Wells Fargo Trust Company, National Association (as Owner Trustee) & Anor v VB Leaseco Pty Ltd (Administrators Appointed) & Ors [2021] HCATrans 182 (4 November 2021)

Last Updated: 5 November 2021

[2021] HCATrans 182

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S60 of 2021

B e t w e e n -

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

First Appellant

WILLIS LEASE FINANCE CORPORATION

Second Appellant

and

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

First Respondent

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

Second Respondent

VAUGHAN NEIL STRAWBRIDGE, JOHN LETHBRIDGE GREIG, SALVATORE ALGERI AND RICHARD JOHN HUGHES (IN THEIR CAPACITY AS VOLUNTARY ADMINISTRATORS OF THE FIRST AND SECOND RESPONDENTS)

Third Respondent

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

Fourth Respondent

KIEFEL CJ
GAGELER J
KEANE J
EDELMAN J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE, SYDNEY AND MELBOURNE

ON THURSDAY, 4 NOVEMBER 2021, AT 10.00 AM

Copyright in the High Court of Australia

____________________

KIEFEL CJ: In accordance with the protocol for remote hearings, I will announce the appearances for the parties.

MR B.W. WALKER, SC appears with MR P.F. SANTUCCI for the appellants. (instructed by Norton Rose Fulbright Australia)

MR J.T. GLEESON, SC appears with MS K.I.H. LINDEMAN for the respondents. (instructed by Clayton Utz)

KIEFEL CJ: Yes, Mr Walker.

MR WALKER: May it please your Honours. The effect, as your Honours appreciate, of sections 7 and 8 of the International Interests in Mobile Equipment (Cape Town Convention) Act 2013 is first to give the force of law, so far as they relate to Australia, to the Convention and Protocol to which I am about to come and, second, to enact that those provisions prevail over any law of the Commonwealth and any law of a State or Territory to the extent of any inconsistency.

Principally, these provisions have substantive effect in this case uncontroversially by affecting the enacted regime upon insolvency, including the various regimes that may result from that, in this case, administration.

For the reasons that we have put in our written submissions, that your Honours I hope have seen set out sequentially in our outline, we would respectfully submit that the trial judge directly reasoned to the ultimate conclusion concerning the meaning of the two innocent‑looking words “give possession” which of course on all sides the parties accept are to be interpreted contextually, that is, not in isolation.

I should mention some other uncontroversial matters, which in another case or cases might turn out to be controversial, and that particularly includes what I might call matters of method concerning the interpretation of the enacted provisions of international law, in this case in the form of the Convention and Protocol to which I am about to come.

Nothing really separates the parties as to general method, and your Honours will have seen the same remark by the Full Court concerning the approach taken by the trial court in that regard. In particular, your Honours will, I fear, have been burdened with a deal of travaux préparatoires – and some case law – but it would appear really common ground not to be decisive – nothing within cooee of stare decisis of course applies in this case, which on our researches, which we think have been reflected in our friends’ endeavours, would appear to be the first to address the particular question before the Court.

Your Honours, the Convention – which I will for shorthand call the Cape Town Convention – is a convention which, from its inception, looked to the device of protocols to cover specific kinds or categories of the mobile equipment in question. Can I, at this point, take your Honours to the Convention, which you will find in the book of further materials and, in particular, could I take your Honours please to tab 10 of book 1, starting at page 69.

These provisions, to which I am about to refer, have been set out, particularly in the first instance judgment, which, as your Honours appreciate, their Honours in the Full Court largely accepted as to these expository materials, but there are matters upon which we lay some emphasis.

On page 70, the preamble refers to the “need to acquire mobile equipment of high value”. The aircraft engines, in this case, capable of being used on Boeing 737s is a manifestly good example of that. The need is also a need to facilitate financing and your Honours will have noticed from the second reading speech a particular reference to the perceived national benefit to be gained from that facilitation of finance.

The advantages of asset‑based financing and the facilitation of such transactions by establishing clear rules to govern them is the very next agreed preambular statement. The universal need for protection is, of course, in accordance with the global character of the subject matter of the Convention and the Protocol, for the reasons which are obvious, with respect to substantial aircraft engines on aircraft capable of intercontinental flight.

The fifth of the preambular statements asserts a belief that rules must promote the autonomy of the parties, necessary in such asset‑based financing and leasing transactions, and “autonomy of the parties” plainly there includes, subject to lawfulness, stipulating between them as to respective and mutual rights and obligations and adoption thereafter, of course, of the private version of pacto sunt servanda.

The agreement in the Convention is one, as I say, that looks forward to the completion or perfection or fleshing out of its scheme by reference to protocols, and you will see at the foot of page 72 a reference in the definition of “Protocol” to its meaning:

in respect of any category of object and associated rights to which this Convention applies, the Protocol in respect of that category –

et cetera. On page 75, the distinction between Convention and Protocol is, of course, preserved by the use of the two distinct words, but in Article 6(1) there is the requirement that the:

Convention and the Protocol shall be read and interpreted together as a single instrument.

So their differences are integral to an understanding of their identity, but they are to be melded for the purpose of being read and interpreted together. Bearing in mind the category character of a protocol, that is, the greater specificity that it is likely to display than the Convention, one sees, then, in Article 6(2) of the Convention, a provision for the Protocol to prevail over the Convention in the event of any inconsistency.

It is at that point, and bearing in mind the choices that may be made by States Parties and the relation of Convention and Protocol, that one comes to how the Convention, in its Chapter III starting in Article 8, deals with what are there called “default remedies”. We would invite your Honours to understand “default remedies” as meaning principally remedies in the event of the default by a party and, in particular, default by what I will call an indebted party.

KIEFEL CJ: Mr Walker, does Article 2 assume any importance in your argument?

MR WALKER: Your Honour, it is clear that Article 2 is important by describing what might be called the intended scope of the Convention, which is a convention with respect to international interests in mobile equipment. In terms of importance for our argument, as it ultimately descends to the question of give possession, I do not think we can point to anything apart from the contextual frame upon which, of course, we rely, from Article 2 and other articles, given the concern of this Convention from the outset in mobile equipment, that is, equipment that may, when a debtor defaults, be, as it were, anywhere with an aerodrome, or indeed, between aerodromes, and where there are leasing agreements of a kind which, even taking into account the multiplicity of different legal systems to which the Convention is intended to be applicable, obviously includes the notion of what we, in our system, would call a reversion, that is, a point at which the object leased will be returned from lessee to lessor.

So it plays what might be called a general framing of the concern with equipment that may be mobile, including between States Parties, that is, international or transnational, and which may therefore be found when the whistle blows upon in particular an insolvency default in a vast range of different places.

In Chapter III – I do not need to dwell on it, but your Honours will have the flavour of the language used therefore in Article 8, “Remedies of chargee”. I do not need I think in‑chief to dwell on the particular aspects of a charge except to note that for all practical purposes and for a general understanding of the intent of this regulation of a particular field of commerce, that it is difficult to take seriously any category of charge that lacks any aspect of hypothecation, that is, resort if necessary by sale to realisation of an object charged in order to permit repayment of an indebtedness. That of course is picked up – and I do not need to dwell on any details – in Article 9. Article 10, however, refers to a leasing agreement:

In the event of default . . . under a leasing agreement as provided in Article 11 . . . the lessor . . . may:

(a) . . . terminate the agreement and take possession or control of any object . . . or

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

That is part of the text of the Convention to which no doubt the Court will pay regard when making ultimate conclusions about the overall reading together of “Convention and Protocol” for the purposes of this case. In Article 11 of the Convention, one sees in paragraph 1 one of the many references in Convention and Protocol to the private agreement between debtor and creditor. There, in Article 11, paragraph 1:

The debtor and the creditor may at any time agree in writing as to the events that constitute a default or otherwise give rise to the rights and remedies specified in Articles 8 to 10 and 13.

So, some notion of what “remedies” may mean can be gathered by the reference to Articles 8 and 9, and 10 as obviously in the nomenclature of Article 11, constituting rights and remedies. Article 13 is referred to and, although undoubtedly important in the regime, it adds nothing particular to the interpretive choice before this Court. One sees in particular the expectation that competent courts will be expected to consider the grant of appropriate judicial enforcement of the position – including the position that we would describe as interlocutory or interim.

But we do need obviously to draw attention with some emphasis to Article 12, which is headed “Additional remedies”. Those so‑called “additional remedies”, which are:

permitted by the applicable law, including any remedies agreed upon by the parties –

so that something to remedy a default, to make good a position upon a breach, or default, or failure to comply, is picked up in Article 12, and one sees that they:

may be exercised to the extent that they are not inconsistent with the mandatory provisions of this Chapter as set out in Article 15.

It is common ground that there is no such inconsistency posed by any of the scenarios that are before the Court for the interpretation in this case. One sees in Article 14 a reference to “Procedural requirements” which is said to be:

Subject to Article 54(2) –

which contemplates the possibility that applicable law might require, by way of prerequisite, leave of the court before doing certain things. We draw to attention that that, together with the reference to:

conformity with the procedure prescribed by the law of the place where the remedy is to be exercised -

naturally and appropriately conjures, without any difficulty, resort to courts of law or other competent tribunals in the case of recalcitrance by a debtor. Article 15 “Derogation” is obviously important but is not going to be critical to any question of interpretation in this case, we think.

Can I then take your Honours to pages 85 and 86 in Chapter VIII, “Effects of an international interest as against third parties”, in Article 30, places the position of what I will call priority, depending upon registration, and again there is no question in this case that factually registration attracted that priority.

Then Article 30(3), carves out from the effects of Article 30 and its priority certain common provisions of municipal systems, in the language of the Convention:

the avoidance of a transaction as a preference or a transfer in fraud of creditors ‑

very familiar matters in our jurisdiction but in many others as well. Then a reference which we think will not have any interpretative weight one way or the other in this case to:

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

Could I then take your Honours please to the Protocol, which starts on page 100 behind tab 11 of the book of authorities. On page 101, its preambular statements categorise its subject matter as “aircraft equipment” and notes explicitly in light of the purposes, some of which I drew to attention from the preamble to the Convention, and notes, that is renders more specific its dealing with the topic at hand by referring to the particular requirements of aircraft finance and, without taking your Honours to it, your Honours will recall reference to a political perception of that in Parliament in the second reading speech.

The first provision I wish to draw to attention is in what might be called the basic or operative provision, which is Article II on page 103, whereby the Protocol applies the Convention:

to aircraft objects as provided by the terms of this Protocol.

So the application of the Convention is by the Protocol to be as provided by the terms of the Protocol, a basic provision which governs, without formal need to resort to the inconsistency provision in the Convention.

Under Article 2, paragraph 2, that combination, as we would put it, is to:

be known as the Convention on International Interests in Mobile Equipment as applied to aircraft objects.

So another clear textual indication of the combined and therefore unitary effect of applicable Convention provisions and Protocol provisions for the purposes of the interpretive question before this Court.

I am reminded, as your Honours have seen, we have emphasised in our written submissions and in our outline that aircraft engines are not just hardware and they are not just, as it were, their present state from time to time. Their histories are a critical part and parcel of their operation, safely, and of course therefore in accordance with regulatory requirements. You will have seen that in the defined terms – you would have seen that in the defined terms on pages 101 and 102, Article I, paragraph 2, subparagraph (b), and at the top of page 102 it is together with a number of things, including:

all data, manuals and records relating thereto ‑

It is at that point that we step into Chapter II of the Protocol which is described as dealing with “Default remedies, priorities and assignments”, and it starts in Article IX, paragraph 1, by adding:

to the remedies specified in Chapter III of the Convention, the creditor may, to the extent –

of agreement, again clear words referring to what starts as a private stipulation between parties, and then refers back to circumstances specified in Chapter III of the Convention and adds to what are called the remedies, the procuring of “the de‑registration of the aircraft”, which obviously would have an effect on its lawful operation, including movement, and under subparagraph (b) procuring what is called its:

export and physical transfer . . . from the territory in which it is situated.

In paragraph 2 of Article IX, those are squarely described as remedies and they are given the status of being capable of being exercised, so to speak, summarily and unilaterally.

In paragraph 3 of Article IX there is a disapplication in a manner which your Honours should regard as being of the kind contemplated by the original relation between Convention and Protocols, a disapplication of Article 8, paragraph 3 of the Convention. I have taken your Honours to that previously, but to remind you, that is the stipulation, which might be described as imposing an obligation on parties in our position, that remedies specified:

shall be exercised in a commercially reasonable manner.

And that:

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.

But the disapplication by the opening sentence of paragraph 3 of Article IX of the Protocol ‑ of Article 8(3) of the Convention ‑ does not, of course, remove anything of that nature because of the sentences that follow. And it is Article IX, paragraph 3 of the Protocol that speaks to the manner of exercise of remedy, and the remedy is described as any remedy given by the Convention. And it may be ‑ though this does not appear to be critical in the reasoning below ‑ that that is a crux of interpretation between us and our friends. I will deal with that later, but your Honours will have seen already our arguments in paragraphs 80 to 84 of our written submissions on the point.

It is to be recalled that the remedy given by the Convention, which is required to be read as one instrument with the Protocol, is, as one can see, a remedy which may take different forms. I am going to come to those in a moment. Any such remedy:

shall be exercised in a commercially reasonable manner.

And then there is the same equivalence or deeming provision by which “commercially reasonable manner” is to be regarded as made out to exist where the remedy, so‑called, is exercised in conformity with a provision of the agreement, with the same proviso, namely:

except where such a provision is manifestly unreasonable.

It is common ground that there is no attempt to make out the application of that proviso, by which I mean the provisions of the agreements to which I am going to come are accepted as being provisions that are not manifestly unreasonable, and therefore, we submit, any exercise of remedy in accordance with those provisions must be deemed to be in a commercially reasonable manner, thereby fulfilling the requirement that is substituted by Protocol Article IX(3) in place of Convention Article 8(3).

GAGELER J: Mr Walker, can I ask a question at this point. As I read Article 8 of the Convention, it is concerned with the chargee being a creditor under a security agreement.

MR WALKER: Yes.

GAGELER J: Article 10 is concerned with the position of a creditor under, relevantly, a leasing agreement.

MR WALKER: Yes.

GAGELER J: When we get to Article IX of the Protocol, there is a disapplication of Article 8(3).

MR WALKER: Yes.

GAGELER J: But then do we read the next sentence as covering the position that is dealt with in Article 10 of the Convention? That is, is what is given by Article IX(3) more than is taken away, or does it cover a greater area than is taken away?

MR WALKER: It may be that it is the reference to Article 13 that your Honours see in Article 8(3) of the Convention that explains the reference to Article 8(3) in Article IX(3) of the Protocol, because Article 13 is not confined on cases of a charge. In terms of what might be called the Venn diagram approach to the question that Justice Gageler has asked me about, it is to be recalled that there is the general provision of Article 12 of the Convention, which, as I drew to attention, ensures that there is, within the armoury of remedy, those agreed upon by the parties, and what appears, in verbal terms, to be a permission or power to exercise them, subject to inconsistency with the mandatory, that is, non‑derogable provisions in Article 15.

And one needs to appreciate, of course, that under Article 15, one of the non‑derogable provisions was Article 8(3), and it may be, because 8(3) picks up 13, and 13 is interim relief, and interim relief is not confined to cases of charge, but that is why, when it comes to the position between creditor and debtor, as opposed to between chargor and chargee, in Protocol IX(3) there is the simple, complete disapplication of 8(3) of the Convention, because, I need to remind your Honours, the non‑derogation in Article 15 is non‑derogation by private agreement. It may be affected by a Protocol requirement.

And obviously enough, in our submission, as between creditors and debtors, in relation to the clarity of the rules, which is an explicit desideratum of the Convention and Protocol, the applicability of the general stipulation for commercially reasonable manner of exercise of remedies makes sense to apply across the board for all parties who may be described as creditors and debtors. Obviously enough, many a chargor and chargee will be respectively debtor and creditor.

The next provision in the Protocol to which I wish to take your Honours, it being where the critical words are found, is of course Article XI – and it is common ground that the paragraph 1 declaration was made – and it is common ground that the choice was made by declaration by Australia for Alternative A.

It is therefore particularly to be found in paragraphs 2 to 13 of Article XI of the Protocol the immediate context of the words, the interpretation of which divides the parties, though of course – and we understand this to be common ground – the context extends to anything that may be turned to account within the Convention and the Protocol. And the parties in their written submissions have drawn to attention, certainly from the appellants’ position, those matters that we call in aid other than in paragraphs 2 to 13 of Article XI.

Can I actually go immediately to paragraph 13 in Alternative A in Article XI of the Protocol in order to complete what I wanted to say about the nomenclature of Convention and Protocol, and the concept of their combination, which we argued in our written submissions, commencing in paragraph 80 – I do not need to take your Honours to those submissions. Paragraph 13 uses naturally, and without any strain, the language of:

The Convention as modified by Article IX of this Protocol –

That is, movement from the general to the specific, by part of what is required to be read as a composite instrument, being the part which prevails in the event of any inconsistency.

And so it is the Convention as modified by Article IX of the Protocol to which I have drawn attention that applies to the exercise of, again, a comprehensive phrase “any remedies under this Article”, and this article is Article XI, the subject matter of which is the one that creates the dispute between the parties before the Court, namely remedies on insolvency. So, it is a further subcategory of possible applications for the Protocol.

It is common ground in the manner that your Honours have seen in the agreed facts and in the findings at first instance, not challenged in the court below or in this Court, that there was an insolvency related event. One sees that time ticks upon its occurrence, the chronology not being in dispute between the parties in this case. At the end of the period stipulated, relevantly by the expression “the end of the waiting period”, which has been declared by Australia to be 60 days, there are these words, that:

the insolvency administrator . . . shall . . . give possession of the aircraft object –

we interpolate, including all the records:

to the creditor no later than ‑

It is in those innocent looking words “give possession” that the dispute between the parties centres on the difference between first instance and first appeal.

Some attention has been paid in the written arguments and in the reasons below to what significance may be gathered for that interpretation exercised by paragraph 4 of Article XI of the Protocol, which extends to the insolvency administrator the protection, if I may call it that, of the application of these provisions to that person in its official, not personal, capacity.

There are obviously financial risk matters that are evoked by and for an insolvency administrator in what might be called onerous stewardship obligations and your Honours are aware that issues determined below but not before this Court concern statutory discretions exercised in favour of the third respondents in that regard.

Then I come to a very important context, which is paragraph 5 of Article XI, where the expression is used:

Unless and until the creditor is given the opportunity to take possession under paragraph 2 ‑

Of course your Honours are well familiar with the fact that the notion of taking possession, which is presumably intended as a correlative of the other party giving possession, does not appear in terms in paragraph 2. Paragraph 2 stipulates an obligation relevantly on the insolvency administrator to “give possession . . . to the creditor”. That is taken up as a concept, no doubt acknowledging that in the usual or perfect course giving as a correlative taking by the use of the language in paragraph 5 and in particular the notion of opportunity. That, of course, betokens the difference between the insolvency administrator or debtor who is under an obligation and the creditor who, relevantly, may not be or in this case is not under an obligation to take possession.

Paragraph 5 of Article XI has as its critical point of interest and concern and its purpose in regulating what might be called allocation of risk and resort to judicial assistance. The allocation of risk is in subparagraph (a) where there is an obligation to:

preserve the aircraft object and maintain it and its value ‑

Pausing there, those are in very familiar fashion by reference to insolvency practice for a very long time and in very many places, forms of conduct which cost money, which indeed may be sufficiently expensive materially to entrench upon funds that, but for their expenditure, would otherwise be available for rateable distribution among creditors, but which in most systems for self‑evident reasons of policy rank in priority of course to any such ultimate distribution.

These are treaty obligations with respect to the facilitation with a view to lowering the price of particular forms of financing. The allocation of risk, of course, is appreciated, as your Honours will have seen from the second reading speech and from the preambular statements to which I have taken you, manifestly matters which are believed to be calculated to affect pricing decisions.

It is for those reasons that the allocation of risk to a default of the category of insolvency‑related event to the insolvency administrator of undertaking the probably costly steps involved in preserving an aircraft object and maintaining it and its value is so important. Then a very significant addition to that stipulation in the treaty obligation which we have enacted municipally is that that be done in accordance with the agreement.

Under 5(b) one sees that the availability under the applicable law of other forms of interim relief is plainly intended obviously to include a panoply of possibilities, depending upon the multitude of ways in which a creditor’s interest might be endangered by conduct or lack of conduct on the part of an insolvency administrator from injunctions to restrain or injunctions to compel, the whole possibilities appear as interim relief.

Paragraph 6 of Article XI contemplates of course, among other things, one of the ways in which an engine’s value can be preserved by its maintenance being performed to include testing, for example. Then in paragraph 7 further language is added with respect to possession, another verb with respect to possession. We have had “give” in 2, we have “take” in 5, and now in 7 we have “retain”:

The insolvency administrator . . . may retain possession of the aircraft object where, by the time specified –

And that obviously means before that time has expired:

it has cured all defaults other than . . . the opening of insolvency proceedings ‑

So you cannot rewrite history. There has been a default. But echoing perhaps many jurisdictions’ view to the late payment of money, there can be a cure by eventual payment of money. So it has cured all defaults and has agreed to perform all future obligations, and then of course the minatory words are added at the end of paragraph 7 that the waiting period is a one‑off benefit only, thereafter there would be no waiting period.

And 7, therefore, contemplates that within the framework of the privately‑agreed stipulations between the parties, the privately‑agreed stipulations, there may be a retention of possession, because your Honours will see that the explicit requirement for that treaty and enacted possibility in favour of an insolvency administrator under paragraph 7 of Article XI requires acceding to “the performance of [all] future obligations” under the agreement. And such future obligations are obligations under the agreement, all of which, of course, serves the Convention purpose of honouring the autonomy, within limits, of the parties who have agreed, relevantly, upon the lease arrangements.

One sees that there is a direction, particularly to what might be called officials, including the judiciary of States Parties, in Article XI, paragraph 9, so that the:

exercise of remedies permitted by the Convention or this Protocol –

language which obviously has to be read in accordance with the stipulation that they are to be treated as part of a composite instrument, “may be prevented . . . after the date”, which is inflexible, firm, clear, hard, as it has been called in some of the literature, “in paragraph 2”. Paragraph 10, as your Honours have seen from our written submissions, is an important provision, the terms of which bespeak what might be called its general application as context for an understanding of more specific provisions in the Article:

No obligations of the debtor under the agreement –

That is the agreement of the parties:

may be modified without the consent of the creditor.

A terse way of permitting freedom of contract in the future, but requiring, in accordance with the preambular statements of values and purposes to which I have drawn attention, permitting the correct pre‑eminence to be given to the terms of the bargain between the parties, it being the terms of the bargain between the parties which has the effect in the market with respect to pricing, including by assessment of risk, including by consideration of possibilities upon default by the debtor, to which there has been the express attention paid when enacting the statute giving force of law to these provisions.

STEWARD J: Mr Walker, we might have skipped over Article XI(8), will you be returning to that? And why it refers to Article IX(1) rather than XI(2)? If you are going to return to it later on, deal with it then.

MR WALKER: Yes, could I deal with it immediately? Paragraph 8 stipulates for what might be called official cooperation and steps necessary to enlist that. So, subparagraph (a) uses the expression – which has to be worked back into IX(1) – of:

they shall be made available by the registry authority and the administrative authorities –

and that means the procuring of deregistration and the procuring of export and physical transfer – and one can see that this an obligation upon States Parties to ensure that their officials do that which is necessary for the official steps contemplated as the additional matters in Article IX, paragraph 1 – that is XI(8)(a).

As to XI(8)(b), there is then the continuing and general obligation imposed on States Parties that:

the applicable authorities shall expeditiously co‑operate with and assist the creditor in the exercise of such remedies –

which means the remedies in Article IX(1):

in conformity with –

and you will see significantly not a reference to private agreement, because these are matters of public regulation:

in conformity with . . . aviation safety laws and regulations.

It is to be recalled of course that, in terms of the speedy resolution of matters – that is the manifest object of these provisions in favour of a creditor – that a contribution of Article XI, paragraph 8 – to be seen in subparagraph (a) – is that these acts of official assistance stipulated in paragraph (a) to be:

no later than five working days –

thereafter, of course, with paragraph (b), for the continuing and general obligation “expeditiously”. And so, we do not obtain, with respect to the particular remedies provided by Article IX(1) and the regulation of official conduct in relation to them by Article XI, paragraph 8 any particular point one way or the other with respect to “give possession” in Article XI, paragraph 2, but we do note that there is, in our submission, a scheme emerging of rapid and complete performance of the obligations in this case imposed by Convention and Protocol and, as your Honours will have seen, by reference to the temporal stipulation in paragraph 2 of Article XI, also to the remedies provided by the agreement.

STEWARD J: Just to trouble you a little bit more, Mr Walker, and I am sorry, it is probably – I am being confused probably. If, in the event of an insolvency, your principal remedy, as you say, it is either delivery of the aircraft part or the lessee deciding that it will cure all defaults and so on, why does Article XI(8) refer at all to the remedies under Article IX? Why do you need them in the event of an insolvency?

MR WALKER: Well, in the event of an insolvency, and the desire by the creditor that the – by the operative at the relevant time, the expiry of the waiting period, for the return of the leased object, then of course there will be in place regulatory provisions concerning, in particular, transit in the air, and certainly international transit of materials.

It is that to which the notion of export and physical transfer from the territory is referring in subparagraph IX(1)(b) of the Protocol, and if one wants return in accordance with the agreement between the parties of the aircraft object, there is the necessity for the universal recognition of those privately‑agreed rights and the remedies for default of the debtor’s obligations, it will be necessary that States Parties cooperate by permitting, that is, removing barriers of unlawfulness, from those necessary steps, to the physical movement of the goods in relation to which the default has been permitted.

And export and physical transfer could not be plainer as to the expectation that there will not be a mere mental act of changing, altering, or abandoning an animus possidendi by a debtor or insolvency administrator, rather it is expected that there will be the realistic and commercially‑significant physical return of aircraft object, in other words, the opposite of retaining possession had default been cured.

It is for those reasons, in answer to Justice Steward’s question about why would you need it, that is because this is not a Convention, which is intended to detract from aviation safety regulation which, as your Honours understand, are governed by other treaty obligations which are not removed in the interests of what might be called international capitalism.

KEANE J: Mr Walker, may I just take you back for a moment to Article XI(5).

MR WALKER: Yes.

KEANE J: You have said that it imposes a responsibility on the administrator for the cost of preservation. Do you also say that it serves to limit the lessee’s financial responsibility, or the administrator’s financial responsibility, so that during any period after the lessee gives the lessor the opportunity to take possession, then until the lessor is ready and able actually to take possession, the responsibility for the cost of preserving the aircraft passes from the lessee? Is that the purpose?

MR WALKER: Emphatically yes, and one can see that signal by the opening three words, “Unless and until”. What paragraph 5 of Article XI is saying, if you will forgive the colloquial way of putting it, to the insolvency administrator, who no doubt has eager and anxious creditors to consider, if you wish to stop the financial bleed which comes from needing to employ contractors or skilled artisans to look after in particular aircraft engines, for example, then the way to stop that is to give possession, which of course you cannot compel someone to take but you can present with an opportunity to take, but the paradigm example is the lessor who has done nothing to dispense a lessee from performing the obligation referred to in paragraph 2 of Article XI and finds that which the lessor might, in a collapsed market for aviation, find to be not particularly welcome apparatus in its already crowded hangars.

So long as they are given the opportunity to take possession, it says under paragraph 2, that is by being given possession, then there is a limit or a stop to the financial bleed on the part of the insolvency administrator or debtor. It is a critical matter which combines a most salutary incentive for the timely performance of the obligation to give possession. You are not required as insolvency administrator to wait until the end of the waiting period; you can do it at the very beginning, if you can so arrange it, and if you are lucky enough that the relevant hangar stipulated for return is on the same aerodrome, then no doubt you will do it that afternoon, if you possibly can, precisely in order to put a stop to the allocation of risk expressed in terms of obligations in relation to conduct but which everyone knows costs money.

We are talking expressly in the context of an insolvency administrator who will necessarily have to incur expenses but who, for obvious reasons which do not need elaboration will be under the spur of keeping them to what might be called a lean rather than a fat extent ‑ at least, without being cynical, that is what one would expect.

There is the incentive provided by paragraph 5 and there is the protection mutually between creditor and debtor. So long as you give possession to such an extent that it can be seen that I have been given an opportunity to take possession, then I can no longer call for you to pay for the mechanics to change the oil and turn over the fans and it is then a matter for the owner that the Convention does not have to worry about because the financing is all over by now. It is then a matter for the owner as to how they evaluate their choice as to whether to send it to landfill or simply to walk away amidst a massive global depression.

Those, in our submission, are straightforward ways to recognise the three plain, I say with some optimism, verbs that one finds used in these provisions: give possession, opportunity to take possession and may retain possession. One sees that the “shall give” is not a matter of choice. One sees that the notion of being given an opportunity to take possession will be what happens after a default by an insolvency related event and one then sees that there is a choice that may be exercised in a timely fashion to cure defaults in the stipulated fashion in order to be able to retain possession.

Obviously, if you decide to retain possession by curing defaults et cetera, you will of course continue to bear such expenses as are the self‑interest or, in this case, the terms of the leasing arrangements imposes upon the lessee acted for by the insolvency administrator to preserve the object, maintain it, et cetera, because, as your Honours have seen, that is stipulated by the Protocol to be required to be done in accordance with the agreement.

EDELMAN J: Mr Walker, in your example of the creditor that does not want to take possession, at least at a particular time when the hangars are full or for whatever other reason they do not want to take immediate possession, how does the insolvency administrator give possession other than – or give the opportunity to take possession other than simply to say, “Well, it is available to you if you wish to come and get it”.

MR WALKER: By giving possession, in this case by returning it to what happened to be the stipulated Florida location. In other words, unless and until a creditor dispenses performance or give possession, it lies ill in the mouth of a debtor to say, as it were, “I do not think you really want this at all and therefore I am not going to give possession of it to you at all”.

There is no hint in the structuring of this interlacing of private agreement and enacted Convention scheme, there is no hint of a debtor who by definition is in default under a lease with the cardinal quality of the lease being that it is temporary only and upon the end of the term something in the notion of reversion occurs – there is not a hint that it is for the debtor to take a punt on whether the creditor will complain about not having another aircraft engine added to the hundreds already waiting on the apron at Florida. No doubt real people behaving sensibly will make their own calibrated decisions in self‑interest and some may even do it out of a sense of pleasant decency.

So it may well be that somebody will say, “Please, I know I am entitled to have this engine back in Florida, but it is chaos here. We have been flooded with return of engines by airlines who can no longer fly. Could you please hold it?” Response, “Yes, that is all very well, but I am paying a fortune for people in overalls to look after these engines. I do not want to do it. We do not think we are going to be able to use these engines at all”. No doubt, then there will be commercial negotiations. No doubt, those who drew the Convention which is pre‑eminently commercial in its genesis and aim understood, as one express provision to which I have drawn already shows, that there could be such an agreement between parties.

But if all that is known is that there is a theoretical possibility that the creditor will be logistically embarrassed by another four engines landing on their premises in Florida, it is absolutely not for the debtor to say that, as either an interpretation of our private agreement or as it is affected by the Protocol and pursuant to the Protocol and Convention, I no longer have to give possession. I can simply say to you, already embarrassed, presumably including by financial consequences, by all means send a team over and collect it.

And it is the sending a team over ‑ and we know that this may be halfway around the world ‑ sending a team over to collect it is so obviously a blatant shift of the risk of a cost and a risk of dealing with third parties such as those who own the aircraft to which the engines are attached that, in our submission, unless you have found anything to indicate that as an intention, either in the agreement between the parties, where it could be found, or in the substantive agreement between parties in an emergency, where it is very likely to be found, no doubt.

You would not expect to find it in the Protocol, because it describes a state of affairs which, if one likes, is a state of emergency, one of those extremes, and this is a protocol that treats, as the most extreme event, relevantly, an insolvency‑related event of a kind normally calculated to produce default, of a kind normally calculated to bring to an end a right to possession, which, of its essence, with aircraft objects, which are tangibles, means, of course, the enjoyment of its physical custody in order to use them for your own purposes.

And it is for those reasons that the sequence of shall give opportunity to take and may retain reflects the ‑ subject to the bargain, to which I will come, it reflects the allocation of risk of the kind which, in our submission, is fairly obvious in a Convention designed to lower, not increase, the cost of asset‑based international financing for these very important transactions, and nationally important, bearing in mind, of course, the surrounding by Australia of sea.

Now, your Honours, it is plainly, in that context, that one looks then to how Article XI Alternative A treats the agreement, and it is for those reasons that we emphasise, as I have earlier drawn to attention, paragraph 10 of Article XI. That is a declaration, principally aimed, of course, at State parties. So they are not going to, by statute, insolvency or otherwise, modify the obligations of the debtor. And that of course drives one to obligations which rise upon default, to which I am about to come.

Now, there is a qualification to that, and it can be seen immediately in paragraph 11 of Article XI, where what might be called the need to wield sharp blades of a disclaimer kind, familiar in domestic insolvency, is preserved by ensuring that the obligation not to modify obligations of debtor will nonetheless permit an insolvency administrator, not a debtor, as your Honours will note, an:

insolvency administrator . . . to terminate the agreement.

And, as your Honours have already seen, termination of the lease agreement is already contemplated to involve return of the leased item, so it is the essence of the leased benefit, it is the capacity to have and enjoy possession, and upon the lease agreement ceasing to operate by termination, that benefit also goes.

Paragraph 12 is important obviously by reason of the priority which gives this Convention and Protocol some chance of affecting the prospect of there being clear rules and understood risks with appropriate allocation calculated to temper rather than infuriate the demands by lenders for the cost or price of finance.

KIEFEL CJ: Mr Walker, I take it that the system of registration is critical to the operation of the Convention and the Protocol.

MR WALKER: Yes, it is, in a familiar fashion, here internationally, as also in many systems nationally including ours, registration is the price one pays of transparency in order to obtain priority over everyone else, and it is common ground that the prerequisite registration was accomplished in this case. Registration is critical. It is at the heart of these treaty obligations that there be registration.

So can I then come back to where I started, Article XI, paragraph 13, one sees there that there is sensibly then the notion of:

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

The Convention as modified includes, of course, as I have drawn to attention, the provisions also in Chapter II of Article IX, paragraph 3, second and third sentences of the Protocol. That means that the remedy for a relevant default of there being immediately and by reason of that an obligation of the debtor to give possession of the insolvency administrator in its place to give possession is one which may be insisted upon only in a commercially reasonable manner.

Not surprisingly, bearing in mind the bare bones nature of a return obligation for peripatetic objects, there is nothing that could sensibly be argued as being manifestly unreasonable in requiring all such objects to be brought home, to one home, that is, the creditor’s home, not the debtor’s home, it being manifestly absurd to suppose that the more distant from Florida – or the more difficult in terms of aviation – one or more of the four engines may find themselves upon the insolvency event, the less important for the creditor would be the obligation to have that to be given possession of those goods.

In other words, the more widespread from the stipulated point – which being a point then has a relation of distance from anywhere else on earth – it is absurd to suppose that the further the distance, the less reasonable it would be to require the debtor – or that is the insolvency administrator as opposed to the creditor – to make the arrangements and, yes, to pay for performance of bring it home.

And that is why, as his Honour Justice Middleton well appreciated, with respect, the whole of our friend’s argument – I hope I will not be accused of travesty here – really boils down to this proposition, that all we have to do is say, as is where is, come and get it, and that will include wherever it happens to be, and with whatever difficulties that may have been caused by the very same events that brought about the insolvency related events.

In allocation of risk between debtor and creditor, an open‑ended spectre of great trouble and expense is one which is apt to increase the desire of the creditor to charge a price to cover that contingency or uncertainty. And the purpose of this Convention and its Protocol was to reduce those uncertainties in order to reduce that perception of risk, in order to reduce the cost of financing, in order to assist in our case with our statute the perceived national benefit of the acquisition of such important plant.

Is that an appropriate time, your Honour?

KIEFEL CJ: Yes, thank you, Mr Walker. The Court will now adjourn.

AT 11.16 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.30 AM:

KIEFEL CJ: Yes, Mr Walker.

MR WALKER: May it please your Honours. The final component of the Convention and Protocol which links to the lease agreements is of course in the Convention, 104 of the authorities, Article IV, paragraph 3 – I am sorry, of the Protocol, I apologise, permitting the parties, by their agreement in writing, to exclude the application of Article XI – not done. So Article XI has, as it were, the imprimatur of agreement between commercial parties, and they may also derogate or vary any of the provisions of the Protocol except of course the provisions to which we have drawn attention, being Article IX, paragraph 3.

In the Convention itself, one has in Article 11, paragraph 1, a further clearly important role for the private agreement of debtor and creditor to:

agree in writing as to the events that constitute a default or –

the language is:

otherwise give rise to the rights and remedies specified –

in the articles with which your Honours are familiar. Obviously enough when one, as one is required to, reads the Convention and Protocol together, including modification by the protocol of convention, that is one of the provisions which was availed of in this case and, it is common ground, effectively so.

To that end, may I take your Honours in the appellant’s book of further materials at tab 2, starting at page 67 – this is by way of example – you will see there the lease in Article I. It incorporates all the terms and conditions of what is called the General Terms Engine Lease Agreement, the GTA, to which we are coming shortly. In Article III under the heading “Delivery/Redelivery Locations” there is a reference to delivery, in this case to a facility in Texas, and upon termination, redelivery to a facility in Wales or Florida, as nominated by the lessor.

There can be little doubt, of course, that both delivery and redelivery for these aircraft engines by reference to location refers to making them actually physically present at those locations. At page 70 in Article XIII of the lease, one sees that under the heading “Return of Equipment”, that the:

Lessee to be responsible for Equipment return in accordance with Section 18 of the GTA and this lease.

Never let it be said that the draftsman withstood the temptation to emphasise by repetition, your Honours. Could I then take you to the GTA, which is behind tab 1 of those further materials, starting at page 5, but I will take you directly to the default provisions, which start in 18. In 18.3, the particular provisions in question I called up, page 35, and one finds at page 36, 18.3(f):

Upon expiration of the Lease Term or other termination of a Lease, Lessee will return the leased Equipment free of all Liens -

Now, that, as is notorious, may well, probably could always be expected to present the risk of financial expenditure. One might get free of a lien by persuading its gratuitous disposal, but mostly it will require paying what the lien secures. There is no question that there is an expectation that there may be money involved as an unremarkable commercial prerequisite to the capacity physically of lawfully to return goods.

One sees that the risk of the location of being a location that might be more or less expensive to the lessee in terms of effecting that delivery depends ultimately upon a choice of the lessor because it will either be that which the lessor has agreed to – that is, described in the applicable lease – or it has been nominated by the lessor, or the lessor is prepared, as the parties could mutually to agree such other location. In each case, the lessor has the whip hand, that being an obvious commercial advantage that is calculated to have some effect on pricing.

Under 19 one sees that the heading “Events of Default; Remedies” introduces not the most crisp, either typographical or linguistic layout of provisions, but nonetheless, without any obscurity, in the middle of page 39 one sees one of the relevant references being the nature of default, for the purposes of the GTA, constituting a default for the purposes of the Cape Town Convention, so that, exactly as the authors and, now, parties to the Convention, must have supposed would be the intended and beneficial outcome, the commercial world has reacted to the clarity of the terms of the Convention by, among other things, building in the commercial scheme of their private agreement so as to pick up the benefits bestowed by the Convention, benefits which, in our submission, emerge preponderantly by the first instance interpretation compared to the Full Court interpretation. On page 41, one sees ‑ ‑ ‑

EDELMAN J: Mr Walker, just before you move from that clause, would there have been anything to prevent the lease agreement from being terminated upon the event of default, and the provisions under the lease agreement requiring redelivery to have been invoked, independently of the meanings of “give possession” under the Protocol?

MR WALKER: In our submission, no, and one of the unexplored problems in our friends’ urging of their outcome that I do wish to expose is that there may be concealed some notion of a paramountcy provision operating whereby assuming that “give possession” means what they mean, any greater obligation imposed between the parties somehow must be shorn of enforceable effect, some procrustean effect whereby the limits that they suppose “give possession” means, in the Protocol, supplies a cutback of what could not be plainer as between the parties in their bargain.

In our submission, there is absolutely no reason to suppose that a convention designed to promote certainty, including as to assessment and calibration of risk, and a pricing response, would be advanced by such an approach, particularly when the expression “give possession”, on any view of it, on any view of it and in isolation, presents a range of possibilities by which it might be done. What the parties have agreed – I am sorry, your Honour.

GAGELER J: I am sorry, I did not mean to cut you off. When you finish your answer, I will ask you another question.

MR WALKER: I was about to say, particularly when the parties have agreed as to what we urge your Honours ought to be regarded as a commercially reasonable manner of exercising the remedy attached to the obligation to give possession, that is, demanding possession, demanding return. There is no doubt about it that effecting physical return to Florida is a means of giving possession, no doubt about that at all.

GAGELER J: Mr Walker, on one understanding of your argument, you are saying that the words “give possession” in Article XI(2) have a constant meaning of give delivery of the physical custody of the aircraft. On another understanding of your argument, you are saying that the words “give possession” mean give that form of possession as is provided for in the agreement between the creditor and the debtor. Do you distinguish between those two, and if you do, which version is the preferable?

MR WALKER: The second is the preferable. We do not distinguish because, we submit, we win on either. I am paid for results, not explanations, your Honours.

GAGELER J: Well, that is the difference between you and me, Mr Walker.

MR WALKER: Indeed it is, your Honour, indeed it is. No, your Honours, seriously, what I mean is that when one bears in mind the role of the stipulation from which there cannot be derogation of the commercially‑reasonable manner of exercising remedies, and the very important stipulation to which I have recently drawn attention in Article IV paragraph (3), where there is – with exceptions, that are important, including the one I have just referred to, there can be varying of the effect of the provisions of the Protocol.

Bearing in mind the range of ways in which one can sensibly, in our system at least, no doubt in many other legal systems appertaining to parties, State Parties to this Convention and Protocol, the range of ways in which the concept of possession and, more to the point, the unitary concept of giving possession might be understood, then of course the parties can, by their private agreement, be regarded as having varied, if you like, by selecting from the range, that which can be done, and indicating that which cannot be done.

In our submission, it is for those reasons that it is the second of the two different ways of viewing the matter that Justice Gageler has raised with me ought to be seen as the preferable one, because it accords with the central significance and continuing role of parties’ agreement.

KIEFEL CJ: Mr Walker, do I understand you to say that a reason that the second of the approaches which Justice Gageler has put to you is the preferable approach is because it is capable of a more universal application across jurisdictions?

MR WALKER: Yes.

KIEFEL CJ: Because you do.....some real difficulties, I think, when you get into areas like German law, where my very flimsy and superficial reading stopped me at the first sentence of a text which said that this is one of the most complicated areas of German law.

MR WALKER: Your Honour, all I can say is I am not only in some difficulty but insuperable difficulty with respect to German law, in all seriousness. But, in our submission, that is an important part of judicial method – all four judges below have already referred to it in a way which is, with great respect, unexceptionable, by which I mean we must address the understanding, interpretation and application of these municipally‑enacted internationally treaty‑agreed terms – not merely acknowledging as some kind of inconvenience, but embracing as the very occasion for their stipulation internationally the intended so‑called universality of a commercially sensible scheme of commercial dealing globally – that is internationally, transnationally – including by private parties. That is regardless of what I am going to call choice of law questions, which itself is, as we all know, not universalised.

It is for those reasons that the repeated clear references that we have collected in our written submissions to the agreement of the parties – and for that matter, the broad and purposive understanding of remedies in the Convention and Protocol language – so importantly the notion of the party autonomy involved in the agreement of the parties.

There can be subsequent agreements, as your Honours have seen in some of the references I have given, but the original agreement – which produces the relation which falls under the protection or regulation of the Protocol – continues to have effect. What I have drawn to attention is that naturally enough, the specific agreement of the parties in relation to those matters of the Protocol which are derogable, if necessary, clearly give to the parties - to the meaning of the words “give possession” as applying between these parties a meaning which is (a) by the Protocol non‑derogably stipulated to be commercially reasonable – that is the first thing - and (b) to be binding.

That of course returns to something where I would be repeating myself, but the significance of the continuing binding effect of the private arrangement seen, for example, in Article XI(10).

Now, your Honours, may I then – at page 39 – having drawn to attention the explicit conjuring up of the Cape Town Convention – then note that there is an elaborate and localised definition of events of default. Then on page 41 – this is all in this – as I say, not particularly elegantly drafted set of provisions – all under the heading in clause 19 of “Events of Default; Remedies”. Plainly, what one finds on page 41 – what is (19)(b)(iii)(C), that is a remedy.

One sees that between the parties, the way in which the parties express the obligation to give possession is that it gives the lessor a remedy to demand that the lessee – and then one sees the words that follow – totally consistent with the words “shall give possession”:

shall upon such demand, return any Equipment . . . otherwise in accordance with, all the provisions –

et cetera, et cetera. Then there is an option – and, in our submission, one of the insuperable difficulties for the argument against us and, with great respect, what we think is – if only implicitly – the reasoning in the court below – is that what is agreed between the parties to be “our option” suddenly becomes “all we can insist upon” – which is utterly to destroy its nature – according to the agreement of the parties.

That cannot follow from mandatory wording of the Protocol, because the only possible candidate to achieve that would be our obligation to exercise remedies in a commercially reasonable manner, the agreement between the parties that that is to be revealed by their agreement – and this is an example of their agreement – and the further protection of what might be called decent behaviour – that is behaviour within civilised limits – that there not be a manifest unreasonableness thereby displayed – a matter not essayed to be shown in this case for self‑evidently good reasons.

So all of those factors, in our submission, show the continuing intended central significance of the parties’ bargain, which is the very thing in which the pricing occurs, which is the very market behaviour which the Convention and Protocol is intended to affect by reducing, rather than increasing, the pricing of this critical finance.

Your Honours, in propositions 3, 4 and 5 we have drawn to attention in a way I do not need further to elaborate, they being found in our submissions as noted and in particular the detailed and, with great respect, careful findings at first instance of the critical facts in this case, very few of which have the slightest element of contest even as to their implications, the one I would want to draw to attention, without taking any time on it at all, concerns the engine records.

The more precise position that we have paraphrased summarily in our proposition 5 is to be found in the narrative set out by the trial judge in his paragraph 176 and picked up in our submissions, as we have there noted, in proposition 5. I do not mean this disrespectfully, but, as one might expect, given the exigencies of a recently‑appointed insolvency administrator, the matters in the nature of records did not come all neatly and easily at once and quickly, they came in with some chivvying between the parties, and dribs and drabs.

I do not mean that there is anything to be criticised there, and his Honour plainly took that into account in matters not before this Court concerning the statutory discretions which were exercised in favour of the administrators, about which we have nothing to say, let alone by way of criticism, but it is important to note that the clarity with which this Convention and Protocol, on very brisk time limits, was intended to restore the commercial enjoyment, including by way of physical possession, of everything necessary for the lessor to turn these assets to profitable account as soon as possible, can be interrupted by disputes about what is involved in the restoration of possession, that is, the very kind of thing which, in our submission, the trial judge’s findings serve, and the Full Court’s judges’ findings and holdings and approach will disserve.

In propositions 6, 7, 8 and 9, there are, as it were, negative positions taken by us in accordance, as we respectfully see it, with the approach of all four judges below. There is, with respect, no guidance to be gathered from such decisions, particularly, great care has to be taken not to avoid the fallacy of assuming the desired outcome of the argument and perceiving, as one so often can, consistency with that conclusion of decisions which were not squarely directed at it. Both sides can do that, it is not useful.

In proposition 10, in a way that I do not need to elaborate really beyond what we put in our written submissions, the climax of his Honour’s reading textually is noted. I do not want to develop that further than I have already in relation to the Protocol’s progression of “shall give opportunity to take and may retain”.

I stress, paragraphs 92 and 93 of the reasons are at the heart of the matter and we urge their correctness and their simplicity and their clarity, qualities which we call in aid in terms of an interpretation of the Convention and Protocol.

Paragraph 107 of his Honour’s reasons, I do not need to take your Honours to them. Your Honours will be familiar with it. It is, with respect, a formidable catalogue of considerations, including those we have noted in our proposition 11 in favour of the outcome for which we contend.

You will note in particular the emphasis that his Honour gives, as we respectfully echo, in his paragraph 110 concerning the agreement’s role in stipulating that which is a commercially reasonable matter of exercising the remedy of being given possession.

In proposition 12, we come to a matter upon which I have already provided responses to some of your Honours’ inquiries. I need, I think, only add that there is, contrary to the approach of the Court, nothing disquieting about a choice being made which effectively requires, unless and until there is the opportunity to take possession by possession being given, financial risk imposed upon that which the municipal insolvency regime creates as what the Protocol calls the insolvency administrator by way of what may very well be very considerable financial burdens.

By definition, this is a Convention and a Protocol concerning highly sophisticated machinery of a kind which, of that very nature, bespeaks the very high likelihood of expenditure being necessary to maintain value and usefulness.

In proposition 13 there is, in our submission, notwithstanding their Honours’ wholehearted and, with great respect, correct embrace of the necessity to avoid a regime centric understanding of the English words in the Convention and Protocol, there is unfortunately, in our submission, a reversion to particular or local idiosyncrasies, including at a high level of sophistication in terms of jurisprudence concerning the concept of possession. This is one of the cruces between us and our learned friends.

In our submission it is simply wrong to engage in that kind of disposition about possession. For a start the unitary concept, if even for one moment one looks at it in isolation, is give possession, and it is not, in our submission, appropriate to engage in an analysis, in Roman law terms or any other particular local form of legal terms, what may be, as we readily concede, a range of ways in what may be called possession may undergo that transformation which is involved in it being given.

STEWARD J: Mr Walker, could I ask you a question. In the case of ordinary default outside of insolvency, the Convention at Article 10 gives a lessor a remedy, namely amongst other things, conferring a discretionary power on the creditor to take possession. Now, on your case, when we come to insolvency under the Protocol, you say a different remedy is given, namely, not a power, but an obligation imposed upon the debtor to give possession to the creditor. Are you able to tell us if there is anything in the materials that might explain why in an insolvency the remedy is different, as you put it?

MR WALKER: May I just go back to the important provisions to be found in Chapter III of the Convention, to which I have drawn attention, namely, Article 12. The Convention says, “any remedies agreed upon by the parties”, and that includes here the so‑called remedy between the parties of demanding return, a demand with which there must be compliance, that is, physical return.

So it is not true that the Convention provides in the case of insolvency or otherwise less than what the parties have agreed because what the parties have agreed, subject only to what are in this case irrelevant inconsistencies or repugnancies, is what the Convention says is to be honoured, as you might expect in a convention designed to provide the kind of calming down of price rapacity that comes with an understanding of risks and an allocation of their financial consequences, in particular to the borrower – the lessor rather than the lessee, all this being asset‑based financing.

So, no, you will not find any explanation of why there is a disparity of such a significant kind, and that is because there never was understood to be such a disparity. The agreement has a consistent effect, subject only to, in this case, irrelevant inconsistencies or repugnancies as between Convention and Protocol, and that is the significance, of course, of looking to what appears, on its face, to be a superadded or supervisory qualification on the exercise of remedies, namely, that it be done in a commercially reasonable manner, no doubt a precaution to recognise the different tolerance that different legal systems may have for different forms of capitalism, red in tooth and claw.

So there is that agreed universal standard, but immediately there is the deemed satisfaction of it by reference to the parties’ agreement, and then again, a universal supervisory requirement that that not fall foul of what might be called a backstop provision, which has no application in this case.

Now that, in our submission, all adds up to a continuing and pervasive significance of the parties’ bargain concerning the nature of remedies in Article 12 of the Convention and the manner of their exercise, as it happens, Article IX(3) of the Protocol, following the displacement of 8(3) of the Convention.

I was about to draw to your Honours’ attention then, the way in which, and this is our proposition 13 in particular, at their Honours’ paragraph 106, the Full Court, at page 144 of the core book, holds that the proper construction of the critical provision, Article XI(2), provides that:

the insolvency administrator must do that which is necessary –

We interpolate, immediately an untethering from what the parties have agreed:

to pass to the creditor the form of possession –

immediately recognising that there may be more than one form, what I have called a range of possibilities:

that the creditor could have taken in the exercise of the self‑help right to take possession.

So, as I put earlier, that which is an option as agreed between the parties, contrary to the agreement between the parties, becomes the sole recourse and becomes the limit of obligation that may be enforced against the insolvency administrator standing in the shoes of the debtor. One notices immediately some difficulties of a kind indicating some instability in that outcome, and the reasoning to reach it, in the following sentences, which are scarcely sentences that promise a clarity, in particular, of apportionment and nature of risk of the kind that one would look for.

To do so may require the taking of affirmative steps . . . beyond simply disclaiming the property.

That is going to be apparently a case‑by‑case dispute, “dispute” being anathema to parties assessing the risks of parting with possession of a very valuable asset to somebody who may, in due course, default in payment obligations or other obligations. Then it gets, with respect, worse:

Merely submitting to the claim by the creditor may not be enough.

But merely submitting to the claim by the creditor, however one dresses up the respondent’s position, is a fair description of what they say suffices, that which provides the maximum that we are entitled to demand, that being a word the parties use concerning this matter of return, under the rubric of the Protocol obligation to give possession.

It is for those reasons, among the others that we have developed in our written submissions, that the propositions that we set out in 15 to 17 of our outline reinforce the conclusion which we urge on your Honours, that the Full Court has erred. Another way of putting it is that they have not, with respect, with the requisite cogency identified error by the first instance judge.

Could I draw to attention in 16 there is an inapt circularity involved surely in seeing as an objection to the operation by its proper interpretation of the Convention as modified by the Protocol for aircraft equipment that it may rework what are called, unhelpfully, we submit, generally accepted principles of insolvency law.

Insolvency law does not stem from St Aquinas. It is not in the air; it is statutory, they are legislated. They record from time to time critically divergent policy decisions. Priorities in the distribution of an insolvent estate is just the most obvious one of social and political significance, whether you are talking about taxes, for example, or wages.

It is for those reasons that we, with respect, are entitled to point to this notion of generally accepted principles of insolvency law and to wonder is that anything other than from time to time what might be seen as common themes in iterations over - maybe you need decades in order to make this conclusion - of the policy in Australia because surely it does not matter what happens in Argentina, concerning insolvency laws.

If insolvency laws, for example, included complete moratoriums or forgivenesses, as they may from time to time and from place to place, is that a generally accepted principle or simply, according to the speaker in question, a deplorable departure from the principle? Is pure equality in pro rata a principle or simply one of the policies that from time to time, subject to critical qualifications, may be seen in insolvency regimes by countries intent on attracting their share of international trade?

Those are matters which, in our submission, produce nothing of any value for the interpretation of the words in question. The Convention and the Protocol avowedly set out to universalise, which means smoothing out differences, and to impose something that may not be found in any one of the States Parties as their insolvency regime, where the States Parties may do what they like with their insolvency regimes in other regards so long as while bound by the Convention and Protocol, they accept it is the Convention and Protocol that will govern them.

In proposition 17, we conclude by reference that has produced a contretemps that I do not wish to engage in in address concerning material which is properly available for your Honours - I certainly do not wish to tread in foul ground under section 73, but what we point out is that anxious consideration of what will happen to administrators who do not have any money and cannot make the payments requisite for arrangements to
transport aircraft engines agreed by their debtor to be physically returned to Florida is, with respect, to attempt interpretation of an international instrument adopted and enacted as such, as such by our Parliament by reference to an extreme.

One does not interpret these Conventions by reference to the highly unusual, literally penniless insolvent administration and there is no reason for your Honours to believe that that is what is presented by the administration for which Mr Gleeson appears.

Proposition 18, in our submission, in a similar fashion, suffers from the proposition that there should have been either one way or the other an either advantage or disadvantage, comparatively speaking, between what I will call convention/protocol affected.....and insolvency generally. That is to ignore that the Convention and Protocol are constructed so that they will avail both creditor and debtor because there are benefits mutually, it will avail, regardless from time to time and place to place of domestic insolvency. That is why nothing is to be gained interpretatively from that.

In particular, it would be wrong to suppose that there is a purpose to be identified by reference to the improvement of a position over named or specified provisions of a named or specified law district, let alone, Australia.

Your Honours, if I may very briefly by way of anticipation note that in proposition 20, if we have understood the contention point correctly, for reasons that I have already developed concerning the centrality of physical presence with all the apparatus and impedimenta and ancillary matters such as records available physically as well for these aircraft objects, then in our submission, the notice of contention point, to the extent that it either goes beyond or differs from the Full Court’s reasoning should, for equal reason, perhaps even more obviously be regarded as erroneous.

Your Honours see that in our proposition 20 we refer again, without apology, to the explicit and implicit informing aim and purpose of the Convention and the Protocol. We have used the expressions of “certainty, security, co‑ordination of mobile assets” where they may be in disparate locations including their records, when in the financing game of musical chairs everything literally comes to a halt. The aeroplanes stop flying. The engines in question stop applying the stipulated minimum thrust which brings them within the Protocol. May it please the Court.

KIEFEL CJ: Yes, thank you, Mr Walker. Yes, Mr Gleeson.

MR GLEESON: Thank you, your Honours. Your Honours, we would frame the ultimate question as whether the appellant is correct that the obligation to give possession of aircraft objects to the creditor upon default under Protocol Article XI(2), Alternative A, required the respondents to redeliver the aircraft engines to the appellants in Florida as if the leases were at an end. Our contention is that that is not the content of the obligation under Article XI(2).

To illustrate the difference between the contentions factually, if your Honours could go to the primary judge’s orders in the appeal book commencing at page 85, Order 5. His Honour ordered the respondents to “give possession” by delivering them up in the manner set out in Schedule 3 to the address in Florida.

In Order 6, he allowed six weeks from the date of the order to achieve that redelivery obligation, which gives us some idea of the complexity of a redelivery obligation. In Schedule 3, commencing at page 92, that complexity is made evident by the range of steps required to be taken, including obtaining regulatory approvals, transport, creation of records, and your Honours will see on page 93, paragraph (ii) at the middle, prepare them for transportation in accordance with paragraph 4 of the order, which is from the bottom of 97 over to 98, an entire series of procedures to be complied with in accordance with manufacturer’s specifications before the transport could occur. So does the obligation give possession, properly construed, through either of the routes raised by your Honour Justice Gageler’s question, produce that consequence?

For our part, if your Honours have what is described as the respondent’s supplementary book of further materials which was filed on 1 November, from pages 5 and following you have the letters which were given on 16 June, that is three days prior to the expiry of the waiting period, where, as well as including the section 443B(3) notice under the Corporations Act, the IA made clear that the engines were available for repossession, if the creditor wished to take that opportunity, and indicated, in the last paragraph, it would work co‑operatively to enable the repossession to occur, but, as per the last sentence:

it is your clients’ responsibility to take possession –

if they wish to do so. In answer to your Honour Justice Keane’s earlier question, we would be submitting, under Article XI(5)(a), once this clear notice was given, the opportunity to take possession had been made available, and from that date, the risk of the costs of preservation and maintenance was transferred to the creditor, in this sense that, as Professor Goode makes clear in the commentary, once the IA gives the opportunity to take possession, whether it is taken or not, there is no further Convention obligation to maintain the equipment.

The position reverts to domestic law, and the IA is responsible, under the Corporations Act, for such steps as need to be taken, or not taken, from that date on. If that means that the conditions of the engines deteriorate, it will be at the creditor’s risk, in the sense that it may have a claim for a proof in domestic liquidation, but it will no longer have its powerful Convention remedy to require the IA, as IA, to carry out the steps. Your Honours, our next proposition concerns possession. Mr Walker has said, just a few moments ago ‑ ‑ ‑

EDELMAN J: Mr Gleeson, could I just ask you about that? Assuming that your interpretation is correct, and that the IA gives the creditor the opportunity to take possession, let us say, immediately after the event of default, there will obviously be a period of, potentially up to say, six weeks or seven weeks even before a creditor is able to take physical custody.

Article XI(5) of the Protocol requires not merely the bearing of costs but the actual preservation of the object and maintenance of it and its value. On your interpretation, would that not mean that the party that is in physical custody of the engine would not be required to preserve the engine or maintain it and its value, because it has given the creditor the opportunity – which may take six or seven weeks – to take possession?

MR GLEESON: Could I take up one aspect of your Honour’s question? The six or seven weeks is a practical indication of what it might take to effect a redelivery in accordance with the lease if the lease were at an end. The reason of six to seven weeks is not just transport, it is certification, regulatory approvals and so on.

In our submission there is a fundamental distinction in the Convention, in the Corporations Act domestic law and in the lease between two quite different types of remedies. One is a remedy of taking possession, which is a remedy granted under the Convention, as I will come to show, under Article 10, and aided by the obligation under Article XI(2) of the Protocol.

A fundamentally different remedy is requiring the debtor, upon default, to effect a redelivery as if the lease were at an end. So, in our practical example, as soon as the default occurred, if, for example, there were no assets in the Virgin administration, a prudent administrator would have issued the letter at page 5 of the supplementary book almost immediately and said, “Your engines are in Adelaide, Melbourne, Perth, you make take possession of them”.

That has to be a realistic opportunity of course. We are not dealing with unrealistic opportunities so it would have to be an opportunity which gave a clear indication where the engine is, when it can be picked up, you have to open the hangar, and so on, but from that date the creditor has the opportunity to take that possession free of what would normally be the stay under the Corporations Act domestic law provision.

So we are not looking at six weeks; we are looking at a creditor from that date, provided the opportunity is realistic, being able to say, “Do I want my engine or not? If I want my engine, I come and assert my possessory title to that engine in Adelaide, and the IA, because of its obligation, must yield possession from that date.

EDELMAN J: From that date it is the creditor’s obligation or desire to preserve the aircraft object but not the obligation of the IA?

MR GLEESON: That is correct, your Honour, as a Convention obligation – the Convention obligation has been satisfied. What will then happen though is – as Professor Goode explains – one reverts to domestic law as to what the IA then is permitted to do or must do in respect to the preservation of that object. So, under domestic law, if one had a provision like the disclaimer provision of the Corporations Act, that would allow the IA to fully free itself from such obligations. But you are back in the territory of domestic law.

Your Honours, the next proposition we wish to address is the concept of possession which Mr Walker has said perhaps you do not need to spend too much time on because you are dealing with a unitary concept of getting possession or taking possession or retaining possession. We would submit that possession is an important concept which has a stated meaning across the Convention and the Protocol, and that meaning will unpack and unlock much of the interpretative challenge in this case.

Can I just show your Honours again the provisions where possession appears? Firstly, in the definition of a lease agreement, on page 72, the grant of the “right to possession” is an essential element of a lease agreement. By contrast, it is not an essential element in the grant of the two other types of agreements, which constitute the “international interest” which your Honour the Chief Justice asked about under Article 2. So, it is not an essential element of either the conditional sale agreement or the charge that there would be a grant of possession, but it is central to a leasing agreement.

The next place it appears in the “Default remedies” in Article 8(1)(a) and Article 10(a) where it emerges in the expression that the remedy is to:

take possession or control of –

the object. So, it is identifying a relationship to the object which can be taken by the creditor as part of that default remedy. It also appears in Article 13(1)(b) as one of the court‑ordered interim remedies but in the Protocol Article XI, Alternative A, as your Honours know, it is something which under Article 2 must be given in certain circumstances – and the timing, under (2)(b) is:

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

So, it can be given. There can be an entitlement to it. Under 5 there is an opportunity to take it. Under 7 it may be retained.

Under Alternative B – which your Honours have received submissions on in writing but not this morning – under Alternative B(2)(b), it speaks of giving:

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

Under 5:

the court may permit the creditor to take –

and, finally, under Article XVI, the debtor has rights:

to the quiet possession and use of the object in accordance with the agreement as against –

a range of parties. So, we would submit that when the Full Court did pay some attention to the concept of possession in paragraphs 97 to 100 of the judgment, it was correct to do so. It was not taking any narrow view, it was recognising that possession has a Convention meaning, that it draws upon civil and common law systems, but it includes elements of a sufficient degree of physical control as well as a manifested intention to exercise that control personally and not on behalf of another in a manner which excludes unauthorised interference – in effect a title to the object which is good as against the whole world, someone who can assert a better title, save someone who can assert a better title.

Your Honours have in volumes 4 and 5 of the authorities the official commentary by Professor Goode, which we submit is of considerable assistance on many questions. The status of that authority, for your Honours’ interpretative exercise, is helpfully explained in a Malaysian decision which is in volume 3 of the authorities commencing at page 458 and that is the AirAsia X Berhad decision.

KIEFEL CJ: Which tab is that, Mr Gleeson?

MR GLEESON: Tab 27, your Honours. In tab 27 commencing at paragraph [263] of the extract we have given your Honours, there is a discussion of Professor Goode’s role as not only the head of the Drafting Committee but that the conference which adopted the Convention and the Protocol in resolution 5 requested this as an official commentary and they said at paragraph [264]:

the interpretation of the Convention and the Protocol –

should, where possible:

be consistent with the Official Commentary to ensure uniformity and to accord with the purpose of the Cape Town Convention.

We would submit that that is consistent with the Vienna Convention on the Law of Treaties provisions – Articles 31 and so on. So the approach taken by this Court can be seen at paragraph 271. So if it is permissible to look at Professor Goode, if your Honours could then go - I will give the tab reference, it is going to be tab 38, but it is volume 5 of the hard copy materials at page 1068.

KIEFEL CJ: Did you say 1068?

MR GLEESON: Yes, your Honour.

KIEFEL CJ: I might be mistaken, Mr Gleeson, my copy only goes up to 1037. It continues, I see, volume 5, yes. Thank you very much.

MR GLEESON: Yes. So, on 1068, on paragraph 4.27 about halfway down, the commentary says:

“Possession” is to be construed in a broad Convention sense, not in terms of national law, and is therefore wide enough to cover what would in some jurisdictions be regarded as mere detention.

If I could burden the Court to go to the previous volume, that is volume 4, at page 778, in section 2.30(3), the Convention fleshes out this concept, the commentary fleshes out this concept further, and refers in particular to a civil law notion of:

a combination of factual possession of an object and an intention to hold it as owner . . . But both have rights that can be asserted against third parties other than those with a better right.

That is the sense in which it is used across the commentary, unless the context otherwise requires. So we would submit it is of some assistance that, when the Court is looking at possession in its various forms in this Convention, this is the broad common law theme which is under examination, and we have given the Court in volume 1 of the authorities - I will give the tab reference, tab 17, page 177 - the civil law provision of the State of Louisiana, as something which can be held or exercised:

by himself or by another –

involving:

detention or enjoyment –

In terms of the German Civil Code, in the English translation at page 182, Articles 854 to 856 are relevant, and they discuss the way in which possession can be acquired. It can be held through an agent and it can be given up by giving up actual control of the thing.

So, to return to your Honour Justice Edelman’s question, one very simple way in which possession could be given up and taken after the IA says, “Here is your object. I recognise default. I offer you the opportunity”, the creditor may say, “I will now constitute you as my agent to continue in physical custody of the engine but under my possession”. In that circumstance, the costs and the benefits from that date on would rest with the creditor.

Now of course, that is not a fanciful opportunity because one of the things the creditor may very much wish to do is to continue to earn the revenues from the use of the engine and could do so, as I say, through an agent.

What we submit this shows is that, by attention to the concept of possession and to the way in which it can be taken and given under both common law and civil law systems, it is relatively easy to see that we are dealing with a different creature to the performance of redelivery obligations.

Your Honours, our next proposition we wish to focus a little more closely on Articles 8 and 10 of the Convention as to the content of this default remedy of taking possession. We make these submissions about it. Firstly, under Article 8 the creditor is given the choice to either exercise the self‑help remedy of taking possession – that is paragraph 1 – or can apply to a court order to authorise that act – paragraph 2.

In the case of the chargee, there must be provision in the agreement to allow such remedies and that is understandable because the chargee may not have this type of claim over the object in the nature of a charge and similarly under Article 10 there is a choice between a self‑help remedy and the court‑ordered remedy.

Your Honours, we would emphasise that what is in Articles 8 and 10 are Convention‑sourced remedies. When they come into Australian law by virtue of the statute of course they become Australian legal norms, but their status is as a Convention‑sourced remedy.

An important difference can be seen from Article 12, to which Mr Walker referred, which is that:

Any additional remedies permitted by the applicable law, including any remedies agreed upon by the parties, may be exercised –

if not inconsistent with the Convention. The applicable law is determined under Article 5 under choice of law principles, but to the extent those additional remedies are permitted they are domestic law remedies that have been administered by the court. So one of the fundamental choices of the Convention by creating the default remedies is to say as autonomous Convention remedies with a Convention meaning, you have remedies under 8 or 10. You may have other remedies which will be domestic law remedies, but only if they are permitted under Article 12.

Your Honours, returning to the taking of possession under 8 and 10, we would submit it is tolerably clear that that refers to the creditor taking an active step to assume the relationship to the object which constitutes a possessory title.

There is no element of the taking of possession which involves the creditor saying to the debtor, “You must perform a redelivery obligation of the object to me at my preferred location and manner”. It is simply not within the content of the default remedy.

If your Honours could go back to Professor Goode, it is section 2.114 on page 826 of volume 4, he explains how the taking of possession can occur. There is a range of ways in which the taking of possession can occur, and none of this involves seeking specific performance by the debtor of an obligation to return or redeliver the equipment.

Just while your Honours have that page, so I do not come back to it, I will be relying a little later on section 2.112, which is an important section on the commercial reasonableness obligation. One of the fundamental differences between the parties is that we submit the Full Court was correct to find that commercial reasonableness governs the mode of exercise of the remedy but does not inform the anterior content of the remedy. That is what Professor Goode says here. It is the manner of exercise of the remedy that must be reasonable, and the commentary gives two examples relevant to the taking of possession. The first, a couple of lines down:

on repossessing the object the creditor must take proper steps to safeguard it from loss or damage -

and at the end of the paragraph, a repossession which is violent would not be commercially reasonable. So where the remedy of taking possession.....default remedy, the content of the remedy is informed by the types of steps referred to in 2.114 and the manner of exercise is informed by 2.112.

KIEFEL CJ: Mr Gleeson, does Professor Goode refer specifically to Article 9 of the Protocol?

MR GLEESON: Yes, he does, your Honour.

KIEFEL CJ: If you were coming to that in your own time, I will leave it until then.

MR GLEESON: Thank you, your Honour. I will get to that as soon as I can.

GAGELER J: Mr Gleeson, can I just ask textually, when you are looking at this point of reasonableness and taking possession and just looking at Article 8 and Article 10, how does the reasonableness element get into the taking of possession under Article 10?

It does not get in under Article 10 at all. If one is only in the world of the Convention, it only covers 8 and the interim remedies under 13, and if one is also in the world of the Protocol, with Article IX. What happens is that Article 8.3 of the Convention is disapplied, but then any remedy given by the Convention – the capital C Convention “is to be exercised in a commercially reasonable manner”. So pausing there, the Convention remedies that it is applying the obligation to will be the Article 8 remedy, the Article 10, taking of possession, and the Article 13, seeking of interim relief.

Could I just give your Honour the Chief Justice at least the reference to the discussion of Article IX of the Protocol. In volume 4 at page 966 at section 3.30 and following there is a discussion of Article IX under two broad topics, firstly that it is adding two new remedies – “de‑registration of the aircraft and export . . . of the aircraft object” and otherwise “modifies some of the existing provisions on remedies”.

So in the pages that follow, 967 through to the top of 977, are discussing the additional remedies provided by Article IX and, taking up your Honour Justice Steward’s question, we submit it is critically important that the Protocol has provided these two additional remedies, in particular the remedy of export and transfer, and those remedies simply would be both redundant and deficient if Mr Walker’s construction was correct. So I will come back to those. That is that aspect of Article IX of the Protocol.

But we do emphasise, just on that aspect, that the approach of the commentary is that these are the only extra remedies being given by the Protocol. Nothing in Article XI of the Protocol is the grant of a fresh remedy, it is merely a regulation of the remedies which already exist under either the Convention, Protocol Article IX, or, perhaps, applicable law if permitted in the context of insolvency. The second aspect of Article IX is discussed on page 977 to 978. This is the modification to extend the commercial reasonableness constraint to all Convention remedies, and again, this is a ‑ ‑ ‑

KIEFEL CJ: Mr Gleeson, does Professor Goode discuss Article XI of the Protocol?

MR GLEESON: Yes, in a number of places, but one good place is, commencing at 3.117, but in particular, Alterative A is discussed from 3.126 through for about the next 10 paragraphs of the commentary, including in 3.126, that what is required by paragraphs 2 and 7 is to give possession, and it is said, about halfway down:

If the insolvency administrator or the debtor fails to give up possession after the creditor has become entitled to it –

then one can seek certain remedies. There is nothing in this commentary to suggest that the giving of possession picks up either of the limbs of your Honour Justice Gageler’s question, that is, either always requires redelivery or requires giving up possession in accordance with the agreement, and at 3.129, near the end of page 1025, when the commentary is explaining how the timing of the obligation works, the commentary says, near the end:

The insolvency administrator or the debtor can only avoid loss of the right to possession if it has cured all defaults –

and so on. So it would appear to be at least broadly consistent with the theme we are seeking to advance, that it is the title to the object which is being dealt with via the obligation, not some separate obligation of redelivery.

KIEFEL CJ: Yes, thank you, Mr Gleeson. The Court will adjourn until 2.15.

AT 12.49 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ: Mr Gleeson, before you continue, could I take you back to Professor Goode at tab 38, page 778, in his discussion of the meaning of “possession”. He says that it is:

to be construed as covering both possession in the common law sense and . . . in the civil law sense.

Both the civilian and common law systems would seem to have in common that they have as their starting point actual or physical possession. It is just that, as I understand what he is saying, the civilian law system adds on - it has more complexities because it operates around intention in the sense of control. I should say I have had a look at some texts as well while I was trying to work this out.

That seems to be what he is saying, but what is common to all of them seems to be this notion of physical or actual possession. So I do not really understand the fact that one needs to construe it to cover both that common concept and the widest civilian law concept of intention or control assists your argument. I am just struggling a little to understand how this works in your argument.

MR GLEESON: Thank you, your Honour. What I was seeking to put was that there will be both the factual element and potentially the mental element and in the factual element, which is looking at perhaps custody, that is something that can be exercised directly or through another person, through an agent.

Equally, it would seem under both the common law and the civil law, possession is something which is capable of being given up by the current possessor declaring that it ceases to hold that title which is good as against the whole world.

So in each case, while to acquire possession one would need to be looking at obtaining that factual element directly or through another, at the stage of giving up possession it can be done in a relatively straightforward fashion by saying, “I no longer assert that title”, and one could either abandon it to the world or one could yield it to the person who is asserting a better title.

So, in that sense, it is distinct from requiring a physical redelivery of the object to some different location which is requested by the creditor. That is the distinction I was seeking to draw – that one does not get a redelivery obligation out of this concept of possession, either common law or civil law – they are really discrete things.

KIEFEL CJ: Then one is thrown to the words “given” and “taken” – they become controlling ‑ ‑ ‑

MR GLEESON: They become ‑ ‑ ‑

KIEFEL CJ: So, essentially what you are saying is the word “possession” itself does not answer the question at all. You would have to go with controlling terms “give” or “take” – the verbs.

MR GLEESON: Your Honour, not quite, with respect. It does not answer the whole question, but it is the creature which has been given, taken or retained – to use the other expression. It is the identification of that creature which we submit is a title to the object which meets the description by Professor Goode – which is the core that has been given, taken or retained.

STEWARD J: Mr Gleeson, before lunch, you said that the only additional remedies that were given by the Protocol were those in Articles IX(1). I wonder if that was quite correct, in this sense, that in Article 10 of the Convention, the remedy of the creditor is to take possession at the option of the creditor. But, for the purpose of Article XI, which creates a choice in the hands of the debtor, there is nothing for the creditor to take, but rather the ball is in the debtor’s choice – in the debtor’s camp – whereby they either give possession – because it cannot be taken from them in the 60-day period – or they fulfil the requirements of Article XI(7) and, in that respect, that the remedy might be – in that respect – different when you get to insolvency in Article XI of the Protocol.

MR GLEESON: Thank you, your Honour. I would put it slightly differently. I agree that the choice is in the hands of the IA, or the debtor, in that – let us say – 60-day period – and, if the IA or debtor is willing and able to cure default, then there is the right to retain possession – under (7) – and so the possessory title will continue thereafter properly in the hands of the IA. I agree then that, if at the end of the 60 days, you have not been able to do that, you come under a mandatory obligation to do the thing called “getting possession”. So, I accept it is a mandatory obligation, which falls due for performance on that day – no later than that day.

But the question then is, what is the point, what is the purpose of that mandatory obligation of giving possession? As we would put it, the purpose is that the remedy remains – the remedy of taking of possession under Article 10 of the Convention – it is in the discretion of the creditor whether the creditor wishes to take possession. But what the IA has to do is to give the possession in the sense of present it, present it to be there for the taking, if the creditor wishes to engage in the taking. The purpose of it is to enhance – strengthen – the ability of the creditor to exercise the Article 10 remedy.

STEWARD J: So, on your case, does the choice that is reposed in the debtor or IA explain why Article XI(2) does not use the word “take”, but a different word, namely “give”?

MR GLEESON: It does in the sense that the “give” is the obligation imposed upon you which otherwise you would not have. Otherwise, you would simply be in a world of a creditor taking, but you now are under this mandatory obligation, and the central point of it is that, under many domestic law systems, but for this obligation you would of course, simply, under domestic law, retain your choice whether to – what you wish to do with the object.

It is that essential cutting down of the choice which you would otherwise have under domestic law, which is the benefit being given to the creditor, and that benefit to the creditor has to be supplemented by XI(9), which is the critical direction to both domestic courts and tribunals, that they may not prevent or delay the exercise of the remedy after that date. So from that date, if the creditor wishes to take possession, it can no longer be prevented under domestic law.

Your Honours, if it was convenient, I was going to complete just a couple of aspects of the Convention, which is the balance of paragraphs 4 to 6 of our propositions, and then come to the ultimate issue. Your Honour the Chief Justice asked about the centrality of registration to this system. It is central. Could I refer to Article 29 of the Convention, which is what creates the priority rule, which is a strict rule based on time of registration with no attention to notice or value.

Subrule (4) indicates that there can be multiple persons who have an interest in the same object, and the priority will be dealt with in terms of the time of registration. That is important because when one is understanding the scope of these remedies, there could be multiple remedies to multiple persons in respect to multiple defaults.

If, for instance, there is a charge in favour of one party, but there is also a lease, if the charge is registered ahead of the lease, then, upon default under the charge, the chargee can exercise its remedies against the lessee, so that the taking of possession under Articles 8 or 10 may extend to remedies against not just the immediate debtor, but against other persons who have later‑ranking interests.

That, we submit, helps, because when one is understanding about the giving or the taking or the retaining of possession, it works quite smoothly if we are thinking of it as title, passing or not passing. It does not sit at all comfortably with redelivery obligations being imposed.

Your Honours, the other aspect of the priorities is in Article 39 there is an ability for a State to declare that certain liens will take priority over registered interests. Australia has done that at page 122 in respect to air services liens. So the result would be that if the lessee was in default, under the Convention the lessor could take possession under Article 10 but would take that possession subject to the superior lien and would need to pay it off or secure it before the lessor could then move the object to some other place, again showing that the possessory title and the transfer or not of that is discrete from redelivery obligations.

Your Honours, in relation to our proposition 5, could I go back to Article 12 of the Convention and emphasise that the additional remedies permitted are those permitted by the applicable law, including those agreed upon, save if they are inconsistent with the mandatory provisions. What Article 12 is doing is allowing domestic law remedies beyond the Convention remedies to exist, subject to the limits of the applicable law.

Could I apply that to the present case, assuming we have not yet reached the Protocol. If the contract contains an obligation of redelivery, in our submission, that would constitute an additional remedy. It would not be something caught within Articles 8 and 10 themselves, and whether it could be enforced would depend upon the applicable law, in this case the Corporations Act.

Therefore, if there are redelivery provisions in the lease, as there are here, the ability to enforce them can only be through Article 12 but would be subject to in this case Australian law, and the relevant provision is on page 141 of volume 1, which is section 440B(3), item 3 of the table, in particular 3(b).

Interestingly, 3(b) itself draws the distinction which we submit the Convention draws as a matter of international law in which come to show your Honours the particular lease draws between taking possession and otherwise recovering the object. But the effect of those words “you cannot otherwise recover” means that in the world of the Convention, once the company goes into administration the redelivery obligation cannot be enforced.

Your Honours, in terms of Article 13 on page 78 that, we submit, is a Convention‑sourced remedy. The contracting state is required to ensure that relief of a defined sort, including possession, can be given on a speedy basis, and you will see from sub‑Article 4 that that is distinct from any
interim relief which may be available under the domestic law.

As to our proposition 6, could I come to Article 30 of the Convention which is absolutely critical on page 86. In general, the Convention leaves insolvency proceedings to domestic law. It does not regulate them per se. What it does is make some stipulations for the intersection between the Convention and domestic insolvency proceedings.

The first stipulation, sub-Article 1, is that the international interests will be effective provided it is registered prior to the insolvency proceedings commencing, but critically for our case sub-Article 3(b), the rules of procedure for enforcement of rights to property under the control or supervision of the IA are not affected by Article 30.

These matters are explained by Professor Goode at 4.220 through to 4.222. The effect is that, if we were solely.....the Convention, because of section 440B, the remedies of taking possession under Articles 8 and 10 cannot be exercised without the consent of the IA or the leave of the court and the remedy of redelivery in the lease, which would otherwise arise under Article 12, is not available for two reasons: firstly, under Article 12 it is not permitted by the applicable law and, secondly, it is not permitted because of Article 30(3)(b).

The Full Court dealt with these matters correctly at paragraphs 86 to 87. So that the fundamental barrier arising at the end of the Convention before the Protocol is really after 30. Then the question is, what is being done by the Protocol to improve the position of the creditor in respect of aircraft objects?

Your Honours, if I could come to the Protocol, can I emphasise one drafting matter which arises from the definition on page 101. The Convention itself – that is, in full, the Convention on International Interests in Mobile Equipment – is referred to in the Protocol as the “capital C Convention”. The Protocol is referred to as the “capital P Protocol”.

What happens under Article II(1) is that the Convention applies to the category of aircraft objects as provided by the Protocol, and they have to be read together because of Article 6 of the Convention. But in terms of nomenclature, as we see from Article II(2), if one is speaking of the two of them together it is called “the Convention on International Interests in Mobile Equipment as applied to aircraft objects”. If one is speaking of them separately, one uses either the capital C Convention or the capital P Protocol. That form of drafting I will seek to show is followed consistently throughout the Protocol and helps some of the interpretive exercise.

Your Honours, coming back to your Honour Justice Steward’s question, it is our overall submission that firstly the remedies given by the Convention remain Convention remedies, even when applied in the world of the Convention plus Protocol. So if a creditor wishes to take possession in a Protocol world, they are exercising their Article 8 or Article 10 Convention remedy.

But secondly, consistently with the language of Article IX(1), in addition to those Convention remedies which continue to exist as such, the creditor is given, subject to the agreement, these two additional remedies there specified, and they are the only additional remedies of the Protocol. The result is that in the world of the Convention plus Protocol, remedies might be of one of three kinds: a Convention‑sourced remedy, such as taking possession; a Protocol‑sourced remedy, which is Article IX(1); or a domestic law remedy, which the Convention and Protocol permit to be exercised. They are three distinct sources of remedies and the Full Court correctly dealt with that at paragraphs 90 to 91.

Your Honours, coming to our proposition 8, could I expand the submission I briefly foreshadowed that the additional Article IX(1) remedy is, or would be, redundant and also deficient if the appellants’ construction of the ultimate point were correct. The export of an aircraft object is straightforwardly an exercise that may be complex. It may involve more than one authority of the State to achieve it. Professor Goode deals with this. I will just reference it - section 3.33.

If the object is in one contracting State and the creditor wishes it to be moved to another contracting State upon default, these are the provisions which enable the creditor to achieve that goal and it makes sense that they are applied to aircraft objects, the subject of this Protocol - they obviously do not make sense for space objects and they are not needed in that area.

What the additional remedies do is give the creditor the ability to call upon the authorities of the State to do everything needed to effect the deregistration or the export or physical transfer. Importantly, your Honours will see from sub-Articles 4 through to 6 that, where the creditor is pursuing this remedy – and I will focus on the physical transfer and export remedy – there are protective provisions in respect to the interests of other people who have interests in the object, which, in terms of the other people who have interests in the object, they are defined as interested persons, which is back on page 71. It is not just the debtor or the guarantor, but it is other persons having rights in or over the object.

So a critical issue given the priority system is, if the creditor is trying to procure the export of the object out of Australia, there must be recognition and protection for people who may have a better claim. So the extra remedies conferred on the creditor have these protections attached to them to make sure the priority system is not subverted.

Comparing that to Article XI(2), if the debtor was already required under the “give possession” obligation to effect the physical transfer and export of the object to the creditor, either always or where the agreement so provided, the first thing you could say about these additional remedies is they are redundant because the creditor simply says to the debtor, you are bound to get my objects to Florida. I do not care how much difficulty that gives you. You must simply, as Mr Walker says, bring them home.

So, in that sense, the additional remedies would be redundant, but secondly, they would be seriously deficient from the debtor’s viewpoint because the additional remedies are not conferred on the debtor – they are only conferred on the creditor. Only the creditor can call upon the contracting States’ administrative authorities to help bring the object home. So, they would be seriously deficient from the debtor’s perspective.

Finally, in terms of the protection of persons with other interest in the property, there is nothing in Article XI(2) where it says “give possession” which in any way grapples with the problem, but what about if someone else has a higher claim to the object.

So, we would submit that Article IX is a strong pointer that “give possession” should comfortably be understood as make available the title of possession which you have to the object – so that it is there for the taking if the creditor wishes to exercise the Convention remedy. Your Honours, could I then deal with ‑ ‑ ‑

STEWARD J: Mr Gleeson, could I ask a question? If the debtor was insolvent because it had defaulted in relation to its lease obligations to the creditor, is there anything that would disable the power of Article 10 of the Convention during the 60-day period? Could the lessor take possession during the 60 days?

MR GLEESON: The answer is no, your Honour. That power during the 60 days is disabled by Article 33(b) that the rules of domestic procedure trump the power. Indeed, in Professor Goode’s commentary, what he says is, the rub of Article XI is that it is addressing the barrier raised by 33(b), which would otherwise continue for so long as domestic law imposes the stay, and it is improving the creditor’s position by imposing the obligation “give possession”, and then, if your Honours go back to Article XI(9) – what XI(9) does is at the end of the 60 days, the taking of possession, which up to that point could be prevented and delayed by domestic law, now must be allowed to continue.

So, it is on day 60 – if it has not happened any earlier, the IA must hand out to be taken the possession – the creditor may now take it, which could not previously be done – and that is the fundamental improvement in the creditor’s position.

Your Honours, I am at paragraph 9 of the outline but can I supplement the submission on commercial reasonableness in this way. Article IX(3) of the Protocol is a fundamentally pro-debtor provision. As part of the quid pro quo of the Protocol, where creditors get enhanced rights they come with enhanced duties in their mode of exercise and one might infer the reason that the obligation of commercial reasonableness has been imposed upon all Convention remedies is that it is part of that quid pro quo that, because we are dealing with highly mobile objects which can readily be moved between jurisdictions, namely aircraft objects, there needs to be an additional constraint on the creditor on its mode of exercise of the remedy.

That additional constraint – I have given you two examples. There cannot be a violent repossession, there must be proper steps to safeguard the object from loss and there could be other examples given. The reason in Article IV(3) of the Protocol that certain parts of Article IX cannot be excluded, namely IX(2), (3) and (4), is that each of those provisions are protecting the interests of either the debtor or other parties with interests in the object.

What that means, on our submission, is that when one comes to Article XI(2), if the IA has not cured the default, et cetera, it loses the ability to retain the possession under XI(7), it must give the possession under XI(2), which is provide the creditor with the opportunity to take that possession under Article X of the Convention, and when the creditor takes it under Article X, it must do so in a commercially reasonable manner.

I will not go to it, your Honours, but we have provided in volume 4 at pages 741, 742 and 753 the article by Saidova, which is the most comprehensive discussion we found on commercial reasonableness, and it emphasises it is there to protect the debtor or the other interested persons.

Your Honours, moving to our proposition 11, which is simply about how Article XI fits together as a whole, our proposition is that the heading, which is “Remedies on insolvency”, tells us these groups of provisions will regulate how remedies are to be exercised in the situation of insolvency, remedies which could be sourced from one of the three areas I mentioned, the Convention, the Protocol, or available domestic law.

It is a provision which has a balance in it, we submit. It certainly improves the position of the creditor dramatically, because the creditor has the certainty that no later than the 60 days it can free itself from domestic insolvency law. That is the fundamental improvement for the creditor. But it also respects the position of the debtor and the IA and, indeed, the position of other creditors of the estate, bearing in mind those other creditors may also be persons with Convention remedies, or they may be other creditors still.

As your Honour Justice Steward has put to me, Article XI(7) is pro‑choice to the IA or the debtor. You may make that basic choice, to cure defaults, et cetera, and if you can, and promise the future, you may retain possession. What follows from Article 7 is the IA or the debtor is being given a meaningful opportunity to use the whole of the period specified in Article II to try and cure default.

So, of course, one of the fundamental purposes of the stay, under domestic law, which the Convention is limiting to, at most, the waiting period, is that it might allow the debtor to reorganise its affairs so as to cure default, continue an operation which would be good for the debtor and good for the creditors, and of course, the present case is a factual example of that, where, during the waiting period, the evidence and the findings show Virgin was attempting to restructure itself so that as many creditors as possible at the end of the period would be able to comfortably continue leasing their engines or aircraft to the next – to the successor of Virgin. Some achieved that result, some missed out.

So the point about 7, we would submit, is it is a meaningful opportunity for the full period of up to 60 days to try to cure the defaults. The thing that immediately follows from that, practically, is that if the “give possession” obligation under 2 requires you to redeliver engines to distant places of the world in accordance with the lease provisions on the return, you will have virtually no realistic opportunity under 7 to try and cure the default, because you will need, from day one, to start preparing the engines and transporting them to locations all over the world.

It seems inconsistent with 7 that that is what is your obligation, whereas if you have the full 60 days to seek to cure default and if you cannot you must hand over the possessory title on day 60, it all works quite comfortably. So that is one part of the balance.

The next part of the balance, which is Article XI(5) which has been discussed, is unless and until you give the opportunity to take possession under paragraph 2, you have the obligations of preservation and maintenance in accordance with the agreement. I mention those words “in accordance with the agreement”. So as part of the quid pro quo, for every day the IA or the debtor seeks to use the opportunity under 7 to cure default, it comes at the cost of preservation and maintenance, but as soon as you have given the opportunity to the creditor to take possession, that Convention obligation comes to an end, as I put earlier.

Your Honours will have observed there is an oddity that Article XI(2) speaks simply of “give possession” whereas Article XI(5) speaks of “given the opportunity to take possession under paragraph 2”, and nothing in paragraph 2 in terms says, “take possession”. The way we submit that works together is that one reads paragraph 2 together with the Convention remedies in Articles 8 and 10. They are the source of your power to take possession. That power has been constrained by reason of Article 30 of the Convention. There is now the obligation imposed on the debtor or the IA to give possession and what that means is the giving of possession is holding out to the creditor the opportunity to take it and, in that sense, the language sits together. It is speaking of the same thing.

EDELMAN J: Mr Gleeson, does that mean that Article XI(5) is effectively read as saying, given the opportunity to take possession under paragraph 2, which paragraph is read with Article 10 or Article 8 of the Convention?

MR GLEESON: Yes, and that is why I have sought to emphasise your remedy remains as creditor the Convention remedy of taking possession under 8 or 10. There is a barrier to that remedy under Article 30 Convention. The barrier is now overcome by this combined means of imposing the mandatory obligation of giving possession, together with Article IX which prevents the court or the tribunal impeding that result.

STEWARD J: Mr Gleeson, may I ask just one more question, I am so sorry. If, on your way of reading the Protocol, possession is given, say, on day 10, thereafter the physical act of retaining or getting possession is for the creditor, but prior to the expiration of the period as referred to in Article XI(9), can the creditor avail itself of the additional remedies in Article IX(1)? Can it procure deregistration and export?

MR GLEESON: Thank you, your Honour. Your Honour, the answer to that lies in how Article XI(8) fits together with Article IX(1), and there is the timing – it works once one reads them altogether because XI(8) is telling us that the duty upon the local authorities to administer those remedies arises not later than five working days after the date the creditor notifies the authorities that he is entitled remedies in accordance with the Convention.

So the sequence is work out when the creditor became entitled to the XI(9) remedies and then allow up to five days for those further steps to occur. When does the creditor become entitled to the XI(9) remedies? Going back to XI(9), it says you are entitled to them to the extent the creditor has agreed ‑ and in the present case there is an agreement in the lease that all Convention remedies are available so that is easy:

and in the circumstances specified in that Chapter –

So that is Chapter 3 of the Convention. So that means in the circumstances of default under Article XI, then you are entitled to pursue those remedies. But the critical thing is you will not be able to pursue them in accordance with the Convention, save as it were as remedies which are supplementary upon your taking of possession.

So, what you will need to do, under Article XI(2), is you either wait to the end of the waiting period or the earlier date on which you are entitled to possession. Once that has happened, the IA or the debtor is required to give you possession. So that gets you to stage one – you now have, if you wish it, the possessory title. If you do not have the possessory title, if you now want to get the object out of Australia, you then move to your IX(1) remedies.

Your Honours, I was going to refer to Article XI(2)(b). While usually it would be a waiting period, it can be an earlier period. Just so your Honours have the context, the waiting period for most contracting States is 60 days, but for some it is 30 days – the supplementary authorities show that – for no state is longer than 60 days. But it can be an earlier period if it is the date upon which you would be:

entitled to possession . . . if this Article did not apply.

So, for example, if, under domestic law, there is no stay on enforcement, then there is no barrier under Article 30 of the Convention, and the creditor would be entitled to possession on day one, on default. On day one, the IA or the debtor would be required to give the possession. So, what would there happen is the creditor would have its taking possession remedy under the Convention, but what it now has is an affirmative obligation on the IA or the debtor to present that possession for the taking. That also improves the position of the creditor.

Your Honours, moving to Article XI(4), we have drawn attention to the fact that if it is an obligation imposed on the IA solely in the official capacity, it is likely in many cases of insolvency that there may not be the bulk of assets in the estate available to the IA to meet multiple claims for redelivery of the expensive type instance in this case.

That is a construction point which points in favour of “give possession” being something which can be done in a straightforward fashion as opposed to the much more complex and expensive process of given delivery.

The answer to that from the appellants in writing is that it is not a problem because the obligation is imposed upon you in your official capacity and it will be limited to such assets in the estate as you can call upon. That, with respect, is not an answer because that creates a grave uncertainty. What is to happen if there are not enough assets in the estate? What is to happen if there are too many claims by creditors in Mr Walker’s clients’ position in respect to the available assets. How do you meet those competing claims? Those problems disappear once the giving of possession is read in the straightforward way we suggest.

Your Honours, could I move to XI(5)(b). During the relevant period, the creditor is entitled to apply for other forms of interim relief available under the applicable law. This is a domestic law remedy; it is not a Convention remedy. It is the Convention permitting the recourse to the domestic courts if they have remedies available in the circumstances.

Article XI(6) is important because it makes clear that the debtor or the IA can use the object under arrangements designed to preserve the object and maintain its value and that is important because, as Professor Goode indicates, one of the things you might do is keep flying the aircraft to earn revenue and to help you through to curing defaults. All that is inconsistent with having to start on day one to redeliver the aircraft to Florida.

I have mentioned XI(9). Your Honours, in XI(10) there is a dispute between the parties. The appellants say that this is a basic recognition, that nothing in the agreement can change and that the agreement is being given this paramount effect by the Protocol. We would read XI(10) as doing something different.

What XI(10) is saying is that the obligations under the agreement cannot be modified without the consent of the creditor, so the obligation to pay lease rentals, perhaps the obligation to return the equipment, none of that can be modified, but that is not to say that it is creating a positive duty on the IA or the debtor, a Convention duty to perform those remedies. It is simply saying that if you do not perform those contractual remedies you will be in a position of breach and breach may lead to a proof in the domestic insolvency administration. Your Honours, that view of Article XI(10) has been taken by one of the authorities and it is the case at tab 27, AirAsia X Berhad, that I referred to in a different context. It is at volume 3, at paragraph 290.

So on our construction, there is no modification appearing of any obligation under the agreement to provide redelivery. It remains an obligation. If it has been unperformed, there will be a claim for damages, which will prove in the insolvency.

Your Honours, in terms of Article XI(11), that preserves the ability of the IA, if there is authority, to terminate the agreement. It is not suggested in the present case that the IA did terminate the agreement, and contrary to what might be suggested this morning, there is no finding or evidence that Mr Walker’s clients have terminated the agreement. Indeed, I think the Court knows that there are further aspects of the proceedings which Willis wishes to litigate before Justice Middleton, where they are seeking specific performance of the lease agreement upon a different basis to that before your Honours. So this agreement has not been terminated.

Article XI(12) deals with the priority situation, and it carves out interests under Article 39(1). They are the statutory liens for air services and the like, and so that confirms the point I made earlier, that in the working out of XI(2), the IA must make available the possession for the creditor to take it, if it wishes. If the creditor does take the possession, it holds the possessory title, but it holds it subject to the air services lien, and it will not be able to get the object out of Australia without satisfying that lien, again showing possession is about title, not about redelivery.

Your Honours, on Article XI(13), we draw attention to the use of the capitalised term “Convention”:

The Convention as modified by Article IX of this Protocol shall apply –

et cetera. Because of the drafting technique I have shown, what that means is, provisions which are in the Convention, subject to any modification of them in Article IX of the Protocol, shall then:

apply to the exercise of any remedies under this Article.

So how does that work? If we take, for instance, commercial reasonableness, that was a provision in the Convention, it was modified by Article IX of the Protocol, and it applies to the exercise of remedies. Therefore, we accept that, if the creditor seeks to take possession under Articles 8 or 10 of the Convention, and it does so in an insolvency case, it must do so commercially reasonably. However, the final words of (13) are:

remedies under this Article.

On one reading, that suggests that maybe the Article is conferring remedies. We think that the better reading of it is the exercise of remedies under this article means the exercise of remedies, in the situation of insolvency, dealt with by this article.

Your Honours, can I put a submission on Alternative B, which then follows. Clearly there are critical differences between A and B, and B is a much weaker provision. Alternative B starts by saying nothing happens unless the creditor issues a notice to the debtor, but once it does, the debtor must do one of two things, either cure the defaults, which is the parallel to Alternative A(7), or, (b):

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

Now (b), that is, paragraph 2(b), Alternative B, looks a little like Alternative A, paragraph 2 and paragraph 5, but it is clearly not identical to it. It seems to use this language of give the creditor the opportunity to take possession, which is very similar to 5, Alternative A. It then qualifies it by saying “in accordance with the applicable law”, so it is a domestic law remedy that is being exercised.

However, because of the similarity of that language “given the opportunity to take possession”, we submit it tends to confirm that Mr Walker’s construction cannot be correct because under Mr Walker’s construction of Alternative A, if you give possession which can include redelivery, and only after you have done redelivery have you then given the opportunity to take possession, but if that were right the same would apply to Alternative B, which would seem peculiar.

Finally, under Alternative B’s paragraph 5, the ultimate remedy is for the court to permit the creditor to take possession on terms controlled by the court and require additional steps, et cetera. So it seems that in the Alternative B world, like our version of Alternative A world, the giving of possession is the giving of the opportunity to take possession. The difference, critically, is that in the Alternative A world the creditor can exercise the self‑help remedy from the Convention, whereas under B they have to submit themselves to the domestic court.

Your Honours, can I deal with the clarification by Mr Walker that his primary case at least is that the obligation to give possession means give the form of possession found in the agreement, and we have a number of answers to that which we would seek to offer your Honours.

The first is that that argument was dealt with squarely by the Full Court at paragraph 94 on page 141, and the reasoning in effect is that in a very tightly crafted convention which expressly references the agreement where it intends to use that to qualify a convention obligation or remedy, it is most unlikely that those words can be read in when they are not there.

So, if your Honours go back to Article XI, the words are not “give possession in accordance with the agreement”; they are simply “give possession”. One can contrast it, for example, with XI(5)(a):

preserve the aircraft object and maintain it and its value in accordance with the agreement –

The Full Court has given a series of further examples where the agreement is expressly referred to if it is intended to be a qualifier of the Convention rule. Another example perhaps, your Honours, is Article IX(1) itself, that the extra two remedies are given to the extent the creditor has agreed.

Your Honour the Chief Justice raised a question on this topic about what would provide a more certain and predictable outcome, and that clearly is an important consideration in the principles which underlie the Convention, that is Article 5, but to revert to the particular agreement in fact would create highly variable and uncertain outcomes, and could I give your Honours an example.

In the primary judge’s judgment at paragraph 109, when we put this argument at trial, which is, but what if the agreement does not tell you anything particularly informative about how to give possession, his Honour said, well, you would fall back on the normal principles of contract, implication of terms, perhaps good faith, you might have to imply them on a case‑by‑case basis, we do not need to explore it further.

So if one were to read the words in, one creates a series of uncertainties which will vary on a case‑by‑case basis of whether the contract has dealt with the question, and if it has not dealt with the question, how does one fill the gaps? Then one only needs to think a little further, given we are dealing with three types of creditors - lessors, conditional sellers, charges. There will be a variety of agreements which have a variety of provisions, or not, about how possession might be taken. So we would then come up with a Convention obligation to give possession, which would be variable, and perhaps uncertain, depending upon all those particularities of the agreement.

Now, that tends to suggest that when the drafters did not say “in accordance with the agreement”, they meant it. Your Honours, that point can actually be illustrated by looking at the present GTA. If your Honours could go back to the appellants’ book of further materials, Mr Walker started with page 67 - this is Article III of the lease - and said that, upon termination of the lease, it is to be redelivered to Florida, and he referred to Article XIII, you are “responsible” for:

return in accordance with Section 18 –

Now, they, on their face, are not provisions about the giving or the taking of possession, they are provisions about the subject of termination of the lease. As I have said, there is no finding, or even suggestion, that this lease has been terminated, even today. So if one is taking this step from the Convention down into the agreement to try and find what it says about possession, one is immediately in this uncertain process.

Now, he then went to what is closer to the mark, which is the clause commencing at the foot of page 40, which is paragraph (b) of clause 19, and no doubt, this says, once there is an event of default, you may:

elect to do one or more of the following –

subject to the applicable law, and we then see a number of options, and if one goes down to (iii), on its face, the first sub‑option within (iii) looks like a possessory remedy. It tells you that, through the contract of the parties:

By written notice –

you can:

cancel Lessee’s rights of possession and use –

Now, on a straightforward reading, that paragraph might be telling you that is one way in which you can exercise a possessory remedy, by written notice. The next paragraph, (B), does not appear to be about possession, it is you may terminate, and as we have seen, that did not occur. Then, although the appellants pass over it very swiftly, what in fact appears within paragraph (C) are two radically different alternatives. The first is that you may demand the lessee:

and Lessee shall upon such demand, return any Equipment –

in accordance with section 18 as if on:

the end of the Lease Term.

That appears to be a redelivery obligation, casting the obligation upon the debtor to do all the things that would happen on a lease return under section 18, or then we appear to have a form of a possessory remedy, the:

Lessor, at its option, may enter upon the premises –

take possession, remove the object, without liability for the entry or the taking, including for damage caused. That second limb, which is in the alternative, appears to be a form of taking of a possessory remedy. It is clearly quite distinct and quite different from the first limb, and when one goes to section 18 to see what else is in the first limb, section 18 is a long provision. It starts at page 33 and it goes all the way through to page 36.

But if the Court even just picks it up at page 35, which is 18.3, in addition to everything that has gone before, which includes inspection obligations, when you return the equipment you have to carry out maintenance in accordance with the program, and then, under (f), you return the:

Equipment free of all Liens other than Lessor’s Liens to the delivery location –

specified by the lessor. So, as a matter of contract, if there was an air services lien, the redelivery obligation imposes on the debtor the duty to pay off the lien, but that is inconsistent with the Convention provision. Then in paragraph (g) there is very important process of attaching serviceable tags, and it was the serviceable tag which led to a lot of the complex orders before Justice Middleton. Then under (h) there is a complex process for shipment and that also was picked up in his Honour Justice Middleton’s orders.

Now, I am really making two submissions. One submission is this entire exercise of descending into the particular agreement to try and find what it says or does not say about the taking of possession is simply erroneous. It is not what this article requires on its proper construction. But the second is, even if you were to do it on this particular lease, you do not get to Mr Walker’s conclusion that the complex provisions in clause 18 are a form of taking of possession. They are something different, namely a form of recovery of the object through a process of redelivery.

Your Honours, I have covered most of what is in our points 10 and 11, which are the nub of the case. In terms of 11(e) I did just want to refer your Honours to the closest domestic authority that we have found, which is the decision in the United States. It is item 26 in volume 3 at page 447. It is the decision in In re Republic Airways Holdings Inc.

To put it in context, the relevant US domestic provision upon which the Convention was largely based is found in volume 1 at page 174, section 1110(c)(1) of the US Bankruptcy Code. Page 174, it has the same ultimate structure, although slightly differently expressed, which is in order to avoid the taking of possession you must, within the 60 days, perform the obligations and cure the default, that is in paragraph (a)(2), and then the critical parallel to the present case is near the foot of the page in paragraph (4)(c)(1), that if you have not cured the defaults you must:

immediately surrender and return –

the equipment on that date. Now, if anything, that language, “surrender and return”, “surrender” is close to our argument, “return” might have a little in it either way. That is the issue dealt with in the In re Republic case. If your Honours could pick it up at volume 3 at pages 453 to 456. On 453 at the foot of the first column the court says that:

As the Collier on Bankruptcy . . . there is no reported authority –

on whether you have to make it available as is where is or whether you have to do the full redelivery obligation. So the argument in the case was basically the argument before your Honours. In the second column near the bottom, the court analysed the creditor’s position as:

akin to requiring the Debtors to comply with the conditions for surrender in the underlying agreements . . . has been rejected by the few courts that have spoken on this issue.

So there is then an analysis of the US cases. I would draw attention to this. On 454, about halfway down the first column in analysing the US Airways Grp case, about 10 lines from the bottom it said:

the court did not require compliance with contractual requirements for return . . . Instead, it held that the aircraft lenders and lessors were not foreclosed from asserting a claim arising from non‑compliance –

So you can prove in the insolvency:

Other courts have similarly rejected –

this attempt. There is a reference to Northwest Airlines, and in the second column of 585 this is important in terms of underlying principle:

[T]he hallmark of Section 1110 is speed. Congress heeded the insistence of aircraft lenders and lessors that they be able to retrieve their property without delay.

Then:

the court in Northwest Airlines rejected the argument that the debtors must comply with all the return provisions . . . noting that “[t]hat is precisely what Section 1110 does not provide.”

We would say a similar position here. Then in the Delta Air Lines case the court again rejected the argument, putting it colourfully, the provision:

does not give lenders . . . a “miracle right to have [the debtors] put it all back together again.”

At the foot of the page and over the court made clear the section:

meant that “you get [the equipment] immediately and you get it as is –

I just emphasise the next bit:

(finding it counterintuitive to require immediate return of equipment while also imposing conditions on its return) –

and that is effectively where, with respect, Justice Middleton’s order has reached, that an obligation which must be performed no later than, in our case 19 June, it is required to be performed by imposing a series of conditions which realistically could not have been complied with.

So, your Honours, in terms of underlying principle, clearly your Honours are looking at predictability, certainty and uniformity, perhaps as the three underlying principles. What they are offering the court is a concept of giving possession, taking possession and retaining possession, which is a Convention concept which focuses on the title to the asset. It gives the creditor the enhanced ability to extract its asset from the domestic insolvency, if so desired, a very valuable benefit given to the creditor, and it imposes this obligation upon the IA or the debtor to facilitate the creditor’s ability to take that remedy.

Your Honours, in terms of the notice of contention, it really is expressing the same point in different words. The notice of contention was there because it more closely mirrors the language of XI(5), and it is really what I said in answer to your Honour Justice Edelman’s question, that that is explicating what is happening under XI(2), that we have put it in those terms.

The way the Full Court has expressed it, at least in paragraphs like 106, and Mr Walker criticises it for being atextual, it is not in the slightest bit atextual. What the Full Court has said is, the basic benefit you get is that the effect.....and the stay is something which can be overcome, and therefore what it means practically is that the IA or the debtor must not exercise its ordinary position in an insolvency, which is refuse to surrender the asset, but must do what is necessary to allow the possession to be taken.

Your Honours, will that involve affirmative steps, as the Full Court said it might? In some cases it might, it would be fact specific. One can imagine that you might be required to unlock the hangar to allow access to the engine. You may be required, if the engine is on your plane, to co‑operate to allow the engine to be disassembled. You will need to do all the things which, in this case, the administrators offered to do to work co‑operatively to make sure the possession could be taken if it wished to be taken.

The point the Full Court was making, we submit correctly, is it is not a bare disclaimer. It is not a bare disclaimer, it is a positive obligation to do that which facilitates the taking of possession.

EDELMAN J: Could it potentially require the engine to be moved, if the engine were in some location, or country, that is difficult to access?

MR GLEESON: The answer is probably not, but it would be fact specific, your Honour. When I say it is probably not, you have to give them the realistic opportunity to assert the possessory title to the object if they wish to do so. What that would mean in your Honour’s example, you would have to look at the facts. Our answer would be probably not – but you would need to look at the facts.

But the critical thing, certainly in a case like the present where the administrators were perfectly capable of saying, look, here are the objects – they are identified – you may take them – you can comfortably come to Adelaide Airport knowing that we will not be locking the hangar - the records point – I think your Honours appreciate the records issue is not before you any more. There was a skirmish below about whether every record had been given on 16 June – in any event, that skirmish has been resolved, they have now been given a long time ago. So, it is about the title and making available the opportunity to take that title.

Your Honours, I did want to say in terms of paragraph 11(c) of our outline that once one thinks through the prospect of multiple creditors it becomes even clearer that giving of possession cannot mean physical redelivery. It is easy to think of a straightforward case where the engines are leased by Willis to Virgin, but also the subject of a registered charge in favour of two people and it is possible to think of an insolvency event occurring either for Willis or for the lessee.

Professor Goode deals with this problem at – I will just give the reference – it is at 5.63 on pages 1274 to 1275, where he says that Article XI does not expressly regulate what happens if there are multiple holders of interests, but the implication is that the duties of the IA are:

owed to the secured creditors successively in order of their priority –

and that must be correct. So, in my example, if it is Willis that is insolvent – and it has, say, a 60-day waiting period – at the end of that period, it must give possession to chargee number A. Chargee A is not bound to take the possession. If it does not, Willis must then give the possession to chargee B.

Self-evidently, this is unworkable if giving of possession involves redelivery because you would be taking every step to try and move the object to the place chargee A wanted it, not knowing whether they were going to take the possession and then you would have to move it back to some.....place.

If in my example it is the lessee that is insolvent, one can just think through the same possibilities depending whether Willis itself is insolvent or not, but clearly there is a strong potential for not only wastage of resources but severe impracticality, to the point of impossibility, if these are redelivery obligations.

Your Honours, I think in terms of proposition 12, the main remaining argument, if I have not already dealt with it, was the idea that safe harbour got Mr Walker home. This was the argument which appealed to Justice Middleton, which is your obligation to give possession creates a remedy of taking possession, you have to take possession reasonably, you are reasonable if you follow the agreement, so lo and behold, you enforce the redelivery obligation.

We submit the Full Court was correct to find that argument involved an elision. It is eliding the content of the remedy of giving possession, which must be first ascertained from the mode of exercise of the remedy, at which point commercial reasonableness comes in.

Your Honours, ever so briefly, Mr Walker mentioned these extrinsic materials, the Australian extrinsic materials. We think that strictly they are not relevant to the construction exercise, because the Parliament has brought the Convention and Protocol into law in full, and they represent no more than the expectations of the legislatures as to what that Convention, properly construed, meant.

So we would submit your Honours should not spend much time on them, but if you did, you would in fact find there is quite a bit pointing in our direction in those materials.

EDELMAN J: Mr Gleeson, on a similar point about extrinsic materials, just a mechanical question about the United States decision in In re Republic Airways Holdings that you took us to - I take it the United States is a party to the Convention, and if so, why was the decision given under different terms of the particular bankruptcy legislation without reference to the Convention itself?

MR GLEESON: I will just have to get the answer to that question, your Honour, if I can do that in a few moments. Sorry, can I just come back to that question, your Honour?

EDELMAN J: Yes, certainly.

MR GLEESON: I will come back to that before I finish, if that is convenient. So – sorry, not wishing to avoid your Honour’s question, I need to come back to it if I can, but if I could just complete the submission I was making on the domestic materials, our primary submission is do not open them, as Mr Ellicott used to say, but if your Honours were to open them, the most relevant paragraphs are pages 56 and 57 of volume 1, including 4.19 and 4.25.

Paragraph 4.25 in particular is a legislative expectation that the provisions will work roughly the way I have been putting, that it will restrain the Australian courts from preventing the exercise of the self‑help remedies, that is, it will be the Convention remedy which will be allowed to go forward, and, as it says, the creditor automatically gains the right to possession after the 60 days. So it seems to be thinking in terms of title, not redelivery.

Your Honours, in terms of relief, I think your Honours are aware that there may be other issues which Mr Walker’s client wanted to raise before Justice Middleton, unfortunately being other ways to try and get the same outcome. If we are successful on the appeal, we think that the orders we have proposed in our written submissions at paragraph 57 accommodate the issues before your Honours, and otherwise leave anything before Justice Middleton to be dealt with appropriately, and in particular, the $500,000 paid into court would then be released to us because we have won the underlying issue.

We did need to say that if the appellant were successful, there is a problem with their orders. If your Honours could go to page 169 of the core book, and this is a point of substance not of drafting. We submit the Court should not make the order at 6(a), which is the declaration, for the reason that there has been no argument before you about whether a breach of the obligation in Article XI(2) imported into Australian law creates a monetary liability of that kind. It may or it may not, but it simply has not been argued before you.

There is no problem making order 6(b), because that is simply an agreed remedy to follow the event because of the bespoke scheme negotiated and then accepted by Justice Middleton – and that would sit with Article XII of the Convention. The order at 6(c) is unnecessary.

Your Honours, the reason I am saying this as a point of substance, not just a point of drafting, is that there are now, but not before, multiple proceedings in lower courts where other creditors, encouraged by Mr Walker’s client, are seeking to do something similar, albeit in a whole range of varying fact situations.

In those cases, there will be – if we are correct on the appeal, there will be no issue. If we are not correct on the appeal, there will be factual dispute about what the giving of possession meant and if it was or was not properly given, there may be a dispute about monetary remedies - how those monetary remedies sit with the Convention. They have not been explored before you today and would need to be left for those other cases. So, in the unhappy event we were not successful, we would submit that justice in the case can be reached without the Court, in particular, making order 6(a) and 6(c).

The answer to your Honour Justice Edelman, which I should have known, is that the United States has ratified but has not imported Article XI. Having not made the relevant declaration under Article XXXIII therefore still applies bankruptcy..... Unless your Honours have questions, they are our submissions.

KIEFEL CJ: Yes, thank you, Mr Gleeson. Reply, Mr Walker?

MR WALKER: My friends started with a catalogue of horrors, including expenditures, were our argument correct that would be suffered by the insolvency administrator. The fact is that in order for – whatever one means by “possession”, to undergo the process of whatever one means by it “being given” – the commercial purpose, the usefulness of these objects, will require someone being able to dispose of their physical location and availability for actual, physical use to deliver the thrust for aeroplanes, and so as to generate revenue. So someone is going to have to bear that matter. It could be shared. There is no regime by which sharing can be proposed, so it is lessor or lessee, or more accurately, of course, with this kind of financing, creditor and debtor.

Now, we know that their actual agreement, which is not irrelevant from an understanding of how the Convention and Protocol operates, given the multiple references to it operating in both those instruments, plainly stipulates for that to be the expenditure of the debtor, as one might expect, given the balance of power and interest in a financing transaction, and in any event, that being a matter which critically affects an assessment of risk and thus a calibration of desired price.

So if the question is, should a creditor or debtor bear the expense, and the creditor and debtor have agreed that the debtor should bear the expense, it would be unusual, in the interests of certainty and the promotion of autonomous party dealings, as the Convention and Protocol are to be understood as intended to advance, to find, within any of the words of those instruments, adapted as they are by parties with, by their autonomous choices, because they can depart from provisions of Convention and Protocol, it would be unusual to find something which neatly and wholly reverses that allocation of financial risk.

There are no such words. In effect, it can be plain, my learned friend is saying that the creditor is to bear, by reason of the reading of the Convention and Protocol, with or without regard to the agreement, that can be put to one side on our friend’s argument, the creditor will have to bear whatever expense may come to exist in the future depending upon whatever location with accessibility or other logistical and governmental circumstances, may obtain in the future, in other words, an unknowable exposure to what might be very considerable risk.

Now, worse, in our submission, though under the banner of promoting certainty, our friend’s argument plainly creates very considerable litigable uncertainties. Take, for example, in the course of an answer to Justice Edelman, my friend’s acceptance that giving possession, even on his argument, must be understood as involving the possibility depending upon particular factual circumstances of doing something which would involve expenditure, which might even involve relocation of the engines.

Furthermore, one can see readily that the notion, in any event, of the XI(5) “giving opportunity to take possession” involves, on our learned friend’s argument, again, a necessary acceptance by them that that will involve litigable factual controversy about whether there has been sufficient notice, sufficient logistical opportunity, sufficient accessibility that there is realistically – to use a word our learned friend has employed – realistically an opportunity to take possession.

Contrast all of that, which is so antithetical to the notion of dispatch and certainty with what we submit the words plainly leave open as the reading for which we contend where there will not be much room for argument about whether something tangible has turned up in a specified location. There, of course, will be, as there might have been had compliance been attempted sooner in this case, an argument about whether, say, all the records were delivered on time and at the right place.

But leaving aside that, and the notion of digital archives and the like, the certainty – the vastly superior achievement of certainty by stipulating physical delivery as the parties had done in their lease agreement is, in our submission, an obvious pointer to giving possession in the provisions for which we seek the first instance reading to be restored in place of the possibilities that our learned friend proposes.

Could I, in relation to the subtleties that our learned friend advances with respect to the notion of remedies as between Convention and Protocol, call in aid what Professor Goode said plainly – and not displaying any doubt or anxiety – concerning the contractual yardstick by which the duty of commercial reasonableness may be measured.

In the materials to which my learned friend took you, which is in volume 4 of Part E of the book – which is part of the extract behind tab 38, starting at page 977, in Professor Goode’s review of the Aircraft Protocol – it is section 3.47 of that portion of his text, under the heading “Exclusion of Article 8(3)”, Sir Roy refers to the replacement by Article IX(3) of Article 3 of the Convention with what is called:

a more general duty of commercial reasonableness.

We interpolate our learned friend’s reading would not be “a more general duty” but would be, at it were, patchy or intermittent in its application, which would be odd, purposively, with respect to something as value laden as commercial reasonableness. Sir Roy then notes that it cannot be excluded by agreement that it is non‑derogable, so of some significance, and then says:

The duty imposed –

and it is a duty, it is an obligation – we embrace that in‑chief – and it is owed to, among others, the entity for which the IA acts, is intended to – is:

extended to cover all remedies in relation to aircraft objects and thus to embrace not only remedies of the creditor under the security agreement but those conferred on the assignee . . . But a remedy given in relation to an aircraft object is deemed to be exercised . . . in conformity with a provision -

except with the proviso to which I have referred. It is quite plain that in that section of the review, the notion that there would be some patchy coverage of that obligation should be rejected and, if it is protective, as it appears for our opposite purposes, we both argue, then, of course, purposively, so it should be read. One then sees in 3.47(2) at the foot of page 977 of the book, the explicit statement by the professor that:

While Article IX(3) extends the requirement of commercial reasonableness to the exercise of remedies under Articles 9, 10, and 12 of the Convention -

that is the way those words are read:

and, by extension, Article IX of the Protocol –

See the combining provision to which we have referred:

some of these provisions will rarely be caught by the requirement.

That does not seem to have caused any doubt by that learned commentator with respect to Article 12’s status as a matter to be governed as remedies given by the Convention because, of course, Article 12 of the Convention permits the exercise, subject to qualification, of privately agreed remedies. It is given by the Convention – that permission.

My learned friend’s argument drew, as it were, something dichotomous, that is, mutually exclusive, between the notion of physical redelivery and the giving of possession. We make two observations, without repeating, I hope, what we have already in‑chief and written.

The first is that it is not a useful paraphrase or proxy concept to introduce the word “title” in this analysis, particularly when, jurisprudentially, possession is not tied to any particular system for the reasons upon which, again, for our opposite purposes, my learned friend and I urge a similar approach to interpretation.

The second proposition is that a moment’s thought concerning the dealing with tangibles, and in particular chattels, makes it clear that one of the most obvious ways of giving possession of a chattel is by A handing it to or physically delivering it to B, with or without appropriate words - we do not have to get into that. Now, in our submission, that is enough to show that of course physical redelivery and the giving of possession are not dichotomous, and we have accepted that it may well be that one can give possession without there being any physical redelivery effected.

It would be unusual, in relation to aeroplane engines, but we would accept that, particularly in relation to digital archives for records, it may be that the notion of “physical” should not be stretched too far. We accept, for example, that we are no longer in an age of paper only.

Our learned friend describes remedies under the Convention as autonomous, meaning they spring, and spring only, from the Convention, and we repeat, of course, the references we have already written and addressed on as to the intertwining and internal reference providing content or qualification or extension to the agreement of the parties by the instrument of transaction which brings them into the relation by which the Convention or Protocol apply in their favour at all.

Our learned friend’s repeated insistence that Protocol Article XI, paragraph 2, involves a reference or a confinement to an understanding of remedy within the meaning of Article 10 of the Convention leaves aside altogether that which we sought to emphasise, namely, the importance of Article 12 of the Convention. I do not need to repeat what I have already said about that. It is an important point, in our submission.

There is circularity in our friend’s suggestion that our argument is defective because it would have the dealings between the parties upon this insolvency in relation to the giving of possession of these engines - it would involve a departure from what our learned friend called the world of creditor taking, by which we understand it to mean a supposed universe where the only giving can be accomplished by taking.

Now that, of course, puts at nought that which one knows is an option under the Convention, may take, and which is plainly an option under the agreement, which is not irrelevant to an understanding of the remedies upon default, which itself can be defined by agreement between these parties, under the Convention and Protocol, because there is an option to take, and one destroys its essential and commercially‑significant character as an option if you make it the sole available course to take.

My learned friend has raised, in several guises, and at several junctions in his argument, the notion of what if, by way of complications concerning, in particular, the involvement of third parties - the last of them was the chargee under a transaction by which the lessor is the chargor, and what happens when the charge to enforce whatever rights the charge gives, and at the same time the chargor, the lessor, wishes to enforce the lease rights to be given possession. In our submission, there is absolutely no difficulty whatever in relation to the property rights and the chose in action aspects of that over which the charge has been given, namely, the lease.

Whether the charge provides for an agency to be created, or whether the charge provides for the chargor to comply with directions of the chargee, or whatever, receivership is another possibility, those are matters which will turn on the terms of the charge. They do not actually even involve a priorities question, and in our submission, no complication of any interpretative assistance is assisted by that hypothetical example.

The same may be said, more simplistically, about the question of priorities generally – multiple creditors, so-called. If they are multiple creditors and the register has been used, then priorities will be determined by registration with one of the hallmarks of the certainty and clarity of the Convention and Protocol scheme – no need to investigate – no call for consideration of any prior actual notice that might otherwise apply domestically with respect to priorities – it will simply be date of registration.

There is, in fact – however complicated it may be administratively for insolvency practitioners – there is no legal complication of a doctrinal, conceptual kind when priorities are assigned and acted upon. They are, with respect, conceptually a most straightforward concept and the notion of multiplying creditors in order to dispense with the plain obligation to give possession is one which, in our submission, is quite remote from reality.

STEWARD J: Mr Walker, can I ask you a question relating to that issue. Is there a problem at all for your case that Article IX(5)(b), for example, in the Protocol, may not be engaged on your interpretation of Article XI, namely the requirement to tell a registry authority that all prior registered interests had been discharged or they have consented to export before the piece of equipment leaves the country?

MR WALKER: No. Article IX(5) is involved, as my friend, I think, answered your Honours, because, very commonly, as your Honours can certainly take judicial notice, export and physical transfer internationally may involve municipal legislation, probably at both ends. But as to the export end, which is what, in Australia, these enacted texts can address, there is an obligation, described as the obligation to honour a request, with respect to deregistration and export - that is what (5) is limited to, a request for deregistration and export. That is obviously a reference back to IX(1).

Now, IX(1) will not be, as it were, inevitable with respect to the obligation to give possession. It is perfectly feasible and within the sensible commercial interests of the lessor to have, as these parties agreed it would have, the right to nominate a place other than Wales or Florida, and in particular, if there was a customer also in Adelaide, there would be no export, and the physical transfer is unlikely to involve any necessity for a request apart from a lowly traffic direction at the aerodrome in Adelaide.

Now, it is for those reasons, in our submission, that one can see that in Chapter II, Article IX(1) and (5) deal simply with a particular aspect of the physical relocation of the assets, which is understood to involve the high possibility of governmental control. Governmental control in relation to insolvency regime has already been affected in the manner that both of us have written and addressed your Honours upon.

But here in terms of what I will call export control, and what might be called physical movement of cargo control, there are obligations which, importantly, are placed upon States Parties and their officials. None of that is inconsistent to the slightest degree in the notion of an obligation being imposed to give possession by the redelivery stipulated in the lease agreement which is known to involve the possibility of international transfer.

When I say, “the possibility”, that is not just because whales in Florida are named, it is because at the time when the obligation matures the engine may well have been, by its intended use, in disparate locations. I do not mean one engine in disparate locations, I mean that the locations in which an engine may be found will depend upon where it was last flown and landed before operations ceased, presumably by reason of the insolvency. It is for those reasons, in our submission, that there is nothing in the terms of IX(5) which cuts across any aspect of our argument.

If I may just return briefly to a matter my learned friend raised about Article IX(3), it is true that the second and third sentence as to its general operation comprise a statement of obligation imposed on parties in our position, but it equally, and just as importantly, imposes a convention or consensus that binds both parties equally by reference to the standard or yardstick of reasonableness provided by a provision of the agreement between them, that is, the autonomous parties who made the agreement which the Convention and Protocol are intended to subserve by aiding rather than detracting from certainty, clarity and low pricing.

It is in that sense that, in our submission, there is nothing in IX(3) which ought to be regarded by your Honours as having no possibility of reflecting an understanding of the obligation to give possession upon which we have obviously concentrated in such a way as to visit the burden by XI(2) which the parties have agreed under the agreement will be visited on the lessee, the debtor.

Your Honours heard the expression “grave uncertainty” used to describe the situation brought about by the circumstances and exigencies that might expand or complicate the logistical and therefore financial requirements for a lessee, that is, an IA, relevantly, to return to the stipulated location - giving possession, as we submit it must be understood.

That, in our submission, is a remarkably lopsided view of the outcome of a bargain which has brought these parties within the purview of these provisions at all. That bargain made it quite clear that, given that these are “mobile”, that is the critical word in this Convention, given that these are mobile and because they have attracted the attention of the international community.....they are obviously also important, and we may add sophisticated, and we may add globalising assets, it is obvious that there will be grave uncertainty as to where they may be when the music stops.

That is the only grave uncertainty, and that is a grave uncertainty which, in our submission, in the interests of Australia, Parliament decided to apply, and I accept what my learned friend says about extrinsic materials in Parliament, has decided to apply these international words, to be interpreted internationally, we accept, in order to make clear where those – where the allocation of risk lies, including as to the duty to give possession.

Now, it would appear that our learned friend, on the other hand, says that in place of what is said to be the grave uncertainty of unknown exigences by reference to where his clients have flown the engines, and where they are left when insolvency intervenes, that there ought to be the certainty that it will always be us. In our submission, that is extraordinarily lopsided and pays no regard to the evident and manifest intent of Convention and Protocol that there would be the capacity of lenders – and these are lenders – to calibrate their financial exposures.

Indeed, my learned friend went this far with respect to what might be called – I think in his language – the option that Protocol XI(6) provides. It may not matter, but it rather highlights the significance of allocation of risk, but my learned friend, we think, went so far as to suggest that, under XI(6),
there could be resort to the engines – simply for the purpose of driving revenue – in order eventually to be in a position to take advantage of the so‑called option under XI(7).

Well, it may be doubted whether that is quite so straightforward – bearing in mind the wear and tear that revenue earning involves – because the arrangements which are a limitation upon the liberty under (6) are arrangements designed to preserve the object, maintain it and its value and it is going far too far as to say those are objects which will be secured by the particular insolvent operator lurching out of the grave under paragraph (7) of Article XI. That may not at all be calculated to achieve that object. That is talking about the physical and also regulatory integrity of the equipment – not talking about the commercial ambitions of the insolvent lessee. May it please the Court.

KIEFEL CJ: Yes, thank you, Mr Walker. The Court reserves its decision in this matter and adjourns to 9.30 am tomorrow.

AT 4.15 PM THE MATTER WAS ADJOURNED