16 I would not have accepted this argument. An agreement not to terminate a lease for non-monetary defaults that cannot be rectified is not the same thing as an agreement to waive or excuse the breach. The former agreement constrains one type of action only - namely, termination of the lease; it does not constrain or prevent reliance on a non-monetary default for any other purpose (for example, claiming damages for the breach). In my view, if there were an implied covenant not to suffer an insolvency event, clause 4.5 of the deed would not operate as a waiver or excuse of such a breach for the purposes of clause 17.3.2.
First purported exercise - liquidator's authority
17 Mr Knoll, for the defendants, submitted that the receiver did not have authority to exercise the option, at least without the approval of the liquidator or of the court, Winners Circle having gone into liquidation. He invoked, inter alia, (CTH) Corporations Act 2001, s 420C(1), which provides that a receiver of property of a corporation that is being wound up may carry on the corporation's business with the written approval of the corporation's liquidator or the approval of the Court. However, s 420C(2) provides that subs (1) does not affect a power that the receiver has otherwise than under that subsection.
18 The power of a receiver to deal with corporate assets the subject the security after liquidation, otherwise than under s 420C(1), has been considered in a number of cases. In Gaskell v Gosling [1896] 1 QB 669, Rigby LJ (whose dissenting judgment was upheld in the House of Lords) said (at 699-700):
… what, then, was the effect of the winding-up order? It could not give the company rights which it did not before possess; for instance, the right of revoking the appointment of the receiver, or withdrawing from his control and management any of the property committed to him, that being the property, first of all, of the debenture-holders, and only belonging to the company as to the equity of redemption expectant on the mortgages to them. But, even if there were any such right on the part of the company, its non-exercise could not make the trustees principals. No doubt the company was incapacitated by the winding-up order from carrying on business, and the receiver could not create debts which would be provable in the liquidation against the unmortgaged assets of the company - that is to say, the uncalled capital, if any there were. In other words, he could no longer pledge the credit of the company. But it seems that he could realise the trade assets and employ them in further trading so long as he was not stopped by the trustees for any of the debenture-holders.
19 In Gough's Garages Pty Ltd v Pugsley [1930] 1 KB 615, the company had issued a debenture charging all its undertaking and assets in favour of the debenture holders. On 22 April 1929 it gave notice to its landlords requiring them to grant it a new lease. In July 1929, the debenture holders appointed a receiver. The landlords having failed to comply with the request for the grant of a new lease, the receiver on 23 September 1929 commenced an action in the county court in the name of the company to obtain the grant of a new lease. On 15 October, a winding up order was made and a liquidator appointed. The landlords objected that an order having been made to wind up the company, the receiver could not maintain the action for a new lease. The County Court judge upheld that objection, but was overruled in the Court of Appeal, which held that the statutory right to apply for a renewal of the lease was a right given by the company to the debenture holders as part of their security, and that the receiver was entitled to enforce that right notwithstanding the liquidation of the company. Greer LJ said (at 621):
A debenture is given to creditors in order that they may have a security. It is a floating security until there is some kind of default and a receiver is appointed, and the rights under the debenture are actually put in some way into execution by the appointment of a receiver. But the receiver under his debenture has certain powers. In this case, among other powers, he has the power "to take possession of, collect and get in the property charged by this debenture and for that purpose to take any proceedings in the name of the company or otherwise as may seem expedient". That right to take proceedings, was just as much a security for the debt as any other rights given by the debenture. I should not be disposed to put too narrow an interpretation on the word "property". After all, property in law consists of rights. The complete property in any chattel consists of the right to the possession and use of that chattel. But a right of any kind, such as a right to a chose in action, is property which may be pledged to debenture holders just as any other kind of property. It does not matter whether the property in question was in existence in the hands of the company granting the debenture at the time when the debenture was given, or whether it came into existence by the operation of a subsequent Act of Parliament. It seems to me that to deprive the debenture holders of a right, under the part of the debenture that I have mentioned, to realise a valuable right of the company, because the company has gone into liquidation, is to nullify one of the valuable rights given to the receiver by the debenture.
20 Romer LJ said (at 625):
By the debenture the company charged in respect of the moneys due to the debenture holders, "its undertaking and all its property, present and future, including its uncalled capital". I think those words "uncalled capital" are by themselves sufficient to show that the property included in the charge consists of every asset of the company. … Among the assets of the company was the valuable right attaching to the company as a tenant under the lease … to obtain compensation, or a new lease in lieu of compensation, under s 4 and s 5 of the Landlord and Tenant Act , 1927. That is, therefore, a right which is charged in favour of the debenture holders and forms part of their security. The debenture provided that at any time after the principal moneys became due the debenture holders might appoint a receiver, and the receiver so appointed should have power "to take possession of, collect, and get in the property charged by this debenture, and for that purpose to take any proceedings in the name of the company or otherwise as may seem expedient". That clause would therefore empower the receiver duly appointed by the debenture holders to take the necessary proceedings for the purpose of obtaining a new lease in lieu of compensation in respect of which new lease the company had already given notice to the lessors on April 22, 1929.
In pursuance of that power, the receiver commenced these proceedings in the county court and rightly commenced them in the name of the company. When the company was ordered to be wound up by the Court, as it was by an order dated October 15, 1929, that right which had been given by contract to the debenture holders of, among other things, taking proceedings to obtain this new lease in the name of the company was in nowise affected. It is perfectly true (and it has been laid down over and over again) that where, as happened in this case, the debenture or trust deed securing the debentures contains the usual clause, that the receiver appointed under the deed shall be deemed to be the agent of the company, that the winding up of the company, or the compulsory liquidation of the company puts an end to the agency. But it does not put an end in any way to the powers of the receiver. In my opinion, when this liquidation order was made, the right of the receiver to proceed in the name of the company in the county court was in nowise affected.
21 In Visbord v Federal Commissioner of Taxation [1943] HCA 4, (1943) 68 CLR 354, Williams J said (at 382):
The company cannot authorise the receiver to do any act which it is unable to do itself, so that it cannot empower the receiver, after the date of the liquidation, to carry on its business so as to create debts provable against the unmortgaged assets of the company … but the receiver can still continue to exercise his powers in the name of the company although the company is no longer liable for any debts which he may incur in doing so …
22 In Mercantile Credits Ltd v Atkins (1985) 1 NSWLR 670, Needham J held that where the right to carry on any business previously carried on by a mortgagor company is part of the security given to the mortgagee, the winding up of the mortgagor company does not of itself terminate the power of the receiver to carry on the business, as the rights of the receiver stem from the power given in the mortgage to appoint him and to carry on the business as agent of the mortgagor company, and that while the winding up determines the authority of the mortgagor company there is nothing to stop the mortgagee from entering into possession by giving the receiver the mortgagee's authority to carry on the business as an agent of the mortgagee.
23 In Re Yates, National Mutual Life Association v Catco Developments Pty Ltd (1989) 88 ALR 583, a company had charged its undertaking by debenture mortgage to Natwest which appointed a receiver under the debenture on 28 May 1986. On 16 December 1987, the company was wound up. On 5 January 1988, the company obtained a judgment against the debtor which remained unsatisfied. On 27 July 1988, Natwest and the receiver executed a further appointment of receiver. The receiver applied to be substituted as petitioning creditor. Sheppard J held that the application was competent; that the debenture provided authority for the receiver to bring the application in the name of the company; and that the powers conferred on the receiver by the debenture mortgage and his appointment expressly authorised him to make the application, as did the provisions of the then Companies (NSW) Code. His Honour referred with approval to observations of McLelland J in Re Leslie Homes (Aust) Ltd (1984) 8 ACLR 1020:
Winding-up deprives the receiver, under such a debenture as that now in suit, of power to bind the company personally by acting as its agent. It does not in the least affect his powers to hold and dispose of the company's property comprised in the debenture, including his power to use the company's name for that purpose, for such powers are given by the disposition of the company's property which it made (in equity) by the debenture itself. That disposition is binding on the company and those claiming through it, as well in liquidation as before liquidation, except of course where the debenture is vulnerable … or is otherwise invalidated by some provision of law applicable to winding-up.
…
In this state of affairs it does not seem to me to be entirely accurate to say (as is said in some of the cases) that a winding up terminates a receiver's agency (if the receiver is appointed before the winding up) or prevents a receiver's agency arising (if the receiver is appointed, as in the present case, after the winding up). Rather the agency remains or arises (as the case may be) but the receiver's authority as agent is necessarily limited so as to be consistent with the existence of the winding up. Accordingly the agency subsists for the purpose of the receiver's dealing with property charged by the relevant security, but not (it seems) so as to permit the creation of any pecuniary liability provable against the company in the winding up. The subsistence of a receiver's agency, notwithstanding a winding up, was recognised by Street J in Re Landmark Corporation (1968) 88 WN (NSW) (Pt 1) 195 at 196 where his Honour said:
The secured creditor is entitled to stand outside the winding up and to rely upon his security, including his contractual right thereunder to appoint a receiver. The effect of a winding up order is to restrict the company's corporate capacity to pursue its objects in its memorandum: at most its business can thereafter only be carried on so far as is necessary for its beneficial winding up … This consequence ensues irrespective of whether a receiver or the liquidator is in fact exercising a right of custody and control over the company's assets. And so far as a receiver is concerned, although he retains his right to custody and control, the company, whose agent he is, no longer has full and free capacity to continue its business in terms of the objects in its memorandum.
24 In my view, these cases establish that while a winding-up order incapacitates a company from carrying on business, and deprives the receiver of power to bind the company personally by acting as its agent, it does not affect the rights of a receiver given under a security that pre-dated the liquidation, although the company is no longer liable for any debts which the receiver may incur in exercising those rights; and an option to renew a lease is such a right.
25 In the present case, the option contained in the lease formed part of the assets of Winners Circle which it gave to the bank as security. Clause 26.4(c) of the Lease Mortgage empowered the receivers to do anything the law allowed a receiver of the lessee's interest in the lease to do, which includes exercise of an option in the lease. The receiver's capacity to exercise the option is not affected by the subsequent appointment of a liquidator. Its exercise may not impose on the company liabilities provable against the unsecured assets, the consequent liability under the (renewed) lease being that of the receiver. But that does not deny the capacity of the receiver to exercise the option, which formed part of the mortgagee bank's security.
First purported exercise - signature
26 The defendants submitted that the notice of exercise, having been signed by one of the receivers, was not a valid notice for non-compliance with clause 1.13.2 of the lease, which provides that all notices to or by a party to the lease shall:
1.13.1 be in writing addressed to the address of the recipient shown in this lease or to such other address as it may have notified the sender, or to the premises if the recipient is the Lessee;
1.13.2 be signed by the Lessee or (if the Lessee is a body corporate) by a director or secretary of the Lessee or by an authorised officer of the Lessor;
…
27 Mr Knoll submitted that upon the proper construction of clause 1.13.2, where the lessee was a body corporate, only a director or secretary could sign a notice. In my opinion, that is not the true construction of clause 1.13.2. The preferable construction is that the words "(if the lessee is a body corporate)" are intended to expand, and not to limit, the permitted methods of execution by the lessee, and not to exclude other methods of signature authorised by law. In other words, the clause contemplates signature by the lessee in any manner permitted by law, and in addition where the lessee is a body corporate, by a director or secretary of the lessee.
28 In the lease, "Lessee" is defined to mean the named lessee (Copatress Pty Ltd, which subsequently changed its name to Winners Circle), "any permitted assigns of the lessee and the servants, agents, employees, invitees, licencees, contractors and subcontractors of the lessee". For the purposes of this definition of "lessee", the receiver was either or both of the "permitted assign" of the lessee (pursuant to the Lease Mortgage and the Consent Deed) or (at least for the purpose of giving notice of the exercise of the option) the agent of the lessee. As already mentioned, clause 26.4(c) of the Lease Mortgage authorised the receiver to do anything the law allowed a tenant of the land or a receiver of the lessee's interest in the lease to do; and clause 39 appointed each receiver appointed thereunder as the lessee's attorney, to do anything expedient to give effect to the receiver's rights, including "signing deeds" and "otherwise dealing with [the lessee's] interest in the lease". The Deed of Appointment of the receivers of 25 March 2009 that gave them all the powers, authorities and discretions conferred on the bank or the receivers under the Lease Mortgage (clause 1).
29 Moreover, JBN in the Consent Deed acknowledged the right of the Bank to appoint a receiver of the lessee's interest, and the right of the Bank and the Receiver to exercise their other rights under the Lease Mortgage (clause 5), and specifically acknowledged and agreed that the Bank could exercise all the rights and powers of the lessee under the lease, including the right to renew the lease, as if the Bank were originally named as the lessee (clause 8). The Deed of Appointment delegated to the Receivers all the Bank's powers under the Lease Mortgage or which it was entitled to exercise by law; through this route also - quite apart from the authority derived from the lessee as part of the security granted by the lessee - the receivers were able to exercise the option and execute the notice of exercise as agents for the Bank, as if it were the lessee.
First purported exercise - s 133E
30 Mr Knoll submitted, although I think eventually rather faintly, that Winners Circle's right to exercise the option to renew was extinguished by reason of the circumstance that on 26 May 2009 JBN gave notice under Conveyancing Act, s 133E, and Winners Circle did not within one month thereafter seek from the court relief against the effect of the breaches identified in the notice.
31 At least ultimately, it was accepted that s 133E was irrelevant unless a relevant breach otherwise disentitling the lessee from exercising the option were established. Of the matters referred to in the s 133E notice, those which were potentially relevant were the insolvency events (which I have, above, concluded were not breaches attracting clause 17.3.2), and an alleged non-payment of costs said to have been associated with defaults. However, there was no evidence whatsoever of any such default, or costs, or demand therefore, and this matter was not pursued on behalf of JBN in argument.
32 Accordingly, s 133E is not, in the circumstances, relevant. There was no relevant breach by the lessee of any relevant obligation precluding its entitlement to the option, relief against the effect of which breach might otherwise have been required.
First purported exercise - conclusion
33 It follows that the purported exercise of the option by the receiver on 12 May 2009 was valid and effective. Question 1 should be answered in the affirmative. It follows also that Question 4(a) should also be answered in the affirmative.
Purported assignment of the lease
34 The next major issue pertains to the purported assignment of the lease on 15 July 2009 by Winners Circle to ACN 138 026 150. It far from clear that this issue has practical significance, particularly in the light of the conclusion I have reached in respect of the first purported exercise, and I shall deal with it but shortly.
35 Clause 4.5 of the lease provides for no assignment without consent:
The Lessee shall not during the continuance of this lease assign or transfer the Lessee's interest in the premises or this lease or by any act or deed procure any assignment or transfer, except in accordance with the terms of this lease.
36 The procedure for obtaining consent for such an assignment is then provided for by clause 4.6, relevantly as follows:
4.6.1 This lease may be assigned or transferred if the Lessee requests the Lessor's consent to the assignment or transfer of this lease in writing and shall furnish with that request:
4.6.1.1 Information regarding the financial resources and financial standing, the business experience and retailing skills of the in-going tenant;
4.6.1.2 Particulars of the use of the premises intended by the in-going tenant;
4.6.1.3 Confirmation that the Lessee has complied with paragraph 4.6.2 of this clause.
4.6.2 The Lessor is entitled to withhold consent to the assignment or transfer of this lease in any of the following circumstances:
4.6.2.1 if the in-going tenant proposes to change the use to which the premises are put (unless the Lessor consents to the change of use);
4.6.2.2 if the in-going tenant has financial resources and retailing experience that are inferior to those of the Lessee;
4.6.2.3 If the Lessee has failed to comply with the provisions contained in this clause for requesting and obtaining consent to the assignment or transfer.
4.6.3 If requested by the Lessor, the Lessee shall furnish to the Lessor such further information as the Lessor may reasonably require concerning the financial standing and business experience of the in-going tenant.
4.6.4 The Lessor agrees to deal expeditiously with the Lessee's request for consent to assign or transfer this lease.
…