In the matter of Elite Sydney Pty Ltd [2016] NSWSC 1934

Affidavit evidence

1. The application is supported by an affidavit of the liquidator, Mr Smith, dated 29 November 2016 which refers to his appointment as liquidator of the Company on 8 September 2016, to the fact that the Company operated a taxi business, and to arrangements which were made between the Company and the Respondents to this application under which the Company operated those taxis. It will be necessary to refer to those arrangements in a little detail, and it is convenient to do so now. The structure of those arrangements in turn explains, no doubt, part of the approach which the liquidator has adopted in this application, although I will find below that that approach does not give adequate weight to the legislative structure that governs the operation of taxis in New South Wales.
2. The first two of the relevant agreements are between the Company and the First Respondent to the application, ESTM. Those agreements are directed, in terms, to dealing with a "Taxi Plate", although I have not been able to identify a definition of that term in those agreements. In order to construe those agreements to operate effectively, in a manner consistent with the relevant legislation, it seems to me that the concept of a "Taxi Plate" must refer, not to a physical taxi plate, being the sheet metal that is attached to the front and rear of the taxi, but also to the right to operate a taxi as provided on the terms of the Passenger Transport Act 1990 (NSW) to which I will refer below. It is plain that the agreement has not been drafted in a manner that adequately recognises the complexity of that concept.
3. The agreement in turn recites that the parties wish by the agreement to set out the terms of the agreement to "lease a Taxi Plate". That concept appears to have a resemblance, at least in a broad sense, to the lease that is permitted by s 32DB of the Passenger Transport Act, namely the letting or subletting of a taxi licence. It should be noted, however, that the Passenger Transport Act, in that section, identifies that concept with greater precision as involving a dealing with the relevant licence, rather than with the taxi plate itself, which is the subject of such a licence.
4. As Mr Mirzai, who appears for the liquidator, points out, clause 3.19 of those agreements in turn comprises an acknowledgment by the taxi operator that it has no right, title or interest in the "Taxi Plate" and shall not in any way charge, mortgage, or in any way encumber or pledge the "Taxi Plate" or provide it as security for any loans. Again, the person who drafted that agreement appears to intend to refer to something other than the physical taxi plate, in that respect, since it is common ground between both parties that the physical taxi plate is likely to have no particular value, absent a right to operate the taxi conferred under the Passenger Transport Act, quite apart from the fact that the taxi plate itself appears to remain the property of the Roads and Maritime Services ("RMS").
5. Somewhat similar difficulties of drafting arise under the third and fourth agreements in issue, between the Company and Combined Communications Network Pty Ltd ("CCN"). Those agreements provide in clause 2, under the heading "Agreement for the Use of Taxi Plates [i]n the operation of a Taxi Cab", that the owner agrees to grant to the operator a right to use and a right to operate the taxi utilising registration plates in accordance with the terms of the agreement. That clause is perhaps a little more precise than the form of agreement used by ESTM, since it at least recognises that what is being dealt with is a right to operate the taxi, albeit that that right will be exercised in circumstances that the taxi registration plates are applied to that vehicle. Clause 12(1) provides that ownership of the vehicle, if a vehicle is supplied, remains with the owner, but that clause appears to be directed to the vehicle itself. Clause 12(2) prohibits the mortgage, sale or other dealings with the taxi cab or plates supplied under the agreement. The latter clause is directed both to a dealing with the motor vehicle and also to the physical taxi plates.
6. Clause 15 of these agreements is also a little more precise than the form of agreement used by ESTM, so far as it involves an agreement by the owner to provide: "such other documentary evidence as may be necessary to establish that the vehicle is duly registered in the name of the Owner and licensed to operate as a Taxi Cab as required by law." That clause at least recognises that the taxi plates themselves do not confer an authority to operate a vehicle as a taxi, which is only derived from the licensing regime under the Passenger Transport Act.
7. The third form of agreement in issue, being a document described as a "Term Purchase Agreement" between CCN and the Company, appears to have only an incidental connection with the use of taxi plates, so far as it amounts, in substance, to a hire purchase arrangement in respect of a vehicle which is registered to operate as a taxi and which will presumably bear such taxi plates. Clause 1.1 of that agreement provides that the Goods, as defined, will be the owner's property until they are purchased in accordance with the agreement. The term "Goods" is in turn defined as each item of goods as described in a rental schedule, including particular items. Mr Mirzai seeks, in a construction which could not be described as ordinary usage, to treat the licence plate attached to the vehicle as falling within the concept "parts and accessories" in that agreement. Although the nature of the "rental schedule" contemplated by that agreement is not entirely clear, if it is the tax invoice or table that appears at the beginning of that agreement, that does no more, for present purposes, than identify the registered number of the relevant vehicle.
8. I have spent some time on those agreements, not only because they are relevant to the determination of the application, but because they also provide some explanation for the fact that the liquidator, apparently consistent with industry practice, has focused his attention on the "taxi plates" as distinct from the right to operate the taxi which emerges from the relevant legislation. I will return to that issue below.
9. Mr Smith's evidence is that the Company remained in possession of the relevant vehicles which carried the relevant taxi plates at the time of the winding up and that he has disclaimed the Company's interest in the relevant vehicles, but not in the taxi plates that had been attached to those vehicles. The continued possession of the vehicles, or at least of the plates attached to them, is relevant in this case so far as the definition of "PPS lease" in the PPSA extends, inter alia, to a lease or bailment of goods for a term of up to one year, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted or substantially uninterrupted possession of the leased or bailed property for a period of more than one year after its first acquisition. That appears to have occurred in this case.
10. Mr Smith's evidence is also that the First and Second Respondents, ESTM and CCN, had not lodged financing statements under the PPSA in respect of the relevant agreements or taxi plates, and it appears to be common ground that that is the case. The question whether the vesting provision in s 267 of the PPSA will apply in this case will therefore depend, primarily, upon whether the relevant property, in the taxi plates or alternatively the right to operate the taxi, was such as to fall within the scope of that section. Mr Smith also refers, in terms which appear to reflect a colloquial usage that is adopted in the taxi industry generally, to a market for the transfer of "taxi plates". That market would perhaps more accurately be described as a market for the transfer of licences to operate taxis.
11. ESTM in turn relies on an affidavit of its director, Mr David Austin, dated 9 December 2016. Mr Austin's evidence is that ESTM leases taxi licences, (implicitly, as distinct from taxi plates) including the taxi licences that are allocated to the number plates in issue in this application. It should be recognised that the clarity of the description of ESTM's business, in that respect, is not entirely matched by the clarity of ESTM's agreements with the Company to which I have referred above. Mr Austin in turn refers to the form of agreement to "lease" that licence to a taxi operator, to which I have referred above. Mr Austin's evidence is that, although the documents are titled "Lease of Taxi Plate", they provide for a lease of the licences under the Passenger Transport Act. Mr Austin in turn gives evidence as to the operation of the taxi licensing regime and that an allocated licence plate (as distinct from a taxi licence) remains the property of RMS and also refers to the process of replacement of lost or stolen number plates. Mr Austin's evidence is, consistent with the statutory regime to which I will refer below, that a number plate cannot be used on a taxi without the applicable licence with which it is associated.
12. The Second Respondent, CCN, relies on the affidavit of its General Manager of Fleet Services, Mr McGregor, who gives evidence of CCN's process for leasing taxi licences under the Passenger Transport Act, although he fairly acknowledges that that process is commonly referred to in the industry as leasing "taxi plates". Mr McGregor gives broadly similar evidence to Mr Austin as to the process of licensing and dealing with taxi plates issued by RMS.

Whether s 267 of the PPSA applies

1. The proceedings ultimately turn on a narrow question, namely whether s 267 of the PPSA applies in respect of taxi licences (or as Mr Mirzai would characterise it, taxi plates) leased by ESTM and CCN to the Company. That will depend, as I will note below, on whether ESTM or CCN had a "security interest" in the relevant property, whether the statutory licence to operate the taxi or the licence plate itself. A "security interest" for the purposes of the PPSA includes the interest of a lessee under a "PPS lease", by reason of s 12(3) of the PPSA, and a "PPS lease" includes a lease or bailment of goods for a term of up to one year, where possession has continued for more than one year, as I have noted above.
2. The critical step in the liquidator's submission turns on the application of s 267 of the PPSA which provides, relevantly, for the vesting of a "security interest" held by a secured party (relevantly, for present purposes, ESTM or CCN) in the grantor (relevantly, the Company) immediately before, relevantly, a winding up order is made, if that agreement gives rise to a security interest for the purposes of the PPSA, and the secured party's interest, as here, is not registered. Mr Mirzai refers to several cases dealing with the rationale and operation of the vesting provisions, which are not controversial in this case.
3. Mr Mirzai also refers to the broad structure of the relevant agreements between ESTM and CCN on the one hand and the Company on the other and submits that, on their proper construction, they are "lease arrangements" in respect of the taxi plates. That submission, in one sense, accurately reflects the terms of the agreements, although I noted above that the agreement used by CCN involved a greater recognition that what was ultimately being dealt with was the licence to operate the taxi. However, it seems to me that that submission requires a significant qualification, because those agreements must be construed in a manner that will allow them commercial efficacy, in the relevant circumstances, as conferring a right upon the taxi operator to operate the taxi. Where the use of the taxi plate, without dealing with the relevant licence, would not confer that right, then the agreements must be read in a manner that gives attention to the right to operate the taxi that arises under the relevant legislation. To put that proposition another way, it was plainly not the parties' intention, notwithstanding the drafting of the agreements, that they deal only with the licence plate that was to be attached to the front and rear of the taxi, as distinct from the right to operate the taxi.
4. Mr Mirzai also refers to the question whether the arrangement is properly characterised as a lease or a licence and to the authorities that treat that as a matter of substance, and not of form. Mr Mirzai characterises these agreements as a lease of the taxi plates. In doing so, he draws on general law principles as to the nature of a lease. It seems to me that limited assistance is to be obtained from such principles, where the legislature can, if it so chooses, authorise a dealing with property, described as a lease, even if that dealing would not constitute a lease at general law. It seems to me that s 32DB of the Passenger Transport Act has that effect, so far as it expressly contemplates that a taxi licence may be let or sublet without the approval of RMS. It seems to me not to the point to submit that, generally, a licence could not be leased, where the Passenger Transport Act specifically authorises that course. Contrary to Mr Mirzai's oral submissions, it does not seem to me that the legislature had in mind that the permission which it granted for the letting of the licence should be construed instead, as though it contemplated a dealing with the licence plate, as distinct from the statutory licence to operate the taxi to which the section refers.
5. Mr Mirzai submits that, since (on his submission) those agreements are directed to dealings with the "taxi plates" and those taxi plates are "property" and also "personal property" for the purposes of the PPSA, then each of the agreements gave rise to a "PPS lease" for the purposes of s 13(1) of the PPSA meaning, inter alia, a lease of goods, relevantly, for a term of up to one year that continued, as I have noted, for more than that period. The last step in that submission is that ESTM and CCN are therefore "secured parties" for the purpose of the PPSA and that, where no financing statement was lodged to perfect the security interest, s 267 therefore applies to the taxi plates. Mr Mirzai there draws in aid the purpose of s 13 of the PPSA, which he described as directed to ensuring that a risk of loss which arises where property is put in the hands of the third party will be avoided, by disclosure of the relevant security interest. That submission broadly reflects the purpose of s 13 of the PPSA, so far as it emerges from the terms of the legislation.
6. However, it seems to me that that submission also requires one significant qualification, namely that s 13 of the PPSA does not extend to all leases or all bailments of all items, but only to leases and bailments of "goods", as defined in the PPSA. The term "goods" is in turn defined in s 10 of the PPSA, critically, as personal property that is tangible property, including specified matters. Accepting that the legislative purpose has the content that Mr Mirzai attributes to it, the legislature has not extended that purpose beyond tangible property. Mr Mirzai submits that it has not done so because a lease or bailment could not arise other than in respect of tangible property. That, however, turns upon an assumption, which is here falsified by the facts, that the legislature could not create, for its own reasons, a concept of leasing property that is not tangible property, relevantly, in the present case, the licence to operate a taxi cab.

The nature of the right to operate a taxi under the Passenger Transport Acts

1. Mr Mirzai's submissions to this point largely focus on the taxi plates themselves, rather than on the licence to operate the taxis, no doubt because the relevant agreements tend to focus on the taxi plates (as distinct from the relevant licences) and those taxi plates could be characterised as "goods" for the purposes of s 13 of the PPSA. Mr Mirzai does, however, acknowledge the existence of the regulatory structure in respect of taxi licensing under the Passenger Transport Act and recognises that a licence, under Part 4 Div 4 of that Act is essential for the operation of a vehicle as a taxi cab. It is necessary to say something further as to the scope of that Act, which was addressed by Mr Horobin, who appears for ESTM and CCN, in some detail in his submissions.
2. Section 3 of the Passenger Transport Act provides that a taxi cab is a motor vehicle that provides a public passenger service and is made to ply or stand for hire in a road or road-related area to procure passengers. Section 32 provides for RMS to license motor vehicles as taxi cabs, in accordance with Part 4 Div 4 of the Act. Section 32 also recognises that, if a licence (implicitly, to operate the taxi cab) is "let or sublet", the authority of that licence inures to the benefit of the lessee or sublessee to a lessor or sublessor. That provision appears to me to contemplate a dealing with the relevant licence, rather than a dealing with the licence plate. Sections 32DA-32DB provide for a lease, sublease, or transfer of taxi licences. Importantly, it seems to me that those sections are directed to the statutory licence to operate the taxi cab, not the licence plate which is to be attached to it, although Mr Mirzai valiantly sought to contend that s 32DB had the contrary effect in oral submissions.
3. Mr Horobin rightly notes that these provisions establish the statutory authority to operate a taxi and provide the basis for the dealing in the relevant licences under the agreements to which ESTM and CCN are party, albeit that the drafting of those agreements may not have fully or clearly recognised the nature of the licences to which they refer. Mr Horobin also submits, and I accept, that the use of the language "lease" in those sections may be idiosyncratic, so far as it contemplates the creation of a statutory basis for dealing, by way of leasing, with the licences created by the Act.
4. Mr Mirzai in turn submits that a licence to operate a taxi is intrinsically linked with a taxi plate. It seems to me that that proposition is true, in the sense that a vehicle licensed as a taxi must also display a taxi plate. However, it does not lead to the conclusion, which Mr Mirzai seeks to draw from it, that the transfer of a taxi plate (as physical property) amounts to a transfer of the licence to operate the taxi conferred by the Passenger Transport Act. It seems to me that, with the greatest respect to the subtlety of Mr Mirzai's submissions, that would turn the legislative regime for the letting or subletting of licences (rather than taxi plates) established by the Passenger Transport Act on its head. Mr Mirzai in turn submits that the possession of a taxi plate entitles a third party to operate a taxi cab, with the implication that the liquidator, if the physical taxi plate is vested in him, can deal with it on the basis that it confers a statutory licence to operate the taxi to follow. It seems to me that that proposition also cannot be accepted. To the contrary, the possession of a taxi licence issued under the Passenger Transport Act authorises the operation of a taxi, and the physical possession of a taxi plate is ancillary to the right to operate a taxi conferred by that licence.
5. Mr Mirzai submits, with apparent reference to the terms of the agreements entered into by ESTM and CCN, that a licence could not be "leased" other than by leasing the taxi plates. Again, I do not accept that submission because, as I have noted above, s 32DB of the Passenger Transport Act specifically contemplates that a licence may be let or sublet, and a licence that the legislature creates is a licence that it can also authorise to be dealt with in such manner as it chooses including by leasing it. In any event, even if that proposition were not accepted, an alternate view is open that the statutory reference to a "letting" of the relevant licence is to something in the nature of a sublicensing.
6. I should note for completeness that Mr Mirzai has also drawn attention to the Passenger Transport Act 2014 (NSW), although the relationship between that Act and the Passenger Transport Act 1990 is not entirely clear. Nothing turns on that question for present purposes, since Part 6 of the Passenger Transport Act 2014 is in corresponding terms to Part 4 of the Passenger Transport Act 1990 to which Counsel have given attention.

The Respondents' Submission

1. It was ultimately not necessary for me to hear oral submissions from Mr Horobin, who, as I have noted above, appears for ESTM and CCN, beyond the matters which he had addressed in written submissions. I should, however, briefly identify the primary submissions which he puts, in written submissions, in opposition to the liquidator's claim and Mr Mirzai's response to them.
2. First, Mr Horobin submits that a "PPS lease", as defined in s 13 of the PPSA, is a lease of, relevantly "goods", which are defined in s 10 of the PPSA, as "personal property that is tangible property" with several inclusions that are not presently relevant. It will be apparent from what I have said above that I do not accept that the relevant agreements fall within that concept, since it seems to me that those agreements, notwithstanding the difficulties in their drafting to which I have referred, were directed not merely to, or primarily to, a dealing with a physical taxi plate, but to the right to operate the taxi which was conferred by the licensing regime under the Passenger Transport Act. That right was not tangible property, any more than a patent, or a copyright, or any other form of statutory licence is tangible property, and it was therefore not within the definition of "goods" in s 10 of the PPSA, and those agreements were therefore not "PPS leases" within s 13 of the PPSA. It may be that, so far as such an agreement did address the physical taxi plate itself, then that alone could be characterised as tangible property and as "goods" within the meaning of s 10 of the PPSA. It is not necessary to determine that question since, as I will note below, nothing would be achieved by a vesting of the taxi plate itself in the Company, which did not carry with it a right to operate the taxi.
3. Mr Mirzai responds that an acceptance that a "lease of a licence" can exist, and that the taxi plates "can be divorced from the taxi licence linked to such plates" would prefer the form of the arrangement over its substance. Mr Mirzai also submits that it would: "treat the conferral of exclusive possession of personal property as a mere incident of that right with a view to circumventing the requirements and consequences of the PPSA." It does not seem to me that that submission answers the difficulty with the liquidator's analysis. It is not necessary to accept that a lease of a licence can exist, at general law, to recognise that s 32DB of the Passenger Transport Act expressly recognises a letting or subletting of the licence to operate a taxi. It is also not necessary to divorce the taxi plates from the statutory licence, but only to recognise that the licence is the critical aspect of the power to operate a taxi, and the taxi plate is an incident of it, not the reverse. This does not circumvent any requirement or consequence of the PPSA, but properly applies the PPSA in the context of the taxi licensing regime established by the Passenger Transport Act. There is also no inconsistency with any legislative intent under the PPSA to regulate long term leases of personal property, where the relevant agreements are not PPS leases, so far as they are directed to the statutory licence to operate the taxi as distinct from the taxi plates.
4. Mr Horobin also submits that a "licence" is not a security interest by reason of s 12(5) of the PPSA, so that the PPSA also does not apply to the relevant agreements on that basis. That section expressly excludes a licence from the concept of "security interest" adopted in the PPSA. The term "licence" is in turn defined in s 10 of the PPSA as including, inter alia, if transferable by the licensee, a right, entitlement or authority to provide services. Mr Mirzai responds that a licence can be "property" for the purposes of the PPSA and can be collateral over which a security is taken. It is not necessary to address this question further, where I have accepted the more fundamental submission put by Mr Horobin, that the relevant agreements did not grant a "security interest" under s 13 of the PPSA in respect of the statutory licence to operate the taxi, because they did not involve a dealing with personal property that was "tangible property" and within the meaning of "goods" in s 10 of the PPSA in that respect.
5. I note, for completeness, that Mr Mirzai points out that the New South Wales legislature had not expressly excluded taxi plates from the scope of the PPSA, although the Personal Property Securities (Consequential Repeals and Amendments) Act 2011 (WA) had done so. It is generally difficult to reason backwards from the absence of a specific exclusion in legislation. Here, it seems to me that the absence of such an exclusion takes matters no further, because, if the construction of the agreements and the Passenger Transport Act for which Mr Horobin contends and which I have accepted is correct, then the right to operate the taxi conferred by the statutory licence arising under the Passenger Transport Act was not within the scope of the relevant provisions of the PPSA and there was no need for a legislative exclusion from it.

Conclusion

1. It seems to me that the directions, and declaration, sought by the liquidator should therefore not be made. First, the consequence of the conclusions that I have reached above is that a right to operate a taxi, arising from the statutory licensing regime under the Passenger Transport Act, is not the subject of the relevant provisions of the PPSA and cannot vest in the liquidator under s 267 of the PPSA. In those circumstances, as Mr Mirzai has fairly accepted, there can be no utility in a direction to the liquidator that he would be entitled to deal with the physical taxi plates since any dealing with the taxi plates could not confer the right to operate the taxi on a purchaser.
2. It is therefore not necessary to address further difficulties which might arise in the form of directions and declaration, including the fact that, so far as a dealing with the taxi plates themselves is contemplated, RMS, which is their owner, has not been joined as party to the proceedings and has not had an opportunity to be heard, and those who hold the licences to the taxi plates managed by ESTM have also not been joined as parties to the proceedings and have also not had an opportunity to be heard. It is also not necessary to address the question of any amendments which might have needed to be made to the directions to remove references to the manner of sale or the exercise in the sale contracts, which could not properly have been the subject of directions on the evidence presently before the Court.
3. In the result, the interlocutory process brought by the Applicant liquidator should be dismissed. I have been advised that an agreement has been reached between the parties that there should be no order as to the costs of the application, reflecting the need for determination of this question in the interests of the Respondents and in the interest of the liquidation. There is of course no difficulty with giving effect to such an agreement where it is reached between the parties and there accordingly should be no order as to the costs of the application.

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