FEDERAL COURT OF AUSTRALIA Heard, in the matter of Mondello Farms Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) v Alleasing Pty Ltd [2013] FCA 913 Citation: Heard, in the matter of Mondello Farms Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) v Alleasing Pty Ltd [2013] FCA 913 Parties: ANDREW JAMES HEARD AND ANTHONY JOHN ARTHUR PHILLIPS IN THEIR CAPACITY AS ADMINISTRATORS OF MONDELLO FARMS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 066 901 844 v ALLEASING PTY LTD ACN 008 655 025 and THE TRANSPORT COMPANY PTY LTD ACN 121 749 611 File number: SAD 233 of 2013 Judge: MANSFIELD J Date of judgment: 11 September 2013 Date of hearing: 22 August 2013 Place: Adelaide Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 19 Counsel for the Plaintiff: M Hoffmann QC Solicitor for the Plaintiff: Fisher Jeffries Counsel for the First Defendant: DJ Blight Solicitor for the First Defendant: King & Wood Mallesons Counsel for the Second Defendant: R Mills Solicitor for the Second Defendant: Hunt & Hunt Lawyers Counsel for the Receivers and Managers of the property of Mondello Farms Pty Ltd: K Dow Solicitor for the Receivers and Managers of the property of Mondello Farms Pty Ltd: Finlaysons IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 233 of 2013 BETWEEN: ANDREW JAMES HEARD AND ANTHONY JOHN ARTHUR PHILLIPS IN THEIR CAPACITY AS ADMINISTRATORS OF MONDELLO FARMS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 066 901 844 Plaintiff AND: ALLEASING PTY LTD ACN 008 655 025 First Defendant THE TRANSPORT COMPANY PTY LTD ACN 121 749 611 Second Defendant JUDGE: MANSFIELD J DATE OF ORDER: 11 SEPTEMBER 2013 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. Subject to Order 2, the Plaintiffs are granted leave to sell the following property pursuant to s 442C(2)(c) of the Corporations Act 2001 (Cth): 1.1 a potato washing and cooling line (as comprised and described in Rental Schedule No. E5N0154218 dated 21 February 2012); 1.2 polybagger and Kwik Lok equipment (as comprised and described Rental Schedule No. E5N0154314 dated 23 March 2012); 1.3 computer equipment and software (as comprised and described Rental Schedule No. E5N0154423 dated 25 May 2012); and 1.4 a Sorma packing line (as comprised and described Rental Schedule No. E5N0155135 dated 28 February 2013), (collectively, the Property), which Rental Schedules appear in annexure TAE5 of the Affidavit of Theodora Alice Eszenyi sworn on 19 August 2013, together with the "master" rental agreement dated 1 February 2012 (together, Rental Agreements). 2. Any disposal of the Property pursuant to the leave granted in Order 1 above is conditional upon: 2.1 payment, by way of bank cheque, to the First Defendant of the sum of $3,284,280.04 (plus GST) in respect of its interest in the Property; 2.2 such disposal being completed by 31 August 2013, or such later date as consented to by the First Defendant (in its absolute discretion); and 2.3 all of the Property being disposed of. 3. Upon completion of any disposal of the Property pursuant to the leave granted in Order 1: 3.1 any security interest in the Property within the meaning of the Personal Property Securities Act 2009 (Cth) held by the Second Defendant is extinguished and any purchaser of the Property will take the Property free of any such security interest. 3.2 the Rental Agreements between the First Defendant and the Second Defendant in respect of the Property will be at an end and each of the First Defendant and Second Defendant will have no rights, obligations or liability under them. 3.3 neither the First Defendant nor the Second Defendant will have any further right, title or interest to or in the Property, or any other claim in respect of the Property. 4. Nothing in these Orders constitutes a determination or other finding as to the nature of any agreement, arrangement or understanding between the Second Defendant and Mondello Farms Pty Ltd under which Mondello Farms Pty Ltd has used the Property. Other Matters 5. No order as to costs. 6. Liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 233 of 2013 BETWEEN: ANDREW JAMES HEARD AND ANTHONY JOHN ARTHUR PHILLIPS IN THEIR CAPACITY AS ADMINISTRATORS OF MONDELLO FARMS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 066 901 844 Plaintiff AND: ALLEASING PTY LTD ACN 008 655 025 First Defendant THE TRANSPORT COMPANY PTY LIMITED ACN 121 749 611 Second Defendant JUDGE: MANSFIELD J DATE: 11 SEPTEMBER 2013 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 These are brief reasons for orders made on 26 August 2013 on an application made under ss 442C(2)(c) and 447A of the Corporations Act 2001 (Cth) (the Act). The orders were to the following effect: 1. Subject to Order 2, Andrew Heard and Anthony Phillips in their capacity as administrators of Mondello Farms Pty Ltd (collectively, the Plaintiffs) are granted leave to sell the following property pursuant to section 442C(2)(c) of the Corporations Act 2001 (Cth): 1.1 a potato washing and cooling line (as comprised and described in Rental Schedule No. E5N0154218 dated 21 February 2012); 1.2 polybagger and Kwik Lok equipment (as comprised and described in Rental Schedule No. E5N0154314 dated 23 March 2012); 1.3 computer equipment and software (as comprised and described in Rental Schedule No. E5N0154423 dated 25 March 2012); and 1.4 a Sorma packing line (as comprised and described in Rental Schedule No. E5N0155135 dated 28 February 2013). (collectively, the Property) which Rental Schedules appear in annexure TAE5 of the affidavit of Theodora Alice Eszenyi sworn on 19 August 2013, together with the "master" rental agreement dated 1 February 2012 (together, the Rental Agreements). 2. Any disposal of the Property pursuant to the leave granted in Order 1 above is conditional upon: 2.1 payment, by way of bank cheque, to Alleasing Pty Ltd (the First Defendant) of the sum of $3,284,280.04 (plus GST) in respect of its interest in the Property; 2.2 such disposal being completed by 31 August 2013, or such later date as consented to by the First Defendant (in its absolute discretion); and 2.3 all of the Property being disposed of. 3. Upon completion of any disposal of the Property pursuant to the leave granted in Order 1: 3.1 any security interest in the Property within the meaning of the Personal Property Securities Act 2009 (Cth) held by The Transport Company Pty Ltd (the Second Defendant) is extinguished and any purchaser of the Property will take the Property free of any such security interest. 3.2 the Rental Agreements between the First Defendant and the Second Defendant in respect of the Property will be at an end and each of the First Defendant and Second Defendant will have no rights, obligations or liability under them. 3.3 neither the First Defendant nor the Second Defendant will have any further right, title or interest to or in the Property, or any other claim in respect of the Property. 4. Nothing in these Orders constitutes a determination or other finding as to the nature of any agreement, arrangement or understanding between the Second Defendant and Mondello Farms Pty Ltd (Mondello Farms) under which Mondello Farms has used the Property. 5. No order as to costs. 6. Liberty to apply. 2 Mondello Farms is a company that was part of a group of companies that together constituted one of Australia's largest wholesalers of processed potatoes (Mondello Group). 3 On 19 March 2013, the Plaintiffs were appointed as joint and several administrators of Mondello Farms and the other companies in the Mondello Group. On the same day, Theodora Eszenyi and Samuel Davies (the receivers) were appointed as receivers and managers of the property of Mondello Farms and the other companies in the Mondello Group by National Australia Bank Ltd, in whose favour the property of Mondello Farms had been charged. 4 In her affidavit of 19 August 2013, Ms Eszenyi stated that she and Mr Davies had reached an in-principle agreement with a third party for that third party to purchase the Mondello Group's business and its assets, including those of Mondello Farms. 5 It is a condition precedent to the sale that the third party purchasers acquire freehold title to specified processing plant and equipment essential to the Mondello Group's potato-processing operations and certain computer equipment and software. 6 Specifically, the items in question are the potato washing and cooling line, polybagger and Kwik Lok equipment, computer equipment and software; and a Sorma packing line (that is, the Property as defined above). 7 The Property was not owned by Mondello Farms (or any other member of the Mondello Group). It was owned by the First Defendant, a provider of leasing and asset financing services. 8 The First Defendant rented the Property to the Second Defendant, a proprietary company which has the same sole director and shareholders as Mondello Farms (namely, Francesco, Giuseppe and Basilio Mondello). 9 The Second Defendant sub-rented the Property to Mondello Farms under an agreement which entitled Mondello Farms to the possession, access and use of the Property upon payment of rent as specified by the First Defendant. 10 The assets of Mondello Farms charged to National Australia Bank Ltd therefore presumably included its interest as lessee of the Property. 11 Section 442C of the Act relevantly provides as follows: (1) The administrator of a company under administration or of a deed of company arrangement must not dispose of: (a) property of the company that is subject to a security interest; or (b) property … that is used or occupied by, or is in the possession of, the company but of which someone else is the owner or lessor. (2) Subsection (1) does not prevent a disposal: (a) in the ordinary course of the company's business; or (b) with the written consent of the secured party, owner or lessor, as the case may be; or (c) with the leave of the Court. (3) The Court may only give leave under paragraph (2)(c) if satisfied that arrangements have been made to protect adequately the interests of the secured party, owner or lessor, as the case may be. … 12 Section 447A(1) of the Act grants the Court a general power to make orders "as it thinks appropriate about how this Part is to operate in relation to a particular company." The Part in question is Part 5.3A of the Act, within which s 442C falls. 13 Section 447A(4) provides: An order may be made on the application of: … (c) in the case of a company under administration – the administrator of the company; … 14 The Plaintiffs brought the application in their joint capacity as administrators of Mondello Farms, after being requested to do so by the receivers. They sought orders that they be granted leave to dispose of the Property pursuant to s 442C(2)(c) of the Act. 15 According to s 442C(3), it was necessary for the Court to be satisfied that arrangements have been made to protect adequately the interests of the owner and lessor of the Property, namely, the First Defendant and the Second Defendant. 16 The receivers and managers appointed by National Australia Bank Ltd as a secured creditor over the property of Mondello Farms, including over Mondello Farms' interest in the Property, consented to the orders, so it was appropriate to assume that its interests as a secured party were protected. 17 In regard to the owner, the First Defendant, the orders I was asked to make, and made, contained the condition that any disposal of the Property is conditional upon payment to the First Defendant of the sum of $3,284,280.04 (excluding GST) in respect of its interest in the Property. Through its solicitors, the First Defendant consented to the proposed orders. As it is legally represented, and consented to the proposed orders, including the substantial payment to be made, I was satisfied that arrangements have been made to protect adequately the interests of the First Defendant. 18 In regard to the lessor, the Second Defendant, the evidence shows that the Second Defendant had previously reached an agreement with Mondello Farms and the receivers to the effect that it would, upon request, inter alia, unconditionally consent to the sale of any item of property to a third-party purchaser. In the event that such consent was requested, the agreement provided that in some circumstances, compensation would be payable by Mondello Farms to the Second Defendant. Those circumstances do not obtain here, so no compensation is payable. Again, the solicitors for the Second Defendant indicated that, consistent with its earlier agreement with Mondello Farms and the receivers, it consented to the proposed orders giving leave for the disposal of the Property. In those circumstances, I am satisfied that arrangements have been made to protect adequately the interests of the Second Defendant. 19 I therefore made the orders proposed and consented to by the parties giving leave for the disposal of the Property upon the terms agreed collectively between them. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate: Dated: 11 September 2013