61 Schedule 2 lists the numbers described as PRM, IVR 1-90 service numbers as at 1 November 2005. There is no evidence as to whether the numbers specified in schedule 2 to the charge, or some of them, are the subject of the proposed transfer.
62 Mr Wood submitted that the opening words of the definition of Mortgaged Property include without limitation all of the rights of the Mortgagor. He submitted that the telephone lines listed in schedule 2 were Mortgaged Property. I accept that PRM's rights to use those lines is within the definition of Mortgaged Property. However, the proposed transfer of the service providers, or as they were sometimes called aggregators, involves no change or dealing with PRM's rights to use those lines. The uncontradicted evidence of Ms Osman is that PRM's rights are by way of licence from Ms Aifantis, and those rights will be unchanged. Nor is there an attempt to deal with the revenues received by Visiontek from carriers in respect of those lines. There is a proposed interference with Visiontek's right to receive revenues from the lines, but not to its rights to the revenues received. Similarly, the proposed transfer of the lines between service providers, whilst it affects the right of PRM to receive revenues pursuant to what I infer is an agreement between Visiontek as its representative and Telstra, is not an attempt to deal with the revenues received by PRM from a carrier. Moreover, any attempted dealing which affects, or may affect, Visiontek's rights or PRM's rights is, on the evidence, an attempted dealing not by PRM but by Ms Aifantis.
63 If contrary to these conclusions, the proposed transfer of the lines to a different service provider were a breach by PRM of any provision of the charge, the breach would be capable of remedy. Assuming, as one must, that the conduct of Ms Aifantis is treated as the conduct of PRM, then she could remedy such a breach by withdrawing the application.
64 There was no notice requiring any such breach to be remedied. Therefore, any such breach, if it were established, would not be a Default Event within the meaning of clause 11.2.2.
Clause 7.3
65 Turning next to clause 7.3, for the same reasons as I have given with respect to clause 6.1.5, I consider that the reference to the Mortgagee's security is to the property of the Mortgagor which is the subject of the charge, and I do not consider that any dealing or proposed dealing has had, or may have, an adverse effect on PRM's property or its value. That is, PRM's right to receive revenue from the telephone lines or their use will not be diminished by its using services of another bureau.
66 If contrary to my view there were a breach of clause 7.3, the breach would be capable of being remedied. I accept that PRM through its directors could influence Ms Aifantis' decision to exercise her rights as a rights of use holder to change the premium rates service provider. If, contrary to my view her doing so would put PRM in breach of clause 7.3 by PRM's influencing that decision, then the breach could be remedied by PRM using its influence to persuade her not to change providers. As no notice requiring the remedy of any such breach has been given, such a breach would not be a Default Event under clause 11.2.2.
Clause 9.1.6
67 I turn next to clause 9.1.6. The alleged breach of warranty is that whereas the charge describes the numbers in schedule 2 as PRM service numbers and PRM SMS service numbers, the evidence is that the rights of use holder for the telephone numbers is Ms Aifantis who has licensed her rights to PRM. There is no evidence that there was no express disclosure in writing to Visiontek prior to the charge that Ms Aifantis was the rights of use holder. For the reasons previously given, I think the onus is on the plaintiffs to establish the absence of such disclosure. As the matter was raised for the first time in closing submissions, there can be no evidentiary onus on the defendants. In any event, the relevant right of PRM is a licence from Ms Aifantis to use the numbers and derive revenue from that use. I do not consider that Ms Aifantis has any interest within the meaning of the clause in those rights of PRM. She is the counter-party to the transaction under which PRM has those rights, but she did not on that account have any right or interest in the right PRM has against her. In my view, no breach of clause 9.1.6 has been established. For these reasons, no Default Event under clause 11.2.2 has been established.
Clause 11.2.3
68 The Default Event relied on under clause 11.2.3 is based on the same alleged breach of warranty in clause 9.1.6 and that claim fails for the same reasons.
Clause 11.2.20
69 I turn next to clause 11.2.20. The Letter of Demand stated that PRM had changed its activities in a manner that could materially and adversely affect its ability to meet its obligations to Visiontek. The change was described as being the transfer of the premium rate service numbers to another service provider; the transfer of existing operator services from numbers currently controlled by Visiontek to new numbers controlled by another service provider on behalf of a third party; and permitting the establishment of new operator services in a third party. The plaintiffs have to establish that it was Visiontek's opinion that there had been such a change in the activities of PRM. The director of Visiontek at relevant times was a Mr Bhaskar Eswaran. It was his decision to make the demand and his decision to appoint administrators. He did not give evidence. There has not in fact been any change in the activity of PRM.
70 Mr Lee, the finance manager, gave evidence in his affidavit that in his opinion the advice form lodged with Telstra and signed by Ms Aifantis asking Telstra to move the premium rate service numbers demonstrated a clear intent from PRM to deny Visiontek the ability to retain any PRM revenues arising out of the service numbers, and denied Visiontek any revenue share it would normally get due to usage of its gateway. He said that the act showed the intention on PRM's part to work against the business interests of Visiontek and was a clear violation of the spirit of the Future Loan Agreement and that was something that materially affected PRM's ability to meet the charge obligations. But in cross-examination Mr Lee accepted that change in the bureau, or aggregator, from Visiontek to Telads did not change PRM's activities as PRM would still be managing the mobile content and operating the call centre. He also accepted that if Telads charged less commission than Visiontek then PRM would make more money and its ability to repay a debt to Visiontek would be improved. The evidence is that the asserted change would not adversely affect PRM's ability to meet any of its financial obligations to Visiontek. The proposed transfer of the service numbers could demonstrate a change in PRM's willingness to continue to meet its financial obligations but not its ability to do so.
71 The terms of the letter of demand and Mr Lee's evidence would suggest that Visiontek was of the opinion that its own revenues would be diminished by the proposed transfer of the service numbers if it proceeded, and was also of the opinion that its ability to apply PRM's revenues in reduction of the alleged debt would be adversely affected. But I do not accept that anyone from Visiontek formed the opinion that PRM's ability to meet its obligations would be reduced. It was also submitted for the plaintiffs that the proposed transfer would materially and adversely affect PRM's ability to meet its obligations to Visiontek being, it was said, the preservation of the Mortgaged Property, namely, PRM's rights to use the telephone lines. The evidence does not establish that Visiontek formed an opinion that there had been any change to PRM's activities that could materially affect its ability to meet its obligation to preserve such Mortgaged Property. And for the reasons I have given in relation to the alleged breach of clause 7.1.1.1, I do not accept that there was a dealing or attempted dealing with the Mortgaged Property which breached PRM's obligations in that respect.
72 For these reasons I am not satisfied that the Default Event under clause 11.2.20 occurred.
Clause 11.2.25
73 The remaining alleged Default Event was in clause 11.2.25. No evidence was given that Visiontek, through its relevant officer, formed an opinion under clause 11.2.25. In the letter of demand and in Mr Lee's affidavit it was said that an opinion had been formed as to the matters in clause 11.2.20, not as to the matters in clause 11.2.25.
74 It was submitted for the plaintiffs that clause 11.2.25 was a "catch-all clause" designed to pick up anything that might have been missed by the specific parts of clause 11.2. That may be, but in that event there must be evidence as to the formation of an opinion in respect of any of the matters referred to in clause 11.2.25.
75 For the reasons I have given there was not a circumstance which was likely to materially and adversely effect the ability of PRM to pay the Secured Money or to comply with its obligations under the agreement, or which affected the value of the Mortgaged Property. The question, rather, is whether there was a circumstance which, in the opinion of Visiontek, was likely to materially and adversely affect its security in terms of clause 11.2.25.3. But as stated earlier in these reasons its security over revenues to be received by PRM was a security by way of fixed charge over all call revenues arising pursuant, inter alia, to any agreement between Visiontek as its representatives and Telstra related to the provision of Information Services. That security is not affected except in so far as call revenues will not continue to be derived. The fact that revenues might be received under a different agreement would not change the nature of the Mortgagee's security. I am not satisfied that a Default Event under clause 11.2.25 has been established.
76 It follows that even if money is owing by PRM to Visiontek, a matter which has not been established, it has not been established that any money owing has become payable. Therefore, it has not been established that Visiontek was entitled to enforce its charge when it purportedly appointed the plaintiffs as administrators. In those circumstances it is unnecessary to consider what the position would have been had a Default Event been established where it was not established that any money was owing. It follows that the declaration which the plaintiffs seek must be refused.
77 Questions arose during the course of the hearing as to what would be the consequences if I reached that position. It was submitted for the plaintiffs that if the declaration were refused on the grounds that the plaintiffs had not discharged an onus which lay on them to establish a Default Event, no other order should be made other than refusal of the declaration. It was pointed out that the defendants have not by cross-claim sought orders under s 447A that the administration be brought to an end, and had they done so the onus would have lain on them to establish the invalidity of the plaintiffs' appointment. As it is, I have concluded that no Default Event has been shown to have occurred and that, therefore, Visiontek was not entitled to make the appointment. The consequence of that finding is that the plaintiffs' appointment as administrators was not valid and I ought to bring the administration to an end.
78 For these reasons, I order that the originating process be dismissed. I order pursuant to s 447A that the administration of the third defendant end. The exhibits may be returned after 28 days. I stand the matter over to deal with the question of costs to Friday, 14 August 2009 at 9.30am.