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

1. [1]

   HER HONOUR: The liquidator of Skypac Aviation Pty Ltd (in liquidation) (Skypac) seeks to recover payments made by Skypac to five companies as being unfair preferences, uncommercial transactions or void dispositions. The first and fifth defendants, Australian Aircraft Management Pty Ltd and Bankstown Aircraft Maintenance Pty Ltd, seek to strike out the claim in respect of void dispositions on the basis that the payments were made the day that administrators were appointed to Skypac. Put shortly, the first and fifth defendants contend that any disposition of Skypac’s property made on the day that the winding up commenced was not made “after” the commencement of the winding up and is not, and cannot be, void within the meaning of section 468(1) of the Corporations Act 2001 (Cth) (the Act). For the reasons which follow, I agree.

Facts

1. [2]

   On 29 September 2015, the Commissioner of Taxation filed an originating process seeking orders to wind up Skypac. On 15 October 2015, Skypac’s sole director resolved to appoint administrators under section 436A of the Act. The same day, Skypac made three payments to Australian Aircraft Management Pty Ltd totalling $16,891.16 and two payments to Bankstown Aircraft Maintenance Pty Ltd totalling $6,431.56. The liquidator says, and the first and fifth defendants agree, that Skypac was insolvent at the time it made these payments. On 19 November 2015, the Court appointed Christopher Palmer as liquidator to Skypac.

2. [3]

   In December 2018, the liquidator sought to amend his claim against the five companies to include a claim under section 468(1) of the Act. In correspondence, the first and fifth defendants’ solicitors raised the issue which is now before the Court and formalised their position in a Defence and an Interlocutory Process filed on 12 February 2019.

Should this be determined on an interlocutory basis?

1. [4]

   The first and fifth defendants seek to dismiss the relevant paragraphs of the amended originating process pursuant to rule 13.4(b) of the Uniform Civil Procedure Rules 2005 (NSW), which permits summary dismissal where “no reasonable cause of action is disclosed”.

2. [5]

   The liquidator submits that the issue is not suitable for summary dismissal because it is clearly arguable that section 468 captures the payments made on 15 October 2015. The discretion of the Court to summarily dismiss a claim is to be sparingly invoked: Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1946] HCA 69. A claim will be summarily dismissed as disclosing no reasonable cause of action only where “the case is so clearly untenable that it cannot possibly succeed”: Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27; Bryant v Commonwealth Bank of Australia (1994) 51 FCR 529; Spencer v Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28, per French CJ and Gummow J at [25]. The liquidator submitted that the Court must form a view that the claim would fail if permitted to go to the trial such that it would be an abuse of process for the Court to allow the proceedings to continue: Ke Qin Ren v Hong Jiang (2014) 104 ACSR 149; [2014] NSWCA 388 at [49].

3. [6]

   The first and fifth defendants submitted that the fact that the Court will have to determine a contested question of law is no bar to summary dismissal of a claim where, as here, the material facts are agreed and no further material evidence could emerge that might affect how the question of law is decided. Reliance was placed on Gatward v Kleem (1955) 72 WN (NSW) 354 per Walsh J at 357-8:

4. [7]

   More recently, in SK Foods LP v SK Foods Australia Pty Limited (in Liquidation) (No 3) (2013) 214 FCR 543; [2013] FCA 526, Flick J was asked to reject a claim for summary dismissal as there was no authority for some of the propositions advanced. His Honour rejected that submission. At [115]:

5. [8]

   It seems to me that the issue raised by the interlocutory process is suitable for consideration on an application for summary dismissal. The relevant facts are not in dispute and are of a very short compass. The facts will not change between now and the final hearing. The legal question is a matter of statutory construction based on those facts. As Spencer v Commonwealth suggests, an application for summary dismissal may be appropriate in such a case.

6. [9]

   A relevant case management consideration is whether either party would seek leave to appeal against an interlocutory decision on this question, thereby delaying any final hearing. The first and fifth defendants undertook not to appeal until the conclusion of the substantive proceedings. The case management concern was thus partially abated, although as matters have turned out, their undertaking does not need to be called upon.

Section 468(1)

1. [10]

   Section 468(1) of the Act provides: (emphasis added)

2. [11]

   The first question is: when did the winding up commence? Division 1A of the Part 5.6 of the Act, entitled “When Winding up Taken to Begin”, contains section 513A, which, relevantly to these facts, provides:

3. [12]

   Section 513C(b) relevantly provides:

4. [13]

   That the Division 1A definitions apply throughout the Act is confirmed by the Dictionary in section 9, which provides that:

5. [14]

   As Skypac was in administration immediately before the winding up was ordered by the Court, the winding up is taken to have begun on the section 513C day, being the day on which the administration began: section 513C(b). The administration of Skypac began when an administrator was appointed: section 435C(1)(a). As such, the parties agree that the administration began on 15 October 2015 and so too did the winding up, consistently with the approach of the Full Court of the Federal Court in Macquarie Health Corp Ltd v Federal Commissioner of Taxation (1999) 96 FCR 238; [1999] FCA 1819 at [100]-[104]. If one inserts this data into section 468(1), it becomes:

6. [15]

   The next question is: do dispositions of property made “after 15 October 2015” include dispositions of property made on 15 October 2015. Section 36(1) of the Acts Interpretation Act 1901 (Cth) specifies how periods of time referred to in legislation should be calculated.

7. [16]

   The liquidator relies on section 105 of the Act, which provides:

8. [17]

   The first and fifth defendants relied on Associated Beauty Aids Pty Ltd v Federal Commissioner of Taxation (1965) 113 CLR 662, which considered the meaning of “from the date of delivery”. Per Barwick CJ at 667-8:

9. [18]

   In Tio v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 126 FCR 185; [2003] FCAFC 53, the Full Federal Court considered section 135 of the Migration Act 1958 (Cth), which required the Minister to give “28 days after the notice is given” before cancelling a visa. Lindgren J noted at [17]:

10. [19]

    One of the authorities cited by Lindgren J was relied on by the liquidator, although I think when read fully, does not assist him. In Prowse v McIntyre (1961) 111 CLR 264, Windeyer J observed, at 280, that:

11. [20]

    The first and fifth defendants noted that section 588FE(2), (6) and (6A) of the Act provide that insolvent transactions, unfair loans and unreasonable director-related transactions made “on … the day when the winding up began” are voidable. A reading of section 468(1) which has the result that dispositions made that day were void would be inconsistent with section 588FE. Section 468(1) should be construed to operate harmoniously with section 588FE.

12. [21]

    The position is not as straight-forward as submitted. Section 588FE, entitled “Voidable Transactions”, prescribes different time periods for different transactions and depending upon the relation-back day which applies to the particular circumstance: (emphasis added)

13. [22]

    Here, the relation-back day is the day on which the application to wind up the company was filed: Item 2 of section 91. The relation-back day is 29 September 2015, which is obviously not the same as the section 513C day of 15 October 2015.

14. [23]

    Subsections 588FE(3), 588FE(4) and 588FE(5) concern transactions which occurred in differing periods “ending on the relation-back day”, that is, 29 September 2015. These subsections do not intersect with the operation of section 468(1) and need not be considered further.

15. [24]

    Subsection 588FE(6) uses different but perhaps more emphatic language in respect of timing. An unfair loan to a company is voidable if it is made “at any time on or before the day when the winding up began”. Here, the day when the winding up began is the section 513C day of 15 October 2015. Item 2 of section 36(1) of the Acts Interpretation Act clarifies that a period beginning on a day includes that day. So unfair loans made at any time on or before 15 October 2015 are voidable, which supports a construction of section 468(1) that does not also make such loans void.

16. [25]

    Subsections 588FE(2)(b) and 588FE(6A)(b) provide that an insolvent transaction or unreasonable director-related transaction is voidable if it occurred in either of the following periods:

17. [26]

    This brings us to subsection 588FE(2A) (and, in the same terms but relating to Deeds of Company Arrangement, subsection (2B).) These subsections were introduced by the Corporations Amendment (Insolvency) Act 2007 (Cth) to apply the voidable transaction provisions to transactions effected during a voluntary administration that preceded a winding up: Explanatory Memorandum at [7.197]-[7.203]; Assaf & Ors., Voidable Transactions in Company Insolvency (LexisNexis Butterworths, 2015) at [8.12]. As the Companies and Securities Advisory Committee explained in Corporate Voluntary Administration (1998), the fact that transactions effected during a voluntary administration then fell outside the voidable transaction provisions created an opportunity for abuse as companies could enter into uncommercial transactions during the administration or, particularly, under a Deed of Company Arrangement, when the company remained in the control of the directors: Chapter 8. These provisions have not been the subject of judicial consideration.

18. [27]

    Subsection 588FE(2A) defines the period of time relevant to voidable transactions for companies in administration before being wound up as “beginning at the start of the relation-back day and ending … when the Court made the order that the company be wound up”. The fact that the subsections were added several years after the initial subsections may explain the different turn of phrase. The wording is more consistent with examining the precise time on the day on which the impugned transaction occurred, however, the introduction of these subsections was not intended to make the precise timing of events on a given day significant, but rather to ensure that the voidable transaction remedies applied where a company had been in administration before being wound up.

19. [28]

    Here, the period under subsection 588FE(2A) begins at the start of 29 September 2015 and ends on 19 November 2015. Relevant transactions occurring in this period are voidable. But section 468(1) has an overlapping operation and may, it seems to me, have the result of rendering a transaction which is voidable under subsection 588FE(2A) as void. This does not favour either the defendants’ or the liquidator’s construction of section 468(1), but does illustrate that section 588FE can give rise to different permutations and combinations such that more than one provision of the Act may apply to the same transaction with differing results.

20. [29]

    The liquidator relied on In the matter of Carpenter International Pty Limited (Administrators appointed) (2016) 51 VR 190; [2016] VSC 118 where Cameron J considered whether creditors of a live cattle export business, Carpenter International Pty Ltd, held a security interest in cattle before administrators were appointed to the company. Some creditors had registered their interest on the day that the administrator was appointed, before the time when the administrator was appointed on that day. The case turned on the construction of section 267 of the Personal Property Securities Act 2009 (Cth) which provided: (emphasis added)

21. [30]

    The company argued that section 267(1)(b)(ii) focused on the day of the administrator’s appointment, not the time at which it occurred on a given day, but her Honour did not agree having regard to the plain and ordinary language of the statute and that the section should be construed consistently with other provisions of the Act: at [165]-[166]. I respectfully agree with her Honour’s conclusions, and note that the section referred to the security interest being perfected by a “time” and “when, on a day” the administrator was appointed. It seems to me quite clear from the section, and the nature of the legislation itself, that it was envisaged that creditors may register a security interest on the day that an administrator was appointed, as long as it was registered before the time on that day when the administrator was appointed. As Cameron J explained more fully at [159]-[164]:

22. [31]

    The liquidator submits that the event that turns a day into a section 513C day is the appointment of an administrator. Section 468, like section 267, focuses on an event, that is, the commencement of the winding up, which is when administrators are appointed to a company pursuant to section 435C(1)(a). Accordingly, dispositions made after the appointment of the administrators are void dispositions. I agree, but the submission does not address the key question, which is what is meant by “after” in section 468. As Carpenter International illustrates, much turns on the precise language of the provision being construed.

23. [32]

    In Overflow FNQ Pty Ltd (in liq) v Austwide Consumer Products Pty Ltd [2018] 1 Qd R 172; [2017] QSC 76 at [20], Henry J considered obiter that a similar construction may apply to section 588FL(7) of the Act, which provides: (emphasis added)

24. [33]

    The liquidator relied on Guthrie as liquidator of Transconsult Australia Pty Ltd v Chandler (1991) 5 ACSR 387, where Owen J considered a precursor to section 468, being section 368 of the Companies (Western Australia) Code. At that time, section 365(2) of the Code provided: (emphasis added)

25. [34]

    In that case, on 16 February 1989 a creditors’ petition was filed. The company had written a cheque which was presented on 16 February 1989. A winding up order was later made. It was unclear whether the cheque was received before or after the creditors petition was filed, and the parties proceeded on the basis that the cheque was received after the creditors’ petition was filed. His Honour proceeded accordingly and did not construe section 368(1), which provided:

26. [35]

    See likewise National Acceptance Corp Pty Ltd v Benson (1988) 12 NSWLR 213 per Priestley JA at 220-221, based on identical provisions of the Companies (New South Wales) Code. But the language of section 365, including the reference to “the time of the filing of the application for the winding up”, has disappeared from the Act. The Explanatory Memorandum does not shed any light on the reason for the different wording in sections 513A, 513B and 513C, enacted by the Corporate Law Reform Act 1992 (Cth).

27. [36]

    The liquidator submitted that section 468 should be read consistently with sections 437A to 437D. Section 437A provides that, while a company is under administration, the administrator has control of the company’s business, property and affairs and may carry on that business and manage that property and those affairs. The administrator does so as the company’s agent: section 437B. Former section 437C provided, “while a company is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer or provisional liquidator of the company.” The liquidator submitted that the appointment of the administrator means the cessation of the director’s powers to deal with the property and only the administrator is thereafter entitled to deal with the company’s property. This submission does not compel a different construction from that which appears from the Act as construed consistently with the Acts Interpretation Act 1901 (Cth) and general case law as to the meaning of “after”.

28. [37]

    It seems to me that the defendants’ submissions are correct. A disposition of property on the day that the winding up commences is not made “after” the commencement of the winding up and is not, and cannot be, void within the meaning of section 468(1) of the Corporations Act 2001 (Cth).

ORDERS

1. [38]

   For these reasons, the Court makes the following orders:

   1. (1)

      Pursuant to rule 13.4(b) of the Uniform Civil Procedure Rules 2005, dismiss paragraphs 3 and 4 of the Amended Originating Process as against the First and Fifth Defendants.

   2. (2)

      Plaintiffs to pay the First and Fifth Defendants’ costs of the Interlocutory Process filed on 12 February 2019.