Diploma Construction Pty Ltd v Precast Prestressed Buildings Perth Pty Ltd

[2004] FCA 1505

FEDERAL COURT OF AUSTRALIA

Diploma Construction Pty Ltd v Precast Prestressed Buildings Perth Pty Ltd [2004] FCA 1505

CORPORATIONS – extension of time for lodging notice of deed of charge – delay due to inadvertence – extension just and expedient subject to liberty to apply

Corporations Act 2001 (Cth) ss 266, 441A

Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 203 ALR 51 cited

DIPLOMA CONSTRUCTION PTY LTD v PRECAST PRESTRESSED BUILDINGS PERTH PTY LTD
W249 of 2004

RD NICHOLSON J
5 NOVEMBER 2004
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W249 OF 2004

BETWEEN:	DIPLOMA CONSTRUCTION PTY LTD (ACN 008 939 179) APPLICANT
AND:	PRECAST PRESTRESSED BUILDINGS PERTH PTY LTD (Administrators Appointed ACN 102 746 449) RESPONDENT
JUDGE:	RD NICHOLSON J
DATE OF ORDER:	5 NOVEMBER 2004
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.The period for lodging with the Australian Securities and Investments Commission notice of the Deed of Charge granted by the respondent to the applicant dated 23 April 2004 be extended to 3 August 2004. 

2.The administrators or any liquidator or unsecured creditor have liberty to apply to discharge or vary the order in the event of the appointment of a liquidator in any winding up which commences within six months of the date of lodgement of the Deed of Charge.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W249 OF 2004

BETWEEN:	DIPLOMA CONSTRUCTION PTY LTD (ACN 008 939 179) APPLICANT
AND:	PRECAST PRESTRESSED BUILDINGS PERTH PTY LTD (Administrators Appointed ACN 102 746 449) RESPONDENT

JUDGE:	RD NICHOLSON J
DATE:	5 NOVEMBER 2004
PLACE:	PERTH

REASONS FOR JUDGMENT

1. This is an ex parte application brought in reliance on s 266(4) of the Corporations Act 2001 (Cth) (‘the Corporations Act’). It seeks two orders. The first is that the period for lodging with the Australian Securities and Investments Commission (‘ASIC’) of a notice of deed of charge granted by the respondent to the applicant and dated 23 April 2004 be extended to 3 August 2004. Additionally the applicant seeks an order that the administrators or any liquidator or unsecured creditor have liberty to apply to discharge or vary that order in the event of the appointment of a liquidator in any winding‑up which commences within six months of the date of lodgement of the notice of the deed of charge.

2. The application is supported by an affidavit of a solicitor for the applicant.  It explains that the applicant owns and conducts a construction and property development business.  The respondent owned and conducted a business involved in the design, manufacture and supply of precast building products.  Fifty per cent of the shares in the respondent were legally and beneficially owned by a company associated with the applicant.  The applicant provided to the respondent working capital requirements by way of cash advance from time to time.  The consequence was that the respondent became indebted to the applicant in a sum totalling just under $330 000, that being the debt as at 22 April 2004.

3. In this situation, on 23 April 2004 a sale of shares agreement was entered into between a company representing interests associated with the respondent and the company holding 50 per cent of the shares in the respondent and being associated with the applicant.  The agreement was also entered into by principals representing, as it were, the applicant and the respondent and other associated companies.

4. The essence of the agreement was that the applicant would cause its associated company to transfer the shares in the respondent to a company associated with the respondent in exchange for a deed of charge to secure the debt.  The agreement provided that the respondent would grant to the applicant a fixed and floating deed of charge over all of its assets in the amount of $320 000, although not limited by the deed to that amount and that the charge would rank in priority behind another charge to Westpac.

5. The deed of charge was signed on 23 April 2004. The evidence of the solicitor is that while he was aware of the need for the deed of charge to be lodged for registration at ASIC as soon as possible after the deed of charge was executed, he was not aware of the need to do so within 45 days, see s 268 of the Corporations Act. Additionally, it was his practice to have a deed of charge stamped prior to lodgement for registration at ASIC in order to avoid inconveniences arising from lodgement and subsequent extraction for the purpose of stamping.

6. Under the share sale agreement the respondent was responsible for payment of all costs associated with the preparation and registration of the deed of charge. This included stamp duty. The evidence is that problems were experienced in extracting the stamp duty and registration costs from the respondent. As a result, the applicant paid those costs itself to ensure that the deed of charge could be lodged for registration at the then earliest possible time and with no further delays. The result was that it was on 26 July 2004 that the deed of charge was stamped. It was lodged for registration on 3 August 2004. The consequence of the occurrence of those events was that the deed of charge was registered eight days after the date of its stamping but outside the 45-day period required by s 268 of the Corporations Act.

7. On 27 October 2004 administrators were appointed of the respondent and associated interests of the respondent. The consequence is that the critical day under s 266(8) for the purposes of this proceeding is the date on which the company came under administration, namely, 27 October 2004.

8. The first meeting of creditors of the respondent under administration took place on 1 November 2004.  Approximately 30 unsecured creditors attended.  The aggregate value they represented was in excess of $1 million.

9. The evidence is that between the date of the execution of the share sale agreement and the critical day no contracts were awarded by the applicant to the respondent.  Consequently, as of today the respondent remains indebted to the applicant in the sum being the amount secured by the deed of charge.

10. Having in mind the provisions of s 441A of the Corporations Act with respect to the decision period which expires at the close of business today, the applicant wishes to appoint a receiver pursuant to the deed of charge. However, it would be unable to do so unless the period of 45 days was extended.

11. The evidence also is that there is a real likelihood of the respondent being placed into liquidation and that unsecured creditors are unlikely to receive a dividend.  The administrators have stated that they propose to continue to run the business of the respondent for a short period to enable two particular contracts to be completed, but at the end of that period they propose to cease trading and attempt to sell the business as a going concern.  Failing that, it would appear to be inevitable that the respondent would be placed into liquidation if that has not sooner occurred.

12. The applicant holds consents of the persons it proposes to appoint as receivers pursuant to the deed of charge.

13. It has been held by the Full Court in Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 203 ALR 51 that the occurrence of administration under Pt 5.3A of the Corporations Act does not exhaust the role to be played by s 266(4) and that the Court retains a power to extend time for the purposes of ss 266(1)(c)(i), 266(1)(d) and 266(2).

14. Section 266(4), which relates to a failure to lodge a notice in respect of a charge and hence to s 266(1)(c), specifies the conditions on which the Court may extend the period. The first matter the Court is required to consider is whether the failure to lodge the notice was accidental or due to inadvertence or some other sufficient cause. I am satisfied on the evidence of lack of awareness that there was inadvertence in this case and that would provide satisfaction of that first limb of s 266(4). I am additionally satisfied that the delay in obtaining payment of the stamp duty is also a sufficient cause for the failure to lodge the notice in the time required by the Corporations Act.

15. Having been so satisfied it is not necessary for me to consider the alternative of whether the failure is not of a nature to prejudice the position of creditors or shareholders.  In any event, I note that the proposed second order protects the position of unsecured creditors.  I have previously stated the proposed terms of that.

16. It is also open to the Court to consider whether it is just and equitable for relief to be granted.  It is not necessary for me to make findings on that in view of the satisfaction I have reached in relation to the first of the requirements above.

17. It then falls to the Court to be able to make an order for extension on such terms and conditions as seem to the Court to be just and expedient and thus to extend the period for such further period as is specified in the order.  I am satisfied that the relevant further period should be extended to 3 August 2004, being the date on which the charge was in fact lodged for registration and that is specified in proposed order 1.  As to terms and conditions, I am satisfied that these are appropriately met by the proposed order 2.

18. For these reasons I consider that the application should be granted.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Associate:

Dated:             19 November 2004

Counsel for the Applicant:	D Vilensky
Solicitor for the Applicant:	Bowen Buchbinder Vilensky
Date of Hearing:	5 November 2004
Date of Judgment:	5 November 2004