AWE Perth Pty Ltd v Clough Projects Australia Pty Ltd - [2023] WASC 203

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   AWE PERTH PTY LTD -v- CLOUGH PROJECTS AUSTRALIA PTY LTD [2023] WASC 203
CORAM:   HILL J
HEARD:   23 MARCH 2023
DELIVERED          :   23 MARCH 2023
PUBLISHED           :   13 JUNE 2023
FILE NO/S:   COR 33 of 2023
BETWEEN:   AWE PERTH PTY LTD
Plaintiff

AND

CLOUGH PROJECTS AUSTRALIA PTY LTD
Defendant

Catchwords:

Corporations - Insolvency - Application under s 588FL(2)(b)(iv) of the Corporations Act 2001 (Cth) for extension of time to fix registration time for security interests - Turns on own facts

Corporations - Insolvency - Winding up - Meaning of security interest - Whether plaintiff’s interests are a security interest within the meaning of s 12(1) of the Personal Property Securities Act 2009 (Cth) - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) s 588FM, s 588FL
Personal Property Securities Act 2009 (Cth) s 12

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff	:	W C J Zappia
Defendant	:	No appearance

Solicitors:

Plaintiff	:	Herbert Smith Freehills
Defendant	:	Clifford Chance

Cases referred to in decision:

Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61; (2017) 53 VR 14
Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2019] WASC 438
Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267
Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520
Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (a firm) [2020] WASC 132
Dickerson, in the matter of McWilliam's Wines Group Ltd (Administrators Appointed) [No 2] [2020] FCA 417
Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment [2022] WASCA 134
Kaizen Global Investments Ltd v Australia New Agribusiness & Chemical Group Ltd (in liq) [2017] FCA 431
KJ Renfrey Nominees Pty Ltd (Trustee) in the matter of OneSteel v OneSteel Manufacturing Pty Ltd [2017] FCA 325
Re Accolade Wines Australia Ltd [2016] NSWSC 1023
Re Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122
Re Appleyard Capital Pty Ltd [2014] NSWSC 782; (2014) 101 ACSR 629
Re Cardinia Nominees Pty Ltd [2013] NSWSC 32
Re Geelong Fire Services [2022] FCA 963
Re One Steel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611
Re Quality Blended Liquor Pty Ltd [2014] QSC 234; [2015] 2 Qd R 381
Re Transurban CCT Pty Ltd [2014] NSWSC 1909
Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq) [2022] QSC 271
Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836

HILL J:

By an originating process filed on 3 March 2023, AWE Perth Pty Ltd (AWE) applied for orders under s 588FM of the Corporations Act 2001 (Cth) (Act) to fix a later time under s 588FL(2)(b)(iv) of the Act to register a security interest under the Personal Property Securities Act 2009 (Cth) (PPSA).
The originating process came on for hearing before me on 23 March 2023. The defendant did not appear at the hearing and neither consented nor opposed orders being made in the terms sought by AWE.[1]
[1] Affidavit of David William John filed 17 March 2023, 'DWJ-2'.
In support of its application, AWE relied on two affidavits:
(a)an affidavit of Seng Yee Lim, the head of legal of AWE's ultimate parent company, Mitsui E&P Australia Pty Ltd, filed 3 March 2023;[2] and
(b)an affidavit of David William John, a partner of Herbert Smith Freehills, the solicitors for AWE, filed 17 March 2023.
[2] An identical copy of the affidavit was also filed on 16 March 2023.
Prior to the hearing, counsel for AWE filed a detailed outline of written submissions. The submissions were of significant assistance in determining the matter on an urgent basis and in producing these written reasons.
After hearing from counsel for AWE, I made orders broadly in terms of the minute of proposed orders filed 17 March 2023 with one exception. I was not satisfied that it was reasonably arguable that the transfer of title clause was a security interest under the PPSA.
At the time of making these orders, I indicated I would subsequently publish written reasons for my decision. These are those reasons.

Factual background

AWE is the operator of Waitsia Joint Venture, which is a joint venture between AWE and Beach Energy (Perth Basin) Pty Ltd, a wholly owned subsidiary of Beach Energy Ltd. The Waitsia Joint Venture governs the development of the Waitsia gas field in the Dongara region of Western Australia.
On 11 January 2021, AWE, in its capacity as operator of the Waitsia Joint Venture, entered into an engineering, procurement and construction (EPC) contract with Clough Projects Australia Pty Ltd (CPA) for the construction of a 250 TJ/day onshore gas processing facility at the Waitsia gas field site (EPC Contract).
AWE contends it is arguable that certain rights conferred on AWE under the EPC Contract are security interests within the meaning of s 12 of the PPSA. The specific rights relied upon by AWE are:
(a)the transfer of title in works to AWE when the works are paid for, are incorporated into the works, or become a fixture (cl 7.6(a));
(b)the requirement that any insurance proceeds received from the damage or destruction of any of the works be paid into a bank account in the joint names of CPA and AWE (cl 20.8(b)(ii));
(c)step-in rights (cl 23.3, cl 23.4 and cl 31);
(d)the irrevocable appointment by CPA of AWE to be its attorney with authority to execute such contracts as necessary to give effect to the novation of any subcontracts if the EPC Contract is terminated (cl 3.4(c)(iii)); and
(e)the obligations imposed on CPA under cl 23.8 where AWE gives notice of termination of the EPC Contract.
None of these security interests were registered on the Personal Property Security Register (PPSR) within 20 business days of entry into the EPC Contract.
On 9 June 2022, AWE effected three registrations on the PPSR against various property of CPA in relation to these arguable security interests (First Registrations). These were:
(a)PPSR Registration no. 202206090053688 being an all present and after acquired property with exceptions (ALLPAP with exceptions) registration for the arguable security interests referred to at [9(c)], [9(d)] and [9(e)];
(b) PPSR Registration no. 202206090053782 being a tangible property – other goods registration for the arguable security interest referred to at [9(a)]; and
(c) PPSR Registration no. 202206090053867 being an intangible property - general and tangible registration for the arguable security interest referred to at [9(b)].
On 5 December 2022, less than 6 months after the First Registrations were effected, voluntary administrators were appointed to CPA.
After the appointment of the voluntary administrators to CPA, AWE did not seek to enforce any of its rights under the EPC Contract. Instead, AWE entered into certain arrangements with the voluntary administrators which had the effect of ensuring the EPC Contract stayed on foot and works under it continued. These arrangements included AWE providing interim funding to the voluntary administrators to enable them to pay out the pre-appointment claims of subcontractors working on the Waitsia project.
AWE and the voluntary administrators also negotiated and agreed amendments to the EPC Contract. These amendments are recorded in the schedule (Amended EPC Contract) to a Deed of Amendment and Restatement dated 1 February 2023 (Deed of Amendment and Restatement). These amendments did not come into effect until the completion of the 'Proposed Transaction'. The Proposed Transaction is defined in the Deed of Amendment and Restatement as a deed of company arrangement which contemplated that CPA would be acquired by WeBuild SPA. Completion of the Proposed Transaction would occur on the effectuation of the deed of company arrangement.
AWE contends the entry into the Deed of Amendment and Restatement arguably gave rise to further security interests within the meaning of s 12 of the PPSA. These rights which arose under the Amended EPC Contract were:
(a)step-in rights, similar to those referred to at [9(c)] but with changed triggers;
(b)the obligations imposed on CPA under cl 23.8(a) in the same terms as referred to at [9(e)] with additional clauses in the event that AWE considered an Event of Insolvency had occurred;
(c)the power of attorney in the same terms as referred to at [9(d)];
(d)the transfer of title to goods as referred to at [9(a)]; and
(e)the introduction of a project bank account regime which required AWE to pay progress payments into a 'sole purpose' bank account (cl 18.2).
On 3 February 2023, AWE effected three registrations on the PPSR against CPA to perfect the arguable security interests (Second Registrations) being:
(a) PPSR Registration no. 202302030067902 being an ALLPAP with exceptions registration to protect the security interests referred to at [15(a)], [15(b)] and [15(c)];
(b)PPSR Registration no. 202302030067918 being a commercial property - other goods registration to protect the issue of the security interest referred to at [15(d)]; and
(c) PPSR Registration no. 202302030067871 being an intangible property - general intangible registration to protect the project bank account regime referred to at [15(e)].
The Second Registrations were effected while CPA was subject to voluntary administration and within 20 business days of entry into the Deed of Amendment and Restatement.
On 15 February 2023, CPA executed a deed of company arrangement with WeBuild SPA (DOCA). The DOCA effectuated on 16 February 2023. Upon effectuation of the DOCA, all unsecured claims against CPA, which existed at the date of the appointment of the voluntary administrators, were extinguished. However, any future rights under certain pre-administration contracts which continued post-effectuation (including the Amended EPC Contract) were excluded from the releases contained in the DOCA.
On 16 February 2023, after being notified the DOCA had effectuated, AWE effected three further registrations on the PPSR against CPA (Third Registrations). These concerned the same arguable security interests the subject of the Second Registrations, namely:
(a) PPSR Registration no. 202302160072785 being an ALLPAP with exceptions registration to protect the arguable security interests referred to at [15(a)], [15(b)] and [15(c)] above;
(b) PPSR Registration no. 202302160073144 being a commercial property - other goods registration to protect the arguable security interest referred to at [15(d)] above; and
(c) PPSR Registration no. 202302160072962 being an intangible property - general intangible registration to protect the arguable security interests arising under the project bank account regime referred to at [15(e)] above.
Since the effectuation of the DOCA, all of the ALLPAP or ALLPAP with exception secured creditors of CPA (apart from AWE) have removed their registrations against CPA from the PPSR.[3]
[3] Affidavit of David William John filed 17 March 2023 [7], 'DWJ-4' - 'DWJ-5'.
Following correspondence that was exchanged between the parties' solicitors, AWE did not seek any orders in respect of the PPSR Registration in [9(b)] as this obligation was removed in the Amended EPC Contract.[4]
[4] Affidavit of David William John filed 17 March 2023, 'DWJ-1'.

Legal principles and statutory regime

As set out in s 3 of the PPSA, the PPSA is a law about security interests in personal property. Personal property is defined very broadly in the PPSA to mean property other than land, a right, entitlement or authority granted by a law of the Commonwealth, State or Territory, or property that is declared not to be personal property for the purposes of the PPSA.[5] Personal property includes many different kinds of tangible and intangible property.
[5] Personal Property Securities Act 2009 (Cth) s 10.
If an interest in personal property falls within the meaning of 'security interest' within s 12 of the PPSA, it is an interest to which the PPSA applies. 'Security interest' is defined in s 12 of the PPSA in broad terms and provides that:
A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).
In considering whether an interest is a 'security interest' under s 12 of the PPSA, it is necessary to consider two matters: first, whether the transaction provides for 'an interest in personal property'; and second if so, does the transaction 'in substance, secure payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property)'.[6] As was noted by Buss P and Murphy JA in Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment:[7]
The PPSA adopts a functional approach and focuses on the substance of the transaction in determining whether an interest is a 'security interest'.
…
Whether a transaction that provides for an interest in personal property, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property) is a question of characterisation of the transaction to which the parties have agreed. It is not merely a question of the intention of the parties and it is not merely a question of interpretation.
[6] Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment [2022] WASCA 134 [189].
[7] Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment [196], [198].
Their Honours went on to state:[8]
The meaning of the phrase 'a right in the personal property' in the definition of 'interest', in personal property, in s 10 of the PPSA is to be ascertained from the text, context and purpose of the phrase in the PPSA as a whole.
It is significant, in our opinion, that the phrase refers to 'a right in' the personal property as distinct from 'an interest in' the personal property. This indicates that the term 'interest', in personal property, as defined in s 10, was intended to have a broad meaning. The attribution of a broad meaning reflects the relevant context and purpose, namely the functional approach of the PPSA and its focus upon the substance of transactions.
[8] Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment [206] - [207].
The Court of Appeal left open the question as to whether a security interest extends beyond a proprietary right (a right in rem) to a 'mere contractual right' (a right in personam).[9]
[9] Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment [201] - [202].
Where a security interest is not perfected in the manner prescribed by the PPSA prior to the appointment of an external administrator to the grantor of the interest, the security interest vests in the grantor.[10] This vesting is irreversible.[11]
[10] Personal Property Securities Act 2009 (Cth) s 267.
[11] Re One Steel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611 [82].
A security interest is perfected if it has attached to collateral, is enforceable against third parties, and certain extra steps (possession or control of the collateral, or registration on the PPSR) have been taken to protect the interest.[12]
[12] Personal Property Securities Act 2009 (Cth) s 21.
Pursuant to s 588FL of the Act, a security interest under the PPSA vests in the company on the appointment of a voluntary administrator if:
(a)the security interest is enforceable and was perfected by registration;
(b)it was registered within the six months preceding the administration or liquidation; but
(c) it was not registered within 20 business days after the grant, unless it was registered within such later time as is ordered by the court under s 588FM.
As Vaughan J stated in Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd, the effect of this section is that:[13]
Where security interests are not registered within 20 business days [of the date on which it arises], there is a six month hardening period unless the court orders there be a later time for registration and registration occurs within that additional time.
[13] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2019] WASC 438 [32].
Where a security interest has been registered before the 'critical time', the court has the power to fix a later date for the purposes of s 588FL(2)(b) even if the application for an order under s 588FM is made after the critical time.[14]
[14] Kaizen Global Investments Ltd v Australia New Agribusiness & Chemical Group Ltd (in liq) [2017] FCA 431 [64].
At present, there is some divergence in the authorities as to the extent s 588FL applies to security interests that arise after the 'critical time' and before the company is no longer subject to external administration. In KJ Renfrey Nominees Pty Ltd (Trustee) in the matter of OneSteel v OneSteel Manufacturing Pty Ltd, Davies J held that where a security interest was registered after the commencement of the winding up or appointment of administrator, the security interest vested on creation even if it was registered within 20 business days, unless an order is made under s 588FM extending the time for registration.[15] This view has been adopted by other judges at first instance.[16]
[15] KJ Renfrey Nominees Pty Ltd (Trustee) in the matter of OneSteel v OneSteel Manufacturing Pty Ltd [2017] FCA 325 [26].
[16] See for example Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836 (Barker J); Dickerson, in the matter of McWilliam's Wines Group Ltd (Administrators Appointed) [No 2] [2020] FCA 417 (Gleeson J); Re Geelong Fire Services [2022] FCA 963 (Moshinsky J).
However, this construction was rejected by Brereton JA (sitting at first instance) in Re Antqip Hire Pty Ltd (in liq).[17]His Honour held that s 588FL does not apply to security interests granted by a company after the critical time but only to security interests that arise after the critical time under a transaction entered into before the critical time.[18] Ultimately, for the reasons set out below at [68] - [79], it is not necessary for me to express any concluded view on which construction I prefer and I decline to do so.
[17] Re Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122 [40] - [62].
[18] Re Antqip Hire Pty Ltd (in liq) [63].
Section 588FL of the Act applies to security interests which arise after the 'critical time'.[19] 'Critical time' is relevantly defined in s 588FL(7) of the Act, where a company is under administration or subject to a deed of company arrangement, as the s 513C day for the company. If the company was not under any form of external administration or restructuring plan prior to the appointment of administrators, this is the date on which the administration began.[20]
[19] Corporations Act 2001 (Cth) s 588FL(2).
[20] Corporations Act 2001 (Cth) s 513C(b).
Pursuant to s 588FM of the Act, the court can make an order, on the application of the company or a 'any person interested', fixing a later time for the purpose of s 588FL(2)(b)(iv). Usually, as is the case in this proceeding, a party will seek an order extending the time for registration to the date when a late registration was in fact effected. A 'person interested' includes the holder of the security interest.[21]
[21] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [33].
An order can be made under s 588FM of the Act where the court is satisfied that:
(a)the failure to register the collateral earlier was accidental or due to inadvertence or some other sufficient cause (s 588FM(2)(a)(i)); or
(b) the failure to register the collateral earlier is not of such a nature as to prejudice the position of creditors or shareholders (s 588FM(2)(a)(ii)); or
(c)it is just and equitable to grant relief (s 588FM(2)(b)).

It is necessary for a party to establish only one of these grounds.[22]
[22] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [39]; Re Appleyard Capital Pty Ltd [2014] NSWSC 782; (2014) 101 ACSR 629 [9]; Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267 [10].
Section 588FM(3) of the Act empowers the court to make the order on 'any terms and conditions that seem just and expedient to the court'.
The purpose and effect of an order under s 588FM is to avoid the vesting of the security interest in a company if it goes into administration or liquidation within six months after the actual date of registration.[23] An order under s 588FM does not have any effect on the priority of a security interest; it simply preserves the security to the detriment of the unsecured creditors. In the absence of an order being made under s 588FM of the Act, a security holder who registers their security interest late is exposed to the risk that its security will be ineffective and will vest in the grantor of the interest if that company goes into administration or liquidation within the six month period after any late registration.[24]
[23] Re Appleyard Capital Pty Ltd [14].
[24] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [34] - [35].
On an application for orders under s 588FM, the company who granted the security interest should be joined as a defendant and served with the application.[25] However, it is not necessary to join other secured creditors as the rights of other secured creditors are not affected by an order under s 588FM(1).[26]
[25] Re Appleyard Capital Pty Ltd [34]; Re Accolade Wines Australia Ltd [2016] NSWSC 1023 [6], [9], [46].
[26] Re Accolade Wines Australia Ltd [10], [21]. See also Re Appleyard Capital Pty Ltd [15]; Re Transurban CCT Pty Ltd [2014] NSWSC 1909 [9].
In order to apply to register a security interest under the PPSA, it is only necessary that the person believes on reasonable grounds that they are or will become a secured party in relation to the collateral.[27] It is not necessary for the court to determine on a final basis whether the interests the subject of this application are registrable security interests. It is sufficient for the court to be satisfied that it is reasonably arguable that the interests the subject of the application are registrable security interests.[28] Where the court is so satisfied, the court can make orders under s 588FM of the Act irrespective of whether s 588FL(2) applies to any arguable security interest. This is because s 588FM operates independently of s 588FL and is not contingent on s 588FL being engaged.[29]
[27] Personal Property Securities Act 2009 (Cth) s 151(1).
[28] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [29] - [30].
[29] Re Quality Blended Liquor Pty Ltd [2014] QSC 234; [2015] 2 Qd R 381 [83].
In considering whether to exercise its discretion to make the orders sought, the court will take into account:
(a)any prejudice that may be suffered by third parties, essentially unsecured creditors, from the orders;[30]
(b)the length of the delay in registration;[31] and
(c)the financial position of the company.[32]
[30] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [51].
[31] Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 [18].
[32] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [54] - [55].
In considering whether a third party may suffer any prejudice from the making of an order under s 588FM, it is important to identify the type of prejudice that is relevant. In Re Appleyard Capital Pty Ltd, Brereton J stated:[33]
… the presence or absence of prejudice to unsecured creditors is a relevant discretionary consideration, relevant prejudice is not necessarily established merely by showing that the dividend to unsecured creditors will be less if the security interest does not vest in the company; the unsecured creditors may well have been in no different a position had the security interest been timely registered. The type of prejudice that is of particular relevance is prejudice attributable to the delay in registration, rather than prejudice from making the order (which is inevitable). This is the type of prejudice contemplated by the legislation (see s 588FM(2)(a)(ii), which refers to prejudice from the failure to register earlier, not from making the order) … (emphasis in original)
[33] Re Appleyard Capital Pty Ltd [30]. Cited with approval in Caason Investments Pty Ltd v Ausroc Metals Ltd [14]; Re Transurban CCT Pty Ltd [13]; Re Accolade Wines Australia Ltd [18] and Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [51] - [52].
The relevance of the period of delay in effecting the registration of the security interest is because if the delay is relatively short, it is less likely that the failure to register within time will have had any relevant impact on unsecured creditors. Where there has been significant delay, there is a greater possibility that unsecured creditors will have dealt with the company on the basis of a register that showed no security interest and that the collateral was unencumbered.
Given the interests of unsecured creditors are a relevant consideration, it is relevant to consider the financial position of the company and whether it is solvent. If the court cannot be satisfied there is no risk that unsecured creditors could be adversely affected, unsecured creditors are entitled to be heard on whether the order sought should be made.[34]
[34] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [54] - [55].

Disposition

I am satisfied that AWE, as a party to the EPC Contract and Amended EPC Contract, is a 'person interested' and has standing to bring this application.
I am also satisfied on the evidence before me that CPA has been joined as a defendant and has been served with the originating process and relevant material.[35]

Do the rights relied on by AWE create a security interest?

[35] Affidavit of David William John filed 17 March 2023 'DWJ-2'.

AWE says that it has various rights under the agreements that give rise to a registrable security interest. These rights are described at [9] and [15]. I set out my reasons on each of these arguable security interests below.

Step-in rights

AWE says the step-in rights in cl 23.3, 23.4 and 31 secure the performance of CPA's obligations under the EPC Contract and the Amended EPC Contract and that these clauses secure this by 'providing for' a 'security interest' within the meaning of s 12 of the PPSA.[36]
[36] Plaintiff's submissions [37].
In support of this submission, counsel for AWE referred me to the decision of Vaughan J in Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd. In that decision, while his Honour declined to authoritatively determine the question, his Honour held there was a reasonably arguable case that the step-in rights in the particular contracts the subject of those proceedings constituted a registrable security interest. In reaching this conclusion, his Honour concluded that:[37]
I am satisfied, to that reasonably arguable standard I have mentioned, that the step‑in rights under the two coal supply agreements are registrable PPSA security interests. The definition under s 12 of the PPSA is a functional definition. The relevant question is whether, in substance, there is an interest in personal property provided for by the transaction that secures payment or performance of an obligation. In the present case, by reference to the definition of step‑in event as incorporates the default in cl 17.1(f), the step‑in right is, among other things, provided to remedy a failure to pay certain amounts becoming due by Griffin Coal to the relevant plaintiff. The step‑in rights allow the relevant plaintiff to enter on and take possession of personal property to operate, maintain and manage the Ewington Coal Mine for the purpose of remedying that step‑in event. In that way, at least arguably, the step‑in rights secure payment or performance of Griffin Coal's obligation to the relevant plaintiff.
[37] Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [30].
In this case, the EPC Contract provides (in cl 23.3(g)(v)) that where CPA fails to remedy an Event of Default or an Event of Insolvency has occurred, or AWE reasonably believes that CPA's actions or omissions are endangering life, property, or the proper functioning of the facility (cl 31.1(a)(ii)), AWE can exercise 'the Company's Step-in Rights' set out in cl 31. That is, AWE's step-in rights are provided for the purpose of remedying an Event of Default. While these clauses are amended in the Amended EPC Contract, the amendments do not relevantly alter the pre-conditions for the exercise of the step-in rights (apart from removing the reference to a Key Milestone Failure in cl 23.3(g)(v) and inserting the belief that CPA was not likely to achieve or had failed to achieve Key Milestone Dates in cl 31.1(a)(iii) and (iv)).
AWE drew attention to a number of provisions of the EPC Contract which, it was submitted, provided a reasonable basis to contend these clauses secure performance of the contract by providing for a security interest within the meaning of s 12 of the PPSA. These include the provisions of the EPC Contract which contemplate that in performing the contract, CPA will own or be in possession of equipment which is used to perform the works, warranties in relation to CPA's equipment, design documents prepared by CPA, and CPA's rights under any subcontracts entered into. Under the terms of the step-in rights, AWE has a possessory right to CPA's equipment and design documents, is entitled to have any contractual warranties assigned to it and to exercise control over CPA's contractual rights under any subcontracts.
For the same reasons as expressed by Vaughan J, I am satisfied it is reasonably arguable that the step-in rights under both the EPC Contract and the Amended EPC Contract are registrable security interests under the PPSA. This is because the step-in rights allow AWE to take possession of personal property, including all plant, materials and information about the works, for the purpose of remedying the step-in event. AWE's exercise of the step-in rights is conditional on an Event of Default, an Event of Insolvency, or a failure to meet Milestone Dates. The step-in right is provided to AWE to remedy a failure by CPA to perform its obligations under the EPC Contract or Amended EPC Contract. I consider it is at least arguable that the step-in rights secure the performance of CPA's obligations to AWE under the EPC Contract or Amended EPC Contract.

Power of attorney

For similar reasons, I am satisfied it is reasonably arguable the power of attorney in cl 3.4(c)(iii) is also a registrable security interest under the PPSA. In this clause, CPA is required to ensure that if the EPC Contract is terminated, CPA and any subcontractor is required to deliver a deed of novation of the subcontract to AWE. In order to effect the novation, CPA granted an irrevocable power of attorney to AWE. This enables AWE to execute any documents required to novate any subcontracts entered into by CPA in the event the EPC Contract or the Amended EPC Contract is terminated.
Granting AWE the irrevocable power of attorney allows it to take possession of personal property (including the relevant subcontracts and deeds of novation) and ensure a deed of novation is entered into. As such, I accept it is arguable that granting the irrevocable power of attorney secures the performance of one of CPA's obligations under the EPC Contract, namely the obligation to deliver a deed of novation of any subcontracts to AWE.

Effect of notice of termination

Clause 23.8 of both the EPC Contract and the Amended EPC Contract sets out the effect of a notice of termination given by AWE under the EPC Contract or Amended EPC Contract and CPA's obligations that arise on the giving of a notice of termination. These obligations include the requirement to make arrangements to enable AWE to take possession of all plant, materials and things comprising the works on the date of termination, to make arrangements to assign to AWE or its nominee all rights and benefits of CPA under any existing commitments with any third party (unless the contract is not assignable or the third party's consent is required and has been refused), and to ensure the assignments are complete and effective on the date of termination.
This clause allows AWE to take possession of personal property, namely all plant, materials and things comprising the works on the date of termination. For similar reasons as set out above, I am also satisfied that it is reasonably arguable that cl 23.8 is a security interest under the PPSA. The obligations of CPA under this clause secure the performance by CPA of its obligations under the EPC Contract or Amended EPC Contract to enable AWE or its nominee to take over the performance of the works.

Passage of title and ownership

Clause 7.6(a) of the EPC Contract provides that title in the works or any part of them passes from CPA to AWE when the works are paid for, incorporated into or form part of the works on site or become a fixture.
Quite properly, counsel for AWE drew to my attention the decision of Brown J in Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq) which held that a clause in similar terms was not a security interest within the meaning of s 12 of the PPSA.[38] In that case, her Honour expressed the view that an open-ended transfer of title without more was not enough to constitute a security interest. Her Honour held that, in that case, there was a disconnect between the performance of future obligations under the relevant agreement and the transfer of title clause and that the transfer of title clause did not secure the future performance of any obligations under the contract.[39]
[38] Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq) [2022] QSC 271.
[39] Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq) [78].
Vaughan JA in Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment referred to the analysis of security of title clauses in various overseas jurisdictions. His Honour noted that these clauses had been 'reconceptualised' so that:[40]
In short, the seller's property interest in the goods is reduced from ownership to security. And, correlatively, the debtor/purchaser is treated as the owner.
[40] Gold Valley Iron Pty Ltd (in liq) v OPS Screening and Crushing Equipment [276] - [279].
Ultimately, it was unnecessary for the purposes of that appeal for his Honour to reach a final view as to whether it was necessary to reconceptualise reservation of title security interests in respect of the PPSA.
In this case, I did and do not consider it is reasonably arguable that cl 7.6(a) creates a security interest in favour of AWE. In my view, this clause is an unpaid seller's reservation of title clause. It does not secure the performance by CPA of any of its future contractual obligations under the EPC Contract or Amended EPC Contract. For this reasons, I do not consider it is arguable that it is a security interest under s 12 of the PPSA.
For these reasons, I was and am not satisfied it is reasonably arguable that AWE was entitled to registration of the following registration numbers which relied on this clause being a reasonably arguable security interest: 202206090053782; 202302030067918; and 202302160073144.

Project bank account

Under cl 18 of the Amended EPC Contract, CPA agreed to establish a sole purpose bank account which would only be applied for payments by AWE to CPA for performance of works under the Amended EPC Contract. In turn, AWE agreed to pay into the bank account any amount which represented the 'cashflow' for the period up until the date the next deposit was due to be paid. The amounts paid by AWE were agreed to be held on trust for AWE up until the date amounts were paid by CPA in accordance with the requirements of the clause.
In Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (a firm), Kenneth Martin J considered similar arrangements and held that the beneficial interest arising from this arrangement was a security interest within the meaning of s 12 of the PPSA.[41]
[41] Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (a firm) [2020] WASC 132 [210] - [219].
In this case, I accept that it is at least reasonably arguable that the money in the bank account to be set up under cl 18 of the Amended EPC Contract was:
(a)personal property;
(b)not held under the legal title of AWE once it was paid into the bank account; and
(c)paid into the bank account to secure the future performance of the Amended EPC Contract.
Having found that all of the clauses relied upon by AWE (apart from cl 7.6) are arguable security interests, the next question is whether each of the registrations is necessary and whether orders should be made in respect of each of them.

Are each of the registrations necessary?

Counsel for AWE drew to the court's attention the question of whether all registrations of the arguable security interests were required. Specifically, in respect of the Second Registrations and Third Registrations, AWE accepted each of these registrations covered the same or similar security interests as the First Registrations.
The question of whether the subsequent registrations were required and whether orders should be made in the terms sought by AWE depends on whether the security interests on which AWE relies arise under the EPC Contract or the Amended EPC Contract. This depends on whether the objective intention of the parties in entering into the Amended EPC Contract was to:[42]
(a)bring the EPC Contract to an end and replace it with the Amended EPC Contract; or
(b)leave the EPC Contract on foot, subject to the alterations contained in the Amended EPC Contract.
[42] Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 [22] (Gleeson CJ, Gaudron, McHugh and Hayne JJ).
The objective intention of the parties is ascertained by the construction of the subsequent agreement, having regard to the relevant context of that agreement. A potentially critical factor in determining the objective intention of the parties is whether the terms of the agreements deal with the same subject matter in different and inconsistent ways.[43]
[43] Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61; (2017) 53 VR 14 [78].
AWE submitted, which I accept, that in this case the objective intention of the parties can be ascertained from cl 3.1 and cl 3.2 of the Deed of Amendment and Restatement. These clauses provided that the Deed of Amendment and Restatement is only intended to vary the EPC Contract (cl 3.2(a)) and not to terminate it, and the amendments do not affect the validity or enforceability of the EPC Contract (cl 3.2(b)). This objective intention is supported by recital 6 which notes that the parties 'wish to amend' the EPC Contract, the use of the definitions in the EPC Contract in the Deed of Amendment and Restatement (cl 1.1(a)), and the definition of Amended Contract (cl 1.1(b)).
It is also relevant that the terms of the agreements do not deal with the same subject matter in inconsistent ways, although some obligations under the EPC Contract have been removed or modified and additional obligations have been imposed under the Amended EPC Contract. In these circumstances, given there are two or more contracts which affect the rights and obligations of the parties, it is necessary to consider which of the contracts is properly to be seen as the source of the relevant obligation.[44]
[44] Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd [49].

I accept and find that on the proper construction of the Deed of Amendment and Restatement, including most notably the matters referred to at [71], AWE and CPA agreed the EPC Contract would remain on foot subject to the amendments contained in the Amended EPC Contract. It is then necessary to consider the effect of these findings and whether the specific security interests relied upon by AWE arise under the EPC Contract or the Amended EPC Contract.
By virtue of the continued operation of the EPC Contract, where those security interests have not been amended, the security interests are protected by the First Registrations and the Second and Third Registrations are strictly unnecessary. The only security interest that falls into this category is the power of attorney under cl 3.4(c)(iii). However, this security interest is not the subject of a separate registration but is included in the registration that protects the step-in rights and the effect of a termination notice that is served. Both of these security interests arise under the EPC Contract but have been amended by the Amended EPC Contract.
Where the security interests which were the subject of the First Registrations have been amended, supplemented or altered by the Amended EPC Contract, it is at least arguable that these security interests have been created by the Amended EPC Contract and need to be the subject of a fresh registration in order to be perfected. In addition, where the security interest was not the subject of the First Registration (namely, the project bank account) as the obligation did not exist at that time, it is at least arguable that this security interest needs to be the subject of a fresh registration in order to be perfected.
For these reasons, unless orders are made under s 588FM of the Act extending the time for registration of the security interests that have been amended or created by the Amended EPC Contract, if CPA re-enters external administration within six months of the interest being registered, it is possible that the 'security interest' will vest in CPA immediately prior to it entering external administration.
Under the terms of s 588FL(2), s 588FL applies, inter alia, where the registration time for the collateral is not within 20 business days 'after the security agreement that gave rise to the security interest came into force'.
Counsel for AWE submitted, which I accept, that it was at least arguable that the security agreement that gave rise to the security interests is the EPC Contract. None of the registrations occurred within 20 business days of the date on which this contract came into force.
I also accept there is an argument as to whether the security interests, which are sought to be protected by the Second and Third Registrations, were created on entry into the Deed of Amendment and Restatement or on effectuation of the DOCA. This turns on the proper construction of cl 2 of the Deed of Amendment and Restatement. It is sufficient for the purposes of this application that I consider both options are reasonably arguable. Given the potential consequences associated with the risk of not registering any security interest, I consider it is reasonably arguable that each of the registrations is required and that it is reasonably arguable that an extension of time is required for each registration.

Is there a basis on which the court should grant s 588FM relief?

Having found, with one exception, that each of the matters relied on by AWE gives rise to a reasonably arguable security interest and that it is reasonably arguable that all of the registrations are required, the court must be satisfied the failure to register the collateral earlier falls within one of the three grounds set out at [36].
In this case, AWE relied on s 588FM(2)(a)(ii) (the failure to register the collateral does not prejudice the position of creditors or shareholders) and s 588FM(2)(b) (just and equitable grounds of the Act).
In its written submissions, AWE distinguished between any prejudice to unsecured creditors that could arise in respect of the First Registrations and those in respect of the Second Registrations and Third Registrations.
In respect of the First Registrations, it was emphasised that shortly after execution of the EPC Contract, there were five ALLPAP or ALLPAP with exception registrations which would have been apparent to any unsecured creditor dealing with CPA. On this basis, it was contended that it was unlikely that any unsecured creditor would have dealt with CPA on the basis that the relevant collateral affected by AWE's rights was unencumbered.
In relation to any unsecured creditors of CPA after effectuation of the DOCA, AWE submitted they did not suffer any relevant prejudice. This was because the First and Second Registrations were in place prior to the DOCA effectuating and the Third Registrations were registered almost immediately.
In support of its submission that it would be just and equitable to grant the relief sought, AWE primarily relied on two matters.
First, AWE referred to its conduct after administrators were appointed to CPA. This conduct included that AWE did not exercise any rights under the EPC Contract but kept it on foot, funded ongoing works on the Waitsia project and paid substantial pre-appointment claims of employees and subcontractors working on this project, and agreed to convert the EPC Contract from a lump-sum contract to a cost-plus contract. AWE contended that these matters contributed to the DOCA and enabled the administrators to achieve the objectives under pt 5.3A of the Act.
Second, as a result of the effectuated DOCA, CPA has been recapitalised and there is no suggestion it is not solvent or that it will not remain solvent. Under the DOCA, all historic liabilities as at 5 December 2022 have been released.
In this case, for the following reasons, I am satisfied that AWE has made out both grounds on which it relied. First, two of the ALLPAP with exceptions registrations on the PPSR were lodged in April 2021, shortly after AWE should have registered its security interests. After this time, it is unlikely that any unsecured creditor who dealt with CPA would have done so on the basis that the relevant collateral affected by AWE's rights were unencumbered. Second, the Second and Third Registrations were lodged promptly. It is unlikely that any unsecured creditor who is dealing with CPA after the DOCA effectuated will do so on the basis that the collateral is unencumbered. Third, since CPA went into administration the EPC Contract has continued on foot, AWE provided funding to the administrators, and AWE agreed to change the basis of its contractual arrangements with CPA from a fixed price contract to a cost-plus contract.

Should the court exercise its discretion to make the orders sought?

Having found there is a basis on which the court can grant s 588FM relief, the final question is whether the court should exercise its discretion to make the orders sought and whether the order should be made on any particular terms and conditions.
In exercising the court's discretion, two relevant factors are the delay in registration of the security interests, the interests of unsecured creditors, and the solvency of CPA.
In this case, the primary factor that militates against an extension being granted is the delay in the registration of the security interests under the EPC Contract. The various security interests relied upon by AWE were created in January 2021 and the First Registrations did not occur until June 2022, a delay of almost 18 months. However, as set out above, at this time, there were at least two other ALLPAP with exceptions security registrations. I accept AWE's submission that this would have been apparent to any unsecured creditor searching the PPSR and that it is unlikely any unsecured creditor would have dealt with CPA on the basis the relevant collateral affected by the various security interests were unencumbered.
I also accept AWE's submission that there is no evidence or suggestion that CPA, having recently recapitalised, is not solvent or will not remain solvent for at least six months.
For these reasons, I was and am satisfied that I should exercise my discretion to make the orders sought and that there are no particular terms and conditions that should be imposed.

Conclusion and Orders

For the reasons set out above, I was and am satisfied that it is appropriate to exercise the power under s 588FM of the Act and make orders fixing a later time under s 588FL(2)(b)(iv) in relation to each of the three registrations the subject of the originating process.
Accordingly, at the conclusion of the hearing on 23 March 2023, I made orders in terms of 'Annexure A' to this judgment.

'Annexure A'

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
13 JUNE 2023