Foreign company, unregistered and without an office in Australia, held to be amenable to a winding up order

17 April, 2019

The recent decision of the Full Federal Court in White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) v Robertson[2018] FCAFC 63 (19 April 2018) serves to reinforce the importance of an external administrator of companies (be that an administrator, administrator under a deed of company arrangement, liquidator or provisional liquidator) seeking directions from a court at an early stage, particularly before embarking upon any significant and expensive course of action in the exercise of their functions.

Background facts

Shortly prior to Christmas 2017 administrators were appointed as joint and several administrators of Mossgreen Pty Ltd, which operated an auction house and gallery business.

Consignors delivered items to Mossgreen and authorised Mossgreen to sell those items at auction and thereby effect a transfer of ownership. Mossgreen was responsible for delivering items sold at auction to the successful bidder (upon payment of the purchase price plus buyer’s commission).  Mossgreen had no title or interest in the goods otherwise than as a bailee.

The appointment of the administrators brought to an end the future performance by Mossgreen of contracts to auction the consigned items.  The company became obliged to return lots to their owners. Shortly after the appointment of the administrators they started to receive requests for the return of consigned items.

The administrators determined that the stock management system of Mossgreen was not kept up to date and could not be relied upon to provide an accurate listing of consigned goods on hand (estimated to be in excess of 10,000 items). Accordingly, in addition to taking steps to pursue a deed of company arrangement and a possible sale, the administrators undertook a detailed “ground up” stocktake of all consigned items in the possession of Mossgreen. The total cost of the aforementioned steps was over $1 million and included $276k for employee wages and superannuation, $213k for fees and disbursements of the administrators, $122k for the costs of engaging Tiger Asset Group to undertake the full stocktake and $72k for legal costs.

After the stocktake was undertaken, the administrators sent circulars to persons who had been identified as owners stating that their goods would be returned on payment of a levy of $353.20 per lot. The amount of the levy was stated to be not negotiable and had been calculated by reference to the expenditure of over $1 million. The administrators claimed an equitable lien over the property of the consignors to support their position.

In early March 2018, over three months after their appointment, the administrators approached the Federal Court of Australia seeking directions under s 90-15 of the Insolvency Practice Schedule in Schedule 2 of the Corporations Act 2001 (Cth), effectively seeking to approve after the event the course of action they had adopted (including endorsing the existence of the lien and the collection of the specified levy). The directions were opposed by consigning owners. The primary judge, Perram J declined to grant the directions sought. The Full Federal Court heard an expedited appealed in respect of that decision.

Nature and extent of equitable and statutory liens

In Hewett v Court (1983) 149 CLR 639 at 663, Deane J explained that an equitable lien is a right against property which is, in truth, a form of equitable charge over the subject property. Gibbs CJ observed at 645 that it is not possible to state “a general principle which would cover the diversity of cases in which an equitable lien has been held to be created”.

In the present case, at [82] et seq., the Full Federal Court observed that:

  • An equitable lien arises by operation of law and does not depend either upon contract or upon possession; and
  • There are many examples in the cases of such a lien arising when a person uses their time and energy for the care, preservation and realisation of property of others.
  • The examples where an administrator has been entitled to an equitable lien over property of third parties must be viewed through the lens that the court was satisfied that the lien arose in the particular circumstances. They do not stand for any broader proposition that an administrator dealing with property owned by third parties will always have a right to a lien over such property for expenses so incurred.

There is a statutory lien under s 443F of the Corporations Act, which protects an administrator’s remuneration and debts or liabilities incurred in good faith and without negligence by the administrator in the performance or exercise of his or her functions as administrator. However, that lien is only over the company’s property. In the present case, the administrators asserted a lien over the consignors’ property.


In short, the Full Court were critical of the administrators for failing to follow a “common-sense approach” in giving effect to their obligation to return consigned items to the owners, as well as not bringing an application explaining the alternatives and seeking directions “before embarking upon one of the alternatives”.

At [44], the Full Court observed that the detailed affidavits provided by one of the administrators, Mr White, provides no evidence “of any thought process by which he considered the significance of the extent to which the items held were legacy items of little value, the extent to which the stocktake was necessary in order to deal with claims by owners, the extent to which the costs involved were proportional to the value of goods involved, and the likely cost to individual owners if the stocktake was undertaken”. Indeed, the Full Court stated that it would have been apparent to a person in the position of the administrators from an early stage that for a significant number of the consigned items, Mossgreen employees would have been able to fulfil the responsibilities of delivering items to buyers and return unsold items to owners applying the systems already in place, without the inventory produced by the stocktake.

At [86], the Full Court observed that (underline added):

In this case, we consider that there is potentially an entitlement to an equitable lien with respect to work properly done and expenses properly incurred that benefit a consignor by securing and protecting their property that is deposited at the company’s premises until it is returned under an efficient process proportional to the nature of the goods in question. Whether equity would grant such lien and its extent may depend upon the value of the statutory lien and the particular circumstances of the administrators’ conduct”.

The Full Court concluded that the administrators had not demonstrated that they were entitled to a lien over the consigned items of the nature and extent advanced, or covering the type of costs and in the amount contended for. Their appeal was therefore dismissed with costs.

The Full Court also questioned whether, in circumstances where owners had been held out of their consigned items for a considerable period,  the administrators would be justified in delaying further the release of consigned items while there was some form of assessment of the amount of a lien that may be required to be paid as a condition of release of property to the owners.

Take-home points

  1. External administrators are regularly placed in difficult situations where they are required to think and act quickly. The present case was no exception. The ability to seeking directions from the court in relation to an issue of power, propriety or reasonableness of a particular course is there to cater for these types of situations.
  2. It is far preferable for external administrators to seek directions before embarking upon a particular course of action as opposed to after, to approve a course they have already undertaken. As the Full Court stated at [47], “The only way to evaluate the claim for directions now sought after the event is to look back and consider what might have been considered if the correct questions had been raised”.
  3. Although external administrators may be entitled to an equitable lien where they have properly done work and incurred expenses for the care, preservation and/or realisation of property owned by third parties, the lien will only protect costs that are directly referable to, and proportional to the nature of, the property. In the present case, the administrators sought to sheet home to the consignors a significant amount of costs in which the consignors had no interest (as they could only be for the benefit of the general body of creditors).

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After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. 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The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. 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Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. 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