Federal Court of Australia

VB Leaseco Pty Ltd (administrators appointed) v Wells Fargo Trust Company, National Association (trustee) [2020] FCAFC 168

Appeal from:

Wells Fargo Trust Company, National Association (trustee) v VB Leaseco Pty Ltd (administrators appointed) [2020] FCA 1269

File number(s):

NSD 994 of 2020

Judgment of:

MCKERRACHER, O’CALLAGHAN AND COLVIN JJ

Date of judgment:

7 October 2020

Catchwords:

AVIATIONInternational Interests in Mobile Equipment (Cape Town Convention) Act 2013 (Cth) – Convention on International Interests in Mobile Equipment – Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment – Vienna Convention on the Law of Treaties Arts 31, 32

AVIATION – construction of Art XI of the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment concerning remedies on insolvency – occurrence of insolvency-related event – insolvency administrator appointed to appellant lessees – meaning of “possession” and “give possession of the aircraft object to the creditor” within the meaning of Art XI(2) of the Protocol (Alternative A) – whether “give possession” requires delivery by insolvency administrators of certain aircraft objects, including aircraft jet engines, to the respondent lessors in the United States in accordance with lease agreements – or whether giving possession effected by insolvency administrator disclaiming aircraft objects or by giving lessors the opportunity to take possession

Legislation:

Air Services Act 1995 (Cth)

Convention on International Interests in Mobile Equipment Arts 1, 2(2)(c), 5, 5(1), 6(1), 6(2), 8, 10, 12, 13, 30, 39

Corporations Act 2001 (Cth) ss 437A, 437B, 437D, 440B, 443B(3)

International Interests in Mobile Equipment (Cape Town Convention) Act 2013 (Cth)

Louisiana Civil Code Art 3421

Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment Arts IX, IX(3), XI, XI(2), XI(5), XI(5)(a), XI(7), XI(9), XI(10), XI(11), XI(12), XII

Vienna Convention on the Law of Treaties Arts 31, 31(1), 32

Cases cited:

Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225

Armory v Delamirie (1722) 1 Str 505; 93 ER 664

Commonwealth v Tasmania (1983) 158 CLR 1

Hocking v Director-General, National Archives of Australia [2020] HCA 19; 94 ALJR 569

Pilkington (Australia) Ltd v Minister for Justice and Customs (2002) 127 FCR 92

Povey v Qantas Airways Ltd (2005) 223 CLR 189

The Winkfield [1902] P 42

Division:

General Division

Registry:

Victoria

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

114

Date of hearing:

22 September 2020

Counsel for the Appellants:

Mr JT Gleeson SC with Ms K Lindeman

Solicitor for the Appellants:

Clayton Utz

Counsel for the Respondents:

Dr CS Ward SC with Mr PF Santucci

Solicitor for the Respondents:

Norton Rose Fulbright

ORDERS

NSD 994 of 2020

BETWEEN:

VB LEASECO PTY LTD (ADMINISTRATORS APPOINTED) ACN 134 268 741

First Appellant

VIRGIN AUSTRALIA AIRLINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 090 670 965

Second Appellant

VAUGHAN NEIL STRAWBRIDGE, JOHN LETHBRIDGE GREIG, SALVATORE ALGERI & RICHARD JOHN HUGHES (IN THEIR CAPACITY AS VOLUNTARY ADMINISTRATORS OF THE FIRST AND SECOND APPELLANTS) (and another named in the Schedule)

Third Appellants

AND:

WELLS FARGO TRUST COMPANY, NATIONAL ASSOCIATION (AS OWNER TRUSTEE)

First Respondent

WILLIS LEASE FINANCE CORPORATION

Second Respondent

order made by:

MCKERRACHER, O’CALLAGHAN AND COLVIN JJ

DATE OF ORDER:

7 October 2020

THE COURT ORDERS THAT:

1.    The appeal is allowed.

2.    Orders 5, 6, 7, 8 and 12 of the orders made by the primary judge on 3 September 2020 be set aside.

3.    The proceeding, including any application by the appellants for declaratory relief, be remitted to the primary judge for further hearing in accordance with these reasons.

4.    The respondents pay the appellants’ costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

A question of construction

1    This is an expedited appeal. It raises what the appellants correctly called “a narrow but important question of construction” about the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the Protocol), namely:

[D]oes the obligation to give possession of aircraft objects to a creditor under Art [XI(2)] of the Protocol require an insolvency administrator (or debtor) to redeliver those aircraft objects in accordance with provisions governing the physical return of such objects in an existing agreement between the parties, or otherwise in a manner deemed reasonable and appropriate by the Court, at the expense of the [insolvency administrator] (or debtor)?

2    The primary judge answered that question in the affirmative.

The parties’ competing submissions summarised

3    The appellants, who are the lessees of those aircraft objects and their insolvency administrators, submit that his Honour erred in doing so, and that he ought to have concluded that the obligation to “give possession” in Art XI(2) of the Protocol instead requires an insolvency administrator “to make aircraft objects available to a creditor, in the sense of giving such a creditor the opportunity to ‘take possession’ of their aircraft objects, and thereby assume as against the whole world the possessory title which up until that point was held by the [administrator]”.

4    The appellants contend that the concept of “possession” used in Art XI(2) refers to the common law doctrine “that physical possession of a tangible or corporeal thing, in the sense of actual physical custody, is not merely evidence of absolute title”, but something that “confers a title of its own sometimes called a possessory title”, which is as good as the absolute title as against every person except the absolute owner. They say that what the administrators are therefore required to offer to the lessor in this case is the ability to assume lawful physical possession of the aircraft objects, which will then be as good as absolute title against everyone except someone who can show a better right to possession. Whether the lessor elects to take that possession then becomes a matter for it.

5    The appellants contend that a court could in an appropriate case declare that an administrator had not given possession because he or she had not provided the opportunity to take it. But they say that what a court cannot do is make orders of the type made by the primary judge in this case for redelivery in accordance with a prescriptive regime, “requiring [a] complex series of positive obligations of a regulatory and technical kind involving substantial expense”.

6    The appellants also submit that the primary judge should have gone on to conclude, on the facts as found, that the appellants had complied with their obligation under Art XI(2) of the Protocol to offer to the lessor the ability to assume lawful possession of the aircraft objects.

7    The respondents submit that the primary judge correctly found that the Protocol, upon the occurrence of an insolvency event involving a registered aircraft object, requires the relevant agreement of the parties (here, leases) to govern the obligations of giving possession, subject only to the requirement that such contractual remedy be exercised in a commercially reasonable manner in accordance with Art IX(3) of the Protocol. In this case, the lease agreements relevantly provide, in effect, that upon the expiry or termination of the lease, the lessee will redeliver the leased equipment free of all liens to a delivery location in Florida. The respondents contend that the primary judge was therefore correct to make orders that required the appellants to do exactly that, in circumstances where it was not suggested that the contractual remedy was unreasonable.

The parties and the background

8    The first and second respondents are respectively the legal and beneficial owners of four aircraft jet engines. Those engines, together with associated stands, equipment and records, were leased to the first appellant, VB Leaseco Pty Ltd (VB), under lease agreements entered into in 2019. VB, in turn, subleased them to the second appellant, Virgin Australia Airlines Pty Ltd (VAA). The third appellants are the administrators of VB and VAA. The fourth appellant is Tiger Airways Australia Pty Ltd (TA), part of the Virgin Australia group of companies. It was added as a party because it transpired during the hearing before the primary judge that one of the engines had been installed on a TA aircraft. Nothing turns on that.

9    The first respondent (Wells Fargo) as lessor holds an “international interest” (that is, a security interest) within the meaning of Art 2(2)(c) of the Convention on International Interests in Mobile Equipment (the Convention). It holds its interest beneficially for the second respondent, the Willis Lease Finance Corporation (Willis). (Wells Fargo and Willis are referred to collectively as the respondents.)

10    Wells Fargo is afforded certain rights, privileges and immunities by the Convention and the Protocol.

11    The Convention and the Protocol have the force of law as part of the law of the Commonwealth, so far as they relate to Australia, under the International Interests in Mobile Equipment (Cape Town Convention) Act 2013 (Cth).

12    Article XI(2) of the Protocol relevantly provides that upon the occurrence of an “insolvency-related event”, the insolvency administrator “shall ... give possession of the aircraft object to the creditor”.

13    It is common ground that an insolvency-related event occurred at the time of the appointment of the administrators to the Virgin Australia group of companies, including VB and VAA, on 20 April 2020.

14    It is not necessary to repeat here the detail of the factual and procedural background to the proceeding, because the question of construction to be resolved does not turn on any controversial fact.

15    The background is recorded in the reasons of the primary judge. See Wells Fargo Trust Company, National Association (trustee) v VB Leaseco Pty Ltd (administrators appointed) [2020] FCA 1269 at [19]-[49].

16    It suffices to say, for present purposes, that on 16 June 2020 the respondents wrote to the administrators, insisting that they comply with their obligations under Art XI of the Protocol to “give possession” of the four engines and associated equipment and records. On the same day, the administrators issued a notice to the respondents purportedly in accordance with s 443B(3) of the Corporations Act 2001 (Cth) (Corporations Act) disclaiming those items.

17    Wells Fargo and Willis commenced the proceeding below by way of an originating application filed on 30 June 2020. By an amended originating application dated 26 July 2020, they relevantly sought the following relief:

Declaration of international interest

1    A declaration that [Wells Fargo] holds (for the benefit of [Willis]) an international interest in the aircraft objects identified in Schedule 2 [to the amended originating application] pursuant to Article[s] 2 and 7 of the [Convention].

Declaration of failure to comply with Article XI of the Cape Town Aircraft Protocol

2    A declaration that the Notice dated 16 June 2020 given by the [administrators] to [Willis] did not discharge [VB’s] or [the administrators] obligation under Article XI of the [Protocol] to give possession of the aircraft objects identified in Schedule 2.

Delivery up of aircraft objects

3    An order that [VB, VAA, the administrators and TA] or any of them give possession of the aircraft objects identified in Schedule 2, by delivering up, or causing to be delivered up the aircraft objects to the Applicants in the manner set out in Schedule 3 at Coconut Creek, Florida, United States of America by no later than 31 July 2020.

4    An order that unless and until [VB, VAA, the administrators and TA], or any of them give possession in accordance with prayer 3, or until further order of the Court, [they] are to preserve the aircraft objects in Schedule 2 by:

(a)    maintaining the Engines identified in Schedule 2 in accordance with paragraph 1 of Schedule 3;

(b)    maintaining insurance cover over the aircraft objects identified in Schedule 2 to the same or greater extent as was maintained at the date of appointment of the administrators.

4A    An order that [VB, VAA and TA] take all steps necessary to cause to be completed, and ‘give possession’ of, all records and information set out in Schedule 2, paragraph 7 of this Amended Originating Process.

4B    An order that the [administrators] do all such things as are necessary and within [their] power to cause [VB, VAA and TA] to carry out the Orders of this Court in respect of the completion and transmittal of the records described at Schedule 2, paragraph 7 of this Amended Originating Process.

(Particulars omitted.)

18    The application was heard by the primary judge on 17 August 2020. On 3 September 2020, his Honour made declarations and orders substantially in the form sought in the amended originating application.

The Leases

19    By the terms of aircraft engine lease agreements dated 24 May, 14 June, 28 August and 13 September 2019, Wells Fargo (as owner trustee for Willis) leased to VB “the Equipment, namely the jet engines and associated stands, equipment and records, subject to the terms and provisions of the leases, which incorporated all the terms and conditions of a General Terms Engine Lease Agreement dated 24 May 2019 (the GTA).

20    Article III of the leases provides that the engines were to be delivered to the lessee at locations in Florida, Texas and the Netherlands, and returned to the lessor upon termination of the lease at “the facility of Willis Asset Management Limited, Bridgend, Wales, or a location in the State of Florida, U.S.A. as determined by [the] Lessor.

21    Article XIII of the leases provides that the “Lessee [is] to be responsible for Equipment return in accordance with Section 18 of the GTA and this Lease”.

22    Clause 7(c) of the GTA provides:

Upon redelivery of the Engine to Lessor, Lessee will return all Engine records delivered to Lessee by Lessor, together with all Engine records generated by Lessee, which will be equivalent to the records provided by Lessor at delivery in accordance with Exhibit F Redelivery Documentation. Additionally, Lessee will provide an Engine Certification Statement in accordance with Exhibit E of this GTA.

23    Clause 18.3(f) of the GTA provides:

Upon expiration of the Lease Term or other termination of a Lease, Lessee will return the leased Equipment free of all Liens other than Lessor’s Liens to the delivery location described in the applicable Lease or to such a location in the continental U.S. nominated by Lessor or to such other location as the parties may mutually agree.

24    Clause 18.3(h) of the GTA sets out a detailed and prescriptive regime for how a shipment of the engines is to be effected, including, by way of example, preserving the engine for long-term preservation and storage for a minimum of 365 days in accordance with the manufacturer’s procedures for the engine.

25    Clause 19 of the GTA deals with remedies available to Willis following events of default. Clause 19(a)(vi) provides that both insolvency and consent to the appointment of a receiver, controller or other officer with similar powers constitute events of default.

26    Clause 19(a)(xvii) provides that an “Event of Insolvency” (which includes the appointment of an administrator) constitutes an event of default.

27    The relevant provisions of cl 19(b), which deal with the lessors consequential remedies, are as follows:

Upon the occurrence of any Default or Event of Default and at any time thereafter long as the same shall be continuing Lessor may in its sole discretion elect to do one or more of the following with respect to any or all of the Equipment, to the extent permitted by, and subject to compliance with any mandatory requirements of, applicable law then in effect:

(i)    Lessor may do anything for Lessee’s account that may reasonably be required to cure any Default or Event of Default and recover from Lessee all reasonable costs, including reasonable attorneys’ fees, incurred in so doing, plus interest thereon …

(ii)    Lessor may proceed by appropriate court action … to enforce performance by Lessee of this GTA and any Leases hereunder and/or to recover damages for the breach hereof and thereof;

(iii)    Lessor may:

(A)    By written notice, cancel Lessees rights of possession and use under any and all Leases between Lessor and Lessee and/or any Related Lease;

(B)    By written notice, terminate its obligations to lease any Equipment to the Lessee under this GTA; [or]

(C)    Demand that Lessee, and Lessee shall upon such demand, return any Equipment promptly to Lessor free of any claims or rights of Lessee in the manner and condition required by, and otherwise in accordance with, all the provisions of Section 18 as if such Equipment were being returned at the end of the Lease Term; or Lessor, at its option, may enter upon the premises where such Equipment is located and take immediate possession of and remove the same by summary proceedings or otherwise free of any claims or rights of the Lessee, all without liability to Lessee

The Convention and the Protocol

28    According to Professor CW Mooney of the University of Pennsylvania Law School, “[b]y any measure, the Convention has proven to be the most successful international secured transactions instrument ever implemented”. See Charles W Mooney Jr, ‘The Cape Town Convention’s Improbable-but-Possible Progeny Part One: An International Secured Transactions Registry of General Application’ (2014) 55(1) Virginia Journal of International Law 163 at 166.

29    The Convention and the Protocol created an international regime for the creation, perfection and priority of interests in mobile equipment, with an International Registry and priority rules based on the order of registration. They came about because of a recognition, among other things, that domestic laws, and the concept of lex situs, are not well suited to high value equipment that regularly crosses national borders (like aircraft engines). See Sir Roy Goode, Security Interests in Mobile Equipment: Lawmaking Lessons from the Cape Town Convention (2014) 35 Adelaide Law Review 59 at 59.

30    According to Professor Goode, “[t]he most crucial element of the whole package is the establishment of an International Registry for the registration, assignment, subordination, etc of international interests in aircraft objects. In a Contracting State, a registered interest has priority over both a subsequently registered interest and an unregistered interest. This is true even if the latter was not capable of registration because, for example, it did not fall within one of the registrable categories or because the debtor was not situated in a Contracting State at the time of the relevant agreement. So a registered international interest trumps all interests created under national law except non-consensual rights or interests covered by a declaration of a Contracting State under art 39 of the [Convention] or pre-existing rights or interests …” (ibid at 64).

31    The provisions in the Convention and the Protocol concerning the International Registry and the priority rules do not concern us here. This case is concerned rather with relevant insolvency provisions, and in particular Art XI(2) of the Protocol. As to the insolvency-related provisions of the Convention and Protocol generally, see Charles W Mooney Jr, Insolvency Law as Credit Enhancement: Insolvency-related Provisions of the Cape Town Convention and the Aircraft Equipment Protocol (2004) 13 International Insolvency Review 27; and Sir Roy Goode, Official Commentary on the Convention on International Interests in Mobile Equipment and Protocol thereto on Matters Specific to Aircraft Equipment (4th ed, 2019) at [2.232]-[2.237] (the Official Commentary).

32    It is necessary, in order to follow the submissions of the parties on appeal, to set out a number of the relevant provisions of the Convention and the Protocol.

The Convention

33    The preamble to the Convention provides as follows:

THE STATES PARTIES TO THIS CONVENTION,

AWARE of the need to acquire and use mobile equipment of high value or particular economic significance and to facilitate the financing of the acquisition and use of such equipment in an efficient manner,

RECOGNISING the advantages of asset-based financing and leasing for this purpose and desiring to facilitate these types of transaction by establishing clear rules to govern them,

MINDFUL of the need to ensure that interests in such equipment are recognised and protected universally,

DESIRING to provide broad and mutual economic benefits for all interested parties,

BELIEVING that such rules must reflect the principles underlying asset-based financing and leasing and promote the autonomy of the parties necessary in these transactions,

CONSCIOUS of the need to establish a legal framework for international interests in such equipment and for that purpose to create an international registration system for their protection,

TAKING INTO CONSIDERATION the objectives and principles enunciated in existing Conventions relating to such equipment,

HAVE AGREED upon the following provisions:

34    Article 1 contains the following definition of a “leasing agreement”: “an agreement by which one person (the lessor) grants a right to possession or control of an object (with or without an option to purchase) to another person (the lessee) in return for a rental or other payment”. A “creditor” is defined as meaning “a chargee under a security agreement, a conditional seller under a title reservation agreement or a lessor under a leasing agreement”.

35    In this case, VB was granted the right of possession or control, which passed to the administrators upon their appointment pursuant to ss 437A, 437B and 437D of the Corporations Act.    

36    Article 5 of the Convention is entitled “Interpretation and applicable law”. Article 5(1) provides that “[i]n the interpretation of this Convention, regard is to be had to its purposes as set forth in the preamble, to its international character and to the need to promote uniformity and predictability in its application”.

37    Chapter III is headed “Default remedies”. Within that Chapter is Art 8, which is entitled “Remedies of chargee” and relevantly provides:

1.    In the event of default as provided in Article 11, the chargee may, to the extent that the chargor has at any time so agreed and subject to any declaration that may be made by a Contracting State under Article 54, exercise any one or more of the following remedies:

  (a)    take possession or control of any object charged to it;

  (b)    sell or grant a lease of any such object;

(c)    collect or receive any income or profits arising from the management or use of any such object.

2.    The chargee may alternatively apply for a court order authorising or directing any of the acts referred to in the preceding paragraph.

3.    Any remedy set out in sub-paragraph (a), (b) or (c) of paragraph 1 or by Article 13 shall be exercised in a commercially reasonable manner. A remedy shall be deemed to be exercised in a commercially reasonable manner where it is exercised in conformity with a provision of the security agreement except where such a provision is manifestly unreasonable.

38    Article 10 is entitled “Remedies of conditional seller or lessor” and provides:

In the event of default under a title reservation agreement or under a leasing agreement as provided in Article 11, the conditional seller or the lessor, as the case may be, may:

(a)    subject to any declaration that may be made by a Contracting State under Article 54, terminate the agreement and take possession or control of any object to which the agreement relates; or

(b)    apply for a court order authorising or directing either of these acts.

39    Article 12 is entitled “Additional remedies” and provides:

Any additional remedies permitted by the applicable law, including any remedies agreed upon by the parties, may be exercised to the extent that they are not inconsistent with the mandatory provisions of this Chapter as set out in Article 15.

40    Article 13 is entitled “Relief pending final determination”. Art 13(1) relevantly provides:

Subject to any declaration that it may make under Article 55, a Contracting State shall ensure that a creditor who adduces evidence of default by the debtor may, pending final determination of its claim and to the extent that the debtor has at any time so agreed, obtain from a court speedy relief in the form of such one or more of the following orders as the creditor requests:

 (a)    preservation of the object and its value;

 (b)    possession, control or custody of the object;

 (c)    immobilisation of the object; and

(d)    lease or, except where covered by sub-paragraphs (a) to (c), management of the object and the income therefrom.

41    Chapter VIII is headed “Effects of an international interest as against third parties”. Within that Chapter is Art 30, which is entitled “Effects of insolvency” and relevantly provides:

1.    In insolvency proceedings against the debtor an international interest is effective if prior to the commencement of the insolvency proceedings that interest was registered in conformity with this Convention.

2.    Nothing in this Article impairs the effectiveness of an international interest in the insolvency proceedings where that interest is effective under the applicable law.

3.    Nothing in this Article affects:

  (a)    

(b)    any rules of procedure relating to the enforcement of rights to property which is under the control or supervision of the insolvency administrator.

42    Article 39(1) relevantly provides:

A Contracting State may at any time, in a declaration deposited with the Depositary of the Protocol declare, generally or specifically:

(a)    those categories of non-consensual right or interest (other than a right or interest to which Article 40 applies) which under that State’s law have priority over an interest in an object equivalent to that of the holder of a registered international interest and which shall have priority over a registered international interest, whether in or outside insolvency proceedings

43    The declarations lodged by Australia under the Convention at the time of the deposit of its instrument of accession included the following:

The Government of Australia declares that, in accordance with Article 39(l)(a) the following categories of non-consensual right or interest have priority under its law over an interest in an object equivalent to that of the holder of a registered international interest and shall have priority over a subsequently registered international interest, whether in or outside insolvency proceedings: statutory liens registered in accordance with the Air Services Act 1995 (Cth) …

44    It follows from that declaration that, where a lessee has possession of an aircraft object and is required to give possession under Art XI(2) of the Protocol (see [47] below), priority is to be afforded to any liens registered under the Air Services Act 1995 (Cth).

The Protocol

45    The preamble to the Protocol provides:

THE STATES PARTIES TO THIS PROTOCOL,

CONSIDERING it necessary to implement the Convention on International Interests in Mobile Equipment (hereinafter referred to as the Convention) as it relates to aircraft equipment, in the light of the purposes set out in the preamble to the Convention,

MINDFUL of the need to adapt the Convention to meet the particular requirements of aircraft finance and to extend the sphere of application of the Convention to include contracts of sale of aircraft equipment,

MINDFUL of the principles and objectives of the Convention on International Civil Aviation, signed at Chicago on 7 December 1944,

HAVE AGREED upon the following provisions relating to aircraft equipment:

46    Chapter II is headed “Default remedies, priorities and assignments”. Within that Chapter is Art IX, which is entitled “Modification of default remedies provisions” and provides as follows:

1.    In addition to the remedies specified in Chapter III of the Convention, the creditor may, to the extent that the debtor has at any time so agreed and in the circumstances specified in that Chapter:

  (a)    procure the de-registration of the aircraft; and

(b)    procure the export and physical transfer of the aircraft object from the territory in which it is situated.

2.    The creditor shall not exercise the remedies specified in the preceding paragraph without the prior consent in writing of the holder of any registered interest ranking in priority to that of the creditor.

3.    Article 8(3) of the Convention shall not apply to aircraft objects. Any remedy given by the Convention in relation to an aircraft object shall be exercised in a commercially reasonable manner. A remedy shall be deemed to be exercised in a commercially reasonable manner where it is exercised in conformity with a provision of the agreement except where such a provision is manifestly unreasonable.

4.    A chargee giving ten or more working days’ prior written notice of a proposed sale or lease to interested persons shall be deemed to satisfy the requirement of providing reasonable prior notice specified in Article 8(4) of the Convention. The foregoing shall not prevent a chargee and a chargor or a guarantor from agreeing to a longer period of prior notice.

5.    The registry authority in a Contracting State shall, subject to any applicable safety laws and regulations, honour a request for de-registration and export if:

(a)    the request is properly submitted by the authorised party under a recorded irrevocable deregistration and export request authorisation; and

(b)    the authorised party certifies to the registry authority, if required by that authority, that all registered interests ranking in priority to that of the creditor in whose favour the authorisation has been issued have been discharged or that the holders of such interests have consented to the de-registration and export.

6.    A chargee proposing to procure the de-registration and export of an aircraft under paragraph 1 otherwise than pursuant to a court order shall give reasonable prior notice in writing of the proposed deregistration and export to:

(a)    interested persons specified in Article 1(m)(i) and (ii) of the Convention; and

(b)    interested persons specified in Article 1(m)(iii) of the Convention who have given notice of their rights to the chargee within a reasonable time prior to the de-registration and export.

47    Article XI is entitled “Remedies on insolvency”. It is necessary to set it out in full:

1.    This Article applies only where a Contracting State that is the primary insolvency jurisdiction has made a declaration pursuant to Article XXX(3).

Alternative A

2.    Upon the occurrence of an insolvency-related event, the insolvency administrator or the debtor, as applicable, shall, subject to paragraph 7, give possession of the aircraft object to the creditor no later than the earlier of:

  (a)    the end of the waiting period; and

(b)    the date on which the creditor would be entitled to possession of the aircraft object if this Article did not apply.

3.    For the purposes of this Article, the ‘waiting period’ shall be the period specified in a declaration of the Contracting State which is the primary insolvency jurisdiction.

4.    References in this Article to the ‘insolvency administrator shall be to that person in its official, not in its personal, capacity.

5.    Unless and until the creditor is given the opportunity to take possession under paragraph 2:

(a)    the insolvency administrator or the debtor, as applicable, shall preserve the aircraft object and maintain it and its value in accordance with the agreement; and

(b)    the creditor shall be entitled to apply for any other forms of interim relief available under the applicable law.

6.    Sub-paragraph (a) of the preceding paragraph shall not preclude the use of the aircraft object under arrangements designed to preserve the aircraft object and maintain it and its value.

7.    The insolvency administrator or the debtor, as applicable, may retain possession of the aircraft object where, by the time specified in paragraph 2, it has cured all defaults other than a default constituted by the opening of insolvency proceedings and has agreed to perform all future obligations under the agreement. A second waiting period shall not apply in respect of a default in the performance of such future obligations.

8.    With regard to the remedies in Article IX(1):

(a)    they shall be made available by the registry authority and the administrative authorities in a Contracting State, as applicable, no later than five working days after the date on which the creditor notifies such authorities that it is entitled to procure those remedies in accordance with the Convention; and

(b)    the applicable authorities shall expeditiously co-operate with and assist the creditor in the exercise of such remedies in conformity with the applicable aviation safety laws and regulations.

9.    No exercise of remedies permitted by the Convention or this Protocol may be prevented or delayed after the date specified in paragraph 2.

10.    No obligations of the debtor under the agreement may be modified without the consent of the creditor.

11.    Nothing in the preceding paragraph shall be construed to affect the authority, if any, of the insolvency administrator under the applicable law to terminate the agreement.

12.    No rights or interests, except for non-consensual rights or interests of a category covered by a declaration pursuant to Article 39(1), shall have priority in insolvency proceedings over registered interests.

13.    The Convention as modified by Article IX of this Protocol shall apply to the exercise of any remedies under this Article.

Alternative B

2.    Upon the occurrence of an insolvency-related event, the insolvency administrator or the debtor, as applicable, upon the request of the creditor, shall give notice to the creditor within the time specified in a declaration of a Contracting State pursuant to Article XXX(3) whether it will:

(a)    cure all defaults other than a default constituted by the opening of insolvency proceedings and agree to perform all future obligations, under the agreement and related transaction documents; or

(b)    give the creditor the opportunity to take possession of the aircraft object, in accordance with the applicable law.

3.    The applicable law referred to in sub-paragraph (b) of the preceding paragraph may permit the court to require the taking of any additional step or the provision of any additional guarantee.

4.    The creditor shall provide evidence of its claims and proof that its international interest has been registered.

5.    If the insolvency administrator or the debtor, as applicable, does not give notice in conformity with paragraph 2, or when the insolvency administrator or the debtor has declared that it will give the creditor the opportunity to take possession of the aircraft object but fails to do so, the court may permit the creditor to take possession of the aircraft object upon such terms as the court may order and may require the taking of any additional step or the provision of any additional guarantee.

6.    The aircraft object shall not be sold pending a decision by a court regarding the claim and the international interest.

48    As at 2019, with one exception, every Contracting State making a declaration, including Australia, has opted for Alternative A. See the Official Commentary at [3.125].

49    Article IV(3) also provides that “[t]he parties may, by agreement in writing, exclude the application of Article XI and … derogate from or vary the effect of any of the provisions of this Protocol except Article IX(2)-(4)”.

50    It was common ground that, although the respondents would otherwise have been entitled to take possession of the aircraft objects immediately upon the Virgin companies going into administration (under cl 19 of the GTA), by operation of s 440B of the Corporations Act (which precluded them from exercising any right of possession without the written consent of the administrators or the leave of the court), the earlier of the two specified dates upon which the administrators were to “give possession” under Art XI(2) was “the end of the waiting period”. By operation of Art XI(3) and Australia’s declaration under the Protocol, that waiting period is 60 calendar days, and came to an end in this case on 19 June 2020.

The reasoning of the primary judge

51    The respondents contended before the primary judge, and on appeal, that the appellants had not complied with their obligations under Art XI(2) of the Protocol to return the engines and associated things to the respondents in Florida, in accordance with the redelivery provisions in the leases, in particular cl 18.3(f) of the GTA. The primary judge accepted that submission, because in his view it accorded with the relevant text, and the object and purpose of the Convention and Protocol, to interpret the words shall … give possession of the aircraft object to the creditor”, as requiring redelivery effectively in accordance with the terms of the lease agreements”.

52    The critical reasoning of the primary judge is as follows (at [84]-[90]):

The scheme prescribed by Alternative A is relatively straightforward. The primary obligation upon an insolvency administrator, arising on the occurrence of an insolvency-related event, is to give possession of the aircraft object to the creditor no later than the specified date. Then unless (which equates to ‘if) and until (which relates to time) the creditor is given the opportunity to take the possession given to the creditor pursuant to the primary obligation on the administrators, the administrator shall preserve and maintain the aircraft object. However, if the administrator cures the relevant default and agrees to perform future obligations by the specified date whereby possession is to be given, the administrator may retain possession of the aircraft object pursuant to Art XI(7). Obviously, at this stage, possession would not have been given nor the opportunity to take possession availed of: the administrator would still be in possession of the aircraft objects as the administrator is to retain possession, being the possession granted under the lease agreements. Further, it must be recalled that the lessor (for one reason or another) may not be ready and willing to take possession of the aircraft objects. So Art XI(5) will operate to relieve the insolvency administrator from still preserving the aircraft objects after giving the opportunity to the lessor to take possession. Until the lessor takes possession, the lessor could still apply for other forms of interim relief available under the applicable law.

Then, significantly, the primary obligation on the Administrators to give possession (and, here, the corresponding remedy for the Applicants in the insolvency situation as provided for in Art XI) is provided with content by the requirement that this remedy is to be exercised in a commercially reasonable manner. In this case the remedy is to be exercised in conformity with the relevant redelivery provisions of the lease agreements.

This obligation on the Administrators arises because Art XI(13) and IX(3) of the Aircraft Protocol require that the remedy available to the Applicants (ie their right to be in possession) must be exercised in a manner that is commercially reasonable. Article IX(3) operates so that the manner of giving of possession will be deemed commercially reasonable if it is exercised in conformity with a provision of the agreement except where such provision is manifestly unreasonable.

Therefore, the Applicants’ entitlement to relief, namely obtaining possession in the present case requires redelivery in accordance with the existing lease agreement terms between the parties in clause 18.3 of the GTA. The location in Florida is expressly stated in Art III of the Aircraft Engine Lease Agreements for each Engine. There has been no suggestion that the provision is manifestly unreasonable.

On this point, the Respondents argued that the lease agreements were irrelevant to the operation of Art XI. Senior Counsel for the Respondents put it this way:

Can I turn, then, your Honour, to the protocol and the point that my learned friend raised about article 9? And if your Honour has that, your Honour sees that article 9 falls within chapter 2, which is Default Remedies, Priorities and Assignments. And article 9 is then the modification of the default remedies provisions, and it’s important, your Honour, to have regard to the architecture of the protocol and the different circumstances in which it is affording remedies. Article 9 modifies the default remedy provisions. My learned friend went to article 9(3). Your Honour and my learned friend discussed the opening sentence concerning article 8(3). It then states:

Any remedy given by the Convention in relation to an aircraft object shall be exercised in a commercially reasonable manner.

Now that, plainly enough, is an obligation imposed on the lessor and not the lessee. There was then a deeming provision in effect that commercial reasonableness will be engaged where a remedy is exercised in accordance with the provision of an agreement, unless that provision itself is manifestly unreasonable. Now, so much is apparent and so much, we submit, is irrelevant. Because the critical question is the anterior question of: are the terms of an underlying agreement in any way relevant to the remedy sought in this application, which is a remedy under article 11(2) of the protocol? So it’s really about an anterior question of: is an underlying agreement relevant to this at all that must be answered? And with that, can your Honour turn to article 11?

The difficulty with this approach is to ignore the fact that Art IX(3) refers to any remedies given by (relevantly) the Aircraft Protocol, which will include the Applicants’ right to and remedy of obtaining possession of the aircraft objects. This remedy available to the lessor (specific to insolvency and aircraft objects) must then be exercised, as an obligation on the lessor, in a commercially reasonable manner, which will be in accordance with the lease agreements. This view of the operation of Art XI is reinforced when one keeps in mind Art XI(10) (where no obligation of the debtor may be modified without the consent of the creditor).

Whilst obviously not directly applicable, provisions for redelivery are not unknown in the context of commercial arrangements. For instance, such provisions are usually included in a charterparty and are subject to principles of maritime law. Here, redelivery usually includes the requirement to keep the vessel in good order until it is delivered by the charterer at a specified place and time. Obviously, the requirements and form of redelivery will be in accordance with the bargain entered into between the parties, and are of fundamental importance: see generally Professor Stephen Girvin, Carriage of Goods By Sea (Oxford University Press, 2nd ed, 2007) at 683-685; Professor John F Wilson, Carriage of Goods by Sea (Pearson, 7th ed, 2010) at 88 and 111-112 and Michael White, Australian Maritime Law (Federation Press, 3rd ed, 2014) at 151-152.

53    His Honour then turned at [92]-[94] to a further analysis of the text of Art XI to cover the relevant submissions of the parties, as follows:

The ordinary natural meaning of the word give connotes positive action. It is an active verb primarily meaning, in the context we are dealing with, to deliver, hand over, to deliver or hand (something) to a person; to put (food and drink) before a person: see Oxford English Dictionary Online (Oxford University Press, June 2020). The use of the verb give in combination with the word possession means to deliver or hand over, and in context means to give back, in the sense of restoring a thing to the lessor. Another meaning of the word give is to present, to hold out to be taken (The Shorter Oxford English Dictionary (Clarendon Press, 3rd ed, 1972)) or [t]o present or expose to the action of a person or thing; to hold out (one’s hand) to be taken (Oxford English Dictionary Online (Oxford University Press, June 2020)). However, that meaning is simply not apposite to the giving possession of the aircraft objects and the context and structure of the Aircraft Protocol. It is again important to remember that we are concerned with complex machinery and moveable property, capable of being relocated in the ordinary course of the aircraft’s work to almost any location. To hold that the obligation to giv[e] possession is satisfied where the debtor or insolvency administrator merely abandoned or relinquished possession would be to transform that positive obligation into an ability to abandon the creditor’s property wherever it happens to be and in whatever condition.

The phrase give possession … to the creditor can be contrasted with the phrase given the opportunity to take possession under paragraph 2 used in Art XI(5). This contrast in context supports the interpretation that give possession is the positive act of giving, and not merely giving an opportunity to take possession. The opportunity to take arises only after the debtor has given possession. That is consistent with the ordinary meaning of the phrase give possession and the notion of passive receipt by the taker.

Then, in my view, Art XI(7), in referring to retain possession, does not detract from the meaning to be ascribed to give possession in Art XI(2) but supports the operation of Art XI. The phrase retain possession in Art XI(7) is being used in a different context to the phrase give possession in Art XI(2), and, as I have alluded to, arises where the relevant default has been cured and there is an agreement to perform all future obligations under the relevant lease.

The orders made by the primary judge

54    Relevantly for present purposes, his Honour made the following orders:

5.    The Respondents or any of them give possession of the aircraft objects identified in Schedule 2 of these Orders, by delivering up, or causing to be delivered up, the aircraft objects to the Applicants in the manner set out in Schedule 3 of these Orders, at 4700 Lyons Technology Parkway, Coconut Creek, Florida, 33073, United States of America.

6.    Subject to any further order, the time by which the Respondents are to carry out the steps required by Order 5 of these Orders to deliver up the aircraft objects is, using their best endeavours, as soon as possible but on or before 15 October 2020. The Applicants will provide such assistance as is reasonably necessary in relation to the Respondents’ obligations under these Orders, including taking any step that is reasonably required to give effect to those obligations of the Respondents.

7.    Unless and until the Respondents, or any of them, ‘give possession in accordance with Order 5, or until further order of the Court, the Respondents are to preserve the aircraft objects in Schedule 2 of these Orders by:

(a)    maintaining the Engines identified in Schedule 2 of these Orders;

(b)    maintaining insurance cover over the aircraft objects identified in Schedule 2 of these Orders;

to the same or greater extent as was maintained at the date of appointment of the Third Respondent as administrators.

8.    The Third Respondent do all such things as are necessary and within its power, using best endeavours, to cause the First, Second, and Fourth Respondent to carry out the Orders of this Court in respect of the completion and transmittal of the records described at Schedule 2, paragraph 7 of these Orders.

12.    The First, Second and Fourth Respondents to pay the Applicants’ costs as agreed or assessed as costs in the administrations of the First, Second and Fourth Respondents.

55    At the end of oral argument on the appeal on 22 September 2020, the court stayed the operation of those orders until the determination of the appeal.

Principles governing the construction of the Convention and the Protocol

56    There was no dispute about the principles governing the construction of the Convention and the Protocol, either before the primary judge, or on appeal. They may be summarised as follows:

(1)    The Convention and the Protocol “shall be read and interpreted together as a single instrument”, and to the “extent of any inconsistency between [them], the Protocol shall prevail”. See Arts 6(1) and 6(2) of the Convention.

(2)    The guiding principles of interpretation are found in the Vienna Convention on the Law of Treaties (Vienna Convention). Article 31(1) of the Vienna Convention provides that a treaty must be interpreted in good faith, in accordance with the ordinary meaning of the terms in their context and in the light of the object and purpose of the treaty. Interpretative assistance may be gained from extrinsic sources (Art 32) in order to confirm the meaning resulting from the application of Art 31, or to determine the meaning when interpretation according to Art 31 leaves the meaning “ambiguous or obscure” or “leads to a result which is manifestly absurd or unreasonable.

(3)    In interpreting a treaty, “it is necessary to adopt an holistic but ordered approach”, which “may require a consideration of both the text and the object and purpose of the treaty in order to ascertain its true meaning”. Assistance may also be obtained from “extrinsic sources[,] [t]he form in which a treaty is drafted, the subject to which it relates, the mischief that it addresses, the history of its negotiation and comparison with earlier or amending instruments relating to the same subject”. See Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 231 (Brennan CJ).

(4)    The manner of interpreting an international instrument “is one which is more liberal than that ordinarily adopted by a court construing exclusively domestic legislation; it is undertaken in a manner unconstrained by technical local rules or precedent, but on broad principles of general acceptation”. See Pilkington (Australia) Ltd v Minister for Justice and Customs (2002) 127 FCR 92 at 100 [26] (Mansfield, Conti and Allsop JJ).

(5)    Regard maybe had to travaux préparatoires if the text is not sufficiently clear in itself, but not otherwise. See, eg, Commonwealth v Tasmania (1983) 158 CLR 1 at 223 (Brennan J).

(6)    Although international treaties should be interpreted uniformly by contracting states, the ultimate question is what does the relevant treaty provide”. See Povey v Qantas Airways Ltd (2005) 223 CLR 189 at 202 [25] (Gleeson CJ, Gummow, Hayne and Heydon JJ).

The appellants’ submissions

57    The appellants submit that the phrase “give possession” in Art XI(2) is to be construed as requiring an insolvency administrator (or in other cases, a debtor) “to make an aircraft object available to a creditor, in the sense of giving the creditor the opportunity to take possession of that object”. They say that, in practice, this will involve an insolvency administrator disclaiming control over the aircraft object, thereby yielding title to the object to the creditor. As such, from the moment possession is ‘given’ in the relevant sense, the creditor has been offered possessory title to the aircraft objects that is good against the world, save against someone who can show a better right to possession, and is therefore able to take possession, should they choose to do so. Importantly, the creditor obtains possessory title notwithstanding the fact that the [insolvency administrator] may retain custody of the aircraft objects at the time they ‘give possession’”.

58    In that regard, the appellants submit that the concept of possession referred to in the Convention and the Protocol is the same concept of possession familiar to the common law. Mr JT Gleeson SC, who appeared with Ms K Lindeman for the appellants, relied in particular on the convenient summary of the common law doctrine of possession in Hocking v Director-General, National Archives of Australia [2020] HCA 19; 94 ALJR 569 at 591 [89]-[91] (Kiefel CJ, Bell, Gageler and Keane JJ), as follows:

Property is not a monolithic notion of standard content and invariable intensity; it is not a term of art with one specific and precise meaning. It is a term that can be, and is, applied to many different kinds of relationship with a subject matter. The relationship with a subject matter is in some contexts best understood in terms of a bundle of rights. In other contexts, it is best understood in terms of a legally endorsed concentration of power.

Accordingly, property is not for all purposes to be equated with full beneficial, or absolute, ownership. Indeed, a proprietary relationship can have the quality of relativity. Especially is that so in relation to property in tangible things. It is an old and well-known application of common law doctrine, for example, that the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner.

The doctrine of the common law has been explained in terms that physical possession of a tangible or corporeal thing, in the sense of actual physical custody of the thing, is not merely evidence of absolute title: it confers a title of its own, which is sometimes called a possessory title. The possessory title that derives from lawful physical possession is as good as the absolute title as against, it is usually said, every person except the absolute owner. Though the doctrine has been so much encrusted with technicalities that any exposition of it must be hedged with qualifications, a slightly more complete statement of it might be that lawful physical possession is as good as absolute title against every person except someone who can show a better right to possession.

(Internal quotations and footnotes omitted.)

59    Mr Gleeson also relied on these passages from the judgment of Edelman J in Hocking at 612-613 [205]-[206]:

Even despite the … bundle of rights and concentration of power metaphors, the Supreme Court of the United States has still characterised the right to exclude others as one of the most essential sticks in the bundle of rights. Indeed, even the most vociferous supporter of the bundle of rights has described the right to possession – that is, the right to control physical access – as the foundation on which the whole superstructure of ownership rests

The essence of a property right to, or property in, a chattel as the right to exclude others also flows from the requirements for a property right in the chattel, namely that a person have (i) a sufficient degree of physical control (sometimes described as factual possession to the exclusion of others and (ii) a manifested intention to exercise that control personally (ie not on behalf of another) in a manner that excludes unauthorized interference. These two requirements have been recognised as essential for a property right to a physical thing for thousands of years … Hence, the common law has long held that mere custody of a chattel by a servant or agent on behalf of an employer or principal is not sufficient for a property right. Similarly, for a property right to arise by bailment the bailee must have both the intention and the practical means to exercise independent control over the item that would exclude the bailor’s own possession and control.

(Internal quotations and footnotes omitted.)

60    The appellants submit that, although Art XI(2) imposes an obligation on the insolvency administrator to “give possession” of the aircraft objects within the specified time (here, 60 days from the date of appointment), the lessor or creditor is not bound to accept possession. (See Sanam Saidova, The Cape Town Convention: Repossession and Sale of Charged Aircraft Objects in a Commercially Reasonable Manner [2013] Lloyd’s Maritime and Commercial Law Quarterly 180 at 184-185, noting various circumstances in which a creditor may choose not to take possession.) The appellants say that it follows that taking possession is a remedy available to a creditor, and in order to permit the creditor to exercise their remedy of taking possession, an insolvency administrator or debtor is required to “give possession” and that “[o]nce the interaction between the mandatory obligation on the [insolvency administrator] … to ‘give possession’ and the (optional) remedy of ‘taking possession’ is appreciated, it can be seen that the concept of ‘giving possession’ in Art [XI(2)] is one of making available to the creditor the ability to take possession, and nothing more.

61    The appellants emphasise the provision in Art XI(5) that stipulates that “[u]nless and until the creditor is given the opportunity to take possession under paragraph 2 … the insolvency administrator or the debtor, as applicable, shall preserve the aircraft object and maintain it and its value in accordance with the agreement …” They contend that by the cross-reference to Art XI(2), Art XI(5) confirms that to “give possession” under Art XI(2) means to “giv[e] the opportunity to take possession”.

62    Next, the appellants say that, reading Art XI(2), (5) and (7) together, Art XI operates as follows. The insolvency administrator or debtor ordinarily has up until the expiry of 60 days to seek to cure past defaults and agree to avoid future ones. If it has not done so, it must then immediately “give possession” to the creditor under Art XI(2) (notwithstanding any domestic insolvency moratorium that may continue to apply, such as s 440B of the Corporations Act). This obligation is discharged by making the aircraft objects available to the creditor, so that the creditor is given the opportunity to take the possession which is offered to it, if it is so minded. That is, it may exercise a self-help remedy, without applying to a court, to take possession of its aircraft objects, such objects having been made available by the insolvency administrator or debtor under Art XI(2). This is confirmed by Art XI(9), which provides that the exercise of this remedynamely the taking of possession may not be prevented or delayed after that date. This is a direction to courts, including the courts of the forum of the insolvent company, which are prevented from seeking to tie up the aircraft object in the insolvency, notwithstanding any domestic insolvency moratorium, and even if this is for the benefit of general creditors.

63    In his oral submissions, Mr Gleeson made the related contention that Art XI(2):

allows us to see the primary benefit which the creditor is given by Article [XI] over the position which would exist under the Convention and the ordinary law of domestic insolvency. The basic problem [Art XI] was concerned with was, creditors could be tied up for lengthy indeterminate periods in domestic insolvency proceedings. With no ability to get possession of their aircraft object. And an aircraft object which, as time went on, may well diminish in value depending upon whether there were resources to preserve and maintain it.

So the perceived problem was domestic insolvency regimes around the world regularly, not in every single case – see the United States, but regularly do what Australia does, which is create a stay or a moratorium upon the ability to get your asset, or get possession of your asset. And they leave those matters to either the consent of the [insolvency administrator] or the leave of the domestic court. So what was sought to be achieved here was to create a hard rule where no later than – in our case, 60 days, the [insolvency administrator] would come under a mandatory obligation to give possession. We emphasise that’s a mandatory obligation arising from the Convention, which takes priority over domestic law and in effect trumps section 440B in our case. Come the 60 days, it is no longer open to the administrators to choose whether to give consent or not – they must give possession.

And come the 60 days, it is not open to an Australian domestic court to choose to give or withhold leave to the administration of that remedy [Art XI(9)].

64    The appellants contend that their construction of Art XI(2) is also supported by Art XI(4), which provides that references to the insolvency administrator in Art XI are to that person in their official rather than personal capacity. It follows, they contend, that Art XI presumes that “giving possession” is an act that can in fact be performed by the insolvency administrator in their official capacity. This is so where the obligation to “give possession” is construed as requiring an insolvency administrator to give a creditor the opportunity to take possession, because such an act would not impose a substantial burden on an insolvency administrator that might exceed the assets of the insolvent estate, and so is an act that can be performed by the insolvency administrator in their official capacity.

65    In his oral submissions, Mr Gleeson sought to emphasise that, on the construction of Art XI(2) favoured by the primary judge:

(1)    the giving of possession extends beyond a transfer or relinquishment of possessory title to the aircraft object, and includes a positive obligation to effect a physical delivery of that object to the lessor (or creditor);

(2)    the physical redelivery is to occur in the manner and condition, and to the place, suitable to the lessor;

(3)    the provisions governing physical return in the existing lease agreement are to be respected;

(4)    the physical redelivery may include a transfer of the objects out of the jurisdiction to the place where the lessor could have demanded redelivery had the lease agreement come to an end, and if no regard were had to the domestic insolvency regime or the Convention;

(5)    the court takes on the role of fashioning a prescriptive regime by which that physical delivery is to be effected, travelling beyond the language of the contract;

(6)    the regime involves the imposition of substantial positive obligations of a regulatory and technical kind upon the insolvency administrator, including inspections and the creation of end of lease records and serviceability tags; and

(7)    the cost of meeting those obligations is an expense that ranks at the head of the claims in the administration, in priority to other secured or unsecured creditors.

66    The appellants contend that the primary judge’s approach to the construction of Art XI(2) was wrong, including because:

(1)    Art XI(2) does not provide that possession is to be given in accordance with the terms of the underlying agreement. To the contrary, it makes no reference at all to the “agreement” between the creditor and debtor. This is a glaring omission in circumstances where Arts XI(5)(a), XI(7), XI(10) and XI(11) all expressly refer to the underlying agreement between the creditor and debtor. It follows that where the Protocol intends for an obligation to be performed in accordance with the underlying agreement, it says so specifically.

(2)    The primary judge’s conclusion that the ordinary meaning of the word “give” is “to deliver, hand over” should not be accepted, because the thing that must be given is not the aircraft object but “possession” of it. The yielding of possession need not entail the physical transfer of the object, and could occur (for example) through a statement that title is yielded. In those circumstances, there is no textual foundation for construing the term “give”, in the context of “giving possession”, as connoting the physical redelivery of a tangible object.

(3)    The primary judges reasoning incorrectly presumes that the reference in Art XI(2) to “giving possession” means something different to the reference to “giving the opportunity to take possession” in Art XI(5). The text of Art XI(5) cannot sustain the primary judges reasoning in light of the express cross-reference to Art XI(2). Giving possession, and giving the opportunity to take possession are, on the proper construction of Art XI, one and the same thing.

(4)    The fact that Convention remedies must be exercised in a “commercially reasonable manner” does not assist in giving content to the obligation to “give possession” unless one presumes that the primary judge’s construction is correct, and that giving possession requires a physical transfer, such that the giving and taking of possession are a bundled-up act, together forming a Convention “remedy”.

(5)    The significant commercial burden the primary judge’s construction imposes on insolvency administrators (and debtors in other cases) further tells against his Honour’s construction, in circumstances where Art XI(4) provides that references to an insolvency administrator in Art XI are to that person in its official, not personal capacity. The costs and practical challenges associated with redelivering aircraft objects are self-evidently significant. There is no reason to assume that there will always be a sufficient pool of free assets for the insolvent estate to bear the costs of redelivery of aircraft objects, as well as the resources (in the form of employees and regulatory, technical and engineering capability) to comply with return obligations under a lease.

(6)    The focus of Art XI is in reality more confined. It is intended to override any domestic insolvency moratorium so that the creditor should be given the opportunity, should it be so minded, to take possession of its aircraft objects. If the taking of possession in turn requires the creditor to accept the burden of disassembly, repair, transport, discharging liens, deregistration costs, import or export duties, and so on, then those are burdens which have been allocated to the creditor as part of the quid pro quo for being able to free its asset from a domestic law insolvency regime no later than the 60-day deadline.

(7)    The primary judge’s construction does not promote “uniformity and predictability in [the Convention’s] application”, as is required by Art 5(1) of the Convention. An obligation to “give possession” in the sense of making aircraft objects available by giving a creditor an opportunity to take possession is able to be applied predictably and uniformly across various factual scenarios. By contrast, an obligation to redeliver aircraft objects necessarily demands a different approach be taken in each circumstance in which the obligation in Art XI(2) applies. The content of the obligation will necessarily differ, depending on the terms of the parties’ underlying agreement.

(8)    The better view is that Art XI(2) grants creditors additional protection in an insolvency context by imposing an obligation on the insolvency administrator (or debtor) to make aircraft objects available to creditors, at a time when a creditor’s entitlement under Art 10 of the Convention to “take possession or control” of their aircraft objects may otherwise be restricted by local law. As such, on the appellants’ construction, Art XI(2) of the Protocol operates harmoniously with Art 10 of the Convention by assisting a creditor in obtaining the substantive benefit of the remedy conferred by Art 10.

67    In the course of his oral submissions, Mr Gleeson also took the court to the relevant provisions of the leases “to illustrate that they reflect the fundamental distinction we urge between a possessory remedy and a redelivery remedy … [which] runs through not only the contract, but … through domestic insolvency regimes, such as the Corporations Act

68    Mr Gleeson pointed first to cl 18.3(f) of the GTA (see [23] above), which provides that “[u]pon expiration of the Lease Term or other termination of a Lease, Lessee will return the leased Equipment free of all Liens other than Lessor’s Liens to the delivery location described in the applicable Lease”. More particularly, he relied on cl 19 of the GTA, which, it was submitted, comprises “a comprehensive set of alternative and cumulative remedies” in the hands of the lessor, namely to:

(1)    act on the lessee’s account to cure any default and recover the costs of doing so (cl 19(b)(i));

(2)    enforce performance of the lease by appropriate court action (cl 19(b)(ii));

(3)    demand that the lessee return any equipment promptly to the lessor free of any claims or rights of the lessee in the manner and condition required by cl 18 as if such equipment were being returned at the end of the lease (cl 19(b)(iii)(C)) (what he described as “the redelivery remedy”); or

(4)    enter upon the premises where the equipment is located, take immediate possession of it, and remove it, by summary proceedings or otherwise, free of any claims or rights of the lessee, all without liability to the lessee (cl 19(b)(iii)(C)) (what he called “the possessory remedy”).

69    Mr Gleeson submitted that the critical conclusion of the primary judge, that the primary obligation” on the administrators to give possession and the “corresponding remedy ... provided for in Art XI” are provided with content by the requirement that this remedy is to be exercised in a commercially reasonable manner … in conformity with the relevant redelivery provisions of the lease agreements”, elided three distinct matters:

(1)    the obligation upon the insolvency administrator under Art XI(2) to give possession (ie, the opportunity for the creditor to assume or take possessory title);

(2)    the remedy which is then given to the creditor, which is the ability to acquire that possessory title under Art XI(2) if it chooses to do so; and

(3)    the manner of exercise of that remedy, which arises at the stage of the taking of possession.

70    Mr Gleeson elaborated on the importance and effect of the elision he identified, as follows:

… in understanding the content of the obligation upon the debtor or lessee, and the content of the corresponding remedy of taking possession, that content must be determined prior to the question of the mode of exercise of the remedy. So in effect, we argue that it was wrong to use [Art IX] to inform the content of our obligation under [Art XI]. It arose at a subsequent stage, once the content of the obligation had been properly determined. And had his Honour put the [Art IX] question out of the frame, one could have approached more squarely the question, does an obligation to give possession include an obligation to [effect] a physical redelivery as if the lease was at an end[?] If it does not, then the question of commercial reasonableness never comes into play.

71    Mr Gleeson next submitted that Arts 8 and 10 of the Convention (concerning remedies of chargees and of conditional sellers or lessors) both refer to the remedy of taking “possession” in the sense that the appellants contend for – namely, the creditor assuming the possessory title against the world, which, up to that point, was held by the debtor – and does not involve, and does not refer to, “the concept of requiring the debtor to effect a physical redelivery to a location suitable to the creditor, or to take positive steps to effect that redelivery in a particular manner [or] condition”. If a remedy of redelivery were to be available under that Chapter of the Convention, it was submitted that would happen, if at all, under the additional remedies permitted by the applicable law provision contained in Art 12. And, it was submitted, it is thus tolerably clear that “possession is being used and understood in a sense that we would be familiar with, where the taking of possession is regarded as a remedy quite distinct from many other remedies that may be exercised either concurrently with it or subsequent upon it. And what that means is, there is absolutely nothing in the concept of the possession remedy which connotes any necessary redelivery by the debtor to the creditor in the manner the creditor seeks”.

The respondents’ submissions

72    Dr CS Ward SC, who appeared with Mr PF Santucci for the respondents, submitted that the solution to the central issue of construction is “relatively straightforward”, and flows from the text of the Convention and the Protocol.

73    The respondents submit that the reasoning and conclusion of the primary judge are correct and that the appeal should be dismissed.

74    They contend that the Protocol requires the relevant agreement between the parties to remain the foundation of the remedies available to a lessor (or creditor) upon the occurrence of an event of insolvency involving a registered aircraft object, subject only to the requirement in Art IX(3) that such remedies be exercised in a commercially reasonable manner. In this case, so the respondents contend, the critical obligations of the lessor are to be found in cll 18.3 and 19 of the GTA, which provide that upon termination of the relevant lease, or upon demand once the lessee enters administration, the lessee will return the aircraft objects free of all liens to the delivery location in Florida. That, so it is contended, is “the starting point” for the task of construction.

75    The respondents submit that it is “the plain intention … [of the Convention and the Protocol] that the [contractual] obligations of the debtor are to be maintained throughout the insolvency process”.

76    The respondents point first to the provision in Art XI(10) of the Protocol, that “[n]o obligations of the debtor under the agreement may be modified without the consent of the creditor”. They say that provision is of “central moment”, and that the maintenance of the appellants obligations, including as to redelivery, “is central to an understanding of what is required by giving possession”. They say that if the construction of Art XI(2) contended for by the appellants were accepted, that would necessarily modify the rights of the creditor and the corresponding obligations of the debtor, because the creditor would not be able to insist on redelivery.

77    Secondly, the respondents point to Art IX(3) of the Protocol, which provides that “[a]ny remedy given by the Convention”, which under Art 12 of the Convention includes “any remedies agreed upon by the parties”, “shall be deemed to be exercised in a commercially reasonable manner where it is exercised in conformity with a provision of the agreement except where such a provision is manifestly unreasonable”. It is submitted that that provision “makes abundantly clear that the agreement between the parties remains the foundation of the remedies for the purposes of the Protocol” because “[t]he agreement is to be given work unless it is [manifestly unreasonable]”.

78    Thirdly, the respondents rely on a number of other provisions in the Protocol, which the primary judge found reflected the Protocol’s “heavy reliance on the parties’ contractual bargain”, as follows:

(1)    Article XI(5) imposes an obligation on an administrator or debtor to “preserve the aircraft object and maintain it and its value in accordance with the agreement”, which is an obligation beyond the administrator’s right of disclaimer in s 443B of the Corporations Act.

(2)    Article XI(7) imposes upon an administrator or debtor, as a condition of retaining the aircraft object, the obligation to cure “all defaults” and agree “to perform all future obligations under the agreement” (which may otherwise have been stayed or compromised by a domestic insolvency regime).

(3)    Article XI(9) makes clear that the creditors exercise of remedies may not be “prevented or delayed” after the “waiting period” referred to in Art XI(2).

(4)    Article XI(12) ensures that the creditor’s international interest has primacy over all other interests: “[n]o rights or interests … shall have priority in insolvency proceedings over registered interests”, save for specific non-consensual liens imposed.

79    Fourthly, the respondents submit that the difference in the wording of Alternatives A and B sheds light on what is meant in Alternative A (the option taken by Australia). Alternative A, “the more rigorous of the two”, relevantly provides that “[u]pon the occurrence of an insolvency-related event, the insolvency administrator or the debtor, as applicable, shall … give possession of the aircraft object to the creditor”. Alternative B, on the other hand, provides that “when the insolvency administrator or the debtor has declared that it will give the creditor the opportunity to take possession of the aircraft object but fails to do so, the court may permit the creditor to take possession of the aircraft object … Dr Ward submitted that the language of Alternative B “is entirely different … from what on our submission, and what the primary judge’s construction is consistent with, is the much more onerous obligation in Alternative A, to positively give possession. That distinction in language is not of no effect. There is a difference between the right to take possession and the obligation to give possession”.

80    Dr Ward submitted that cl 19 of the GTA, along the same lines, also provides for a number of different remedies, including an obligation to redeliver, which “[sit] alongside the possibility that my client could choose to take possession. That is consistent with both logic and the agreement of the parties, and the practical operation of the Protocol. There is a difference, both in quality and nature, and in practical implementation, between the ability of a party to take possession, using if necessary the processes of deregistration and export that are provided for expressly by the [Convention], and the obligation – the positive obligation – to give possession, which exists only in the more onerous option, Alternative A”.

81    Fifthly, the respondents submit that Art 5(1) of the Convention (“[i]n the interpretation of this Convention, regard is to be had to its purposes as set forth in the preamble, to its international character and to the need to promote uniformity and predictability in its application”) is also relevant to the question of construction, as follows:

[T]here is nothing that would provide more uniformity and predictability than the proposition that parties who have entered into express agreements, dealing with defaults following insolvency, would ordinarily be expected to comply with those provisions. Every party in the world would understand that that is the starting point, unless the provision was manifestly unreasonable in the circumstances that arose. My learned friend says, Well, some creditors might not have return provisions in their agreements.

Well, your Honours, that is precisely the point. [T]he starting point is the parties are held to the bargain that they have struck. If you strike a good bargain, you have a good bargain. If you strike a less good bargain, you have a less good bargain. But that doesn’t promote instability or uncertainty. The proposition of certainty is the starting point of the parties’ bargain.

82    Sixthly, the respondents submit that their proffered construction of Art XI(2) of the Protocol is supported by another part of the preamble to the Convention, viz that one purpose of the rules established under it is to “promote the autonomy of the parties”.

Consideration

General principles of construction

83    As with the task of statutory construction, it is necessary to start in this case with the operative words of the Protocol, and to construe those words in the context of the Protocol and the Convention read as a whole. Of course, context, object and purpose are to be considered, but “[p]rimacy is to be given to the written text”. See Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 254 (McHugh J). See also Commonwealth v Tasmania (1983) 158 CLR 1 at 177 (Murphy J) ([t]he Convention should be interpreted giving primacy to the ordinary meaning of its terms in their context and in light of its object and purpose …”).

84    The basic principle of interpretation is that courts should focus their attention on the “four corners of the actual text” in discerning the meaning of the text. See Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 255 (McHugh J). As his Honour went on to say:

The text of the treaty, being the starting point in any investigation as to the meaning of the text, necessarily has primacy in the interpretation process. As the International Law Commission has noted [citing Reports of the Commission to the General Assembly [1966] 2 Yearbook of the International Law Commission 169 at 220]:

The article [a provision that ‘exactly mirrored’ Art 31 of the Vienna Convention] ... is based on the view that the text must be presumed to be the authentic expression of the intentions of the parties; and that, in consequence, the starting point of interpretation is the elucidation of the meaning of the text, not an investigation ab initio into the intentions of the parties.

85    It follows that, contrary to the submission on behalf of the respondents, the lease agreements are not the “starting point” for the inquiry into the proper construction of Art XI(2) of the Protocol. We must start with the text of the Convention and the Protocol.

The Convention

86    The terms of the Convention do not expressly confer on creditors (which are defined in Art 1 to include lessors under a leasing agreement) the right to enforce provisions of their agreement that require redelivery on default or termination. Rather, they confer remedies that include the self-help remedy of being able to take possession. See Arts 8(1)(a) and 10(a), at [37] and [38] above. Further, in the case of a creditor who is a chargee, the remedy of taking possession must be exercised in a commercially reasonable manner. See Art 8(3), at [37] above. A taking of possession in accordance with a provision of the agreement will meet that requirement “except where such a provision is manifestly unreasonable”. By giving the agreement that limited operation, the Convention thus does not confer an unqualified right to enforce the terms of the agreement irrespective of the terms of domestic law.

87    The Convention does provide that remedies permitted by the applicable law, including those agreed upon by the parties, may be exercised by the creditor. See Art 12, at [39] above. However, a taking of possession contrary to the requirements of the domestic law of the place where the property was located would not be permitted by the applicable law (which, in this case, is Australian law). One relevant aspect of the applicable law will be insolvency law. Indeed, Art 30 assumes that insolvency laws will apply, and provides for an “international interest” registered in conformity with the Convention to have effect in insolvency proceedings brought against a debtor. Article 30(3)(b) (see [41] above) of the Convention then preserves what are described as “rules of procedure relating to the enforcement of rights to property which is under the control or supervision of the insolvency administrator”. Therefore, if there is an insolvency administration, then, under the Convention, the creditor must conform to the requirements of the domestic law as to the procedures by which it may enforce its rights to the property. The Convention thus does not provide for the enforcement of contractual rights to take possession of an “international interest” in the territory of a participating State where such enforcement would be contrary to the procedures required by domestic insolvency law (such as where leave of a court is required to exercise such rights).

The Protocol

88    The Protocol has its own provisions as to what is to occur when there is an insolvency that affects aircraft objects. It does not simply apply the terms of the Convention concerning the application of domestic insolvency law. Instead it includes an express provision dealing with domestic insolvency in the context of aircraft objects (being the presently contentious terminology to be found in Art XI of the Protocol). To the extent of inconsistency between the Protocol and the Convention, Art 6 of the Convention provides that the Protocol prevails. Parties may also contract out of the terms of Art XI (see Art IV(3), at [49] above) which would leave them with the application of the Convention provisions in relation to domestic insolvency.

89    Therefore, it is the provisions of the Protocol as to how to deal with domestic insolvency law that are material for present purposes.

90    In the case of aircraft objects in particular, the qualified rights to take possession that are conferred or recognised by the Convention are preserved by the Protocol, which also confers the further right on the creditor to procure the export and physical transfer of the aircraft object from the territory where it is situated. See Art IX(1), at [46] above. Therefore, relevantly for present purposes, the self-help right to take possession and the right to enforce the terms of the agreement to the extent permitted by domestic law in Australia apply to aircraft objects. The exercise of those rights must be done in a commercially reasonable manner and, in that regard, exercise in conformity with a provision of an agreement will meet the reasonableness requirement except where the provision is manifestly unreasonable. See Art IX(3), at [46] above. These requirements qualify the manner in which the self-help right to take possession and the right to enforce the agreement to the extent permitted by domestic law may be exercised. They do not create a right to enforce the terms of the agreement irrespective of the domestic law (particularly domestic insolvency law).

91    In the case of an administration in insolvency, the Protocol goes on expressly to modify the domestic insolvency law insofar as it applies to aircraft objects. See Art XI, at [47] above. The modification includes the obligation that Art XI(2) imposes upon the IA to “give possession”.

92    With those observations in mind, we turn to the text of Art XI.

Article XI of the Protocol construed

93    The first thing to note about Art XI(2) is that it does not provide that “possession” is to be given in accordance with the terms of the underlying lease or loan agreement between the parties. As the appellants submitted, there is no reference in Art XI(2) to any such agreement.

94    That being so, it seems to us that for the respondents to prevail it would be necessary to read into Art XI(2) after the critical words “give possession of the aircraft objectthe words “in accordance with the agreement between the parties”. But the notion that such words are necessarily to be implied is an unlikely one, given that four other provisions within the same Article concerning Alternative A – Arts XI(5)(a), XI(7), XI(10) and XI(11) – include an express reference to the underlying agreement between the creditor and debtor. (See [47] above.) In such circumstances, there is much to be said for the appellants’ contention that, if the Protocol intends for an obligation to be performed in accordance with the underlying lease or loan agreement between the parties, it says so.

95    Secondly, the cross-reference to Art XI(2) in Art XI(5), viz that “[u]nless and until the creditor is given the opportunity to take possession under paragraph 2 … the insolvency administrator or the debtor, as applicable, shall preserve the aircraft object and maintain it and its value in accordance with the agreement …” confirms that “giving possession” under Art XI(2) is not to be understood to include redelivery.

96    Although the respondents sought to rely on the reference to “giv[ing] the creditor the opportunity to take possession” in Alternative B as standing in contrast to the language in Alternative A, it seems to us, reading Alternatives A and B as a whole, that both are concerned with conferring the same form of possession on the creditor, and do not extend to requiring redelivery in the manner contended for by the respondents. See the Official Commentary at [3.136], which compares Alternatives A and B. There is no suggestion there that the possession that must be given under Alternative A is any different to the possession that may be taken under Alternative B. It follows, in our view, that the difference in language does not impose an additional affirmative obligation to redeliver in accordance with the terms of the agreement that would require the making of detailed orders of the kind made by the primary judge.

97    Thirdly, although the respondents were of course correct to point out that the proper construction of Art XI(2) is governed by Art 31(1) of the Vienna Convention, not by direct application of the Australian common law doctrine of possession, that doctrine, and the notion that possession may be established by (i) a sufficient degree of physical control, and (ii) a manifested intention to exercise that control personally (not on behalf of another) in a manner that excludes unauthorised interference, would be familiar to any lawyer from the common law world, and to civil lawyers.

98    The notion familiar to Commonwealth lawyers that lawful physical possession is as good as absolute title against every person except someone who can show a better right to possession is derived from well-known English cases, including Armory v Delamirie (1722) 1 Str 505; 93 ER 664; and The Winkfield [1902] P 42 at 55-56 (Collins MR). See also Sir William Holdsworth, A History of English Law (Sweet and Maxwell, 1966) vol 7 at 449; Sir Frederick Pollock and Sir Robert Samuel Wright, An Essay on Possession in the Common Law (Law Press, 1990) at 1-2; Sir John Salmond, Jurisprudence, ed Glanville L Williams (Sweet and Maxwell, 10th ed, 1947) at 285 (“[p]ossession, for example, is evidence of ownership; the possessor of a thing is presumed to be the owner of it, and may put all other claimants to proof of their title”).

99    Likewise, in the United States, where the development of the common law also drew heavily on the English cases (see Oliver Wendell Holmes Jr, ‘Lecture VI: Possession’ in The Common Law & Other Writings (Legal Classics Library, 1982) at 206), “possession” is most commonly used to indicate the holding or retaining of property in one’s power or control. It denotes custody with a right or interest of proprietorship, and is inclusive of custody, so that a person is in possession of a chattel when they have physical control of the chattel with the intent to exercise that control. See, for example, WestLaw, Corpus Juris Secundum (at September 2020) 73 Property, ‘§ 51 Possession defined’.

100    Civil law systems likewise recognise that possession means the detention or use of a physical thing with the intent to hold it as one’s own. Article 3421 of the Louisiana Civil Code, for example, provides that “[p]ossession is the detention or enjoyment of a corporeal thing, movable or immovable, that one holds or exercises by himself or by another who keeps or exercises it in his name”. The editors’ notes to that provision in WestLaw, West’s Louisiana Statutes Annotated (at September 2020) state:

(a)    This provision is based on Articles 3432, 3426, 3430, and 3436 of the Louisiana Civil Code of 1870. It does not change the law.

(b)    This definition of possession accords with the civilian tradition and with definitions in contemporary civil codes. But cf. 3 Planiol et Ripert, Traité pratique de droit civil français, 158 (2d ed. Picard 1952): Possession is a state of fact which consists in the detention of a thing in an exclusive manner and in the performance on this thing of the material acts of use and enjoyment as if the possessor were owner.

101    In our view, the primary judge erred in using the provision in Art IX that any remedy given by the Convention, which includes under Art 12 of the Convention “remedies agreed upon by the parties”, shall be exercised in a commercially reasonable manner, to inform the content of the insolvency administrator’s obligation to give the opportunity to take possession under Art XI of the Protocol. As the appellants contended, the issue of whether a remedy has been exercised in a commercially reasonable manner falls to be determined, if the issue arises at all, once the content of the remedy is determined. And once it is understood that the content of an obligation to give possession under Art XI(2) does not include an obligation to effect a physical redelivery as if the lease were at an end, the question of the commercial reasonableness of the exercise of a remedy agreed upon by the parties does not arise.

102    The effect of the construction of Art XI of the Protocol preferred by the primary judge is that the funds available to creditors generally in the insolvent administration would have to be applied to meet the costs of redelivery in priority to any other claim (including claims by the insolvency administrator to administration costs and other claims afforded statutory priority such as, in Australia, employee claims and taxation liabilities).

103    On such an approach, instead of the creditor being confined to claims against the relevant aircraft object (being the extent of its security or property interest as the case may be), it would be able to look to the insolvency administrator (and thereby the insolvent administration) to cover the costs of redelivery of the object. In effect, the creditor would stand first in line to secure out of the insolvent administration the costs of effecting redelivery (which may be considerable), to the necessary detriment of all other creditors.

104    As a result, funds which in the ordinary course of things would be shared equally between general creditors, subject to priority claims such as the costs of the insolvent administration and statutory claims, would instead be made available first and foremost to the creditor to meet the costs of redelivery. The claims of other creditors to be administered in insolvency would then be entirely subjected to the need to meet the costs of redelivery of the aircraft object to the creditor. Indeed, it appears that such a construction may be pressed so far as to burden the insolvency administrator with having to satisfy claims made by third parties (such as those with prior legal claims to the object by way of lien or otherwise) that need to be met in order for the insolvency administrator to be able to effect redelivery as required under the agreement.

105    In our view, it is tolerably clear that the Convention and the Protocol were not intended to operate in a way that would result in such a reworking of generally accepted principles of insolvency law.

106    With due respect to the considered views of the primary judge, formed with urgency in the course of managing a complex insolvency, Art XI(2), properly construed, provides that notwithstanding the domestic insolvency law, the insolvency administrator must do that which is necessary to pass to the creditor the form of possession that the creditor could have taken in the exercise of the self-help right to take possession. To do so may require the taking of affirmative steps by the insolvency administrator beyond simply disclaiming the property. Merely submitting to the claim by the creditor may not be enough. However, the extent of those affirmative obligations is confined by what is needed to overcome any barrier to taking possession that is a consequence of the insolvent administration, and does not extend to affording to the creditor any form of possession of the relevant aircraft objects that the creditor would be unable to take in the exercise of the remedy conferred by the Convention (and applied to aircraft objects by the opening words of Art IX of the Protocol) in circumstances where there was no insolvent administration. To the extent that the existence of the insolvent administration means that the creditor cannot exercise that self-help remedy, the insolvency administrator must give possession. It is an obligation that arises in circumstances where the creditor wishes to take up the opportunity to take possession. It is for that reason that Art XI imposes obligations upon the insolvency administrator that are expressed to apply unless and until “the creditor is given the opportunity to take possession” under Art XI(5). Once that opportunity is afforded those obligations come to an end, unless the creditor seeks to take up the opportunity, in which case they continue until the obligation to give possession (which is of the character already described) must be performed by the insolvency administrator.

107    It follows, obviously enough, that we also do not accept the respondents’ contention that Art XI(10) of the Protocol (“[n]o obligations of the debtor under the agreement may be modified without the consent of the creditor) is of “primary importance” because “[i]t expressly preserves intact the contractual obligations of the debtor upon an insolvency event”. In our opinion, and as the appellants submitted, in the view we take of the proper construction of Art XI(2), the respondents’ obligations to the lessor under the lease agreements remain unmodified. Art XI(10) instead imposes constraints upon the enforcement of those obligations, and makes clear that if a domestic insolvency regime otherwise permitted a court to modify the agreement, it may no longer do so.

The travaux préparatoires

108    The court was referred by the appellants to the travaux préparatoires, but as the primary judge found, and as the respondents submitted, they “are at best ambivalent as to the proper construction of Art XI(2) in its final form” and “no observation is focussed on the issues directly to be determined by the Court in these proceedings, and the supplementary materials to the extent relied upon are of no assistance”.

The second reading speech

109    The respondents relied on the second reading speech for the Bill that became the International Interests in Mobile Equipment (Cape Town Convention) Act 2013 (Cth), and on the primary judge’s observations about it to the effect that the international legal system established by the Convention was intended to reduce the risk and cost associated with financing aircraft and engines. So much may readily be accepted, but in our view, that has no bearing on the question of how the relevant words in Art XI(2) of the Protocol are to be construed. If it did, it would follow that any construction of the Convention or Protocol that could be said to make cheaper the provision of credit to airlines would be favoured as a matter of construction, which strikes us as unlikely, and inconsistent with the well-established principles governing the interpretation of treaties. In any event, that purpose or object cannot trump what is, in our view, the proper construction of the critical words of the text of Art XI(2).

Disposition

110    The appellants urged us to make a declaration that they had complied with any obligation under Art XI(2) of the Protocol to “give possession” of the respondents’ “aircraft objects” by disclaiming control of them. However, given the basis upon which the parties have joined in the present appeal, which focused upon the legal question of the proper construction of Art XI(2) of the Protocol, the factual issues as to what may be required in order to give possession in light of our reasons should be remitted to the primary judge. In our view, Art XI(2) does not impose a requirement to effect redelivery according to the terms of the agreement with the creditor. That is a sufficient basis upon which to uphold the appeal. Further, on the proceedings as presently constituted, any orders could not extend to proprietary claims that might be made as against the aircraft objects by parties other than the insolvency administrator. The Protocol deals only with claims by the creditor against its counter-party under the relevant agreement, or against the insolvency administrator in respect of the interest in the aircraft objects that forms part of the property in administration, relevantly for present purposes the possessory interest. Issues may now arise as to the approach to be adopted in dealing with those third party interests given that the insolvency administrator does not have an obligation to deal with them in order to effect redelivery.

111    The appellants also submitted that, if their appeal were successful, they should have restitution of the expenses that they have incurred, or to which they have irrevocably committed, in complying with the orders of the primary judge to date. There was evidence given at the hearing of the appeal that those costs are in the vicinity of $145,000. But we did not hear submissions on the matter, and the respondents have not had an opportunity to consider the evidence adduced about it. Accordingly, the question of whether the appellants are entitled to restitution, and if so in what amount, should also be dealt with by the primary judge on remittal.

112    The appeal should be allowed, orders 5, 6, 7 and 8 of the orders made by the primary judge set aside, and the matter remitted. We will also grant leave to the appellants to seek such declaratory relief as may be demonstrated to be appropriate based upon these reasons.

113    As to costs, the appellants are entitled to the costs of the appeal.

114    Further, the costs order made by the primary judge was made in circumstances where the creditor had been successful. Accordingly, we will also vacate that order, being order 12 made by the primary judge, and leave the question of the costs of the proceedings before the primary judge to be addressed as part of the remitter.

I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices McKerracher, O’Callaghan and Colvin.

Associate:    

Dated:    7 October 2020

SCHEDULE OF PARTIES

NSD 994 of 2020

Appellants

Fourth Appellant:

TIGER AIRWAYS AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 124 369 008