Federal Court of Australia

Manly Warringah Cabs (Trading) Co-operative Limited v Sydney Taxis Pty Ltd, in the matter of Sydney Taxis Pty Ltd (No 2) [2020] FCA 1336

ORDERS

THE COURT ORDERS THAT:

1.    A declaration that, on a proper construction of the Business Sale Agreement made between the plaintiff and the defendant in about late 2008, no right, title or interest in the telephone numbers listed below, passed to the defendant under the agreement:

(a)    9972 5600 to 9972 5699;

(b)    9981 6666; and

(c)    131 668.

2.    Otherwise, the interlocutory process filed 3 September 2020 be dismissed.

3.    The plaintiff and RSL Ex-Servicemen’s Cab & Co-Operative Members Limited each bear their own costs of the interlocutory process.

4.    The provisional liquidator’s costs of the interlocutory process be costs in the provisional liquidation.

5.    The defendant be wound up under the Corporations Act 2001 (Cth).

6.    Michael Jones of Jones Partners, a registered liquidator, be appointed as liquidator of the defendant.

7.    The costs of the plaintiff, in relation to the winding up application, be paid out of the assets of the defendant in accordance with section 466(2) of the Corporations Act 2001 (Cth).

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

REASONS FOR JUDGMENT

(Revised from the transcript)

GLEESON J:

1    On 19 August 2020, on the application of the plaintiff (Manly Cabs), a provisional liquidator, Michael Jones, was appointed to the defendant (Sydney Taxis) and the proceeding was listed to hear an application to wind up the company on 9 September 2020: Manly Warringah Cabs (Trading) Co-operative Society Limited v Sydney Taxis Pty Ltd, in the matter of Sydney Taxis Pty Ltd [2020] FCA 1216.

2    Manly Cabs and RSL Ex-Servicemen’s Cab & Co-operative Members Limited (RSL Cabs) each own 50% of the issued shares in Sydney Taxis and each has appointed two directors of Sydney Taxis. The relationship between Sydney Taxis, Manly Cabs and RSL Cabs, which is governed by a shareholders agreement, has broken down. Further, Manly Cabs and RSL Cabs agree that Sydney Taxis is probably insolvent.

3    Sydney Taxis presently operates a radio room and call centre for both Manly Cabs and RSL Cabs. Manly Cabs is substantially dependent for its ongoing business on the services provided by Sydney Taxis. Without those services, Manly Cabs would have no radio work, no duress alarm system (required by State legislation) and no booking system.

4    Manly Cabs presently encompasses a network of about 50 taxis.

Interlocutory process

5    By interlocutory process filed 3 September 2020, Manly Cabs applied for relief in relation to certain telephone numbers associated with its business. The application followed a claim by RSL Cabs that Sydney Taxis owns the relevant telephone numbers pursuant to a Business Sale Agreement made between Manly Cabs and Sydney Taxis in late 2008 (BSA). The proposed relief, as amended by short minutes provided to the Court on 9 September 2020 comprises:

(1)    A declaration that, on the proper construction of the BSA, no right, title or interest in the telephone numbers listed below, passed to Sydney Taxis under the BSA:

9972 5600 - 9972 5699, 9981 6666, 131 668 (disputed numbers).

(2)    A declaration that as between Manly Cabs, RSL Cabs and Sydney Taxis and/or the liquidator of Sydney Taxis, Manly Cabs has a better right to the disputed numbers.

(3)    A direction that the liquidator is justified in providing to Telstra any authority, consent or like document required by Telstra to effect the transfer of control of the disputed numbers to Manly Cabs.

6    In support of the application, Manly Cabs relied on the following evidence:

(1)    affidavit of Susan Inskip, director of Manly Cabs, affirmed 9 July 2020 and accompanying exhibit marked “SI-1”.

(2)    affidavit of Shane Martin, Manly Cabs’ administration officer, affirmed 12 August 2020; and

(3)    affidavits of Karen McLean, Manly Cabs’ solicitor, sworn 2 and 4 September 2020.

7    The application was opposed by RSL Cabs.

8    The provisional liquidator did not oppose the application and informed the Court that, in his opinion, creditors of Sydney Taxis would not be prejudiced by the proposed direction.

Relevant facts

9    The evidence included:

(1)    photographs depicting taxis with Manly Warringah markings, marked respectively with the telephone numbers 9972 5666 and 9972 5600;

(2)    the web pages for the Manly Cabs website, identifying the telephone number for bookings as 9972 5600 on each page;

(3)    web pages for the Sydney Taxis website, which identify the call centre line as 02 9470 1122, and which identify their four “partners” including Manly Cabs and RSL Cabs; and

(4)    web pages for the RSL Cabs website, which identify the telephone number as (02) 9581 1111.

10    Ms Inskip’s evidence was that Manly Cabs also used the numbers 9981 6666 and 131 668.

11    Mr Martin stated that Manly Cabs uses two sets of telephone numbers for telephone bookings, being 9972 5600 to 9972 5699 and 131 668. The former is a “100-number band”. All 100 numbers are available to be dialled into. 131 668 is a national 13 number and the service provider is Telstra. Each of the numbers is on an “Exchange level Redirect or Diversion” to Sydney Taxis.

12    In a report dated 7 September 2020, the provisional liquidator noted that the ownership of the disputed numbers is a significant issue. The provisional liquidator stated that:

…in the event that:

a)    Manly Cabs retains ownership of the telephone number, Manly Cabs will request that the data contained on the MTI system for the Manly Cabs fleet be provided to them and they will operate their call centre from the Boola St address.

RSL Cabs would then be in a situation where the commerciality of their operations would need to be considered by them.

b)    The number in question is held to be a number of Sydney Taxis, I would place the number for sale by way of tender and I presume that I would receive competing offers from across the industry.

This situation would affect the ongoing trading ability of Manly Cabs as they would essentially have no telephone booking system.

RSL Cabs would also be in a situation where the commerciality of their operations would need to be considered by them.

13    By letter dated 26 August 2020 from RSL Cabs’ lawyers to the provisional liquidator, RSL Cabs stated its intention, if Sydney Taxis is wound up, to submit an offer to purchase certain of the assets of Sydney Taxis including the disputed numbers.

14    RSL Cabs did not contest that the disputed telephone numbers are associated with Manly Cabs. There is no evidence to suggest that the telephone numbers are associated with any other brand. At least two of the disputed phone numbers form part of the livery of Manly Cabs’ taxis.

15    It follows that, to the extent that the telephone numbers have any value, Manly Cabs has substantially contributed to that value by advertising the telephone numbers for its taxi services.

16    Prior to the BSA and the shareholders agreement, Manly Cabs and RSL Cabs each made their own arrangements regarding the receipt and despatch of telephone and advance bookings to taxis on their networks, the monitoring of in-car alarms and other activities that required the use of telephone services.

17    In 2008, Manly Cabs and RSL Cabs decided to join together in operating a radio room and call centre so as to reduce the expense related to those services to each taxi network.

18    The recitals to the BSA provide relevantly:

A. The Seller [Manly Cabs] carries on the Business.

B. The Seller wishes to transfer the Assets of the Business to the Buyer [Sydney Taxis].

19    The “Business” is defined in Schedule 1 of the BSA as follows:

The business involves the receipt of taxi bookings from the public and their dispatching to taxi cabs via the taxi network operation using the equipment and employees of the call centre located at 12 Boola Place, Cromer, NSW.

20    Self-evidently, in order to conduct this business, it was necessary for Sydney Taxis to receive calls from the disputed numbers.

21    The BSA expressly addressed this practical requirement at cl 5.6 entitled “Transfer of Services”, which provides:

The parties must ensure that:

(a) The Buyer obtains on Completion the Seller’s existing telephone booking numbers, administration numbers and fax transmission numbers, internet domain names, email addresses and any phonewords for the Business at the date of this agreement, and

(b) Any deposits the Seller has paid to the suppliers of telephone and fax services will be refunded to the Seller and replaced by deposits paid by the Buyer or will be allowed to the Seller as an adjustment on or after Completion.

22    The evidence does not reveal the mechanics by which Sydney Taxis “obtained” Manly Taxis existing telephone booking numbers on completion of the BSA.

23    Manly Cabs acknowledged that Sydney Taxis assumed responsibility for the payment of the costs of the incoming lines for both Manly Cabs and RSL Cabs and those costs were funded through monthly fees payable to Sydney Taxis for each of their cabs.

Rights in relation to telephone numbers

24    There is no property in a telephone number. This follows from s 454B of the Telecommunications Act 1997 (Cth) which provides:

454B    No property rights in numbers

Determination of a person as the numbering scheme manager does not confer any property rights in numbers used in connection with the supply of carriage services in Australia.

25    RSL Cabs accepts that Telstra is a “numbering scheme manager”. It follows that Telstra is unable to confer property rights in telephone numbers, and Manly Cabs was unable to confer property rights in the disputed numbers by the BSA.

26    This position is confirmed by Telstra’s General Terms for Corporate Customers (Telstra Terms). RSL Cabs did not concede that these terms apply to the disputed numbers, however, it is reasonable to assume that the terms, or materially similar terms, are applicable. For its part, Manly Cabs did not dispute that Sydney Taxis is the customer that obtains contractual rights under the relevant terms. Relevantly, the terms confirm that the customer does not own or have any legal interest or goodwill in any telephone number issued to the customer. The terms also permit the customer to “transfer” a telephone number to another person with the prior consent of Telstra.

27    Thus, the proposition that an agent may not assert title in property against its principal (it being put by Manly Cabs that Sydney Taxis may not assert title in the disputed numbers against Manly Cabs) also has no relevant operation.

28    Clause 5.6 of the BSA is consistent with the absence of any property right in the disputed numbers, making separate provision for the transfer of Manly Cabs’ existing telephone booking numbers apart from the transfer of property rights by the sale of the “Assets” within the meaning of the BSA.

29    Accordingly, I will make a declaration of the kind sought in para 2 of the interlocutory process.

30    However, based on the Telstra Terms, the current position is that Sydney Taxis has a contractual right to transfer the disputed numbers with Telstra’s prior consent (including to Manly Cabs or to a third party). That is the right that Manly Cabs submits that the provisional liquidator is justified in exercising in favour of Manly Cabs.

Is Sydney Taxis’ the agent of Manly Cabs for the purposes of dealing with telephone numbers?

31    Manly Cabs submitted that Sydney Taxis became the agent of each of Manly Cabs and RSL Cabs for the purposes of their dealings with Telstra. There is no written agreement between Manly Cabs and Sydney Taxis evidencing this agency relationship, and senior counsel for Manly Cabs, Ms Peden SC did not seek to explain the scope of the relationship. On the available evidence, I am not persuaded that there is an agency relationship between Manly Cabs and Sydney Taxis of the kind identified.

Does Manly Cabs have a “better right” to the disputed numbers?

32    In Rahme v Telstra Corporation Ltd (1995) 119 FLR 426 Young J made a declaration that, as between the plaintiff and the second and third defendants, the plaintiff had a better right and title to certain telephone numbers. This declaration was based on his Honour’s conclusion that there was at least some proprietary right in the nature of goodwill in the association of a telephone number with a particular business. His Honour expressed the view that the precedent value of this decision in relation to a telephone service connected after 1991 was “nil”.

33    A few years later, in Saxby Bridge Mortgages [1999] NSWSC 695, Austin J doubted that there is a general proposition that, where a telephone number becomes associated by customers with the user’s business, the proprietor has in all cases a proprietary right in the nature of goodwill. However, his Honour noted that equity would restrain an apprehended passing off where the ingredients of the tort and the risk of harm to the plaintiff are made out.

34    RSL Cabs does not suggest that it has any right to the disputed numbers. It wishes to “purchase” the numbers, on the mistaken assumption that they are presently assets of Sydney Taxis. On the available evidence, and particularly having regard to the Telstra Terms, I am not satisfied that Manly Cabs has a better right to the disputed numbers than Sydney Taxis. At present, it appears that the only relevant right is a contractual right, held by Sydney Taxis.

Direction under s 90-15

35    Section 90-15(1) of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Corporations Act 2001 (Cth) provides:

The Court may make such orders as it thinks fit in relation to the external administration of a company.

36    By s 90-20(1)(a), a person with a financial interest in the external administration of the company may apply for an order under s 90-15. By s 90-15(2), the Court may also exercise the power under s 90-15(1) on its own initiative, during proceedings before the Court.

37    Manly Cabs is identified as a creditor of Sydney Taxis in the provisional liquidator’s report. Accordingly, I am satisfied that Manly Cabs has a financial interest in the external administration of Sydney Taxis and may apply for an order under s 90-15.

38    In Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 8) [2020] FCA 533 at [50] and following, I set out the following relevant principles:

[50] In Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; Gordon J noted at [166]:

[T]he statutory framework for a liquidator to apply for directions has changed. Prior to its repeal and the enactment of the Insolvency Practice Schedule [being Schedule 2 to the Corporations Act], s 479(3) of the Corporations Act allowed a liquidator to apply to the court for directions in relation to a matter arising under a winding up. Section 90–15(1) of the Insolvency Practice Schedule now provides a source of power for the court to provide directions to liquidators, and relevantly provides that the court may make ‘such orders as it thinks fit’ in relation to the ‘external administration’ of a company.

[51] In using the language “such orders as it thinks fit”, s 90-15(1) plainly confers a very broad power on the Court.

[52] In Ample Source International Ltd v Bonython Metals Group Pty Ltd (in liq), Re Bonython Metals Group Pty Ltd (in liq) (No 8) [2018] FCA 1614 at [88]-[92] , I set out the following matters concerning s 90-15:

[88] By s 90-20(1)(d) of the Insolvency Practice Schedule and the definition of “officer” in s 9 of the Act, a liquidator is a person who may apply for an order under s 90-15.

[89] The Court’s supervisory powers under s 90-15 of the Insolvency Practice Schedule are arguably as broad, or broader than, its powers under the previous provision, being the former s 479(3) of the Act.

[90] Section 479(3) allowed a court-appointed liquidator to apply to the Court for directions in relation to a matter arising under a winding up. The function of a liquidator’s application for directions under s 479(3) was to give the liquidator advice as to the proper course of action for him or her to take in the liquidation: Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [7].

[91] In Re Ansett Australia Ltd and Korda [2002] FCA 90; (2002) 115 FCR 409, Goldberg J explained at [44]:

When liquidators and administrators seek directions from the Court in relation to any decision they have made, or propose to make, or in relation to any conduct they have undertaken, or propose to undertake, they are not seeking to determine rights and liabilities arising out of particular transactions, but are rather seeking protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct. They can obtain that protection if they make full and fair disclosure of all relevant facts and circumstances to the Court. In Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674, McLelland J said at 679–680:

The historical antecedents of s 479(3) …, the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator’s application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitory form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction.

…

Modern Australian authority confirms the view that s 479(3) ‘does not enable the court to make binding orders in the nature of judgments’ and that the function of a liquidator’s application for directions ‘is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company’s transactions before the liquidation’: [cases cited omitted].

[92] At [65], Goldberg J concluded:

[T]he prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator’s or administrator’s unease. There must be an issue calling for the exercise of legal judgment.

[53] In S & D International v MIG Property Services [2010] VSC 336; (2010) 79 ACSR 373, Warren CJ approved the liquidator’s compromise of legal proceedings involving competing claims over a property held on trust, exercising the power then conferred by s 511 of the Corporations Act. At [17], her Honour described the case as one that “dealt with the risk attendant upon a conscientious liquidator in an acrimonious liquidation environment” and considered that s 511 orders may have utility to protect liquidators “where such protection would be just and beneficial to advancing the liquidation process as a whole”.

[54] At [18], her Honour referred to the following observation of Mansfield J in Re Corporations Law; v Addstone Pty Ltd (in liq) [1997] FCA 1043; (1997) 25 ACSR 357 at 363:

While the court may be reluctant to give directions when purely commercial considerations are relevant to the liquidator’s decision, even in relation to the conduct of litigation, there will be circumstances where it is or may be appropriate to do so. One of those circumstances may be where the liquidator’s proposed decision is the subject of criticism by a particular creditor or creditors as being unreasonable or mala fides.

[55] At [23], Warren CJ concluded that the liquidator had made a reasonable commercial decision in good faith when entering into the relevant settlement deed, on the facts before her Honour. At [24], her Honour considered that something more was needed to justify an order pursuant to s 511. Her Honour concluded that the history of the dispute gave rise to a well-founded fear in the liquidator that he may be the subject of claims, and that fear may preclude the settlement money being received to the detriment of creditors. Her Honour considered that the circumstances were unusual enough to warrant the grant of the protection sought.

[56] In Re One.Tel Ltd and ors [2014] NSWSC 457; (2014) 99 ACSR 247 at [35], Brereton J noted the need for caution in making a direction, saying:

But the fact that a direction under s 511 — unlike an approval under s 477(2A) or (2B) — exonerates the liquidator from personal liability, means that a closer examination of the liquidator’s decision is required than under s 477. In short, the court should not make a direction the effect of which is to exonerate the liquidator from personal liability in respect of a commercial judgment that the liquidator is concerned may prove contentious, unless satisfied that the liquidator’s decision is, in all the circumstances, a proper one.

[57] In that case, the relevant direction concerned entry into a deed of settlement which, Brereton J concluded (at [49]), was a decision involving both the exercise of legal judgment and commercial judgment.

[58] In Re KSK Holdings (Australia) Pty Ltd (in liq) [2019] NSWSC 1463 at [18], Rees J explained:

The Court may give directions where it will be “of advantage in the liquidation”: Dean-Wilcox v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212; (1997) 24 ACSR 79 at 81. The Court will not generally give a direction where the matter relates to the making or implementation of a business or commercial decision or when no legal issue is raised, or where there is no attack on the propriety or reasonableness of the liquidator’s decision, but it may do so where there is the prospect of such an attack: Re Steel Distribution Pty Litd (in liq) (recs and mgrs apptd) [2013] NSWSC 669 at [20] per Black J; Re Dungowan Manly Pty Ltd (in liq) [2018] NSWSC 1083 at [17].

Consideration

39    I am not persuaded that the provisional liquidator would be justified in taking steps to transfer the disputed numbers to Manly Cabs without first satisfying himself that the right to transfer does not have value that might be realised for the benefit of the creditors of Sydney Taxis.

40    The proposed direction is plainly to the advantage of Manly Cabs because it will secure (or at least is intended to secure) the uninterrupted operations of that taxi network. Conversely, there is a real prospect of significant disruption to the business of Manly Cabs if it is not able to secure the disputed numbers promptly.

41    However, there is evidence that RSL Cabs perceives value in obtaining the use of the disputed numbers. The provisional liquidator contemplated a sale of the numbers by tender if the numbers were assets of Sydney Taxis. In my view, whether the provisional liquidator (or any subsequent liquidator) would be justified in facilitating the transfer of the disputed numbers to Manly Cabs for no consideration is essentially a commercial decision and the circumstances and available evidence do not support the exercise of the s 90-15 power in the manner proposed.

42    Ms Peden SC submitted that the provisional liquidator could not obtain any value for the transfer of the numbers because any purchaser would face a passing off action by Manly Cabs. However, on the available evidence, there is a prospect that the provisional liquidator could obtain value. If Ms Peden SC is correct, the provisional liquidator may be able to verify her contention rapidly. However, I am not satisfied that it is to the advantage of the provisional liquidation, or the impending liquidation, to foreclose that possibility.

43    Accordingly, I will not give the direction sought.

Winding up application

44    The application to wind up Sydney Taxis was not opposed by RSL Cabs.

45    The winding up order is sought pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth), by which such an order may be made if the Court is of the opinion that it is just and equitable that the company be wound up. Manly Cabs has standing to apply for a winding up order on a ground provided for by s 461 as a contributory.

46     In Australian Securities and Investment Commission v Bilkurra Investments Pty Ltd [2016] FCA 371 (Bilkurra), Beach J at [56] identified the following three factors of central significance to the exercise of the power to wind up a company on just and equitable grounds:

(a) First, is there a justifiable lack of confidence in the conduct and management of the relevant company or its affairs?

(b) Second, is there a real risk to the public or the public interest that warrants protection by such an order and the incidents flowing from liquidation?

(c) Third, is the relevant company solvent? A court may be reluctant to wind up a solvent company.

47    The likely insolvency of a company is relevant to the formation of the opinion that a company should be wound up on the just and equitable ground: Bilkurra at [58].

48    Based on the evidence of Ms Inskip, Manly Cabs has a justifiable lack of confidence in the conduct and management of Sydney Taxis. This lack of confidence was validated by the concerns identified in the provisional liquidator’s 7 September 2020 report concerning the information contained in the company’s financial accounts.

49    The report also summarises the major unresolved disputes between Manly Cabs and RSL Cabs as shareholders and appointees of the directors of Sydney Taxis and states Mr Jones’ confidence that there is no chance of resolving the disputes between Manly Cabs and RSL Cabs.

50    The report also records the provisional liquidator’s opinion that Sydney Taxis is insolvent. That opinion is based upon a cashflow projection showing that it is likely the company would be unable to fund trading in the future; an analysis of the ratio of current assets to current liabilities which indicates that Sydney Taxis did not have sufficient assets to discharge its liabilities since at least 30 June 2018; an analysis of working capital indicating that since at least 30 June 2018 the company may not have been able to repay its short term liabilities and an analysis of the ratio of total assets to total liabilities indicating that the company may have difficulties in repaying all of its liabilities in full in the long term, even if it was able to realise all of its assets at book value.

51    On the basis of this evidence, I am of the opinion that it is just and equitable that Sydney Taxis be wound up.

52    I am otherwise satisfied that the requirements for a winding up order are satisfied.

Costs

53    Each of Manly Cabs and RSL Cabs had a measure of success in relation to the interlocutory process and accordingly each should bear their own costs of that application. There is no reason why the costs of the provisional liquidator should not be costs in the provisional liquidation, and I consider that to be the appropriate order in relation to those costs.

Associate:

Dated:    18 September 2020