Calzaturificio Zenith Pty Ltd (In Liq) v New South Wales

Federal Court of Australia|1994-07-01|Before: Re J

CATCHWORDS CORPORATIONS '- winding up - alleged preference under bankruptcy legislation (Bankruptcy Act 1966 (Cth) s122) - "running account" - services provided by government instrumentality, - whether periodic payments for services were not preferences because inseparable part of a wider transaction -' whether principle of "running accounts" applicable - whether United States "net result" doctrine

applicable - whether the capacity of the creditor to impose a lien rendered the payments non-preferential

INTEREST - order for payment of interest on preferential payments - date from which calculated

Civil Aviation Act 1988 (Cth), s8, s9, s12, s13, sS20AA, s27, $28, Ss32B, s66, Ss68-76, S98

Civil Aviation Regulations (Cth), reg7A, reg8, regi0, reg13, reg97, reg98, reg100, regl67(b), reg 169A

Insolvency Statute 1865 28 Vict. No. 273 (VIC), s31 Bankruptcy Act 1869 c.71 (U.K.), s92

The Bankruptcy Act of 1867 (US), 14 Stat.517, s35 The Bankruptcy Act of 1898 (US), ¢c.541, 30 Stat.544, s57g, s60

Statutes Relating to Interest: Federal Court of Australia Act 1976 (Cth), s51A

Calzaturificio Zenith Pty Ltd (In Liq) v New South Wales Leather & Trading Company Pty Ltd [1970] VR 605, 610, 614, 620-1, considered

Re J.F. Aylmer (Manildra) Pty Ltd (1968) 12 FLR 337, 345, 354-5, 352, considered

Spedley Securities (In Lig) v Western United Ltd (In Li (1992) 27 NSWLR 111, 114-5, considered

Re Discovery Books Pty Ltd (1972) 20 FLR 470, 474-5 478-9, considered

Richardson v The Commercial Banking Co. of Sydney Ltd (1952) 85 CLR 110, 129, 132, 133, 135, considered

Rees v Bank of New South Wales (1964) 111 CLR 210, considered

Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266, considered Re Weiss; Ex parte White v John Vicars & Co. Ltd [1970] ALR 654, 657, 659, 660-1, considered

CEA Technologies Pty Ltd v Civic Aviation Authority (1994) 122 ALR 724, 731, considered

Union Bank v Wolas, 116 L. Ed. 2d 514, 524 (1991), considered S. Richards & Co. Itd v Lloyd (1933) 49 CLR 49, 60, considered

Humphery v McMullen (1868) 7 S.C.R. (L) 84, 89-94, considered The Bank of Australasia v Harris (1861) 15 Moo 96, 15 E.R.

Sheldrick v Aitken (1869) 6 W.W. & A'B (L) 59, 64, considered Arnold v Maynard 1 F. Cas. 1181 (1842), considered

Smyth v The Queen (1957) 98 CLR 163, 166-7, considered

Muntz v Smail (1909) 8 CLR 262, 266, 271, considered

Yaple v Dahil-Millikan Grocer Co., 193 U.S. 526 (1904), considered

Joseph Wild & Co. v Provident Life & Trust Co., 214 U.S. 292 (1909), considered

In re Thomas W. Garland Inc., 19 B.R. 920, 922-925 (E.D. Mo. 1982), considered

In re St. Louis Globe Democrat, Inc., 99 B.R. 946, 948-9 (E.D. Mo. 1989), considered

Pirie v Chicago Title & Trust Co., 182 U.S. 438, 446-7 (1901), considered

In_re Fred Stern & Co. Inc., 54 F.2d 478 (2d Cir. 1931), considered

CSR_Ltd v Starkey (1994) 13 ACSR 321, 325, 327-8, considered

In re Fulghum Construction Corp. 706 F.2d 171, 174 (6th Cir. 1983), considered

Cimmaron Oil Company, Inc. v Camerson Consultants, Inc., 71 B.R. 1005 (N.D. Tex. 1987), considered

Goodsole v Jeffery 168 N.W. 461 (1918) in 1 ALR 1060-70, considered

Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266, 281, 283, 316-7, considered

Page v Commonweaith Life Assurance Society Ltd (1935) 36 S.R. (NSW) 85, 89, considered

Re Price (No. 6); Richardson v Commercial Banking Co. of Sydney Ltd (1949) 15 ABC 26, 41, 42, 43, considered

Stephen v Doyle (1882) 3 NSWLR (Eq.) 1, 3, considered

Rees v Bank of New South Wales (1964) 111 CLR 210, 221-2, considered

Re Patullo; Ex parte Official Receiver (1931) 3 ABC 197, 203-4, considered

Re _ A. & J. Lazzarotto Pty. Ltd., the Supreme Court of Victoria, Full Court, 16 December 1977, unreported, at 7,

M_& R. Jones Shopfitting Co, Pty. Ltd. (in Lig.) v The National Bank of Australasia Ltd., (1983) 7 ACLR 445, 453,

Re Baronga Nominees Pty. Ltd (In Lig.) [1983] 8 ACLR 265, 273,

Petagna Nominees Pty Ltd v A_E Ledger Liquidator of Linun Pty Ltd (in lig) (1989) 1 ACSR 547, 567, considered

Re Captain Homemaker Pty Ltd (In Lig) (1984) 8 ACLR 1005, 1013, considered

Australian and Overseas Telecommunications Corporation Ltd v

Russell Kumar & Sons Pty Ltd (1992) 10 ACSR 24, 29, considered

Harkness v Potts (1993) 10 ACSR 517, 521, considered Willcox v Goess, 92 F.2d 8, 1% (2d Cir. 1937), cert denied, 303 U.S. 647 (1938), considered

Knysh v Corrales Pty Ltd (1989) 15 ACLR 629, considered

N.A. Kratzmann Pty Ltd (In Lig.) v Ducker [No.1] (1966) 123 CLR 257, 285, considered

N.A. Kratzmann Pty Ltd (In Liq) v Tucker [No. 2] (1968) 123 CLR 295, 298-9, considered

Spediey Securities Ltd (In Lig) v Western United Ltd (In Lig) (No. 2) (1992) 10 ACLC 887, 887-8, considered

Maurice Drycleaners Pty Ltd (In Lig) v National Australia Bank Ltd (1990) 8 ACLC 798, and Hamilton v Commonwealth Bank of Australia (No. 2) (1992) 10 ACLC 1611, considered

Re Fiorino (Gummow J, 14 April 1994, unreported, considered In_ re Roco Corp., 37 BR 770 774 (D. RI. 1984), considered In_re Art Shirt Ltd., Inc., 93 BR 333, 341-2 (E.D. Pa. 1988), considered

Smith v Mark Twain National Bank, 805 F.2d 278, 291 (8th Cir. 1986), considered

IAN DOUGLAS FERRIER AND DESMOND WILLIAM KNIGHT (AS LIQUIDATORS OF COMPASS AIRLINES PTY LIMITED (IN LIQUIDATION)) v CIVIL AVIATION AUTHORITY

CORAM: Beaumont, Gummow, Lindgren JJ WHERE: Sydney DATE: 21 December 1994

NEW SOUTH WALES DISTRICT REGISTRY NO NG 3136 of 1994

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

Appellants AND: CIVIL AVIATION AUTHORITY Respondent CORAM: Beaumont, Gummow and Lindgren JJ PLACE: Sydney DATE: 21 December 1994

(1) Direct that the appellants file and serve draft short minutes of the orders to be made in accordance with the reasons for judgment.

(2) Stand the matter over to a date to be fixed for the purpose of hearing submissions on costs and on the form of the orders to be made.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

I. INTRODUCTION 1 II. THE REASONING AT FIRST INSTANCE 10 III. CONCLUSIONS ON THE APPEAL 14

A. The Operation of the CA Act; the Determinations and the CA Regulations; the CAA and the Statutory Framework

of the CA Act 14 B. The Determinations of the Charges 20 c. The CA Regulations 22 D. The Remedies Available to CAA 23 E. The Law as to Preferences 25 (1) The Rationale of Preference Recapture 25

"Running Account" in the United States 34 (4) The General Concept of a "Running Account" 42

(5) The "Running Account" in the High Court of Australia 43

(7) The Application of the "Running Account" Principle in the Australian Courts

Other Than the High Court 58 F. The Principles to be Applied Here 71 G. The Primary Facts 72 (1) Dramatis Personae 73 (2) The Aircraft 73 (3) The Beginning of the Relationship between CAA and Compass - November 1990 74 (4) Avcharges for December 1990 75 (5) Payment on 5 March 1991 of $1,430,485.25 and its Sequelae 76 (6) Payment on 15 May 1991 of $1,453,780.37 83

Payment on 2 July 1991 of $840,838.39 - First of the 9 Payments Within the Preference Period

Payment on 2 August of $1,397,394.47 - Second of the 9 Payments Within the Preference Period

Payment on 4 September 1991 of $2,069,624.66 - Third of the 9 Payments in the Preference Period

Payment on 9 September 1991 of $66,291.59 - Fourth of the 9 Payments in the Preference Period

Payment on 4 October 1991 of $1,600,000 - Fifth of the 9 Payments in the Preference Period

Payment on 9 October 1991 of $1,641,551.05 - Sixth of the 9 Payments in the Preference Period

Payment on 31 October 1991 of $975,532.00 - Seventh of the 9 Payments in the Preference Period

Payment on 4 November 1991 of $59,588.68 - Eighth of the 9 Payments in the Preference Period

CAA Imposes Liens on the Five Compass Aircraft on 28 November 1991

On 1 December 1991 a "Deal" is Done Between CAA and Compass

On 2 December 1991 CAA "Removes" its Liens Imposed on 28 November 1991

On 18 December 1991 Only $1,380,399.47 (the Last of the 9 Payments in the Preference Period) is Paid by the Bank Settlement Plan and Compass Does Not Pay the Shortfall of $1,380,399.47 Necessary to Make the Payment of $3,081,102.63 Promised for that Date

iii - (22) Imposition of liens on 18 December 1991

(23) The End of the Relationship Between CAA and Compass

H. The Proper Inferences to be Drawn From the Primary Facts

) ) NEW SOUTH WALES DISTRICT REGISTRY ) No NG 3136 of 1994 ) )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

Respondent CORAM: Beaumont, Gummow and Lindgren JJ PLACE : Sydney DATE: 21 December 1994 REASONS FOR JUDGMENT THE COURT:

The appellants ("the Liquidators"), as liquidators of Compass Airlines Pty Limited ("Compass"), appeal from an order

of a Judge of the Court (Lockhart J) dismissing their

application for relief by way of recovery, pursuant to s. 565 of the Corporations Law ("the Law"), and s. 122 of the Bankruptcy Act 1966 ("the Act"), of amounts totalling $10,351,523.90 paid by Compass to the Civil Aviation Authority ("CAA"). The Liquidators asserted that the payments were void as against them as preferences. His Honour's judgment is

On 20 December 1991 Compass filed an application seeking an order for its winding up and for the appointment of provisional liquidators in the interim. On that date, the Liquidators were so appointed. The Court ordered that Compass be wound up on 10 July 1992, and on that date the Liquidators were appointed. Accordingly, the relevant six month period

referred to in s. 122 of the Act was from 20 June 1991 to 20 December 1991.

It appears that the parties accepted before the primary Judge that relevant charges made by CAA to Compass, penalties incurred by Compass for late payment, and the impugned

Date o70708os og Q90910 101010i1111291919191919191 919191919191 Preference Period 20.6.91 to 20.12.91

$4,301,071.74 $3,526.524.94 $3,460,233.35 $3,556.349.29 $3,475,014.27

$6,596,445.04 $5,199,050.57 $5,251,175.79 $5,297,997.26 $8,223,884.01 $8,303,353.95 $6,233,729.29 $6,167,437.80 $9,248,540.43 $9, 243,382.32

$9,287,270.62 $9,380,440.49 $7,780,440.49 $6,139,889.44 $6,185,028.60 $5,209, 496.60 $8,692,949.20 $8, 771,091.66 $8,711,502.98 $8,763, 754.77 $11,982,754.72 $12,114, 302.06 $10,413,598.90

[* As appears below, the figure of $19,035,873.91 was stated by the primary

Judge as the "value of services provided" by CAA to Compass.

in the column above do not exactly total that amount, but nothing appears to turn on this for our purposes. J

By virtue of the provisions of the Civil Aviation Act

1988 ("the CA Act"), which will be discussed further later, in

default in payment in certain circumstances, CAA was entitled

to place a "statutory lien" on an aircraft in respect of which

CAA had provided services for which there was an outstanding

The four grounds of appeal, the first two of which are

His Honour erred in failing to find that each and every payment made by [Compass] to [CAA] between 2 July 1991 and 18 December 1991 totalling $10,351,523.90 had the effect of giving [CAA] a preference, priority or advantage over other creditors of Compass pursuant to Section 565 of the Corporations Law.

His Honour erred in finding that the payments made to [CAA] formed an integral and inseparable part of an entire transaction between the parties or otherwise qualified as payments made on a running

account for the purposes of the law as_ to preferences.

Alternatively, his Honour erred in failing to find that the payment of $1,700,703.16 made to [CAA] on 18 December 1991 occurred at a time and in a context when the relationship giving rise to a running account between Compass and [CAA] had ceased to exist and that that payment had the effect of giving [CAA] a preference, priority or advantage over other creditors of Compass within the meaning of Section 565 of the Corporations Law.

His Honour erred in holding that [CAA's] right to impose statutory liens on aircraft leased and operated by Compass but owned by others, had the effect of protecting the payments from being characterised as a preference, priority or advantage over other creditors of Compass for the purposes of Section 565 of the Corporations Law."

The primary Judge said (48 FCR at 167) that ultimately the

unchallenged evidence of the witnesses. In fact, the

documentary evidence was extensive - over 1200 pages, although

CAA provided services to Compass during 1991. It charged Compass for those services and imposed penalties for lateness in payment. There was no issue as to CAA's right to impose the charges and penalties, nor was there any issue as to the correctness of the account given earlier of the dates and amounts of the charges, penalties and payments during the

Lockhart J summarised (at 165-6) the value of the services provided by CAA to Compass, the penalties imposed and

the payments made over the six-month period from 20 June 1991

"(a) value of services provided by the Authority to Compass - $19,035,873.91;

(b) penalties charged by the Authority to Compass - $719,580.49;

(d) payments made by Compass to the Authority - $10,351,523.90;

(e) excess of services supplied over payments made ((a)

(d)) - $8,684,350.01;

(f) excess of services and penalties over payments ((c)

(d)) $9,403,930.50."

In addition, his Honour found that CAA continued to provide services to Compass after Compass made its last payment of

Sub-section 565 (1) of the Law provides, relevantly, that a payment made by a company that, if it had been made by a Natural person, would, in the event of his or her becoming a bankrupt, be void as against the trustee in the bankruptcy, is, in the event of the company being wound up, void as against the liquidator. Sub-sections 565 (2) and (3) provide respectively for the date that, in the case of the winding up of a company, corresponds with the date of presentation of the petition in bankruptcy and to the date on which the person becomes a bankrupt. So far as relevant, in the present case the date is, in each instance, the date when the application for the winding up order was filed, that is to say, 18

"122(1) A... payment made, ... by a person who is unable to pay his debts as they become due from his own money (in this section referred to as 'the debtor'), in favour of a creditor, having the effect of giving that creditor a preference, priority or advantage over other creditors, being a... payment ... made ... :

(a) within six months before the presentation of a petition on which, +». the debtor becomes a bankrupt; or

Sub-section 122 (2)(a) provides that nothing in s. 122 affects the rights of a payee in good faith and for valuable consideration and in the ordinary course of business. But since CAA did not rely upon this provision, the case turns upon the applicability of sub-s. 122 (1) (a), and, in particular, upon the phrase "having the effect of giving that

creditor a preference, priority or advantage over other

It should be noted at the outset that even in cases where there is but one payment attacked as a preference there is some dispute as to the time at which and the hypothesis upon which the presence of the necessary "effect" is ascertained. Two views have been put forward. They are summarised as follows in Mr K. Bennetts' article "Establishing Preferential Effect under Avoidance Powers, Corporations Law" (1994) 12

"One involves the liquidator establishing the financial position of the company at the time of the transaction and a determination of the likely return to the preferred

creditor in a hypothetical winding up at that time, taking into account other creditors' claims existing at that time. The other approach involves the same exercise related, however, to the financial position of the company and the claims of its creditors in the actual winding up of the company.

The better and more logical view of preferential effect is that which suggests that any comparison between the transactional benefit received by a creditor and the creditor's position in a winding up should be determined on the basis of the creditor's likely position in a hypothetical winding up at the time of the transaction

and not a comparison based on the likely outcome for the

creditor of the actual winding up arising subsequent to the transaction."

Support for this preferred view is supplied by the decision of

Menhennitt J in Calzaturificio Zenith Pty Ltd (In Liq) v New South Wales Leather & Trading Company Pty Ltd [1970] VR 605 at 610, the judgments of Street J and Walsh JA in Re _ J.F. Aylmer (Manildra) Pty Ltd (1968) 12 FLR 337 at 345 and 354-5 respectively, and what was said by McLelland J in Spedley Securities (in Lig) v Western United Ltd (In Lig) (1992) 27 NSWLR 111 at 114-5 where there is a collection of other authorities perhaps supporting the contrary view. See also the discussion of the point by Professor R.M. Goode in Principles _of Corporate Insolvency Law, 1990, pp. 168-9; the learned author is dealing with the British legislation, but

what he says on this point appears equally applicable in

In the present case, this matter would give rise to no

difficulty for the case presented by the Liquidators. This is

because the evidence establishes that at the date of each of

What immediately is in issue is a related but distinct point. In Aylmer at 345 and Re Discovery Books Pty Ltd (1972) 20 FLR 470 at 474-5, Street J and Fox J respectively considered the situation where on a proper analysis there was but a single entire transaction, albeit one involving several elements. If a plurality of dealings or payments constitutes but one transaction, then one does not look to the effect (whether ascertained upon one or the other of the above hypotheses) of each payment. Rather, the Court considers the overall result of the transaction as a whole after the last of the payments in question. It then decides whether the effect of this was to give a preference. The issue on the present appeal is whether the primary Judge correctly determined that the "effect" which was to be gauged here was that of an entire transaction. Hence the significance for this case of the "running account principle" recognised in three important decisions of the High Court in Richardson v The Commercial

Banking Co. of Sydney Ltd (1952) 85 CLR 110, Rees v Bank of

New South Wales (1964) 111 CLR 210 and Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266.

At the outset, we should note what is involved in these

three High Court cases. They were decided under s. 95 of the

Bankruptcy Act 1924 ("the 1924 Act"). In Re Weiss; Ex parte

White v John Vicars & Co. Ltd [1970] ALR 654 at 657, Gibbs J

"It is clear that for the purpose of deciding whether a payment is void within s.95 (1) of the Bankruptcy Act it is the effect in fact of the making of the payment that is decisive. It is also clear that in some cases, where the payment forms part of a wider transaction, or where it is sufficiently connected with other items in a running account, it is the effect of the whole transaction, of all the connected items, that has to be regarded."

His Honour's use of the disjunctive, so as to yield a proposition with two branches, should be noted. On the present appeal, it was submitted for CAA that even if there was no running account in the sense used by Gibbs J,

nevertheless each payment formed part of a wider transaction

The primary Judge examined the legislative basis for, and detail of, the charges which CAA made to Compass and the penalties which CAA imposed on Compass for late payment, as well as the circumstances in which each of the nine impugned

payments totalling $10,351,523.90 in the period 20 June 1991

His Honour then examined the legislative basis for the statutory liens which CAA "imposed" upon all five aircraft

operated by Compass. CAA first imposed such a lien on 28

November 1991. It caused this to be "removed" on 1 December

1991, and then imposed a further lien on 18 December 1991.

The Liquidators contended that, for the purpose of s. 122, the "effect" of the nine payments was to be ascertained by looking at the effect of each payment regarded in isolation and assessed immediately after it was made. CAA contended that the "effect" of the nine payments was to be ascertained by treating them as part of a "running account" transaction, and so by setting off against them the charges for services provided by CAA to Compass over a period terminating on 20 December 1991. The Liquidators responded that the payments were not made or received on account of or in consideration for or upon any express or implicit mutual assumption or agreement that payment of past indebtedness would ensure future supply of services by CAA. It would, they submitted, be an odd result if, although an airline operator making timely payments to CAA of statutory charges was not paying on a@ running account, an operator which was continually delinquent in discharging its obligations was paying on a

His Honour reached certain conclusions by drawing inferences based upon the primary facts. The evidence of these was documentary. Of relevance to the first two grounds

"The payments which are under attack in this case form an integral and inseparable part of an entire transaction which governed the relationship between the parties.

There was a mutual assumption by [CAA] and Compass that there would be a continuance of the relationship between them of a commercial nature, with the resultant continuance of the relation of debtor and creditor in the running account.

The payments were made in this case both to reduce past indebtedness and on the clear understanding that further services would be supplied by [CAA] to Compass on the usual terms of credit for which the Act, Regulations and the Determinations provide ..., from a business point of view the payments made were connected with future provision of services.

Each of the payments was made in reduction of the running account and the basis for the payments was' the continuance of the supply of services to Compass." (48 FCR at 170-1)

"[T]he question of whether a preference has been received by a creditor is examined by seeing if the creditor is better off as a result of the impugned payments being made than he would otherwise have been if the payments had not been made. In the present case [CAA] was substantially worse off at the commencement of the winding up than it was during most of the previous six months. The balance owing on 1 July 1991 was $4,301,071.74 and on 20 December 1991, $10,413,598.90. It is true that in the meantime payments had been made by Compass to [CAA] in substantial sums; but [CAA] had provided services and facilities to Compass of substantial value during that time." (48 FCR at 171)

"The payments ... were payments made for the continuing provision of services which were vital to enable Compass to continue in business." (48 FCR at 172)

"Payments were made to reduce the general debit as it stood periodically and to maintain a relationship between Compass and [CAA] that promised advantage to both of them. The payments fell within the so-called running account exception and the mutual assumption referred to by Barwick CJ in Queensland Bacon." (48 FCR at 172)

"The fact that [CAA] is a government instrumentality and a monopoly is not to the point. Nor is it to the point that the trading terms of [CAA] are defined by the [CA]

Act, the regulations and the Determinations [thereunder] cee. [T]he operation of the principles relating to running accounts in the law of preferences [is not excluded] merely because the creditor is a monopolist." (48 FCR at 173)

His Honour also held (48 FCR at 174) that CAA was entitled throughout the preference period to impose statutory liens on the Compass aircraft securing Compass's indebtedness to CAA, and that in the result the payments did not deplete the assets of Compass because to the extent of the indebtedness, those

As a result of his characterisation of the payments and the dealings between the parties, the primary Judge held that the so-called "running account" concept applied and also that the mutual assumption of the parties meant that the payments formed part of a whole transaction. Thus, his Honour's decision involved the applicability of both branches of the proposition explained by Gibbs J in Weiss and set out earlier in these reasons. The result, Lockhart J. held, was that the payments made did not have the 'effect" of giving CAA a preference, priority or advantage over other creditors of Compass. In this respect his Honour did not distinguish between the final payment of $1,700,703.16 made on 18 December

III. CONCLUSIONS ON THE APPEAL A. The Operation of the CA Act: the Determinations and the

CA Regulations; the CAA and the Statutory Framework of

CAA is established by the CA Act as a body corporate (s. 8). Section 9 sets out the general functions of CAA. These include the conduct of safety regulation of civil air operations in Australia, the provision of air route and airway facilities, air traffic control services, a rescue and fire fighting service, a search and rescue service and an aeronautical information service. Sub-section 9 (4) provides that, subject to s. 12, "the functions to provide services and facilities may be performed at the discretion of the Authority". Section 12 states that the Minister may give CAA written directions as to the performance of its functions or the exercise of its powers with which CAA must comply, but in the present case there is no suggestion that the Minister had given any such direction as a result of which CAA was dispossessed of the discretion vested in it by sub-section 9 (4). However, the evidence does show an awareness or belief at all material times upon the part of the board and senior executives of Compass that the Minister had a real and proper interest or concern in the conduct of its affairs. There is also a question as to precisely what that discretion was, and in particular, as to whether it embraced a discretion not to provide a particular service or facility to Compass while CAA was providing the same service or facility to other operators.

(It may be noted here that, as Neaves J held in CEA

Technologies Pty Ltd v Civic Aviation Authority (1994) 122 ALR

724 (at 731), s. 9 does no more than set out the functions of CAA; it does not require or authorise, in any relevant sense, the making of a particular decision.) Section 13 gives CAA "power to do all things necessary or convenient to be done for or in connection with the performance of its functions",

Part III (ss. 17-32) is headed "REGULATION OF CIVIL AVIATION". Section 20AA relevantly prohibits a person from flying an aircraft in Australia unless it is registered under the Civil Aviation Regulations ("CA Regulations"). Section 27, which empowers CAA to issue "Air Operators' Certificates" for the purposes of its functions, provides that, except as authorised by such a Certificate, an aircraft shall not operate in Australia, and further provides that a Certificate has effect subject to its conditions, being conditions specified in the CA Regulations and any other conditions specified by CAA in the Certificate or in a written notice given to the holder of the Certificate. Section 28 provides that CAA shall issue an Air Operator's Certificate when applied for unless the applicant has not complied with, or has not established the capability to comply with, the provisions of the CA Regulations relating to safety. In addition CAA shall not impose or vary a condition of, or suspend or cancel, such a Certificate except for the purpose of ensuring

compliance with safety provisions of the CA Regulations.

Accordingly, it was never open to CAA to cancel or suspend Compass's Air Operators' Certificate for non-payment or delay

Part IV (ss. 32A-42) of the CA Act is headed "BOARD OF AUTHORITY". Section 32B provides that the CAA Board's

"(a) to decide the objectives, strategies and policies to be followed by the Authority; and

(b) to ensure that the Authority performs its functions in a proper, efficient and economical manner."

Part VI (ss. 49-83E) is headed "FINANCE". Within this Part, Division 2 (ss. 66-83) 1s headed "Charges and Statutory

(a) fixing the amounts of charges [relevantly, charges for a service or facility provided by CAA]; or

(b) setting out a method by which the amounts of charges may be worked out; or

As noted later, the Board did make such determinations.

Sub-sections 66 (8), (9), (10) and (11) are as follows:

Subject to subsection (9), where a charge is not paid within the period determined by the Board, being a period beginning of the day on which the charge became due and payable, the person liable for the charge is liable to pay the Authority, in addition to the charge, a penalty, calculated upon the unpaid amount of the charge from the day on which the charge became due and payable, and compounded.

The penalty shall not exceed a _e penalty equivalent to 1.5%, or such other percentage as is prescribed, of the unpaid amount of the charge for each month or part of a month during which it is unpaid, calculated from the day on which the charge became due and payable, and compounded.

Subsection (9) does not require the penalty to be calculated on a monthly basis.

Charges and penalties may be recovered as debts due to the Authority."

Clearly, the remedy of suing Compass from time to time in

respect of charges and penalties was available to CAA.

Sections 68-83 provide for statutory liens. Section 68

specifically provides for a "Register of Statutory Liens".

(a) at the end of the payment period after a charge became payable in respect of an aircraft, the charge is not paid; and

(b) at the end of that period, a statutory lien is not in effect in respect of the aircraft; and

(Cc) the charge or penalty in respect of the charge remains unpaid;

then, if an appropriate officer so directs at any time, the Registrar [defined in s. 3 as "the person by whom the Register is maintained"] shall make an entry in the Register in the manner prescribed and, upon the making of the entry, there is vested in the Authority in respect of the aircraft a statutory lien covering the following:

(e) any penalty that becomes payable ain respect of the charge after the entry is made;

(£) any further outstanding amounts in respect of the aircraft."

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