New South Wales Supreme Court CITATION : BTA Institutional Services Australia Ltd & BNY Trust (Australia) Registry Ltd [2009] NSWSC 1294 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 6 November 2009 JUDGMENT DATE : 26 November 2009 JURISDICTION : Equity Division JUDGMENT OF : Brereton J DECISION : Judicial advice given CATCHWORDS : EQUITY – trusts and trustees – applications to the court for advice and authority – where questions for which advice is sought relate management and administration of trust property – where law governing the trust is the law of NSW – where trust is administered in NSW – advice on question of construction – where persons with rights affected have been notified and given opportunity to be represented in court – advice given LEGISLATION CITED : (NSW) Trustee Act 1925, s 63 CATEGORY : Principal judgment ConnectEast Management v Commissioner of Taxation [2009] FCAFC 22, [24] CASES CITED : Draper v The Society of Our Lady's Nurses of the Poor (1980) NSWSC, Kearney J, 3 December 1979, 8 February 1980, ed 3612/79, unreported In the Estate of Webb (deceased) (1992) 57 SASR 193, 195-6 (King CJ) BTA Institutional Services Australia Ltd (first plaintiff) BNY Trust (Australia) Registry Ltd (second plaintiff) Allco Asset Finance Ltd (objector) Allco Managed Investments Ltd (objector) PARTIES : Allco Management Ltd (objector) ACME Funds Management Ltd (objector) ACME Leasing Pty Ltd (objector) Bank of Scotland plc (interested party) SIF Ltd (interested party) FILE NUMBER(S) : SC 4906/09 Mr J Sackar QC w Mr M O'Meara & Mr J Arnott (plaintiffs) COUNSEL : Mr T Bathurst QC w Mr S Nixon (objectors) Mr McHugh SC w Mr R Foreman (interested parties) Gilbert & Tobin (plaintiffs) SOLICITORS : Corrs Chambers Westgarth (objectors) Watson Mangioni (interested parties) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Thursday, 26 November 2009 4906/09 Application of BTA Institutional Services Australia Limited & anor JUDGMENT 1 HIS HONOUR: The first plaintiff BTA Institutional Services Australia Limited ("BTA"), and the second plaintiff BNY Trust (Australia) Registry Limited ("BNY"), are the trustees of trusts created pursuant to four deeds which form a structure under which each of Allco Asset Finance Limited ("AAFL"), Acme Funds Management Limited ("Acme Funds"), Acme Leasing Pty Ltd ("Acme Leasing"), and Allco Managed Investments Limited ("AMIL") is a financier in respect of a number of the aircraft leasing transactions, being some a total of 69 aircraft leasing transactions originated by AAFL and its parent entity. BTA is the trustee of trusts created under The Master Trust Deed – 2006, The Financing Deed – VH-VQU, and The Financing Deed – VH-VQZ; and BNY is the trustee of a trust created by the Ireland Master Trust Deed. 2 AAFL and Allco Management Limited ("AML") act as managers of and perform managerial roles in relation to certain aviation transactions that have taken place under the structure created by the trust deeds. Under the Master Financing Deed (clause 5.1), each of the parties identified in a Financing Certificate for a Series as the particular Allco Financing SPC for that Series, the particular RILA entity for that Series, and the particular Lessor (if any) for that Series, appoints a manager as its sole and exclusive manager during the term of the Financing Deed in connection with the Transaction Documents. For convenience, this manager, appointed for a particular series, may be called "an Individual Series Manager". Under the Master Trust Deed – 2006 (clause 11.1), Allco Aviation Finance Pty Ltd, called the Issuer, appoints a manager (AAFL) – identified not in a separate document (such as a Financing Certificate), but in the Master Trust Deed itself, to which it is a party – not in respect of a particular series, but as its sole and exclusive manager "in respect of each series", as and when the series is established, and without any further act of appointment. This manager, appointed by the Issuer under the Master Trust Deed, may for convenience be called "the Issuer Manager". 3 On 4 November 2008, AAFL and AML had a receiver and manager appointed to all or substantially all of their assets and, on 16 June 2009, they entered into deeds of company arrangement. The appointment of a receiver to AAFL and AML meant that both companies became "insolvent" within the meaning of that term in the transaction documents. AAFL and AML have nonetheless continued to perform their obligations as managers under the transaction documents. However, BTA and BNY ("the Security Trustees") have each received instructions from The Bank of Scotland plc ("BOS") and A&L, who are lenders in respect of a significant amount of the funding for the aviation transactions, to proceed immediately to remove and replace AAFL and AML as managers of the aviation transactions, in circumstances where the receivers have entered into an agreement to sell the shares in AAFL and AML to HNA/Bravia, the effect of which upon completion would be that HNA/Bravia would control the managers of the aviation transactions. The Security Trustees sought and obtained counsel's advice as to the construction and application of the provisions of the transaction documents relating to the removal and replacement of the managers of the aviation transactions. Counsel's advice included that the position was not without doubt, and that the prudent course was for the Security Trustees to seek judicial advice. In these proceedings, the Security Trustees seek the court's opinion, advice and direction, pursuant to Trustee Act 1925, s 63, or the inherent jurisdiction, on five questions which have arisen in relation to the trusts of which they are trustees. 4 The questions for advice concern the construction and operation, first, of the trust deeds already mentioned, and secondly, of the Master Financing Deed – March 2006, the Master Financing Deed – August 2006, the Financing Deed – VH-VQQ and the Financing Deed – VH-VQR. The questions for advice in relation to the trust deeds are questions "respecting the interpretation of the trust instrument", within Trustee Act, s 63(1). The rights of the relevant Security Trustee under each of the Financing Deeds form part of the trust property, and so the questions for advice in relation to them are questions "respecting the management or administration of the trust property", within Trustee Act, s 63(1). 5 The Security Trustees are incorporated and resident in Australia, and carry on their business in New South Wales and act as trustee of the relevant trusts in New South Wales. The governing law of all the transaction documentation, other than the Ireland Master Trust Deed, is the law of New South Wales. The governing law of the Ireland Master Trust Deed is the law of England, but as the trusts under it are administered in New South Wales, the provisions of the (NSW) Trustee Act are apt to apply [In the Estate of Webb (deceased) (1992) 57 SASR 193, 195-6 (King CJ)]. 6 An application for judicial advice under s 63 is primarily for the purpose of enabling the trustees to be advised as to the nature or extent of their powers and duties of management or administration of the trust property, rather than resolving disputed questions of construction, particularly where the respective rights of beneficiaries and creditors are concerned. However, the distinction is not a clear-cut one, and so long as the application falls within the terms of s 63(1) it is competent, even if it raises questions of construction (as a question "respecting the interpretation of the trust instrument" necessarily will). However, if the outcome may affect interested persons such as beneficiaries or creditors, then it is appropriate that they be given notice of the proceedings, and an opportunity to be represented [Draper v The Society of Our Lady's Nurses of the Poor (1980) NSWSC, Kearney J, 3 December 1979, 8 February 1980, ED 3612/79, unreported]. In this case, directions were made on the first return date on 16 October 2009, for the notification of all potentially interested persons. As a result, AAFL, AML, Acme Funds, Acme Leasing and AMIL appeared as "objectors", and two financiers – BOS and SIF Limited – appeared generally to support the Security Trustees' contentions. Having regard to the nature of the questions upon which advice is sought, the notice given to the potentially interested parties, and the opportunity that those potentially interested parties have had to make submissions, I am satisfied that it is not inappropriate to proceed under Trustee Act, s 63. 7 For the purposes of the proceedings, there was before the court a Further Amended Statement of Facts (FASOF), and Counsel's advice obtained by the Security Trustees. The questions originally posed in the FASOF were amended and refined from time to time, including in part as a result of the issues raised by the objectors. Question 1: Master Trust Deed – 2006 8 Question 1 is as follows: If the Security Trustee were to receive instructions from the Majority Financiers to do so, would the Security Trustee be acting in accordance with its powers under the Master Trust Deed – 2006 in removing AAFL or AML (as applicable) as the manager in respect of (a) a single series and/or (b) all series under the Master Trust Deed – 2006 and in approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve? 9 Clause 11.8 of the Master Trust Deed – 2006 deals with the removal of the Issuer Manager in the event of insolvency, as follows: (a) The Issuer may remove the Manager from office in respect of all Series in their entirety immediately by notice in writing on the occurrence of any of the following events: (i) the Manager is Insolvent; or (ii) the Manager breaches its obligations under this Deed. (b) The Security Trustee (acting on the instructions on the Finance Parties) may also remove the Manager from office if any of the events in subparagraphs (a)(i) or (a)(ii) occur. 10 Clause 11.10 of the Master Trust Deed – 2006 provides that the termination of the Issuer Manager's appointment is not effective unless and until a replacement Issuer Manager is appointed: Neither the termination of the Manager under clause 11.7 ("Termination of Manager") nor the removal of the Manager under clause 11.8 ("Removal of Manager") is effective unless and until a replacement Manager has been identified and approved by the Security Trustee (acting on the instructions of the Finance Parties), and that replacement Manager has executed documents reasonably satisfactory to Security Trustee to become the replacement Manager for the purposes of the Transaction Documents. 11 This question raises two issues: the first is whether the power conferred by clause 11.8(b) can be exercised only "in respect of all Series in their entirety" (as the objectors contend), or can be exercised separately in respect of each Series (as the Security Trustees and the supporting financiers contend); and the second is whether that power can be exercised in the absence of prior identification and approval of a replacement manager. 12 The objectors point to the use of the word "also" in clause 11.8(b) as implicitly picking up the words "in respect of all Series in their entirety" from clause 11.8(a). On the other hand, clause 11.8(b) may be distinguished from clause 11.8(a) because, under the former, the Security Trustee is required to act "on instructions of the Finance Parties", whereas no such limitation applies to the power of the Issuer under subparagraph (a). The Issuer is a single identity common to all Series. While the Security Trustee is also common to all Series, the Finance Parties are not, there being different Finance Parties for each Series. In the Master Trust Deed, "Finance Party" is defined to mean, in respect of each Series, the Security Trustee, a Financier, a Market Intermediary, and a Notice Party. Clause 5.1 of the Master Trust Deed provides that the Security Trustee agrees to follow the instructions of the relevant Finance Parties of a Series as set out in the Series Transaction Documents, and any reference to the Security Trustee acting on the instructions of the Finance Parties is to be construed accordingly. Clause 3.3(a) of the Master Financing Deeds provides that in any case where the Financing Deed and the Transaction Documents (which include the Master Trust Deed – 2006) do not specify on whose instructions the Security Trustee is to act, then "the Security Trustee is to act on the instructions of the Majority Financiers and any reference to the Security Trustee acting on the instructions of the Financiers will be construed accordingly". There is no Market Intermediary for any of the Series. The Notice Parties correspond with the Financiers. Clause 3.3 of the Master Financing Deed applies to the Master Trust Deed – 2006, because it is a "Transaction Document" within the definition of that term in clause 3.3(a) of the Master Financing Deed. Accordingly, the requirement under clause 11.8(b) of the Master Trust Deed – 2006 to act on the instructions of the Finance Parties is to be read as a requirement to act on the instructions of the Majority Financiers. The objectors did not contend otherwise. The result is that the Security Trustee is enabled to act on the instructions of a majority by value of the Financiers, and that unanimity of the Financiers is not required. 13 While there is a definition in the Master Trust Deed of "Overall Majority Financiers", it appears only in the context of a "Master Event of Default", which pertains to replacement of the Issuer as distinct from the manager. By clause 5.1 of the Master Trust Deed – 2006, the Security Trustee agrees to follow the instructions of the relevant Finance Parties of a series as set out in the series transaction documents, and any reference to the Security Trustee acting on the instructions of the finance parties is to be construed accordingly. Clause 5.2 provides that if a Master Event of Default occurs, then in connection with the Specific Series Transaction Documents, the Security Trustee must act in accordance with the instructions of the relevant Finance Parties of that Series; and in connection with the Issuer Security Deed, the Security Trustee must act in accordance with the instructions of the Overall Majority Financiers. There is a Master Event of Default if the Issuer becomes insolvent (clause 15). That is not relevant in the present circumstances, it being the Manager and not the Issuer that is insolvent. Clause 16.2 provides that at a meeting of Financiers called consequent on a Master Event of Default, the Financiers of all series may by resolution of the Overall Majority Financiers instruct the Security Trustee to take action under clause 5.2. "Overall Majority Financiers" is defined to mean "in respect of all the Series in their entirety, the Financiers, the total of whose Amount Owing in respect of all the Series in their entirety, is at least 51 percent of the aggregate of the Amount Owing of all Financiers in respect of all the Series in their entirety". 14 There is no other reference, except in clause 5.2 and 16, to the "Overall Majority Financiers". The absence of that concept from clause 11.8(b), where it would be expected if the objectors' construction were the correct one, is telling, and suggests that the power in clause 11.8(b) was contemplated to be exercised in respect of each Series, and not overall in respect of the entirety of the Series as a whole. 15 This view is reinforced by the requirement, imposed by clause 2.1 of the Master Trust Deed – 2006, that the Security Trustee must treat each Series as separate and independent of each other Series (an obligation that is not imposed on the Issuer). It is true that clause 2.1 also provides that the parties involved in each Series are unique to that series, except that the Security Trustee, the Issuer and the Manager are involved in all Series. However, that provision is descriptive rather than mandatory; it accurately describes the situation as at the date of the deed, but it does not prescribe that the manager must forever remain the same manager for each series. 16 This view is further reinforced by clause 11.7 of the Master Trust Deed – 2006, which provides that the Issuer Manager may terminate its appointment in respect of one or more series: In respect of one or more series, the Manager may, with the prior written consent of all of the parties of the relevant series, terminate its appointment. 17 Admittedly, clause 11.9 points in the opposite direction: 11.9 Liability Ceases Following removal of the Manager or termination of the Manager's appointment, but without prejudice to the liability of the Manager for any antecedent breach of its obligations under this deed, the Manager ceases to be a party to this deed and incurs no further liability pursuant to this deed, but will be obliged to deliver to the replacement Manager all documents held by the Manager in connection with the transaction documents. 18 However, if any content and work is to be given to the words "in respect of one or more series" in clause 11.7, clause 11.9 must be read as limited to the one or more Series in respect of which the manager terminates its appointment under that clause. This is supported by the requirement, contained in clause 2.1, that each Series be separate and independent from each other. Accordingly, the better view is that clause 11.9 is to be construed as follows: Following removal of the Manager or termination of the Manager's appointment in respect of one or more series … the Manager ceases to be bound by this deed in respect of that series but will be obliged to deliver to the replacement Manager all documents held by the Manager in connection with the transaction documents insofar as they relate to such series . 19 The power of the Security Trustee to remove the manager from office under clause 11.8(b) of the Master Trust Deed – 2006 is exercisable upon "the instructions of the Finance Parties". That term is defined in the Master Trust Deed to mean "in respect of a Series …"; the power is therefore exercisable on a basis that requires consideration of each Series separately. The power of the Security Trustee to act upon the instructions of the "Finance Parties", construed as the "Majority Financiers", requires calculation of the "Majority Financiers" by reference to each Series and not by reference to "all Series in their entirety", because the definition of "Majority Financiers" in the Master Financing Deed refers to the total of the "Financiers", which in turn is defined "in respect of a series". 20 Additional considerations favouring this view are that the appointment of the Issuer Manager is in respect of each series, not all series (clause 11.1); the appointment being as manager "in connection with the Series Transaction Documents" (clause 11.1), and "Series Transaction Documents" is in turn defined (in the Master Trust Deed – 2006, clause 23.1) in terms which relate to each separate series; and the manager's remuneration is payable in respect of each series, on terms separately agreed for that series (clause 18.2). 21 It follows that, in my opinion, the Security Trustee acting on instructions of the Finance Parties may remove the manager from its office as such in respect of one or more series, on the instructions of the finance parties for that series. Accordingly, I will answer Question 1: Yes, in respect of each series under the Master Trust Deed – 2006 set out in annexure 1 to the FASOF. 22 The objectors submit that this answer requires further qualification, in that clause 11.10 has the consequence that the power under clause 11.8(b) cannot be exercised unless and until a replacement manager has been identified and approved by the Security Trustee (acting on the instructions of the Finance Parties) and that replacement manager has executed the requisite documents. Although this issue was argued principally by reference to Question 2, below, it is convenient to dispose of it too, at this point. 23 In my view, the provision that the removal of the manager is not effective unless and until the replacement manager is identified and approved is not a condition precedent to the exercise by the Security Trustee of the power of removal, but operates as a stay on the effect of the exercise of that power until it is satisfied. In other words, the Security Trustee may exercise its power of removal without having identified, let alone obtained agreement to, the proposed replacement; but the removal will not take effect until those requirements are satisfied. Question 2 – Master Financing Deed 24 Question 2 is as follows: If the Security Trustee were to receive instructions from the Majority Financiers to do so, would the Security Trustee be acting in accordance with its powers under the relevant Master Financing Deed or Financing Deed in removing AAFL or AML (as applicable) as the Manager in respect of (a) a single series and/or (b) all series under the relevant Master Financing Deed or Financing Deed and in approving the appointment of a proposed replacement Manager which the Majority Financiers identify and approve? 25 Clause 5.1 of the Master Financing Deed provides for the appointment, in respect of a particular Series, of a manager (the Individual Series Manager), the role of which is set out in clause 5.2 and includes performing certain calculations, undertaking administrative or management tasks and preparing and keeping accounting records. Although in most cases the same entity has been appointed Issuer Manager under the Master Trust Deed, and also Individual Series Manager under the relevant Financing Deed, the positions are separate. 26 Clause 5.7 of each Master Financing Deed deals with the removal of an Individual Series Manager in the event of insolvency, as follows: (a) Allco Financing SPC, RILA or the Lessor (if any) may remove the Manager from office immediately by notice in writing on the occurrence of any of the following events: (i) the Manager is insolvent; (ii) the Manager breaches its obligations under the Financing Deed; or (iii) the expiration of three months after Allco Financing SPC, RILA or the Lessor (if any) gives notice to the Manager that it requires the Manager to cease acting as Manager under the Financing Deed. (b) The Security Trustee (acting on instructions of the Financiers) may also remove the Manager from office if any of the events in subparagraphs (a)(i) or (a)(ii) occur. 27 The effect of clause 3.3(a) of the Master Financing Deed is that the Security Trustee may exercise this power on the instructions of the Majority Financiers, as the objectors accept. The removal of AAFL or AML as an Individual Series Manager in respect of a particular Series would not of itself affect its appointment in respect of any other Series. 28 Clause 5.9 of each Master Financing Deed addresses the replacement of the manager, providing that the removal of a manager is not effective unless and until a replacement manager has been identified and approved by the Security Trustee and each Financier, and that replacement manager has executed certain documents: Neither the termination of the Manager under clause 5.6 ("Termination of Manager") nor the removal of the Manager under clause 5.7 ("Removal of Manager") is effective unless and until a replacement Manager has been identified and approved by the Security Trustee and each Financier and that replacement Manager has executed documents reasonably satisfactory to the Security Trustee to become the replacement Manager for the purposes of the Transaction Documents. 29 For the reasons advanced in respect of Question 1, the requirement for approval of the replacement does not operate as a condition precedent to exercise of the power of removal, although the removal will not take effect until those requirements are satisfied. However, in this respect use of the word "each" requires unanimity on the part of the Security Trustee and each Financier in respect of a particular Series; the approval of the Majority Financiers would not suffice [ConnectEast Management v Commissioner of Taxation [2009] FCAFC 22, [24]]. 30 The Financing Deed – VH-VQQ and the Financing Deed – VH-VQR contain provisions substantially similar in this respect to the Master Financing Deeds. 31 The Security Trustees have not sought advice as to how any discretion that clause 5.7 might confer ought to be exercised, and the advice sought pertains only to the question of interpretation, so as to define the Security Trustees' powers, and not with the question of discretion as to how those powers might prudently be exercised, or whether the Security Trustee would be justified in exercising them. I will answer Question 2 as follows: Yes, in respect of each series under the Master Financing Deeds, the Financing Deed – VH-VQQ and the Financing Deed – VH-VQR set out in annexure 1 to the FASOF. However, the removal of an individual series manager in respect of a particular series would not be effective unless and until a replacement individual series manager has been identified and approved by each financier for that series. Question 3 – Ireland Master Trust Deed 32 Question 3 is as follows: If the Security Trustee were to receive instructions from BOS or any other Financier to remove the Manager, would the Security Trustee be acting in accordance with its powers under the Ireland Master Trust Deed and the MRAD and justified if it: (a) removed the Manager; (b) notified the Issuer and the specified Financiers that it has done so and that it will appoint a replacement Manager within 28 days (or such other period as the court decides as reasonable) of the notice being provided unless the Issuer or the Manager proposes a replacement Manager and the approvals and opinions of each specified Financier and the approval of the Issuer required by clauses 1.3 and 1.4 of the MRAD are provided to the Security Trustee within that period; (c) if no replacement Manager is proposed by the Issuer or the Manager and approved by clauses 1.3 and 1.4 of the MRAD within 28 days (or such other period as the court decides is reasonable), appointed a replacement Manager on the instructions of the Majority Beneficiaries? 33 Clause 12.1 of the Ireland Master Trust Deed provides for the appointment of a manager, and clause 12.2 sets out the powers and duties of the manager, which include the day-to-day administration, supervision and arrangement of the trust and each series under the deed. Clause 12.8(a) provides that the Issuer (Allco Aviation Funding (Ireland) Limited, a company incorporated in Ireland) must remove the manager from office in respect of all series in their entirety immediately if the manager is "insolvent". The Issuer has not done so. Clause 12.8(c) gives a concurrent right to the Security Trustee to remove the manager if it is "insolvent", provided that the Security Trustee may exercise this power "acting on instruction of any Financier". 34 Clause 1.3 of the Manager and Remarketing Agent Deed (MRAD) of 14 March 2008 obliges the Security Trustee to appoint a replacement manager where the manager is removed because it is "insolvent", notwithstanding any other provision of any "Series Transaction Document", which includes the Ireland Master Trust Deed. Although not expressed in terms to be subject to instructions from any other person, it is subject to clause 6.1 of the Ireland Master Trust Deed, which provides that where that deed or a Series Transaction Document does not specify on whose instructions the Security Trustee is to act, or specifies that the Security Trustee is to act on the instructions of "the beneficiaries", the Security Trustee is to act on the instructions of the Majority Beneficiaries. 35 There are two series under the Ireland Master Trust Deed, relating to aircraft Indigo VT-INR and Indigo VT-INS. BOS is a junior residual financier with respect to both, and a Financier within the meaning of the Ireland Master Trust Deed. The Security Trustee would therefore be acting within power if it were to remove the manager upon instructions to do so from BOS. 36 The Security Trustees now accept, as the objectors point out, that the right to propose a replacement is given to the manager (AAFL) as well as to the Issuer (the relevant words in clause 1.3(a) of the MRAD being "unless the Issuer or Manager proposes a replacement Manager"). The present form of Question 3 now accommodates that. 37 The obligation of the Security Trustee under the MRAD to appoint a replacement manager operates unless the Issuer or Manager proposes a replacement manager that has been approved in accordance with clause 1.3(b), and in the opinion of each specified Financier has substantially the same employees as the existing manager; has systems, operations and resources sufficient to allow it to carry out its duties; and is a specialist management or aircraft remarketing entity of good reputation and experience. The MRAD does not prescribe a time within which the Issuer must act to nominate a replacement manager and obtain the necessary approval. The Security Trustee has proposed a period of 28 days. The objectors propose a period of 42 days, to allow time for both AAFL and the Issuer to nominate a replacement manager, and seek and obtain the necessary approvals. As a matter of construction, in the absence of express provision, it would ordinarily be concluded that a reasonable time was to be allowed. On an application for judicial advice, and in the absence of evidence, it is appropriate to take the more conservative view, and allow the period of 42 days proposed by the objectors. 38 I will answer Question 3 as follows: Yes, subject to the substitution of 42 days for 28 days in paragraphs (b) and (c) of the Question. Question 4 – Financing Deed – VH-VQU 39 Question 4 is as follows: If the Security Trustee were to receive instructions from the Majority Financiers to do so, would the Security Trustee be acting in accordance with its powers under the Financing Deed – VH-VQU in removing AML as the Manager in respect of series VH-VQU under the Financing Deed – VH-VQU and in approving the appointment of a proposed replacement Manager which the Majority Financiers identify and approve in respect of series VH-VQU under the Financing Deed – VH-VQU? 40 BTA is the Security Trustee of the trust created by the Financing Deed – VH-VQU. Clause 8.1 provides for the appointment of a manager, the powers and duties of which are set out in clause 8.2. Clause 8.7 provides that the Security Trustee "acting on the instructions of the Financiers" may remove the manager from office in the event it becomes "insolvent". Clause 4.7 corresponds with clause 3.3 of the Master Financing Deed, providing that where the Financing Deed does not specify on whose instructions the Security Trustee is to act, the Security Trustee is to act on the instructions of the Majority Financiers "and any reference to the Security Trustee acting on the instructions of the Financiers will be construed accordingly". Accordingly, the Security Trustee is empowered to remove the manager on instructions from the Majority Financiers to do so. 41 Clause 8.9 of the Financing Deed addresses the replacement of the manager, providing that the removal is not effective unless and until the replacement manager has been identified and approved by the Security Trustee and "each Facility Agent (acting on the instructions of the relevant Financiers)". As with the Master Financing Deed, the Financing Deed – VH-VQU does not state expressly on whose instructions the Security Trustee is to act in identifying and approving the replacement manager, but clause 4.7 provides that where the deed does not specify on whose instructions the Security Trustee is to act, it is to act on the instructions of the Majority Financiers, and the removal of the manager can take place on the instructions of the Majority Financiers; accordingly, the Security Trustee would be justified in identifying and approving a replacement manager that had been identified and approved by the Majority Financiers. 42 For the reasons given in respect of Question 1, the requirement for the approval of each of the Facility Agents to the replacement manager is not a condition precedent to exercise of the power of removal, but the removal would not take effect until that requirement was satisfied. 43 I would therefore answer Question 4 as follows: Yes, but the removal of AML as manager would not be effective unless and until a replacement manager has been identified and approved by each Facility Agent (acting on the instructions of the relevant Financiers). Question 5 – Financing Deed – VH-VQZ 44 Question 5 is as follows: If the Allco Companies were to remove the Manager, would the Security Trustee be acting in accordance with its powers under the Financing Deed – VH-VQZ in consenting to the removal of the Manager and approving the appointment of a proposed replacement Manager which the Majority Financiers identify and approve in respect of series VH-VQZ under the Financing Deed – VH-VQZ were it to receive instructions from the Majority Financiers to do so, but, if the Allco Companies were not to remove the Manager, would the Security Trustee be justified in taking no action on instruction from A&L with respect to series VH-VQZ? 45 BTA is the Security Trustee of the trust created by Financing Deed – VH-VQZ, clause 8.1 of which provides for the appointment of a manager, the powers and duties of which are set out in clause 8.2. Clause 8.7 provides that "the Allco Companies" (being Allco VQZ Financing Pty Ltd, RIL Aviation VQZ Pty Ltd and Allco Rentals Pty Ltd) may remove the manager from office immediately on it becoming "insolvent", provided that they obtain the prior written consent of the Security Trustee. In this case, clause 8.7 does not give a separate right to the Security Trustee to remove the manager on its becoming insolvent. 46 The Security Trustee has received instructions from A&L to remove the manager appointed under Financing Deed – VH-VQZ with respect to series VH-VQZ. However, because – unlike under the other trust deeds to which reference has been made – under this Deed it has no independent right to do so, it is not entitled to act on that instruction. 47 Clause 8.9 provides for the replacement of the manager, in the event of removal, including that the removal is not effective unless and until the replacement manager has been identified and approved by the Security Trustee and "each Facility Agent (acting on the instructions of the relevant Financiers)". Only if the "Allco Companies" remove the manager under clause 8.7 would the Security Trustee then be justified, on receipt of instructions from the Majority Financiers, in consenting to the removal of the manager. In that event, the removal would not be effective until each Facility Agent (acting on the instructions of the relevant Financiers) had approved the replacement. 48 I would therefore answer Question 5 as follows: Yes, but any removal would take effect only upon the approval by each Facility Agent (acting on the instructions of the relevant Financiers) of the replacement manager. Conclusion 49 For the foregoing reasons, and subject to any submissions that Counsel may wish to make about the form of the advice, I give the advice set out below. In doing so, I am not giving advice as to the prudence or propriety of any discretionary judgment on the part of the Security Trustees as to whether or not a manager should be removed and a replacement manager appointed. (1) If the Security Trustee were to receive instructions from the Majority Financiers to do so, the Security Trustee would be acting in accordance with its powers under the Master Trust Deed – 2006 in removing AAFL or AML (as applicable) as the manager in respect of each or any series under the Master Trust Deed – 2006 and in approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve, but any such removal would not take effect unless and until a replacement manager has been identified and approved by each Financier for the relevant series. (2) If the Security Trustee were to receive instructions from the Majority Financiers so to do, the Security Trustee would be acting in accordance with its powers under the relevant Master Financing Deed or Financing Deed in removing AAFL or AML (as applicable) as the manager in respect of each or any series under the relevant Master Financing Deed or Financing Deed and in approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve, but any such removal would not take effect unless and until a replacement individual series manager has been identified and approved by each Financier for the relevant series. (3) If the Security Trustee were to receive instructions from BOS or any other financier to remove the manager, the Security Trustee would be acting in accordance with its powers under the Ireland Master Trust Deed and the MRAD and justified if it (a) removed the manager; (b) notified the Issuer and the specified financiers that it has done so and that it will appoint a replacement manager within 42 days of the notice being provided unless the Issuer or manager proposes a replacement manager and the approvals and opinions of each specified financier and the approval of the Issuer required by clauses 1.3 and 1.4 of the MRAD are provided to the Security Trustee within that period; and (c) if no replacement manager is proposed by the Issuer or the manager and approved pursuant to clauses 1.3 and 1.4 of the MRAD within 42 days, appointed a replacement manager on the instructions of the Majority Beneficiaries. (4) If the Security Trustee were to receive instructions from the Majority Financiers so to do, the Security Trustee would be acting in accordance with its powers under the Financing Deed – VH-VQU in removing AML as the manager in respect of series VH-VQU under Financing Deed – VH-VQU and in approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve in respect of series VH-VQU under Financing Deed – VH-VQU, but any such removal would not take effect unless and until a replacement manager has been identified and approved by each Facility Agent (acting on the instructions of the relevant financiers). (5) If the Allco Companies were to remove the manager, the Security Trustee would be acting in accordance with its powers under the Financing Deed – VH-VQZ in consenting to the removal of the manager and approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve in respect of series VH-VQZ under the Financing Deed – VH-VQZ were it to receive instructions from the Majority Financiers to do so, but if the Allco Companies were not to remove the manager, the Security Trustee would be justified in taking no action on instruction from A&L with respect to series VH-VQZ. 50 I order that the plaintiffs' costs be paid out of the assets of each of the trusts, pro rata according to the capital of each trust. I reserve liberty to the parties to apply by arrangement with my associate within seven days for any additional or different costs order. Thursday, 4 December 2009 51 Having received further submissions as to form of the advice proposed and, in particular, paragraphs 49(1) and 49(5), I now give the following advice: (1) If the Security Trustee were to receive instructions from the Majority Financiers in a series to do so, the Security Trustee would be acting in accordance with its powers under the Master Trust Deed – 2006 in removing AAFL as the manager of the Issuer in respect of that series under the Master Trust Deed – 2006 and in approving the appointment of a proposed replacement manager in respect of that series which those Majority Financiers identify and approve, but any such removal would not take effect unless and until a replacement manager has been identified and approved by the Majority Financiers for the relevant series. (2) If the Security Trustee were to receive instructions from the Majority Financiers so to do, the Security Trustee would be acting in accordance with its powers under the relevant Master Financing Deed or Financing Deed in removing AAFL or AML (as applicable) as the manager in respect of each or any series under the relevant Master Financing Deed or Financing Deed and in approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve, but any such removal would not take effect unless and until a replacement individual series manager has been identified and approved by each Financier for the relevant series. (3) If the Security Trustee were to receive instructions from BOS or any other financier to remove the manager, the Security Trustee would be acting in accordance with its powers under the Ireland Master Trust Deed and the MRAD and justified if it (a) removed the manager; (b) notified the Issuer and the specified financiers that it has done so and that it will appoint a replacement manager within 42 days of the notice being provided unless the Issuer or manager proposes a replacement manager and the approvals and opinions of each specified financier and the approval of the Issuer required by clauses 1.3 and 1.4 of the MRAD are provided to the Security Trustee within that period; and (c) if no replacement manager is proposed by the Issuer or the manager and approved pursuant to clauses 1.3 and 1.4 of the MRAD within 42 days, appointed a replacement manager on the instructions of the Majority Beneficiaries. (4) If the Security Trustee were to receive instructions from the Majority Financiers so to do, the Security Trustee would be acting in accordance with its powers under the Financing Deed – VH-VQU in removing AML as the manager in respect of series VH-VQU under Financing Deed – VH-VQU and in approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve in respect of series VH-VQU under Financing Deed – VH-VQU, but any such removal would not take effect unless and until a replacement manager has been identified and approved by each Facility Agent (acting on the instructions of the relevant financiers). (5) If the Allco Companies were to remove the manager, the Security Trustee would be acting in accordance with its powers under the Financing Deed – VH-VQZ in consenting to the removal of the manager and approving the appointment of a proposed replacement manager which the Majority Financiers identify and approve in respect of series VH-VQZ under the Financing Deed – VH-VQZ were it to receive instructions from the Majority Financiers to do so, but any such removal would not take effect unless and until the replacement manager has been identified and approved by each Facility Agent (acting on the instructions of the relevant financiers). However, if the Allco Companies were not to remove the manager, the Security Trustee would be justified in taking no action on instruction from A&L with respect to series VH-VQZ. Counsel addressed as to costs 52 UCPR r 55.1 requires that a statement under s 63 of the (NSW) Trustee Act 1925, facts upon which judicial advice is sought, must be divided into consecutively numbered paragraphs and must state the facts concisely and must state the question for opinion, advice or direction. It is not the role of a Statement of Fact necessarily to set out the arguments relied upon in favour or against any particular advice or direction sought. In this case the Security Trustee in its Amended Statement of Facts included in Part 10 paragraphs 110 to 157 an argument that was advanced by the "instructing lenders" as to a certain construction of one of the documents in issue. That argument was one which the Security Trustee's counsel had advised did not reflect the preferable view and, ultimately, was deleted from the Further Amended Statement of Facts and not pressed at the hearing. However, there is no necessity that in seeking advice on a particular issue, the trustee does so only if it believes that the advice sought is the preferable view. It is entirely open for a trustee, where there is doubt, to put before the Court a contention that it believes reflects a view other than the preferable one lest of course the Trustee's view be incorrect. 53 Ultimately, it is a matter for submission and argument and not the Statement of Facts to set out the competing arguments as to what advice should be given. I do not regard the inclusion in the Amended Statement of Facts of paragraphs 110 to 157 as involving any such impropriety as would warrant depriving the Trustee of its costs in that respect. In seeking advice on an issue that was agitated by some of the instructing members, it was not acting inappropriately. 54 I will, therefore, not vary the costs order proposed on the last occasion which I now confirm. ********** 07/12/2009 - Addendum - Paragraph(s) Additional paragraphs 51-54 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.