case, the receivers have done nothing which infringes someone else’s right, analogous to the breach of covenant on the part of a lessee which always precedes a lessee’s application for relief against forfeiture. Even so, it is the conduct of the receivers which is the substantial cause of the proceedings. Their intentions in relation to the Plant could have been carried out if they had served a notice complying with section 419A(3) in time. One can see now, in retrospect, that the core of the receivers case for being excused – that they had not used the Plant, were not going to use the Plant, and had orally informed HVCP of that on 27 February – was known to HVCP prior to the case starting. The receivers’ solicitors wrote a letter before action (paragraph [52] above), and HVCP’s solicitors declined to agree to consent to an order like the one I propose to make (paragraph [55] above), before the proceedings were started. However it was not clear, when the case started, how the receivers would put their case. There were fresh affidavits being filed up to 23 May – Mr Newton and Mr Lewis each swore an affidavit on 22 May, which was filed in court on 23 May. It was in his affidavit of 22 May that Mr Newton explained how he had been too busy with other tasks to send out the notice, and filled out various aspects of the facts relevant to the case. It was only on 22 May that the receivers dropped their mistaken contention that section 419A did not apply to payment of rent by them. Even so, HVCP continued vigorous opposition to the receivers being granted relief, even when the receivers’ affidavits were on, and it was clear that the case was one for relief under section 419A(7), save only for the quite confined argument (which the receivers lost) about whether the GST indemnity was within section 419A.

149 In all these circumstances I will order the plaintiffs to pay one half of the costs of the defendant of proceedings number 2729 of 2003.

Number 2577 of 2003

150 Nothing was done in proceedings number 2577 of 2003 beyond the filing of the initiating process and first affidavit. However those proceedings were in the wrong forum, and brought on the wrong basis. The Originating Process (paragraph [56] above) expressly said they were based on section 1324 Corporations Act 2001. Section 1324 Corporations Act 2001 says:

“(1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:

(a) a contravention of this Act; or

(b) attempting to contravene this Act; or

(c) aiding, abetting, counselling or procuring a person to contravene this Act; or

(d) inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or

(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or

(f) conspiring with others to contravene this Act;

the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

…

(10) Where the Court has power under this section to grant an injunction restraining a person from engaging in particular conduct, or requiring a person to do a particular act or thing, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person.”

151 Even though, at the time those proceedings were begun, section 419A(2) had imposed a liability to pay rent on the receivers, which had not been excused, the receivers were not engaging in a contravention of the Corporations Act by not paying that rent. Rather, the receivers were failing to perform a civil obligation, which arose from the Act. An action to recover rent which was due by reason of section 419A, was one which could, and should, have been brought in the District Court, if it was to be brought at all. In any event, now that I have excused the receivers from liability to pay the rent, the substance of the claim is one which must fail. Those proceedings should be dismissed. I cannot see that the plaintiffs have incurred any costs in connection with those proceedings. The dismissal should be on the basis that no order is made as to costs of those proceedings.

In proceedings 2729 of 2003:

1. Declare that the Plaintiffs have no liability under section 419A Corporations Act 2001 (Cth) to pay any amount of rent which accrues due on or prior to 27 February 2003 under the agreement for lease of a coal crusher and washer (“Plant”) made 21 August 2000 between the Defendant and Nardell Coal Corporation Pty Limited.

2. Declare that the Plaintiffs have no liability under section 419A Corporations Act 2001 to pay any amount of indemnity for taxation under Clause 12.3 of the said agreement for lease, being a liability to pay taxation calculated by reference to rent which accrues due on or prior to 27 February 2003 under the said agreement for lease.

3. Order that the Plaintiffs be excused from paying rent which accrues due on and after 28 February 2003 for the said Plant.

4. Order that the Plaintiffs be excused from paying any amount under Clause 12.3 of the lease of the said Plant calculated by reference to rent which accrues due on or after 28 February 2003.

5. Order the Plaintiffs to pay one-half of the costs of the Defendant of the proceedings.

In proceedings number 2577 of 2003

**********

Last Modified: 07/28/2003

Actions

Download as PDF Download as Word Document

Citations

Re: Nardell Coal Corporation (in liq) v Hunter Valley Coal Processing [2003] NSWSC 642

Most Recent Citation

Obst v Adelaide Brighton Cement Limited (No 2) [2011] SADC 10

Cases Citing This Decision

43

Joseph v Spencer (No 2) [2025] NSWCA 138

De Vries v Rapid Metal Developments (Australia) Pty Ltd [2011] NSWCA 100

Cases Cited

13

Statutory Material Cited

9

Latoudis v Casey [1990] HCA 59

Oshlack v Richmond River Council [1998] HCA 11

Woodgate v Davis [2002] NSWSC 616

CITATION:	Re: Nardell Coal Corporation (In Liq) v Hunter Valley Coal Processing [2003] NSWSC 642
HEARING DATE(S):	11 June 2003 & 3 July 2003
JUDGMENT DATE:	25 July 2003
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Receivers liable to pay amount of indemnity for GST attributable to rent unless relieved. Receivers relieved from liability to pay rent, and amount of indemnity for GST attributable to rent.
CATCHWORDS:	CORPORATIONS - RECEIVERS, MANAGERS AND CONTROLLERS - liability of receivers under s 419A(2) Corporations Act to pay rent or other amounts for leased third party property - circumstances in which receivers have such a liability - scope of "rent or other amounts" - whether amount payable under lessee's covenant to indemnify lessor for GST is "rent or other amounts" - factors affecting the courts discretion under s 419A(7) Corporations Act to excuse receivers from liability - ability of the court to excuse liability that accrued in the past under s 419A(7) - PROCEDURE - costs - of court application seeking an indulgence - WORDS AND PHRASES- "excuse"
LEGISLATION CITED:	Acts Interpretation Act 1901 (Cth) Companies Act 1936 Companies Act 1961 Companies (NSW) Code 1981 Conveyancing Act 1919 (NSW) Corporate Law Reform Act 1992 (Cth) Corporations Act 2001 (Cth) Corporations Law Trustee Act 1925 (NSW)
CASES CITED:	Associated Newspapers Ltd v Grinston (1949) 66 WN (NSW) 211 Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; (2000) 34 ACSR 158 In Re; Botibol [1947] 1 All ER 26 British Investments and Development Co Pty Ltd (1979) CLC 40-522 Commonweath Bank of Australia v Butterell (1994) 14 ACSR 343; (1994) 35 NSWLR 64 Consolidated Entertainments Ltd v Taylor [1937] 4 All ER 432 FAI Insurances Ltd v Winneke (1982) 151 CLR 342 Featherby v Read [2002] WASC 251 Re Freightlines Northern Territory Pty Ltd (In liq) [1999] QSC 209; (2000) 2 QdR 384 Golski v Kirk (1987) 14 FCR 143 Gosling v Gaskell [1897] AC 575 Hawkins v Bank of China (1992) 26 NSWLR 562 Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 Langley v Foster (1909) 10 SR(NSW) 54 Re NRMA Limited [2000] NSWSC 82; (2000) 34 ACSR 158 Oshlack v Richmond River Council (1998) 193 CLR 72 Russell Halpern Nominees Pty Ltd v Martin [1987] WAR 150 Shepherd v Australia and New Zealand Banking Group Ltd (1996) 20 ACSR 81 Re Teller Home Furnishers Pty Ltd (In liquidation); Electronic Industries v Horsburgh [1967] VR 313
PARTIES :	Alan Edward Lewis and Andrew John Love in their capacity as Receiver & Managers of Nardell Coal Corporation Pty Limited (Receivers & Managers Appointed) (In Liquidation) - Plaintiff Hunter Valley Coal Processing Pty Limited - Defendant
FILE NUMBER(S):	SC 2729/03
COUNSEL:	AJ Meagher SC; JE Thomson - Plaintiff BA Coles QC; M Tyson - Defendant
SOLICITORS:	Minter Ellison - Plaintiff Bowring Stone - Defendant