Caason Investments Pty Ltd v Ausroc Metals Ltd
[2016] WASC 267
•23 AUGUST 2016
CAASON INVESTMENTS PTY LTD -v- AUSROC METALS LTD [2016] WASC 267
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 267 | |
| 23/08/2016 | |||
| Case No: | COR:175/2016 | 11 AUGUST 2016 | |
| Coram: | MASTER SANDERSON | 11/08/16 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Extension granted | ||
| A | |||
| PDF Version |
| Parties: | CAASON INVESTMENTS PTY LTD AUSROC METALS LTD |
Catchwords: | Corporation Application for extension of time to register interest on Personal Property Securities Register Applicable principles |
Legislation: | Corporations Act 2001 (Cth) Personal Properties Securities (Corporations and Other Amendments) Act 2010 (Cth) |
Case References: | 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782 Barclays Bank Plc [2012] NSWSC 1095 In Re Cardiff Workmen's Cottage Co Ltd [1906] 2 Ch 627 National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1 Re a Limited Company (1928) 28 SR (NSW) 364 Re Accolade Wines Australia Ltd [2016] NSWSC 1023 Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220 Re Guardian Securities Ltd [1984] 1 NSWLR 95 Sanwar Aust Finance Ltd v Ground-breakers Pty Ltd (in liq) (1990) 2 ACSR 692 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
AUSROC METALS LTD
Defendant
Catchwords:
Corporation - Application for extension of time to register interest on Personal Property Securities Register - Applicable principles
Legislation:
Corporations Act 2001 (Cth)
Personal Properties Securities (Corporations and Other Amendments) Act 2010 (Cth)
Result:
Extension granted
Category: A
Representation:
Counsel:
Plaintiff : Mr B C Walrut
Defendant : No appearance
Solicitors:
Plaintiff : Lavan Legal
Defendant : No appearance
Case(s) referred to in judgment(s):
123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782
Barclays Bank Plc [2012] NSWSC 1095
In Re Cardiff Workmen's Cottage Co Ltd [1906] 2 Ch 627
National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1
Re a Limited Company (1928) 28 SR (NSW) 364
Re Accolade Wines Australia Ltd [2016] NSWSC 1023
Re Cardinia Nominees Pty Ltd [2013] NSWSC 32
Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220
Re Guardian Securities Ltd [1984] 1 NSWLR 95
Sanwar Aust Finance Ltd v Ground-breakers Pty Ltd (in liq) (1990) 2 ACSR 692
1 MASTER SANDERSON: By originating process filed 9 August 2016 the plaintiff sought relevantly the following orders:
3.2 Pursuant to section 588FM of the Act, 31 May 2016 be fixed as the later time for the Plaintiff to register its security interest on the PPSR for the purposes of subparagraph 588FL(2)(b)(iv) of the Act in respect of the collateral being all of the present and after-acquired property of the Company referred to in registration number 201605310094784 in the register established under the Personal Property Securities Act 2001.
3.3 In the event that within 6 months of 31 May 2016 a winding up of the Company commences, or an administrator of the Company is appointed under sections 436A, 436B or 436C of the Corporations Act 2001 (Act), or the Company executes a deed of company arrangement, the liquidator, administrator, deed administrator and any unsecured creditor of the Company has liberty to apply to discharge or vary any order extending the time for registration of the Plaintiff's security interest.
2 After hearing argument and considering the plaintiff's written submissions I made the order largely in terms sought by the plaintiff. These are my reasons for doing so.
3 The background to this application is detailed in the affidavit of Richard Jude Flory dated 8 August 2016 which is annexed to the affidavit of Blair Llewellyn Strickland of the same date. In about mid-November 2014 the defendant by its director one Jim Malone requested that the plaintiff provide short term financial accommodation to provide working capital to the company whilst it undertook a capital raising. On or around 28 November 2014 the plaintiff provided financial accommodation to the company pursuant to a loan agreement. On the same day the company granted to the plaintiff a General Security Deed (GSD) over all its present and after acquired property. The plaintiff is not usually engaged in the business of lending either secured or unsecured loans. The plaintiff's primary operations include research and development in the clean energy and resources exploration and investment in mining and resources companies. It does not generally provide funding to companies and accordingly does not ordinarily take security.
4 The GSD was not registered on the Personal Properties Securities Register (PPSR) until on or about 31 May 2016.
5 Sections 588FL and 588FM of the Act were introduced by the Personal Properties Securities (Corporations and Other Amendments) Act 2010 (Cth). Section 588FL(2) provides that:
(2) This subsection covers a PPSA security interest if:
(a) at the critical time, or, if the security interest arises after the critical time, when the security interest arises:
(i) the security interest is enforceable against third parties under the law of Australia; and
(ii) the security interest is perfected by registration, and by no other means; and
(b) the registration time for the collateral is after the latest of the following times:
(i) 6 months before the critical time;
(ii) the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;
(iii) if the security agreement giving rise to the security interest came into force under the law of a foreign jurisdiction, but the security interest first became enforceable against third parties under the law of Australia after the time that is 6 months before the critical time - the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier;
(iv) a later time ordered by the Court under section 588FM.
(2) On an application under this section, the Court may make the order sought if it is satisfied that:
(a) the failure to register the collateral earlier:
(i) was accidental or due to inadvertence or some other sufficient cause; or
(ii) is not of such a nature as to prejudice the position of creditors or shareholders; or
(b) on other grounds, it is just and equitable to grant relief.
8 In Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 Black J said (at [11]):
Sections 588FL and 588FM of the Corporations Act were introduced by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth). Section 588FL(2) provides that:
(2) This subsection covers a PPSA security interest if:
(a) at the critical time, or, if the security interest arises after the critical time, when the security interest arises:
(i) the security interest is enforceable against third parties under the law of Australia; and
(ii) the security interest is perfected by registration, and by no other means; and
(b) the registration time for the collateral is after the latest of the following times:
(i) 6 months before the critical time;
(ii) the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;
(iii) if the security agreement giving rise to the security interest came into force under the law of a foreign jurisdiction, but the security interest first became enforceable against third parties under the law of Australia after the time that is 6 months before the critical time-the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier;
(iv) a later time ordered by the Court under section 588FM.
9 Section 588FM of the Act provides for extensions of time to register in certain circumstances. In 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782 Brereton J said at [9]:
Thus s 588FM confers on the court a discretion to fix a later time if satisfied of any one of three grounds, namely that the failure to register the collateral earlier was accidental, or was not of such a nature to prejudice the position of creditors or shareholders, or that on other grounds it is just and equitable to do so. The section also permits the court to make the order on terms and conditions.
10 In order to enliven the discretion of the court under s 588FM(2) of the Act one of the three grounds in s 588FM referred to by Brereton J needs to be established. In this case what was relied upon by the plaintiff was that the failure to register was due to inadvertence; in other words reliance was placed on s 588FM(2)(a)(i).
11 The concept of 'inadvertence' has been considered in case law dealing with the former s 266 and recently in case law relating to s 588FM. In Sanwar Aust Finance Ltd v Ground-breakers Pty Ltd (in liq) (1990) 2 ACSR 692 Kelly SPJ (with whom Macrossan CJ and Connolly J agreed) said (at 695):
The question of whether an omission to carry out a statutory obligation because of ignorance of the law may amount to inadvertence has been considered by courts on several occasions and the weight of authority is that it may do so.
12 In Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220 Philippides J said:
A lack of legal understanding as to the requirements of registration, and the implications of late registration, has also been held to amount to inadvertence.
13 In National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1 the bank's officers intended to delay lodgement of the notice on a mistaken understanding that it was necessary to defer lodgement pending completion of new documents to replace security documents that had been lost. Hansen J found the bank's failure to lodge the notice was deliberate and intentional. It was not produced by accident. However his Honour concluded that (at [65]):
In my view, the NAB's failings, although regrettable, particularly perhaps for such a large lending institution, were not made with any fraudulent or improper intention and, as such, are not beyond the scope of those acts or omissions for which the curative power of the court under s 266(4) is intended. The failings were attributed to human error, oversight or inadvertence. It is precisely circumstances of this kind for which the provision is designed.
14 An alternative consideration in an application of this kind is that of prejudice. In Appleyard Brereton J said at [30]:
… 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 for making the order (which is inevitable).
15 This is the type of prejudice contemplated in the legislation (see s 588FM(2)(a)(ii), which refers to prejudice from the failure to register earlier, not from a making of the order) and referred to by Buckley J in In Re Cardiff Workmen's Cottage Co Ltd [1906] 2 Ch 627; Re a Limited Company (1928) 28 SR (NSW) 364 and by McLelland J in Re Guardian Securities Ltd [1984] 1 NSWLR 95, 98. The period of delay in affecting registration is relevant, because the shorter the delay the less likely that the failure to register within time will have had any impact. The significance of the passage of time is mainly related to the possibility of competing interests having arisen, in particular through others having dealt with a company that the collateral was unencumbered. Brereton J said in the matter of Re Accolade Wines Australia Ltd [2016] NSWSC 1023 [19]:
… if the Court is not satisfied that there is no risk that unsecured creditors could be adversely affected, the unsecured creditors (or their representatives) are entitled to be heard against the making of an order, though this may sufficiently be achieved by suspending the operation of the order, or by imposing a term reserving leave to apply to set it aside in the event of a liquidation or administration (a Guardian Securities condition).
16 That is not to say that an order will not be made if there is a possibility of prejudice to unsecured creditors. Brereton J considered this issue in Appleyard at [26] - [28]. His Honour said:
… On the one hand, Hewlett-Packard demonstrates that it is open to make an order, notwithstanding detriment to the unsecured creditors. On the other, Re Flinders Trading Co holds that an order ought not be made in those circumstances, even on the ground of inadvertence …
… it must be born [sic] in mind that the only utility of obtaining an extension is so that, in the event of liquidation or administration, the security interest will not vest in the company but persist for the benefit of the secured creditor to the prejudice of the unsecured creditors. An approach that regarded an adverse impact on the interests of unsecured creditors as practically conclusive would be inconsistent with the above-cited statements of three of the most eminent equity judges of this court of the last century in Re a Ltd Co (Long Innes J), in Re Dudley Engineering Pty Ltd (Street J), and in Re Guardian Securities (McLelland J), and with the decision of the Full Federal Court in Hewlett Packard. Moreover, if the interests of the unsecured creditors were given such influence as Re Flinders Trading Cosuggests, the jurisdiction created by the section would be devoid of practical utility, as the only cases in which an order would be made would be cases in which there was no need for one because the company was manifestly solvent, and would not go into administration or liquidation within six months.
17 The evidence of the failure to register is given by Mr Flory at [22] - [34] of his affidavit. It is clear from Mr Flory's evidence he was not aware of the effect of s 588FL of the Act. Mr Flory states that the plaintiff had never previously dealt with registration on the PPSR. The plaintiff was aware that the GSD should have been registered on the PPSR but did not appreciate the detrimental effect that the failure to register on the PPSR within a particular period of time would have on the enforceability of the GSD.
18 I was satisfied that the evidence of Mr Flory demonstrated there was a lack of understanding as to the legal implications of late registration. It is clear there was a level of inadvertence in this particular instance on the part of the plaintiff. Furthermore Mr Flory had discussions with a Mr Malone of the defendant and as a consequence of those discussions the plaintiff elected not to immediately register the GSD. While that decision may be characterised as deliberate and intentional rather than one produced by accident it was done without the plaintiff having a proper appreciation of the consequences of that decision.
19 It is clear from the evidence of Mr Flory the actions of the plaintiff in electing not to immediately register were not made with any fraudulent or improper intention and, as such, were not beyond the scope of those acts or omissions for which the curative power of the court is intended. The failings of the plaintiff can be attributed to oversight or inadvertence. It is precisely these circumstances for which the provision in s 588FM of the Act is designed to remedy. I was therefore satisfied the discretion of the court to make an order was enlivened.
20 The delay in the registration of the interest was some 18 months. A search of the PPSR revealed only one other creditor had registered a security interest against the defendant following the execution of the GSD but before the plaintiff registered on 31 May 2016. That creditor was served with the proceedings. They elected not to appear at the hearing. But counsel for the plaintiff did tender a letter from solicitors Pointon Partners which was sent to the plaintiff's solicitors and which they asked be brought to the court's attention. The correspondence raises two concerns. The first is as to service of the documents. It is clear the documents were served at the address on the PPSR. There is nothing in that complaint. Further, the documents clearly came to the attention of the creditor and no prejudice has been suffered.
21 The letter seems to suggest the circumstances do not exist which would enliven the jurisdiction to make the orders sought by the plaintiff. For reasons set out below I am not satisfied that is the case. The letter then goes on to say:
In the event the Court is minded to grant your client the relief sought in the Originating Process we suggest that an order also be made along the following lines:
'This order is to have no effect on the priority to be afforded to the security interest granted to Robbie Jesse Hunt in the collateral referred to in registration number 201602120033166 in the Register.'
We note that such an order has been made in previous applications under s 588FM of the Act including in the matters of Apex Gold Pty Ltd ACN 124 893 778 [2013] NSWSC 881 and Cardinia Nominees Pty Ltd [2013] NSWSC 32.
22 In my view it is not necessary to make such a specific order. What I did do was include in the orders made a 'Guardian Securities' order, that is liberty to apply generally, which will allow the court to remedy any prejudice which might be suffered by a creditor as a result of these orders being made.
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