14 Following Jackgreen's suspension, the final balance of Jackgreen's account with AMEO was calculated. The result was a positive sum of more than $1 million in favour of Jackgreen. AEMO does not dispute its liability to make this payment to Jackgreen. The only question is whether, in a physical sense, the payment should be directed to the receivers or to the deed administrators.
15 The activities of the plaintiffs as receivers and managers have been confined to collecting debts for the supply of electricity by Jackgreen up to cessation of its business on 18 December 2009. The plaintiffs have collected debts existing at the time of their appointment and raised (and received payment of) final bills on customer accounts up to 18 December 2009. A position has apparently been reached where this process is complete and the plaintiffs would appropriately retire - were it not for the uncertainty they regard as existing on the question of their personal liability on which they consider that no satisfactory explanation or assurance has been received from the Department of Mines and Energy, QCA and AEMO.
16 In relation to the matters just described, the receivers and Jackgreen seek relief as follows:
"1. The Court declares that any amount payable by the Second Defendant to the Second Plaintiff pursuant to paragraph 3.15.13 of the National Electricity Rules falls within the definition of 'Secured Property' in the Charge provided by the Second Plaintiff to Australian Executor Trustees Limited dated 6 November 2007 and registered No. 1545824 in the register of company charges at the Australian Securities and Investments Commission.
2. The Court orders that the Second Defendant pay any amount presently due to the Second Plaintiff pursuant to paragraph 3.15.13 of the National Electricity Rules to the First plaintiffs as receivers and managers of the Second Plaintiff."
Background to the second issue
17 The second aspect of these proceedings (concerning the possibility of personal liability of the receivers and their entitlement to the protection) arises from correspondence to which I now turn.
18 On 5 March 2010, QCA wrote to Mr Arnautovic, one of the receivers, referring to complaints of overcharging or otherwise irregular charging received from unnamed former customers of Jackgreen. The letter said that it appeared that Jackgreen had, in respect of the matters mentioned, breached certain provisions of the Electricity Industry Code and the Electricity (Retail Billing Guarantees Service Level Scheme) Code. Reference was also made to certain reporting obligations which, it was said, Jackgreen had not performed.
19 After referring to the apparent breaches and drawing attention to ongoing requirements, QCA's letter said:
"Failure by Jackgreen to comply with its Code obligations may result in the Authority issuing you, as controller of Jackgreen, with a (public) Warning Notice under section 120S of the Electricity Act 1994 which, if not complied with, may result in the Authority applying to the Supreme Court for civil penalty orders of up to $500,000 for a corporation or $100,000 for an individual."
20 In a response dated 31 March 2010, Mr Arnautovic commented on the substantive matters raised and said:
"You assert in your letter that in the event Jackgreen fails to comply with its obligations under the relevant codes, that the Authority will issue a warning notice to me personally as Jackgreen's controller.
Section 120S of the Electricity Act 1994 (Qld) ( the Act ) empowers the Authority to issue a warning notice to an "electricity entity". Given that I am not an "electricity entity", I am unsure on what basis the Authority claims it is entitled to issue a warning notice to me personally for any alleged breach of the relevant codes by Jackgreen. I would appreciate you confirming the Authority's position on this issue."
21 QCA wrote again to Mr Arnautovic on 14 April 2010. After making certain observations and requests in relation to alleged overcharging, the letter said:
"If these matters cannot be resolved promptly, given the time that has already elapsed, the Authority will have to consider issuing Jackgreen (Jirsch Sutherland as receiver and manager of Jackgreen) with a (public) Warning Notice under section 120S of the Electricity Act 1994 requiring it to comply with its obligation under the Code and referring the matter to the regulator (Queensland Mines and Energy)."
22 The receivers' solicitors wrote to QCA on 30 April 2010 in response to the letter of 14 April 2010. Their letter contained a paragraph as follows:
"Your letter makes reference to issuing a warning notice to our clients. Section 120S of the Electricity Act 1994 empowers the QCA to issue a warning notice to an electricity entity . The definition of electricity entity in s 22(1) is an entity that is a participant in the electricity industry (being generation, transmission, distribution and retail entities who hold the relevant authority). As the receivers and managers do not fall within the definition of an electricity entity we fail to see how section 120S can apply to our clients as receivers and managers of Jackgreen."
23 Further correspondence in similar vein passed between Mr Arnautovic, the receivers' solicitors, QCA and the Queensland Government (Department of Mines and Energy) over the following weeks. In a letter of 28 June 2010, the receivers' solicitors said:
"Our clients remain of the view that they, as receivers and managers, do not fall within the definition of an electricity entity and as such consider there is no basis for the Authority to issue a warning notice and /or obtain civil penalty orders against them personally for any alleged breach of the electricity Codes by Jackgreen.
Despite previous requests and noting the very serious nature of the allegation and pecuniary penalty, the Authority has neither confirmed the basis on which the receivers can be liable under section 120 of the Electricity Act 1994 or withdrawn its previous threats that the receivers may be personally liable for a civil penalty order for alleged breaches by Jackgreen of the relevant Codes."
24 QCA said in a reply of 30 June 2010:
"While you may be of the view that your clients do not fall within the definition of a retail entity, the advice provided by the Regulator (the Assistant Director-General of the Department of Employment, Economic Development and Innovation (DEEDI) to Jirsch Sutherland on 26 February 2010, set out the obligations on Jackgreen, and the Receiver and Manager of Jackgreen, given that Jackgreen continued to hold an electricity Retail Authority in Queensland."
25 Since reliance was here placed on a letter of 26 February 2010 from the Department of Mines and Energy, it is appropriate to set out in full the text of that letter (addressed to Mr Arnautovic, as receiver and manager of Jackgreen):
"Dear Mr Arnautovic
I am writing to you in your role as joint Receiver and Manager of Jackgreen (International) Pty Ltd (Jackgreen), an electricity retail entity currently licensed in Queensland.
A number of complaints have been received from former customers of Jackgreen in Queensland indicating that they have received a final bill from Jackgreen seeking recovery of:
(1) The final payment owed under their contract with Jackgreen (prior to the happening of the Retailer of Last Resort event);
(2) an amount already paid in respect of the previous bill issued to them by Jackgreen; and
(3) a late payment fee of $10.00.
I understand Mr Edward Harriman, Senior Accountant of Jirsch Sutherland, has been contacted by the Energy Ombudsman Queensland and the Queensland Competition Authority (QCA) in relation to this matter.
Jackgreen continues to hold a Retail Authority in Queensland, issued under the Electricity Act 1994 (the Act). As such the company and its administrators are subject to Queensland legislative requirements, including those relating to the billing of customers.
Under section 55E of the Act, all holders of Retail Authorities in Queensland are required to comply with all codes applying to the retail entity under the Act. Jackgreen is therefore subject to the Electricity Industry Code and I request that you take immediate action to comply with section 4.11.3(a)(ii) of the Code in relation to the overcharging of customers. I have provided section 4.11 of the Electricity Industry Code entitled 'Undercharging and overcharging' as an enclosure to this letter for your convenience.
The provisions of the Electricity (Retail Billing Guaranteed Service Level Scheme) Code should also be complied with in relation to this matter. More specifically, Jackgreen (as a retail entity under that Code) must now use its best endeavours to automatically give a Guaranteed Service Level rebate to those customers to whom it has issued an electricity bill that contained a material error (refer to the various provisions under section 2.2 of the Code which are enclosed with this letter for your convenience.
I refer you also to section 80 of the Electricity Regulation 2006 (the Regulation), which provides that a customer affected by a Retailer of Last Resort (ROLR) event is not liable to pay the defaulting retailer, or an insolvency official for the defaulting retailer, for services provided after the ROLR event.
Section 80 should be read in conjunction with section 74 of the Regulation. Section 74 of the Regulation declares part 3 of the Regulation ('Retailer of last resort scheme') to be a Corporations legislation displacement provision for the purposes of the Corporations Act 2001 (Cth), section 5G, in relation to the provisions of chapter 5 of that Act.
The effect of section 74 is that the powers available to external administrators of corporations pursuant to chapter 5 of the Corporations Act 2001 must be exercised subject to Part 3 of the Regulation and which includes section 80 (to the extent there is an inconsistency).
Therefore, if a final bill sent by Jackgreen to customers includes any charges for electricity supplied after the ROLR event occurred, this amount would be considered an overcharged amount, together with any billing for amounts previously paid and the late payment fee, and dealt with in accordance with the relevant Codes.
Please be aware that breaches of the legislation and Codes may be subject to enforcement action by the Regulator (the Director-General of the Department of Employment, Economic Development and Innovation) and the QCA. Enforcement action by the Regulator can include monetary penalties of up to 1333 penalty units ($133,000) for each contravention, and penalties imposed by the QCA can be up to $500,000 for companies and $100,000 for individuals.
I seek your prompt action in dealing with this issue to ensure no further inconvenience is experienced by customers, in relation to the failure of Jackgreen. If you require any further information please contact Ms Phyllis Davey of the Department of Employment, Economic Development and Innovation on 07 3239 0038."
26 It is, I think, fair to say that, while AEMO, QCA and the Department pointed out in the letters to Mr Arnautovic and the receivers' solicitors what were seen as breaches of applicable provisions by Jackgreen and the consequences that might flow from any such breaches (including a civil penalty order made by the Supreme Court of Queensland under s 120X of the Electricity Act 1994), there was no direct response to the question, posed by Mr Arnautovic and his solicitors on several occasions, whether it was suggested that such consequences might be visited upon the receivers personally.
27 The relief the plaintiffs seek in relation to the second issue is as follows:
"3. The Court declares that the First Plaintiffs are not an electricity entity within the meaning of section 120X of the Electricity Act 1994 (Qld).
4. The Court directs, pursuant to Corporations Act s 424, that the First Plaintiffs would be justified, upon their retirement as Receiver and Managers of the Second Plaintiff in retaining from the assets of the Second Plaintiff an amount of $500,000 plus an amount reasonably calculated by them up to a maximum of $150,000 on account of costs estimated to be incurred in respect of any proceedings taken against them personally by the Third Defendant for breaches of the Queensland Electricity Code."
The receivers' position and powers
28 The position occupied by the receivers and the powers they have are defined, in the first instance, by the terms of the charge under which they were appointed. The power of the chargee to appoint a receiver was created by clause 12.11(a). Clause 12.11(c) authorised the chargee to:
"remove the Receiver, appoint another in his or her place if the Receiver is removed, retires or dies, and reappoint a Receiver who has retired or been removed;"
29 Powers of a receiver so appointed come from clause 13.2:
"(a) A Receiver will have the right in relation to any property in respect of which the Receiver is appointed to do everything that the Chargor may lawfully authorise an agent to do on behalf of the Chargor in relation to that property and without limitation, a Receiver may in relation to that property exercise:
(i) the rights capable of being conferred upon receivers and receivers and managers by the Corporations Act and the laws of any relevant jurisdiction;
(ii) the rights set out in clauses 12.3 to 12.10 inclusive;
(iii) the rights of the Chargor and the directors of the Chargor; and
(iv) any other rights the Lender may by written notice to a Receiver give to a Receiver.
(b) The Lender may by written notice to a Receiver at the time of a Receiver's appointment or any subsequent times give any rights to a Receiver that the Lender thinks fit."
30 It is necessary to refer also to the provisions of the deed of 23 December 2009 by which the chargee appointed the receivers:
" Appointment
(a) The Chargee appoints the Receivers, jointly and severally, to be receivers and managers of the Chargor.
(b) The Receivers, without limitation, are vested with and have all the powers, authorities and discretions as are available to receivers and managers appointed under the provisions of the Charge whether at law, in equity, by statute or otherwise.
(c) The Receivers accept the appointment.
Agency
(a) To the full extent permitted by law the Receivers are and act as agents of the Chargor.
(b) The Chargor is solely responsible for the Receivers' acts and defaults and for the Receivers' remuneration unless and until the Chargee otherwise directs in writing and the Chargee is NOT responsible for the Receivers' acts or defaults to any person having dealings with them on any account whatever.
(c) The Chargee declares that save as otherwise directed in accordance with the provisions of the Charge or unless otherwise required by law, all surplus moneys from time to time held by the Receivers (excluding their remuneration, costs, expenses and charges) must be accounted for to the Chargee.
Termination
(a) This appointment is made without prejudice to and with full reservation of the Receivers and as to the powers, authorities and discretions of the Chargee.
(b) The Chargee may at any time revoke the Receivers' appointment as receivers and managers contained in this instrument by notice in writing to the Receivers, but any act done by the Receivers prior to receiving such notice will be valid as if such notice had not been executed."
31 From the charge and the deed of appointment, several basic (and quite uncontroversial) propositions may be extracted: first, the receivers are agents of Jackgreen (which, by its execution of the charge, consented to the receivership regime for which it provided); second, the chargee accepts no responsibility for the acts and defaults of the receivers; third, it is the function and responsibility of the receivers to account to the chargee for moneys received, subject to such applications as are made in the proper performance of the receivers' functions; fourth, the receivers may, if they wish, resign; and, fifth, if the receivers do resign, it is open to the chargee to appoint another receiver in their place.
Decision on the first issue
32 The theoretical contest here as to the right to receive the money for Jackgreen is between the receivers and the administrators of the deed of company arrangement. I refer to it as a theoretical contest because, in reality, the administrators do not claim to be the appropriate recipients.
33 The course the declaration and order in items 1 and 2 at paragraph [16] above contemplate is obviously the correct one. The charge under which the receivers were appointed was a charge over the whole of the property of Jackgreen, present and future. The chose in action of Jackgreen as against AEMO, whenever it arose, is caught by the charge. The receivers appointed by the chargee are therefore entitled to receive the proceeds of the chose in action.
34 The declaration and order in items 1 and 2 at paragraph [16] above will therefore be made.
The second issue - the statutory regime
35 The question whether the receivers are an "electricity entity" as defined by the Electricity Act 1994 (Qld) is to be approached, in the first instance, by reference to s 22 of that Act:
"(1) An electricity entity is an entity that is a participant in the electricity industry.
(2) The following entities are the participants in the electricity industry--
(a) generation entities;
(b) transmission entities;
(c) distribution entities;
(d) retail entities."
36 It is thus made clear that an entity is an "electricity entity" only if it falls within one of the categories in s 22(2). Subsequent provisions identify the persons within each category. Thus, for example, s 25 states that a "generation entity is a person who holds a generation authority", while s 29, s 37 and s 46 respectively make like provision in relation to transmission entities, distribution entities and retail entities (referring, in each case, to a "person who holds" an authority of the corresponding designation). Provisions ancillary to each provision constituting and defining a particular category of entity then state what an authority of the particular kind authorise its holder to do and specify the conditions to which an authority of that kind is subject: see, in relation to s 25, ss 26 to 28; in relation to s 29, ss 30 to 36A; in relation to s 37, ss 38 and 39; and in relation to s 46, s 47 and ss 55D to 55G.
37 The clear effect of the provisions mentioned is that a "person" (the expression used in each of s 25, s 29, s 37 and s 46) cannot be an "entity" within any of the stated categories of "electricity entity" unless the person is the holder of an "authority" granted under the Electricity Act.