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Northway Panels v Warry [2018] VSC 581 (24 September 2018)

Last Updated: 4 October 2018

S ECI 2018 1408

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CORPORATIONS – Receivers, managers and controllers – Application to restrain receivers – Jurisdiction over receivers – Where receivers appointed under security instrument - Whether appointment is valid – Whether power of appointment must be exercised ‘reasonably’ – Whether ‘unreasonable’ conduct is a ground for setting aside appointment – Relief refused – Corporations Act 2001 (Cth), s 148A.

PRACTICE AND PROCEDURE – Urgent injunction application – Requirements for interlocutory injunction – Whether plaintiff can show serious question to be tried – Whether balance of convenience favours injunctive relief – Injunction refused.

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HIS HONOUR:

1 By Summons on Originating Motion dated 19 September 2018, as an urgent application, the plaintiffs seek the following Orders:

1. An order pursuant to rule 45.05(2) of the Supreme Court General Civil Procedure Rules 2005 (Vic) that the Court dispense with the requirements of rule 5.03(1) and rule 8.02 with respect to appearance and authorise the Plaintiff to commence the proceeding by originating motion in Form FC.
2. The application be forthwith referred to the Judge sitting in the Practice Court for hearing and determination.
3. That Adrian John Warry and Shane Leslie Deane of Dye & Co. Pty Ltd, Chartered Accountants, of 165 Camberwell Road, Hawthorn East 3123 appointed the Receivers and Managers of the Plaintiff’s on 14 September 2018 be hereby restrained from acting on their appointment as Receivers and Managers of the Plaintiff’s.
4. Admiralty Drive Pty Ltd ACN 107 880 937 be hereby restrained from acting on its appointment documents.
5. Admiralty Drive Pty Ltd ACN 107 880 937 be hereby restrained from filing any documentation as required pursuant to section 427 of the Corporation Law.
6. A declaration pursuant to Section 418A of the Corporations Act 2001 that the purported appointment of Adrian John Warry and Shane Leslie Deane of Dye & Co. Pty Ltd, Chartered Accountants is invalid

7. Such further and other orders as this Honourable Court deems fit.

2 In substance, the plaintiffs seek injunctive relief restraining the first defendants from fulfilling the terms of their appointment as Receivers and Managers under a General Security Deed dated 29 May 2017, associated Specific Security Deeds, and a Loan Agreement also dated 29 May 2017, as varied, between the first and second plaintiffs as borrowers and the second defendant as lender. The plaintiffs also seek orders that the appointment is invalid pursuant to s 418A of the Corporations Act 2001 (Cth) (the Act).

3 Section 418A of the Act provides:

Court may declare whether controller is validly acting

(1) Where there is doubt, on a specific ground, about:

(a) whether a purported appointment of a person, after 23 June 1993, as receiver of property of a corporation is valid; or

(b) whether a person who has entered into possession, or assumed control, of property of a corporation after 23 June 1993 did so validly under the terms of a security interest in that property;

the person, the corporation or any of the corporation's creditors may apply to the Court for an order under subsection (2).

(2) On an application, the Court may make an order declaring whether or not:

(a) the purported appointment was valid; or

(b) the person entered into possession, or assumed control, validly under the terms of the security interest;

as the case may be, on the ground specified in the application or on some other ground.

4 Broadly this application raises two questions:

(a) Is the appointment of the Receivers and Managers invalid?

(b) If so, should the Court grant an injunction restraining –

(i) the second defendant from purporting to appoint the first defendants; and

(ii) the first defendants from fulfilling the terms of such an appointment?

Factual background

5 The plaintiffs to this proceeding are:

(a) Northway Panels (Vic) Pty Ltd (first plaintiff);

(b) Airport West Towing Pty Ltd (second plaintiff);

(c) Northway Properties Pty Ltd (third plaintiff); and

(d) Cocivera Family Pty Ltd (fourth plaintiff).

6 The plaintiffs are collectively referred to as the ‘Northway Group’.

7 A company named ET&S Pty Ltd (ET&S) is related to the Northway Group but is not a party to this proceeding.

8 The defendants to this proceeding are:

(a) Adrian John Warry and Shane Leslie Deane as joint Receivers and Managers (first defendants); and

(b) Admiralty Drive Pty Ltd (second defendant).

9 The first plaintiff operates a panel beating business. ET&S operates a towing business. In its operation of the towing business, ET&S utilises the assets of the second plaintiff (namely tow truck licenses and tow trucks), although there is no formal agreement reflecting this arrangement. ET&S attends vehicle crashes and returns cars to a panel beating business operated by the first plaintiff at premises in Airport West. The first plaintiff then completes the required panel beating work.^[1]

10 The fourth plaintiff also owns a tow truck license which is not presently being utilised.^[2]

11 The first plaintiff is the principal income generating entity within the Northway Group. In addition to servicing the borrowings of the Northway Group, the first plaintiff largely pays the Northway Group’s outgoings, except for petrol, maintenance and other incidental expenses associated with the two tow trucks operated by ET&S.^[3] ET&S is currently trading at a loss.^[4]

12 On 14 September 2018, the first defendants were appointed under the General Security Deeds and Specific Security Deeds in respect of the Loan Agreements by the second defendant, as the Receivers and Managers of a business conducted by the Northway Group.

13 An outline chronology of the relevant loan and security arrangements is as follows:

(a) On or about 29 May 2017 the second defendant advanced the sum of $937,825.67 to the first and second plaintiffs, pursuant to the Loan Agreement, and the first and second plaintiffs indebtedness was guaranteed by the third and fourth plaintiffs.^[5]

(b) In about July 2017 the second defendant entered into a further agreement with the first and second plaintiffs (Deed of Acknowledgement and Variation) pursuant to which the parties agreed to a variation of the Loan Agreement increasing the abovementioned loan commitment to $1.2 million. This varied loan arrangement also extended the operative loan repayment date to ‘one on or before 20 April 2019’.^[6]

(c) On about 29 May 2017 the second defendant and the second plaintiff entered into an agreement (Specific Security Deed No 1) pursuant to which the second plaintiff provided security to the second defendant so as to secure the loan advanced under the Loan Agreement, and pursuant to which the second plaintiff granted collateral security in respect of its tow truck licenses, numbers TOW055 and TOW828.^[7]

(d) On or about 29 May 2017 the second defendant and the fourth plaintiff entered into an agreement (Specific Security Deed No 2) pursuant to which the fourth plaintiff granted certain security to the second defendant to secure the loan under the Loan Agreement, and by which the fourth plaintiff provided collateral security in relation to tow truck license number TOW831.^[8]

(e) On about 29 May 2017, the second defendant and the fourth plaintiff entered into an agreement (General Security Deed No 1) pursuant to which the fourth plaintiff provided security to the second defendant in relation to the loan under the Loan Agreement.^[9]

(f) On about 29 May 2017, the second defendant and the third plaintiff also entered into an agreement (General Security Deed No 2) pursuant to which the third plaintiff provided security to the second defendant so as to secure the loan pursuant to the Loan Agreement.^[10]

(g) On about 29 May 2017, the first plaintiff, the third plaintiff, Ms Marina Cocivera and Mr Carmelo Cocivera guaranteed and indemnified the second defendant in respect of, inter alia, the first and second plaintiffs' performance of their obligations under the Loan Agreement.^[11]

14 On 11 September 2018 the first defendant, Mr Adrian Warry (Warry), Registered Liquidator and Chartered Accountant, completed an investigating accountants’ report into the financial position of the first plaintiff, the second plaintiff and ET&S.^[12]

15 On 12 September 2018, on behalf of the second defendant, Messrs Vince Rizzo and Luke Rizzo wrote to Ms Cocivera attaching a Notice of Default and Demand. The notice alleged several instances of default by the first borrower and second plaintiff, including that:^[13]

(a) the borrower was insolvent as, among other things, it is unable to pay its debt in breach of cl 8(t) of the Loan Agreement, or that it has otherwise suffered an ‘Insolvency Event’ in breach of cl 8(b) of the Loan Agreement;

(b) the borrower has entered into a compromise with the ATO with respect to tax debts in breach of cl 8(t) of the Loan Agreement and cl 8.1(k) of the General Security Deed and Specific Security Deeds;

(c) in the opinion of the lender, there has been a material adverse change in the financial position of the borrower, thereby putting the lender’s security at risk in breach of cl 8.1(v) of the General Security Deed and Specific Security Deed; and

(d) the borrower and guarantors have failed, neglected or refused to provide information requested by the lender’s investigating accountants in breach of cls 9(z) and 14.8 of the Loan Agreement.

16 The Notice of Default and Demand concludes:

The Lender hereby demands from the Borrower and each Guarantor repayment of all money owed under the Loan Agreement and all Secured Moneys (as defined in each General Security Deed referred to in the Schedule) (Moneys Owing) which as at 11 September 2018, totalled $965,714.07 in full by no later than 4.00pm on 14 September 2014 failing which, the Lender will exercise all of its rights under the Loan Agreement and the Securities without further notice.^[14]

17 On 14 September 2018, the first defendants were appointed as Receivers and Managers of the plaintiffs. The Notice to Company of Appointment of Receivers and Managers, effecting the appointment of the first defendants, is dated 14 September 2018 and signed by Messrs Vincent Rizzo and Luke Rizzo.^[15]

The Northway Group’s submissions

Serious issue to be tried

18 In summary, the Northway Group submit the following matters give rise to a serious issue to be tried:

(a) The appointment of the first defendants, is invalid because –

(i) the second defendant provided ‘unreasonably’ short notice in relation to the Northway Group’s default and payment demand to the plaintiffs; and

(ii) it was ‘unreasonable’, in all the circumstances for the second defendant, to appoint Receivers over all relevant assets.

(b) In the circumstances, the second defendant should have provided 7 to 14 days for payment from the date of demand, particularly given that the Northway Group had foreshadowed an objection to the appointment of receivers.

(c) Notwithstanding the terms of the security interest, the Court has the power to ensure that rights thereunder are exercised reasonably.^[16] The Northway Group argue that in these circumstances the Court has power to restrain the unreasonable appointment of a receiver and should do so in this case.

(d) Even if the appointment of the first defendants was valid, the exercise by the Receivers in taking control of the first plaintiff, being the trading entity and the only income producing asset, was disproportionate and ‘unreasonable’ in relation to any need to realise the second defendant’s security interest.

(e) The security provided by the Northway Group exceeds the second defendant’s entitlement under the loan agreement.

19 During argument, the plaintiffs abandoned reliance upon any bad faith by the second defendant in relation to the first defendants’ appointment. The plaintiffs did not seek to dispute the specific breaches of the loan and security agreements, nor did the plaintiffs directly contest the solvency case against the Northway Group.

Balance of convenience

20 On the balance of convenience, the Northway Group contend that their net assets secured to the second defendant are in the sum of $1,937,681, and that they also own assets in the nature of tow truck licenses and tow trucks to the approximate value of $1,420,000. Accordingly, the total net assets which the Northway Group own and which will ultimately be available to meet their obligations under the varied Loan Agreement^[17] are in the approximate sum of $2,391,967.

21 As I understand the Northway Group’s submissions, the matters referred to above in paragraphs [18(d)-(e)] were also put as supporting a balance of convenience favouring the plaintiffs.

22 Further, the first plaintiff also relies on having recently entered into an agreement with BASF Australia. Under this agreement, if the first plaintiff purchases paint products from BASF Australia for the next five years, the first plaintiff will receive an ‘upfront sign on incentive’ of $160,000.00. The first plaintiff asserts that payment is due to be paid by BASF Australia within the next two weeks, and that this money will ensure that it continues trading in the foreseeable future. The Northway Group contend that unless the Receivers and Managers are removed this payment may be jeopardized.^[18]

23 The first plaintiff also points out that it intends to execute a Franchise Agreement with Fix Auto Canada Inc within about a week. The first plaintiff asserts that as a result of the appointment of the Receivers and Managers it is unable to proceed with execution of this prospective Agreement. The Fix Auto Franchise would, the Northway Group contend, ensure the continued viability of the Northway Panels business for many years because that franchise would provide access to Fix Auto's national clients, including leading insurers.^[19]

24 The Northway Group further argued that the consideration of the balance of convenience should take into account the detriment to the first plaintiff if the Receivers remain in place, and in particular, that the agreement with Fix Auto Canada Inc. will probably fall through.

25 The Northway Group also point to:

(a) the potential to lose an injection of cash, being $160,000, which it soon anticipates receiving from BASF Australia; and

(b) the fact that the first plaintiff is preparing an income tax return and financial statements so as to plan and meet its financial obligations. This includes engaging a finance broker with a view to obtaining sufficient finances to pay out the Loan Agreement with the second defendant in full.

26 The Northway Group also contend that, if the Receivers are not removed, the guarantors will suffer significant and irreparable damage, including the possible loss of the Cocivera family home at 31 Faye Crescent in Keilor, Victoria.

27 The Northway Group argue that the appointment of the Receivers and the notification of the appointment of a Receiver to the first plaintiff has had, and will continue to have, a detrimental impact on the plaintiffs’ business, including on the attitudes of customers and suppliers.

28 Further, the Northway Group argue that, even if the harm caused to them was not regarded as irreparable, it would be unjust in all the circumstances to confine the Northway Group to a remedy in damages, especially where the defendants’ ability to meet such damages is unknown. In this respect the Northway Group argue that the second defendant is adequately protected by an undertaking as to damages from the plaintiffs and the securities it holds, which significantly exceed the second defendant’s claim. The Northway Group therefore argue that it is unreasonable for the defendants to remain in control of the first plaintiff, which is the only revenue generating entity in the Group.

29 Finally, the Northway Group point out that the second defendant does not depose to any detriment in the event that it is enjoined.

30 It is submitted by the Northway Group that in this case the magnitude of the harm which would be caused to the plaintiffs were the defendants not to be enjoined, and the absence of harm to the second defendant if enjoined, renders it the most appropriate to grant the injunction which the Northway Group seek.

The Defendants’ submissions

31 In essence the defendants argue that:

(a) the Northway Group is insolvent;^[20]

(b) in the event of a relevant breach by the Northway Group, the Loan Agreement and the Security Deed do not require the second defendant to give notice before appointing a Receiver and Manager under the Loan and Security Agreements with the plaintiffs;

(c) given the terms of the Loan Agreements and the General and Specific Security Deeds, the second defendant is not obliged to act reasonably in relation to the appointment of a Receiver. Rather it is only obliged to act contractually, which has occurred.

(d) the Northway Group has not identified or sought to establish why the appointment of the Receivers was invalid;

(e) in the circumstances, the second defendant has , in any event, acted reasonably in relation to the Receivers’ appointment;

(f) the Northway Group’s assertion as to the current value of its assets is largely unsupported and is not verified by the valuation evidence; and

(g) the Northway Group’s alleged prejudice is not corroborated by any evidence adduced by it on this application.

32 The first defendants also submit that:

(a) The Northway Group’s Summons and Originating Motion seek orders as to the validity of the Receivers under s 418A of the Act. However there is, at all events, no unqualified general power of the Court to remove a receiver;^[21]

(b) Commonwealth Bank of Australia v Oswal^[22] casts doubt on whether an appointor has an obligation to exercise its rights in good faith that is implied into the security instrument;^[23]

(c) For the Northway Group to have an arguable case, it requires specific grounds to be identified in the application. The Northway Group has not attempted to establish or even assert such grounds;

(d) The Court should not grant an injunction to allow the first plaintiff to continue trading temporarily. If the first plaintiff continues to trade, unrestrained, other creditors may well be disadvantaged and furthermore the directors of the Northway Group would be at the risk of trading insolvent;

(e) To succeed in this application under s 418A of the Act for interim or final orders, the Northway Group must show that there is ‘doubt’ on specific grounds about the validity of the receivers' appointment.^[24] This they have failed to do;

(f) The Northway Group do not challenge the second defendant's power and authority to exercise its security rights, nor the manner of execution of the notice of appointment; and

(g) By the Northway Group‘s own evidence, there were defaults under the loan agreement.^[25]

33 There would be no benefit in granting the injunctions sought because, based on the Cocivera Affidavit, the Northway Group’s apparent argument for more time to operate the plaintiffs’ businesses, absent the Receivership, relies on an agreement in relation to ‘Fix Auto Canada’. The prospective Fix Auto Canada agreement has not been concluded and is speculative.

34 The Warry Affidavit sworn 21 September 2018 establishes that the Northway Group and each of the plaintiffs are likely to be insolvent. The Warry Affidavit demonstrates that the first plaintiff is unable to pay its debts as they fall due.

35 The first and second plaintiffs appear to operate solely as trustees of their respective trusts, and hold the relevant assets and secured property to which the first defendants have been appointed, as trust assets.^[26] The relevant Trust Deeds provide that those trustees are removed automatically upon appointment of a Receiver, as has occurred here on 14 September 2018.^[27]

36 Therefore, in the current circumstances, the first and second plaintiffs hold their respective trust assets as bare trustees and can exercise only very limited powers. Further, the trustees, following the appointment of a Receiver, are obliged to refrain from active management that does not fall within the scope of their duty.^[28]

37 Accordingly, the first and second plaintiffs are not in a position to exercise power to operate the first plaintiff as a trading entity.

38 Further, for the foregoing reasons, the first and second plaintiffs would not be empowered to trade hereafter with the trust assets, even if the orders sought by the Northway Group were granted. They are also precluded from entering into either of the possible prospective agreements in relation to ‘Fix Auto Canada’ and the proposed arrangement with BASF Australia.

39 Further, if the injunctions sought by the Northway Group were to be granted, the first defendants would be hampered in their ability to efficiently, expeditiously and at minimal cost undertake their tasks as the Receivers and Managers as a result of the likely delay an interim injunction of the type sought by the Northway Group would cause.

40 In turn, and as a likely result of the delay referred to, there would be prejudice to the second defendant in relation to the recovery of the debt it is pursuing if the injunction sought was granted, and there would also be likely prejudice to other interested parties, including other creditors of the Northway Group for the same reasons.

Considerations

41 In deciding whether to grant an interlocutory injunction, the Court will consider, among other things:^[29]

(a) Whether there is a serious question to be tried as to the plaintiff’s entitlement to relief; and

(b) Whether the balance of convenience favours granting the injunction.

There is no serious issue to be tried

Recent financial woes of the Northway Group

42 In April 2017, the operating entity which was a predecessor to the first plaintiff went into liquidation as a result of unpaid tax and underpaid superannuation.

43 The Northway Group have experienced difficulty meeting their tax obligations since early 2018. At about that time, the Northway Group entered into a tax payment arrangement with the ATO and again entered into further arrangements of this kind in April, May and June of 2018.

The Northway Group have breached their obligations

44 As recently as the end of June 2018, the Northway Group confirmed a further tax arrangement plan with the ATO in relation to unpaid tax in the sum of $140,816.52.

45 The first plaintiff also appears to have substantial forthcoming tax obligations but no apparent likely means to pay.

46 The above arrangements are in prima facie breach of the Loan Agreement^[30] and Specific Security Deed No. 1.^[31] Accordingly, each such arrangement with the ATO prima facie empowered the second defendant to appoint a Receiver and Manager, without the need for any demand or notice in such circumstances.^[32]

47 Two separate independent accountants have recently reported on the Northway Group and their opinions are that the Northway Group is unable to pay its debts as they fall due.^[33]

48 The circumstance referred to in the last preceding paragraph also prima facie constitutes a breach of the Loan Agreement.^[34] The same circumstance also appears to have breached the Security Deeds,^[35] entitling the second defendant to appoint a Receiver and Manager without the need for a demand or notice pursuant to, at page 16, Exhibit ‘MC-12’ of the Cocivera Affidavit.

49 I am also satisfied, on the present material, and for present purposes, that the Northway Group is in default under the Loan Agreement and associated securities and guarantees, by reason of the prima facie instances of default referred to in the Cocivera Affidavit, Exhibit ‘MC-22’ which, amongst other things, describes the Northway Group’s default by reason of insolvency for non-payment of certain debts.

50 Accordingly, the defaults which the Northway Group do not seek to specifically dispute include that:

(a) the first and second plaintiffs being insolvent and unable to pay their debt in breach cl 8(t) of the Loan Agreement, and suffering an suffered an ‘Insolvency Event’ (cl 8(b) of the Loan Agreement);

(b) the first and second plaintiffs have entered into a compromise with the ATO with respect to tax debts in likely breach cl 8(t) of the Loan Agreement and cl 8.1(k) of the General Security Deed and Specific Security Deeds; and

(c) the breaches acknowledged at [35] of the Cocivera Affidavit.

51 Upon default by the Northway Group, the Loan Agreement entitled the second defendant to demand immediate repayment of sums due under that agreement. No period of notice was required.

52 Although the Northway Group sought to argue that the second defendant had unreasonably exercised its power of appointment, the plaintiffs did not seek to put forward a case that the second defendant did not have the power to appoint the Receivers and Managers.

53 Notably, therefore, the plaintiffs have:

(a) Failed to dispute that the breaches of the relevant agreement had not occurred;

(b) Failed to contest the defendant’s assertions that the Northway Group was at material times, and is presently, insolvent.

54 Furthermore, the Northway Group has not sought to set out by reference to the terms of the Loan Agreement and associated security deeds and guarantees why the second defendant’s appointment of the Receivers and Managers is invalid.

55 In my view, there is no present basis to doubt that the appointment of the first defendants is valid and that those Receivers and Managers have taken possession of the relevant assets validly, under the terms of the relevant securities.

56 Accordingly, for the above reasons there is on the current material and submissions no serious issue to be tried in this respect.

Balance of convenience favours the defendants

57 In Bradto Pty Ltd v State of Victoria,^[36] Maxwell P and Charles JA observed:

...whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.^[37]

58 In my view, the Northway Group is prima facie insolvent and accordingly can proffer no sufficient undertaking as to damages.^[38]

59 I do not regard the plaintiff’s identification of assets held by the second plaintiff and third and fourth plaintiffs, which are unsubstantiated by valuation (save for a recent offer in relation to tow truck licenses including TOW 055) to meet or even traverse the case impugning the Northway Group’s insolvency.

60 I also consider the second, third and fourth plaintiffs’ assertions as to the considerable value of these assets, are unsupported by any persuasive valuations. The letter of offer tendered by the plaintiffs at the conclusion of argument is of a weak and unpersuasive nature in relation to the value of its tow truck licences and tow truck vehicles. As a result, I ascribe little weight to the Northway Group’s evidence and assertions as to the value of their real and personal assets.^[39]

61 I am not satisfied that the Northway Group’s net assets exceed or even equal the sum presently owing to the second defendant under the Loan Agreement and associated security deeds and guarantees.

62 Indeed the Northway Group did not contest the current insolvency of the first plaintiff or the defendant’s case that the Northway Group was at material times, and is now, insolvent.

63 I also accept the second defendant‘s submissions that the Northway Group’s proposals to enter a franchise agreement with ‘Fix Auto Canada Inc’ and a further agreement with paint supplier, BASF Australia, are of at least dubious commercial worth and indeed may further compromise the first plaintiff’s commercial position in the near term.^[40]

64 Furthermore, in my view, delay in the proper exercise of the Receiver and Managers duties under and in relation to the securities pursuant to which they were appointed, is likely to generate unnecessary cost for the parties, including the second defendant, and may also for those reasons prejudice other interested parties, including other creditors of the Northway Group.

65 Furthermore, since the first and second plaintiffs appear to now hold the Northway Group’s assets as bare trustees, and are thereby constricted by how they can deal with such assets, it seems unlikely that refusing the injunctive relief sought would in any event aggravate any detriment to the first and second plaintiffs.

66 For the above reasons, were it necessary to take the balance of convenience matters into account, I would conclude that these matters decisively favour the defendants.

Conclusions

67 For the above reasons I find that:

(a) there is no serious issue to be tried;

(b) if it were necessary to decide the balance of convenience, that balance would be decisively in favour of the defendants; and

(c) no injunctive relief of the type sought by the Northway Group is appropriate.

Orders

68 I order that:

1. The plaintiffs’ application by Originating Motion and Summons filed 19 September 2018 is dismissed.
2. The plaintiffs pay the first and second defendant’s costs associated with the hearing of the application on a standard basis.^[41]

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SCHEDULE OF PARTIES

BETWEEN

^[1] Affidavit of Adrian Warry, 21 September 2018 (‘Warry Affidavit’), [8]–[9].

^[2] Ibid [12].

^[3] Ibid [10].

^[4] Ibid [10].

^[5] Affidavit of Marina Cocivera, 19 September 2018 (Cocivera Affidavit), Exhibit ‘MC-9’.

^[6] Cocivera Affidavit, Exhibit ‘MC-11’.

^[7] Cocivera Affidavit, Exhibit ‘MC-12’.

^[8] Cocivera Affidavit, Exhibit ‘MC-13’.

^[9] Cocivera Affidavit, Exhibit ‘MC-14’.

^[10] Cocivera Affidavit, Exhibit ‘MC-15’.

^[11] Cocivera Affidavit, Exhibit ‘MC-16’.

^[12] Affidavit of Vincent Rizzo, 21 September 2018, Exhibit ‘VR-11’.

^[13] Cocivera Affidavit, Exhibit ‘MC-22’.

^[14] Cocivera Affidavit, Exhibit ‘MC-22’.

^[15] Affidavit of Vince Rizzo, 21 September 2018, Exhibit ‘VR-12’.

^[16] In support of this proposition, Counsel for the plaintiff referred to Australian Barter Currency Exchange Pty Ltd v Uniting Church NSW Trust Association Ltd [2009] NSWSC 607 at 609. For reasons referred to below, I am not satisfied that this case supports the proposition.

^[17] Affidavit of Marina Cocivera, 19 September 2018, Exhibit ‘MC-9’ and ‘MC-11’.

^[18] Cocivera Affidavit, Exhibit ‘MC-26’.

^[19] Cocivera Affidavit, Exhibit ‘MC-27’.

^[20] The Northway Group rely on the Investigating Accountants’ Reports dated 5 September 2018 (Affidavit of Vince Rizzo, 21 September 2018, Exhibit ‘VR-10’, p 21) and 11 September 2018 (Affidavit of Vince Rizzo, 21 September 2018, Exhibit ‘VR-11’ p 19–21). These reports make findings that the ‘Group’ is unable to pay its debts, but only focus on P1, P2 and ET&S.

^[21] T24.19–30.

^[22] [2012] WASC 128.

^[23] I note that Oswal was an application for summary judgment. Le Miere J expressed the view that an obligation of good faith was unlikely to be implied but resolved the application on a different basis (at [23]).

^[24] See Kasofsky v Kreegers [1937] 4 All ER 374; Native Bond Pty Ltd v Cant [2015] VSC 203 at [8]. Once that is established, the burden of proof then shifts to the defendants to demonstrate that the receivers’ appointment was valid.

^[25] Cocivera Affidavit, [35].

^[26] Warry Affidavit, 21 September 2018.

^[27] See cl 48 on page 11 of the Trust Deed appointing the first plaintiff as Trustee of the Northwest Panels (Vic) Trust (Warry Affidavit, Exhibit ‘AJW–4’). See cl 48 on page 11 of the Trust Deed appointing second plaintiff as Trustee of the Airport West Towing Trust (Warry Affidavit, Exhibit ‘AJW–5’).

^[28] Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2011) 119 FCR 442 at [21].

^[29] Australian Broadcasting Corp v O’Neill [2006] HCA 46; (2006) 227 CLR 57, 68 (Gleeson CJ and Crennan J).

^[30] See cl 8(t) on page 18 of the Loan Agreement (Cocivera Affidavit, Exhibit ‘MC-9’).

^[31] See cl 8.1(k) on page 16 of Specific Security Deed No. 1 (Cocivera Affidavit, Exhibit ‘MC–12’).

^[32] In the Loan Agreement, see cls 9.1 (Options of Lender) and 10.1 (Protection of Lender) (Cocivra Affidavit, Exhibit ‘MC-9’). In Specific Security Deed No. 1, see cls 8–11, pgs 15-22 (Cocivera Affidavit, Exhibit ‘MC–12’).

^[33] Affidavit of Vincent Rizzo, 21 September 2018, Exhibits ‘VR–10’ and ‘VR–11’.

^[34] Refer to cl 8(b), page 16, and 8(t), page 18, (Cocivera Affidavit, Exhibit ‘MC-9’).

^[35] Refer to cl 8.1(a), page 16; cls 9.1(c) and 10.1, page 18, (Cocivera Affidavit, Exhibit ‘MC-12’).

^[36] [2006] VSCA 89; (2006) 15 VR 65.

^[37] Ibid 73.

^[38] The current prima facie position in relation to the Northway Group’s insolvency appears to give rise to a real risk that the relevant Directors are, by allowing the relevant Northway companies, including the first plaintiff, to trade, perpetrating breaches of s 588G of the Act.

^[39] T29.11–21.

^[40] Second Defendant’s Submission, 21 September 2018, [15].

^[41] Counsel for the plaintiffs did not oppose dismissal of the Originating Motion in addition to the dismissal of the Summons. Nor was there opposition by the plaintiff to the order for costs sought by the first and second defendants encompassing not only the Summons but the Originating Motion (T38.20–28).