Ansett Australia Ground Staff Superannuation Fund Pty Ltd v Ansett Australia Ltd & Ors [2003] VSCA 117

Ansett Australia Ground Staff Superannuation Fund Pty Ltd v Ansett Australia Ltd & Ors [2003] VSCA 117 - VSCA 2003 case summary — Zoe

[7]

The explanation for seeking answers to question 14 may not have been the same at the time the originating motion was taken out, on 21 December 2001, as it was when it came on for hearing before the learned judge in late July and late August 2002. When first taken out the second respondents were sued as administrators appointed by the company pursuant to Part 5.3A of the Act, which had the necessary consequence that the unsecured creditors of the company were subjected to a moratorium in respect of their debts pursuant to ss.440D-440G of the Act [9]. In practice it is assumed that no past debts of a company should be paid during this stage of an administration, which ordinarily will be very short, and that they will be paid pursuant to a subsequent deed of company arrangement, or, if that cannot be agreed upon, in the course of the consequential winding up. The priorities sections, especially s.556, simply do not apply at the administration stage and so did not apply in this case when the proceeding was issued. In the present case, it was only late in the piece and in effect after the proceeding was set down for hearing that the respondent administrators became administrators pursuant to the deed of company arrangement executed on 2 May last year. As already stated, s.556 does not here provide the order of priority for payment of Ansett's unsecured debts, except to a limited extent, for it is controlled by clause 18 of the deed. Not only does that clause express priorities in different terms from those found in s.556, but explicitly, by clause 18.2.4.3, the deed purports to exclude the critical claims in this case which are there described as "Top Up Retrenchment Benefit Claims". To add insult to injury clause 16.1.1 also states that these "Top Up Retrenchment Benefit Claims" by the trustee should be treated as "ordinary unsecured claims" without priority, "even if a court determines that all or any of such claims rank to priority in a liquidation of the Company".

[8]

The seeds of a real dispute between these claimants (together with the appellant as trustee for the fund providing for such claims) and the administrators (and the other unsecured creditors) may be seen in these clauses. Doubtless drafts of such a clause were put forward early in the process of putting the deed of company arrangement to the creditors as a whole, albeit that the deed was not approved by the creditors in a general meeting until late March 2002 and not executed until 2 May. Relatively soon thereafter, on 19 June 2002, the appellant as trustee issued an application in the Federal Court seeking to terminate the deed or amend it so as to delete or vary those provisions which deny the trustee priority in respect of the "Top Up Retrenchment Benefit Claims". The basis for that application, not surprisingly, is an assertion that the explicit denial of the claims defeats a legitimate right or expectation in the trustee (and indirectly in those claimants) which could otherwise expect to have the benefit of the priorities stated in the various ways claimed in para.14 of the originating motion. That application has proceeded but has been adjourned, as we were told, to await the outcome of this appeal and cross-appeal. As I would understand it, the Federal Court application does not directly seek an answer to the priority of the Top Up Retrenchment claims, for the issue is substantially as to the fairness of the provisions which would purport to exclude them. It can, however, be understood that, as part of the chain of reasoning leading to a conclusion in favour of the applicant trustee, it might be thought necessary to satisfy the judge that a real right, benefit or privilege was being taken away, so that the Court might find it necessary to reach some conclusion that the right, benefit or privilege would have existed if the company had gone into liquidation. Doubtless it would have been convenient to have had a ruling from this Court on which to found the argument, but I am unable to say, as it was not argued before us, that the Court hearing the termination etc. application would have to be satisfied as to the existence of the potential right. It may be sufficient to show in the circumstances that there was a deliberate exclusion of a class which had a potential or arguable right to claim priority, especially where the exclusion is as blatant as that contained in the present deed. Some of the relevant principles were said to have been authoritatively expounded by the Full Federal Court in Lam Soon Australia Pty. Ltd. v. Molit (No. 5) Pty. Ltd.[10], but there are a number of bases for termination raised in s.445D and in the related sections. Without wishing in any way to suggest how that application might properly be dealt with, it may not be found necessary to examine the priority issue in the detail thought appropriate to the issues raised in the present litigation.

[9]

Sufficient has been said to show how the problem arose. It is unnecessary to set out more of the background than that which appears in the detailed reasons of the learned judge[11]. At each stage the questions in para.14 of the originating motion should be seen to have been truly hypothetical. There was some redrafting of that paragraph so as to make it rather more elaborate but in essence it asked the same kind of questions throughout. At the first stage it must have been hypothetical in that during the moratorium no question could arise as to payment of the relevant debts or as to their priority, so that the question could only have been relevant to circumstances which had not yet occurred, namely either in relation to priority in the course of a future liquidation or in relation to priority under a deed of company administration which incorporated by default or explicitly the provisions of s.556. The paragraph was at that time hypothetical because the company may not have gone into liquidation at all, say if there had been a satisfactory sale of the business as a going concern, and because a deed of company arrangement might not have included provisions as to priority which were the same or similar in substance to those in s.556. As to the position and relevance of the questions in para.14 after the deed had been entered into, the issue of priorities under s.556 was and is not relevant to the administration of the deed as it stands, because of its special provisions as to priorities, particularly in clause 18, so that for present purposes paragraph 14 is hypothetical because it asks a question or a series of questions about priorities which might arise only in the course of liquidation, an event which is presently unlikely to occur, unless by chance termination results from the Federal Court application.[12] It seeks answers to questions which are in effect based on the hypothesis or condition "if the company were to be wound up". Those questions are not relevant to any existing or imminent set of circumstances, although they may well be seen to be relevant as part of the enquiry necessary to be embarked upon by the judge to determine the application in the Federal Court.

[11]

There is a further significant complication which came to light during the course of the hearing before us, or at least after the judgment was given by the learned trial judge. The questions asked in para.14 of the amended originating motion were directed to "any such further contribution", which referred back, as I would understand it, to contributions in particular to the ground staff superannuation plan, declarations as to which were sought and obtained pursuant to paragraph 12 of the originating motion, which is the subject of the cross-appeal. The answers in fact given to the questions in paragraphs 12(a) and 14 each referred to further contributions for membership groups 1 and 3 held to be payable pursuant to a particular funding and solvency certificate dated 24 April 2002 and known as "FSC 5". Consequently the negative declarations made pursuant to paragraph 14 of the amended originating motion were confined not only to the ground staff plan but also to that which was required, so it was alleged but is still disputed, pursuant to a specific certificate. I shall not elaborate on the exceptionally complicated Commonwealth statutory scheme which effectively requires employer contributions to be made in particular specified ways, nor on the complex trust deed which sought to give effect to those requirements and which is administered by the appellant. What has happened, however, is that, since the order was made, the actuary whose responsibility it is to issue the various funding and solvency certificates has declared, under reg.9.18 of the Superannuation Industry (Supervision) Regulations 1993, that the ground staff plan is "technically insolvent" within the meaning of Part 9 of those regulations. This largely flowed from the finding pursuant to paragraph 12 of the judge's order that Ansett was under such an obligation and Ansett's subsequent failure to pay the certified contributions, presumably because the administrators, relying on the terms of the deed of company arrangement, had no available funds to pay unsecured debts. The further consequence was that, under the regulations, the actuary issued what was called a "special funding and solvency certificate", operative from 25 March 2003, which was stated to "replace FSC 5" and required minimum contributions by Ansett in a form set out in the appendix which were different in form and substance from those required under FSC 5, in particular requiring payment of a lump sum of $130m.

[14]

The appellant, notwithstanding these changes, maintains that, although the questions to be answered on the appeal are hypothetical, that is not a bar to giving relief by way of declaration, nor is it an objection that they are advisory. In particular it relied on Brash Holdings Ltd. v. Katile Pty. Ltd.[14], in which the Full Court determined an appeal brought by four companies in administration for declarations as to what would be the effect on certain creditors of a proposed deed of arrangement which had not yet been resolved upon. It is sufficient to say that that was a quite different application made pursuant to the unusually expressed s.447A of the Act which permits the Court to make orders "as it thinks appropriate about how the Part is to operate in relation to a particular company". It was brought by the companies under administration, for that right is given specifically by sub-s.(4)(a) of the section, but it is clear from the judgment that it was brought at the instigation of the administrators because of their concern as to the possible effect of a deed of company arrangement. Although the Court pointed out that the application had not been brought by them pursuant to s.447D, permitting an administrator to seek directions, it must be seen as advisory in the special circumstances contemplated by that part of the legislative scheme. The Court expressed its concern as to the procedure adopted[15], but gave what was in effect advice to the administrators, inasmuch as the Court even refused to make a substituted declaration on the ground that it would have to be cast in terms which made allowance for the rights of particular owners or lessors who were not all before the Court. It was a very special exercise of jurisdiction, which answered a question in general terms in relation to any proposed deed of company arrangement. Doubtless it was hypothetical, but, in the context of administrations the only hypothesis was that some deed of arrangement would be entered into, a matter of high likelihood if the companies were not to be placed in liquidation.

[26]

There remains the question of costs. The Court invited both parties to put in written submissions on this subject and detailed submissions have been received from them. Much information has been relied upon but none of it throws a great deal of light on the issue. Both sides protest that the other is responsible and, in particular, the respondents maintain that they have warned the appellant frequently and in many places as to the possible outcome, or more precisely, of an absence of outcome, to the appeal. Unfortunately, when it came to the hearing before the learned judge, there was a lack of protestation and indeed, as it seems, explicit acquiescence in the issue being put before her. At one stage, early in the hearing, counsel for the appellant explained the relationship between s.556 and Part 5.3A of the Act, though not in terms which made clear that s.556 was largely ousted by the terms of this deed of company arrangement. What counsel said was that the Court was being asked to "proceed upon an assumption" that the priorities in s.556 applied to the "Top Up Retrenchment Benefit Claims" although clause 16 of the deed explicitly stated that they should not "rank to priority" in the ordinary way. Again, counsel said that all parties were "agreed" that the judge "should disregard" clause 16 for the purposes of the hearing. It is not suggested that that statement was denied in any way by any of the other counsel present, including those representing the respondents. In those circumstances it may be thought unreasonable for the respondents now to criticise the appellant for persisting in the course that it took, so that the die was effectively cast, even though it has now moved to the stage of an appeal from the original judgment. However, they have uttered warnings at various stages, especially at interlocutory stages, that this Court may not see fit to consider the questions raised by the appeal. They have done so several times by correspondence and it has been raised explicitly at the interlocutory stages of the Federal Court application. They directed the appellant's attention to the very problem raised by this Court, so much so that the appellant's solicitors sought an assurance that the respondents would not take any point that the questions were hypothetical. Their solicitors replied by saying that they would not make any formal application to this Court, but they repeated their warning and said it could well arise. It may be said that they acquiesced in this course and certainly the respondents raised none of these matters when the appeal was called on. However, they had little choice. The real author of the disaster was, unfortunately the appellant, especially when it chose to split the two proceedings. It should therefore bear the costs. However, I would not award solicitor-client costs, as sought.

At a glance

Court

Decision date

Before

Source

Judgment (64 paragraphs)

Parties

Legislation Cited (2)