In the matter of Ansett Australia Limited; Intrepid Aviation Partners VII... [2001] FCA 1360 | Case summary

REASONS FOR JUDGMENT 1 The applicant is (by way of assignment) the owner and lessor of a Boeing 727‑277F aircraft, Australian registration number VH‑RMX, which it has leased to Ansett Australia Limited (Administrators Appointed) ("Ansett"). Ansett is in administration pursuant to Pt 5.3A of the Corporations Act 2001 (Cth) and, accordingly, by virtue of the provisions of s 440C of the Corporations Act, the applicant cannot take possession of the aircraft except with the administrator's written consent or with the leave of the Court. The applicant has applied for that leave. 2 On 14 September 2001, the applicant gave notice to Ansett pursuant to its rights under Article 13 of the relevant lease agreement that as a result of the appointment of the administrators of Ansett on 12 September 2001, there had been a default and a material breach of the lease agreement entitling the applicant to give notice terminating the lease. 3 On 17 September 2001, the applicant served a notice on Ansett that it terminated the lease agreement and required Ansett forthwith to deliver the aircraft to the applicant at Tullamarine Airport, Melbourne. Ansett is presently in possession of the aircraft. The aircraft is a freight aircraft and has been used by Ansett as part of its freight operation for the purpose, substantially, of carrying freight from Perth to Melbourne and return, although it may have been used on other routes from time to time. The Perth/Melbourne route is an integral part of the air freight transportation network which exists in Australia. 4 Although Ansett is the lessee of the aircraft, it has contracted with Independent Air Freighters Pty Ltd for that company to maintain, crew, service, fuel and operate the aircraft. In recent times, prior to the administration of Ansett commencing, although the aircraft has been part of the Ansett freight operation, it has been effectively maintained and operated by Independent Air Freighters Pty Ltd. As a result of the administration of the Ansett Group, the Ansett fleet has in effect been grounded and the aircraft has not been flying on its freight route and carrying out its freight operations since early in the morning of Friday, 14 September 2001. The result has been that a substantial backlog of freight has built up waiting to be transported. 5 Evidence was given by Mr Allen Buckley, the chief executive officer of Australian Air Express Pty Ltd, that there is at the present time a build-up of freight in Melbourne waiting to be trans‑shipped to Perth of some 12,000 kilograms and that there is 5,615 kilograms in Sydney which has not yet been transferred to Melbourne for trans‑shipment to Perth. Mr Buckley described this freight as genuine overnight freight which includes not only freight, but articles carried for Australia Post. There is a limited number of aircraft available in Australia to carry freight of this quantity, and Mr Buckley described the need to have the aircraft back in the air as a need which was absolutely desperate. 6 The purpose of an administration under Pt 5.3A of the Corporations Act is to provide a reasonably short period of time within which the administrators can consider what to do with the company, and to form an opinion whether it would be in the creditors' interests that it should enter into a deed of company arrangement, or that the administration should end, or that the company should be wound up: s 438A. Accordingly, the provisions of Pt 5.3A of the Corporations Act provide a period of time during which there can be no dealings by lessors of property leased to the company under administration, in order to give the administrators the opportunity to consider the future of the company under administration and its viability. 7 I have a discretion under s 440C of the Corporations Act to grant leave to a lessor to take possession of property which is used or is in the possession of a company under administration. That discretion is unfettered, as the section simply provides that the Court may grant leave and does not provide any matters subject to which the discretion may be exercised. The matter was expressed succinctly by Byrne J in Java 452 Pty Ltd; Permanent Trustee Australia Ltd v Stout (1999) 32 ACSR 507 at 516 when his Honour said: "No guidance is given in the statute as to the manner in which the discretion to grant leave might be exercised. In these circumstances, I see my task as that of giving effect to the object of Pt 5.3A as that appears in s 435A and, generally, from the legislation. At the same time I must have regard to the fact that, in many respects, the statute intrudes upon the rights of persons dealing with the company under administration and with administrators themselves. I must seek to balance the statutory objects with the rights of those persons, bearing in mind that, in case of conflict, the will of Parliament must prevail." The object of the administration provisions in Pt 5.3A of the Act is found in s 435A which says: "The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence, or (b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company." What is unusual about this case is that the applicant is not so much seeking to obtain possession of the aircraft to protect its proprietary and security interests in the aircraft, rather it is seeking to obtain possession of the aircraft for the purpose of making it available to an alternative entity who, in conjunction with Independent Air Freighters Pty Ltd, can maintain the freight operations of the aircraft which, on the evidence which I have heard from Mr Buckley, forms an integral part of the air freight network in Australia. 8 That gives rise to public interest considerations and not just considerations which bear upon the rights of the applicant. Nevertheless, given the object of Pt 5.3A of the Corporations Act and the interests which need to be balanced, that is, the interests of the creditors as against the interests of the company under administration and the possibility of it achieving a viable outcome from its administration, I consider I am entitled to take that public interest consideration into account as part of the exercise of my discretion. 9 I have heard evidence from Ms Dalma Thompson, a chartered accountant, who is part of the team working with the administrators and carrying out the administration under Pt 5.3A. The administrators, through Ms Thomspon, have expressed concern about the giving up of possession of the aircraft. It appears that the administrators are in the course of negotiations for the sale of the air freight unit of the Ansett group. Ms Thompson said that those negotiations are in an advanced state and it may be, subject to the successful conclusion of the negotiations, that an agreement may be concluded over the next weekend with the possibility of a handover of the air freight unit commencing on Monday or Tuesday of next week. 10 The evidence before me was that the aircraft is an integral part of the air freight unit of the Ansett group and the administrators are concerned not to prejudice any negotiations for the sale of that unit, nor do they wish anything to occur which may have an adverse impact on the negotiations which are presently in progress. 11 I am satisfied that, subject either to certain undertakings being given by the applicant and Independent Air Freighters Pty Ltd, or, if those undertakings are not forthcoming, conditions imposed by the Court, it is appropriate to make an order that in a limited and a temporary way the applicant have leave to obtain possession of the aircraft for the limited purpose of enabling it to continue the freight operations which it carried out hitherto in conjunction with Ansett, prior to Ansett going into administration. 12 Although I must take into account the concerns of the administrators not to prejudice the present negotiations for the sale of the air freight unit, it does not appear, so long as the aircraft is operated in the way it has operated hitherto, that there can be any significant prejudice to the administrators or to the negotiations they are undertaking. On the evidence before me it does not appear that, even if such a sale were to occur, the aircraft would be required to be delivered up before Monday or Tuesday of next week. Whether it can be delivered up to a purchaser depends, perhaps, on coming to an accommodation with the applicant in any event, having regard to the default which has occurred. 13 As I have indicated earlier, there is a significant public interest element in this application, having regard to the build-up of freight which cannot yet be carried from Melbourne to Perth, from Sydney and through Melbourne to Perth, and from Perth to Melbourne. It seems to me, in those circumstances, that subject to it being made clear that the possession which will be allowed by my order is for a limited and temporary purpose, that so long as it is provided that the aircraft be the subject of proper insurance and only be used by Independent Air Freighters Pty Ltd for the purpose of carrying freight in Australia and that Independent Air Freighters Pty Ltd and the applicant undertake not to remove the aircraft from Australia, I consider it appropriate to make an order that such possession be taken by the applicant. 14 It should also be made clear that I have reached the conclusion that such an order should be made in the short term to enable the freight operation between Perth and Melbourne and also, if it can be arranged, between the mainland and Tasmania to be continued. I am prepared to make an order on the basis that the possession which will be allowed is not to be considered or regarded as possession being obtained, or given, or directed pursuant to the notice of termination dated 17 September 2001 which has been given to Ansett by the applicant. That position should be preserved. What I am seeking to do is to freeze for the moment the rights of the parties in relation to the aircraft, subject to it being able to be used for the purpose for which it was hitherto used. 15 Subject to hearing further submissions in relation to the form of order, I would propose to order that the applicant have leave to take possession of the aircraft on the terms, or subject to the undertakings, to which I have referred. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

In the matter of Ansett Australia Limited; Intrepid Aviation Partners VII LLC v Ansett Australia Limited

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Judgment (7 paragraphs)

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