In the matter of Ansett Australia Limited and Mentha [2001] FCA 1439

FEDERAL COURT OF AUSTRALIA

In the matter of Ansett Australia Limited and Mentha [2001] FCA 1439

IN THE MATTER OF ANSETT AUSTRALIA LIMITED (ACN 004 209 410) & ORS (All Administrators Appointed) and MARK FRANCIS XAVIER MENTHA and MARK ANTHONY KORDA (As Administrators)

V 3045 of 2001

IN THE MATTER OF HAZELTON AIR CHARTER PTY LIMITED (ACN 065 221 356), HAZELTON AIR SERVICES PTY LIMITED (ACN 000 242 928), HAZELTON AIRLINES LIMITED (ACN 061 965 642) (All Administrator Appointed) and MICHAEL JAMES HUMPRHIS (As Administrator)

V 3046 of 2001

GOLDBERG J

12 OCTOBER 2001

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 3045 of 2001 IN THE MATTER OF:
ANSETT AUSTRALIA LIMITED (ACN 004 209 410) & ORS (All Administrators Appointed) (see Schedule A) AND MARK FRANCIS XAVIER MENTHA and MARK ANTHONY KORDA (As Administrators) Plaintiffs V 3046 of 2001 IN THE MATTER OF: HAZELTON AIR CHARTER PTY LIMITED (ACN 065 221 356), HAZELTON AIR SERVICES PTY LIMITED (ACN 000 242 928) HAZELTON AIRLINES LIMITED (ACN 061 965 642) (All Administrator Appointed) AND MICHAEL JAMES HUMPRHIS (As Administrator) Plaintiff
JUDGE:	GOLDBERG J
DATE:	12 OCTOBER 2001
PLACE:	MELBOURNE

CORRIGENDA

In the Reasons for Judgment of Justice Goldberg dated 12 October 2001, please amend the following:

1. Page 2, paragraph 2, second last line

Amend "Air New Zealand Engineering Services Limited" to read "Ansett Australia and Air New Zealand Engineering Services Limited".

2. Page 5, paragraph 12, second last line

Amend "The Hazelton companies has recommenced operating most of its routes" to read "The Hazelton companies have recommenced operating most of their routes".

3. Page 10, paragraph 28, fourth line

Amend "the director of companies" to read "the directors of companies".

4. Page 31, first line

Amend "are giving protection" to read "are given protection".

5. Page 31, paragraph 87, second line

Amend "may associate" to read "my associate".

SOPHIA GRACE

Associate to Justice Goldberg

22 October 2001

SCHEDULE A

Ansett Australia Limited (ACN 004 209 410)

501 Swanston Street Pty Ltd (ACN 005 477 618)

Aeropelican Air Services Pty Ltd (ACN 000 653 083)

Airport Terminals Pty Ltd (ACN 053 976 444)

Aldong Services Pty Limited (ACN 000 258 113)

Ansett Aircraft Finance Limited (ACN 008 643 276)

Ansett Australia Holdings Limited (ACN 004 216 291)

Ansett Aviation Equipment Pty Ltd (ACN 008 559 733)

Ansett Carts Pty Limited (ACN 055 181 215)

Ansett Equipment Finance Limited (ACN 006 827 989)

Ansett Finance Limited (ACN 006 555 166)

Ansett Holdings Limited (ACN 065 117 535)

Ansett International Limited (ACN 060 622 460)

Ansett Australia and Air New Zealand Engineering Services Ltd (ACN 089 520 696)

Bodas Pty Ltd (ACN 002 158 741)

Brazson Pty Limited (ACN 055 259 008)

Eastwest Airlines (Operations) Ltd (ACN 000 259 469)

Eastwest Airlines Limited (ACN 000 063 972)

Kendell Airlines (Aust) Pty Ltd (ACN 000 579 680)

Morael Pty Ltd (ACN 003 286 440)

Northern Airlines Limited (ACN 009 607 069)

Northern Territory Aerial Work Pty Limited (ACN 009 611 321)

Rock-it-Cargo (Aust) Pty Ltd (ACN 003 004 126)

Show Group Pty Ltd (ACN 002 968 989)

Skywest Airlines Pty Ltd (ACN 008 997 662)

Skywest Aviation Limited (ACN 004 444 866)

Skywest Holdings Pty Ltd (ACN 008 905 646)

Skywest Jet Charter Pty Ltd (ACN 008 800 155)

South Centre Maintenance Pty Ltd (ACN 007 286 660)

Spaca Pty Ltd (ACN 006 773 593)

Traveland International (Aust) Pty Limited (ACN 000 275 936)

Traveland International Pty Limited (ACN 002 275 936)

Traveland New Staff Pty Ltd (ACN 080 739 037)

Traveland Pty Limited (ACN 000 240 746)

Walgali Pty Ltd (ACN 005 258 921)

Westintech Limited (ACN 009 084 039)

Westintech Nominees Pty Ltd (ACN 009 302 158)

Whitsunday Affairs Pty Ltd (ACN 009 694 553)

Whitsunday Harbour Pty Limited (ACN 010 375 470)

Wridgway Holdings Limited (ACN 004 449 085)

Wridgways (Vic) Pty Ltd (ACN 004 153 413)

(All Administrators Appointed)

FEDERAL COURT OF AUSTRALIA

In the matter of Ansett Australia Limited & Ors (All Administrators Appointed) and Mentha & Korda (As Administrators)

V 3045 of 2001

In the matter of Hazelton Air Charter Pty Ltd & Ors (All Administrator Appointed) and Humphris (As Administrator)

V 3046 of 2001

GOLDBERG J

12 OCTOBER 2001

MELBOURNE

SUMMARY

1. In accordance with the practice of the Federal Court in some cases of public interest, the following summary has been prepared to accompany the reasons for judgment delivered today. This summary is intended to assist in understanding the outcome of these proceedings and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court's reasons is that contained in the published reasons for judgment which will be available on the internet at www.fedcourt.gov.au, together with this summary.

2. On 12 and 14 September 2001, administrators were appointed to companies in the Ansett group. The airline operations of the Ansett group ceased at 2.00am on 14 September 2001. The administrators resigned on 17 September 2001 and were replaced by the current administrators, Mark Mentha and Mark Korda. On the same day Mr Humphris became the administrator of Hazelton Air Charter Pty Limited, Hazelton Airlines Limited and Hazelton Air Services Pty Ltd ("the Hazelton companies").

3. Late in the night on 4 October 2001, the Ansett group, the Hazelton companies, Air New Zealand Limited and its subsidiaries ("the Air New Zealand group") and the persons who had been directors and secretaries of the Ansett group and the Air New Zealand group since Air New Zealand acquired full ownership of the Ansett group ("the directors") entered into a agreement called a Memorandum of Understanding ("the Memorandum"). Under the Memorandum, the New Zealand Government will pay the administrators $150 million, and the Air New Zealand group will waive certain potential legal claims against the Ansett group. The Memorandum also provides that the administrators and the Ansett group will release the Air New Zealand group and the directors from certain claims against them. The Memorandum is conditional upon the Court approving the terms of the Memorandum on or before 12 October 2001.

4. The administrators applied to the Court under the provisions of the Corporations Act 2001 (Cth) for approval of the Memorandum. Representatives on behalf of the Australian Securities and Investments Commission, the Commonwealth of Australia, the Australian Council of Trade Unions and twelve unions and their members who were employees of the Ansett group, the Air New Zealand group and ten of their directors appeared at the hearing of the applications and did not oppose the applications. The only person who appeared and made submissions against the Court making the orders sought was a creditor, E/Wise Solutions Pty Ltd.

5. I have reached the conclusion that the Court should direct that it approves the Memorandum and that the administrators may properly perform and give effect to it.

6. I publish my reasons for reaching this conclusion.

7. The administrators have made a considered commercial judgment that it is in the interests, and for the benefit, of the Ansett group and its creditors that they enter into Memorandum of Understanding.

8. I repeat par 78 of my reasons for judgment:

"As it is apparent that the administrators and the Hazelton administrator have demonstrated that they have taken into account, and considered, the interests of the Ansett group and the Hazelton companies and the interests of their creditors, and that they have not taken into account, or been influenced by, matters irrelevant in relation to, or antithetical to, the administration of the Ansett group in the manner described in s 435A of the Act (par 69 above), I am satisfied that it is appropriate to order that they may properly perform and give effect to the Memorandum of Understanding.

9. The manner in which the administrators use the $150 million is a matter for the administrators to determine and it is no part of the function of the Court to give any indication or direction as to how that amount might, or should be applied.

10. Paragraph 2 of the order of the Court is:

"Pursuant to s 447D(1) of the Act, as it operates in accordance with para 1 of this order, the Court directs that:

(a) The Court approves the Memorandum of Understanding which is Schedule B to the judgment;

(b) The plaintiffs may properly perform and give effect to the Memorandum of Understanding."

FEDERAL COURT OF AUSTRALIA

In the matter of Ansett Australia Limited and Mentha [2001] FCA 1439

CORPORATIONS - external administration - application under ss 447A and 447D of the Corporations Act (2001) (Cth) - court approval of memorandum of understanding - direction that administrators may properly perform and give effect to memorandum of understanding -where memorandum of understanding provided for substantial payment and release of certain claims - whether administrators had taken into account and considered interests of companies' creditors - court's power under s 447A of the Corporations Act (2001) (Cth).

Corporations Act 2001 (Cth): s 437A(1), s 447A, s 447D, s 479(3)

Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 referred to

Editions Tom Thompson Pty Ltd v Pilley (1997) 77 FCR 141 referred to

Sanderson v Classic Car Insurances (1985) 10 ACLR 115 referred to

Mentha v G E Capital Ltd (1997) 27 ACSR 696 referred to

Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 applied

Re Mineral Securities Australia Ltd [1973] 2 NSWLR 207 referred to

Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 applied

IN THE MATTER OF ANSETT AUSTRALIA LIMITED (ACN 004 209 410) & ORS (All Administrators Appointed) and MARK FRANCIS XAVIER MENTHA and MARK ANTHONY KORDA (As Administrators)

V 3045 of 2001

V 3046 of 2001

GOLDBERG J

12 OCTOBER 2001

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY		V 3045 of 2001
IN THE MATTER OF:
ANSETT AUSTRALIA LIMITED (ACN 004 209 410) & ORS (All Administrators Appointed) (see Schedule A) AND MARK FRANCIS XAVIER MENTHA and MARK ANTHONY KORDA (As Administrators) Plaintiffs
JUDGE:	GOLDBERG J
DATE:	12 OCTOBER 2001
PLACE:	MELBOURNE

THE COURT ORDERS THAT:

1. Pursuant to s 447A of the Corporations Act 2001 (Cth) ("the Act"), s 447D(1) of the Act is to operate in relation to each of the companies set out in Schedule A to the judgment so that in an application by the plaintiffs for directions pursuant to s 447D(1) in relation to a Memorandum of Understanding dated 3 October 2001 referred to in the application, the Court may give a direction that it approves the Memorandum and that the plaintiffs may properly perform and give effect to the Memorandum of Understanding.

2. Pursuant to s 447D(1) of the Act, as it operates in accordance with para 1 of this order, the Court directs that:

(a) The Court approves the Memorandum of Understanding which is Schedule B to the judgment;

(b) The plaintiffs may properly perform and give effect to the Memorandum of Understanding.

3. The costs of all parties who have appeared in the proceeding, save for Air New Zealand Limited and its subsidiaries and directors and Travel Compensation Fund, be costs in the administration of the companies set out in Schedule A to the judgment.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY		V 3046 of 2001
IN THE MATTER OF:
HAZELTON AIR CHARTER PTY LIMITED (ACN 065 221 356) HAZELTON AIR SERVICES PTY LIMITED (ACN 000 242 928) HAZELTON AIRLINES LIMITED (ACN 061 965 642) (All Administrator Appointed) AND MICHAEL JAMES HUMPRHIS (As Administrator) Plaintiff
JUDGE:	GOLDBERG J
DATE:	12 OCTOBER 2001
PLACE:	MELBOURNE

THE COURT ORDERS THAT:

1. Pursuant to s 447A of the Corporations Act 2001 (Cth) ("the Act"), s 447D(1) of the Act is to operate in relation to Hazelton Air Charter Pty Limited, Hazelton Air Services Pty Limited and Hazelton Airlines Limited so that in an application by the plaintiff for directions pursuant to s 447D(1) in relation to a Memorandum of Understanding dated 3 October 2001 referred to in the application, the Court may give a direction that it approves the Memorandum and that the plaintiff may properly perform and give effect to the Memorandum of Understanding.

2. Pursuant to s 447D(1) as it operates in accordance with para 1 of this order, the court directs that:

(a) The Court approves the Memorandum of Understanding which is Schedule B to the judgment;

(b) The plaintiff may properly perform and give effect to the Memorandum of Understanding.

3. The costs of the plaintiff and Australian Council of Trade Unions and its associated parties be costs in the administration of the said companies.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 3045 of 2001 IN THE MATTER OF:
ANSETT AUSTRALIA LIMITED (ACN 004 209 410) & ORS (All Administrators Appointed) (see Schedule A) AND MARK FRANCIS XAVIER MENTHA and MARK ANTHONY KORDA (As Administrators) Plaintiffs V 3046 of 2001 IN THE MATTER OF: HAZELTON AIR CHARTER PTY LIMITED (ACN 065 221 356), HAZELTON AIR SERVICES PTY LIMITED (ACN 000 242 928) HAZELTON AIRLINES LIMITED (ACN 061 965 642) (All Administrator Appointed) AND MICHAEL JAMES HUMPRHIS (As Administrator) Plaintiff
JUDGE:	GOLDBERG J
DATE:	12 OCTOBER 2001
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 On 12 and 14 September 2001, Messrs Peter Hedge, Greg Hall and Allan Watson ("the first administrators") were appointed administrators of Ansett Australia Limited and the other companies set out in Schedule A to this judgment in accordance with the provisions of Pt 5.3A of the Corporations Act 2001 (Cth) ("the Act"). I will refer hereafter to these companies and to Ansett Australia and Air New Zealand Engineering Services Limited collectively as "the Ansett group". Those appointments occurred as a result of resolutions of the various companies in the Ansett group on 12 and 14 September 2001. The first administrators caused the airline operations of the Ansett group to cease at 2.00am on Friday 14 September 2001.

2 On 17 September 2001, I ordered that Mark Francis Xavier Mentha and Mark Anthony Korda ("the administrators") be appointed joint and several administrators of the Ansett group other than Hazelton Air Charter Pty Limited, Hazelton Airlines Limited, Hazelton Air Services Pty Ltd ("the Hazelton companies"), and that Michael James Humphris be appointed administrator of the Hazelton companies with effect from the time that Messrs Hedge, Hall and Watson gave notice in writing of their resignation as administrators of the Ansett group. On 17 September 2001 Messrs Hedge, Hall and Watson resigned as administrators of the Ansett group and thereupon the administrators were appointed administrators of the companies in the Ansett group and Mr Humphris ("the Hazelton administrator") was appointed administrator of the Hazelton companies. On 4 October 2001, the administrators were appointed administrators of Air New Zealand Engineering Services Limited pursuant to the provisions of Pt 5.3A of the Act.

3 On 5 October 2001, the administrators filed an application in the Court which was expressed to be made pursuant to ss 447A and 447D of the Act and the inherent jurisdiction of the Court. The administrators sought the following orders:

"2. Approval of the Agreement entitled Memorandum of Understanding between the Ansett Group and the Air New Zealand Group and others ('the Agreement').

3. Further or alternatively to paragraph 2 hereof, that the Plaintiffs may properly perform and give effect to the Agreement."

On 8 October, the Hazelton administrator filed an application in substantially the same terms seeking orders that the Court approve the agreement, or alternatively an order that he may properly perform and give effect to the agreement.

4 The parties to the Memorandum of Understanding are the Ansett group set out in Schedule A to the Memorandum of Understanding, the Hazelton companies, the administrators, the Hazelton administrator, Air New Zealand Limited ("Air New Zealand") and its subsidiaries (other than the Ansett group and the Hazelton companies) set out in Schedule B to the Memorandum ("the Air New Zealand group") and each party who is, or was at any time since Air New Zealand acquired full ownership of the Ansett group a director or secretary of any company in the Air New Zealand group or the Ansett group as set out in Schedule C to the Memorandum ("the Directors").

5 I will consider the detail of the Memorandum of Understanding shortly but, for present purposes, it is sufficient to note that it provides for the New Zealand Government to pay the administrators $A150 million for the Air New Zealand group to waive various claims it may have against the Ansett group, and for the administrators and the Hazelton administrator to release Air New Zealand from any claims in relation to a Letter of Comfort dated 8 August 2001 and to release the Directors from certain claims which might be made against them. (Money amounts are expressed in Australian dollars unless otherwise indicated.)

6 At the final hearing of the applications, appearances were announced and submissions were made by the administrators, the Hazelton administrator, the Australian Securities and Investments Commission ("ASIC"), the Commonwealth of Australia, the Australian Council of Trade Unions ("ACTU") and twelve specified unions and their members who were employees of the Ansett group, the Air New Zealand group and ten of the directors and one creditor, E/Wise Solutions Pty Ltd. Only E/Wise Solutions Pty Ltd opposed the Court making orders sought, although there were differing views as to the form of order which should be made.

7 It is helpful to rehearse the events which have led to the making of the applications. The first Ansett airline operation commenced in February 1936 with one aeroplane. In 1979 the Ansett group was taken over by TNT Limited and News Limited. By the 1990s, the Ansett group had grown into a major national airline and was one of the two principal domestic airlines operating throughout Australia. It also flew international routes. Air New Zealand acquired TNT's 50 per cent shareholding in the Ansett group in June 1996 and News Limited's 50 per cent shareholding in the Ansett group in June 2000.

8 The extent of the Ansett group's airline operations and their significance for the Australian economy and the Australian community can be seen from the following statistics and circumstances which existed prior to the appointment of the administrators:

· The Ansett group employed approximately 16,000 people;

· The total wages and salaries paid by the Ansett group annually as at February 2001 was approximately $963 million;

· The Ansett group served over 130 domestic destinations and made approximately 900 flights per day across the Australian network;

· The Ansett group had approximately 130 planes in its fleet;

· In the 2000 financial year Ansett carried over 14.04 million passengers of whom 13.35 million were carried on domestic routes;

· The Ansett group contributed approximately $73.3 million in tax for the financial year ending 30 June 2000;