Evolution Fleet Services Pty Ltd v Allroads Plant Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Evolution Fleet Services Pty Ltd v Allroads Plant Pty Ltd [2022] FCA 1084

File number: QUD 233 of 2022
Judgment of: DOWNES J
Date of judgment: 14 September 2022
Catchwords:

CORPORATIONS – application pursuant to s 588FM(1) Corporations Act 2001 (Cth) for an order fixing a later time for the purposes of s 588FL(2)(b)(iv) – failure to register security interest due to inadvertence – order made with imposition of Guardian Securities condition

CORPORATIONS – application pursuant to s 293(1) Personal Property Securities Act 2009 (Cth) for an extension of the number of business days in the period specified in s 62(3) – failure to register security interest due to inadvertence – just and equitable to make orders sought – orders made
Legislation:

Corporations Act 2001 (Cth) ss 588FL, 588FM

Personal Property Securities Act 2009 (Cth) ss 12(3), 13, 14, 62, 63, 293
Cases cited:

Commonwealth Bank of Australia v HM Aircraft Holdings Pty Ltd (2021) 152 ACSR 63; [2021] FCA 447

Elimatta Pty Ltd v NT Bullion Pty Ltd, in the matter of NT Bullion Pty Ltd [2021] FCA 1416

One Corporate Trust Services Ltd v MLSP Assets Pty Ltd in its capacity as trustee for the MLSP Assets Trust [2022] FCA 555

In the matter of Appleyard Capital Pty Limited; 123 Sweden AB v Appleyard Capital Pty Limited (2014) 101 ACSR 629; [2014] NSWSC 782

Squadron Resources Pty Ltd v Highlake Resources Pty Ltd, in the matter of Highlake Resources Pty Ltd [2018] FCA 1292

Von Arx v Todae Solar Pty Ltd, in the matter of Todae Solar Pty Ltd (Administrators Appointed) [2020] FCA 1071
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 39
Date of last submission/s: 9 September 2022
Date of hearing: 23 August 2022
Counsel for the Applicants: Mr M Stunden
Solicitor for the Applicants: Thomson Geer
Counsel for the First Respondent: No appearance
Counsel for the Second Respondent: No appearance
Counsel for the Third Respondent: No appearance
Counsel for the Fourth Respondent: No appearance
Counsel for the Fifth Respondent: No appearance
Counsel for the Sixth Respondent: No appearance
Counsel for the Seventh Respondent: No appearance
Counsel for the Eighth Respondent: No appearance
Counsel for the Ninth Respondent: No appearance
Counsel for the Tenth Respondent: No appearance
Counsel for the Eleventh Respondent: No appearance
Counsel for the Twelfth Respondent: No appearance
Counsel for the Thirteenth Respondent: No appearance
Counsel for the Fourteenth Respondent: No appearance
Counsel for the Fifteenth Respondent: No appearance
Counsel for the Sixteenth Respondent: No appearance
Counsel for the Seventeenth Respondent: No appearance
Counsel for the Eighteenth Respondent: No appearance
Counsel for the Nineteenth Respondent: No appearance
Counsel for the Twentieth Respondent: No appearance
Counsel for the Twenty First Respondent: No appearance
Counsel for the Twenty Second Respondent: No appearance
Counsel for the Twenty Third Respondent: No appearance
Counsel for the Twenty Fourth Respondent: No appearance
Counsel for the Twenty Fifth Respondent: No appearance
Counsel for…
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Details
Case
[2022] FCA 1084
Decision Date

CaseChat Overview and Summary

Evolution Fleet Services Pty Ltd and Evolution Asset Management Pty Ltd, trading as Evolution Group, sought orders to extend the time for registering certain security interests on the Personal Property Securities Register. The applications were made pursuant to the Corporations Act 2001 (Cth) and the Personal Property Securities Act 2009 (Cth). The applicants had discovered during a refinancing process that they had failed to register their security interests in certain vehicles, which needed to be registered before the new financier would agree to refinance their facilities. The matter was urgent, with the deadline for obtaining the orders being 20 September 2022. The applicants sought an extension of the time for registering their security interests to protect their super priority under the Personal Property Securities Act.

The primary issue before the court was whether it was just and equitable to grant the applicants' requests to extend the time for registering their security interests on the Personal Property Securities Register. The applicants argued that the failure to register was due to inadvertence and that the extensions were necessary to protect their super priority interests. The respondents did not oppose the relief sought, and the court found that the applicants' requests were reasonable and in the interest of justice.

The court found that it was just and equitable to grant the applicants' requests for an extension of time to register their security interests. The court noted that the applicants' failure to register was due to inadvertence, and the extensions were necessary to protect their super priority interests. The court also considered the urgency of the matter, as the applicants needed to obtain the orders by 20 September 2022. The court granted the applicants leave to amend the originating process, fixed the time for registering the security interests as 21 June 2022, and extended the number of business days for registering the security interests. The court also granted liberty to apply to discharge or vary the orders in certain circumstances.

The court made the following orders: (1) the applicants have leave to amend the originating process; (2) the time for registering the security interests is fixed as 21 June 2022; (3) the number of business days for registering the security interests is extended; (4) any liquidator, administrator, or deed administrator of certain respondents has liberty to apply to discharge or vary the orders; and (5) the applicants have liberty to apply. The orders were made to protect the applicants' super priority interests and to ensure that the refinancing process could proceed as planned.

Orders

Orders of the court

1. The applicants have leave to amend the originating process in the form of annexure ALM-47 to the affidavit of Ms Alice Morrow affirmed on 12 September 2022.

2. Pursuant to s 588FM of the Corporations Act 2001 (Cth), 21 June 2022 is fixed as the time for the applicants to register on the Personal Property Securities Register (PPSR) each PPSR registration referred to in Schedule A and Schedule B annexed to these orders for the purposes of s 588FL(2)(b)(iv) of the Corporations Act.

3. Pursuant to s 293(1)(a) of the Personal Property Securities Act 2009 (Cth), the number of business days set out in s 62(3)(b) of that Act is extended, in respect of each registration referred to in Schedule A to these orders, so that the period will expire on 21 June 2022.

4. Any liquidator, administrator or deed administrator of any of the first to seventh, tenth to twelfth, fourteenth and sixteenth respondents has liberty to apply to discharge or vary order 2 if any winding up of any such respondent occurs, or an administrator is appointed to such respondent under ss 436A, 436B or 436C of the Corporations Act, or any such respondent executes a deed of company arrangement, within six months of 21 June 2022.

5. The applicants have liberty to apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons below, the orders sought by the applicants will be made in accordance with the terms of the proposed further amended originating process with a modification to paragraph 3, as discussed below. Further, the orders sought in paragraph 4 of the proposed further amended originating process were made on 23 August 2022.RELEVANT BACKGROUND TO APPLICATIONS Evolution Group Holdings Pty Ltd (Evolution) is the holding company of both applicants, Evolution Fleet Services Pty Ltd (EFS) and Evolution Asset Management Pty Ltd (EAM). These three companies form part of the Evolution Group. On 27 January 2017, Evolution and EFS entered into a business sale agreement to purchase the business known as “Surefleet Australia” from Cashcownow Pty Ltd. The internal structure of the Evolution Group is such that EAM owns vehicles and leases them to EFS, which in turn leases them to third party customers as part of the “Surefleet” business. Each of the leases to the third parties in this case are for a term of more than two years or are a lease for an indefinite term in a case in which the lessee, with the consent of EFS, has retained uninterrupted (or substantially uninterrupted) possession of the vehicle for a period of more than two years after the day on which the lessee first acquired possession of it. For that reason, each of the leases of the vehicles listed in the Updated Master Schedule annexed to the affidavit of Mr Andrew Baxter sworn on 9 September 2022, and the annexures to the further amended originating process, is a PPS lease within the meaning of s 13 of the PPSA. It follows that EFS has a security interest as well as a purchase money security interest or PMSI within the meaning of that Act: ss 12(3) and 14 PPSA. The acquisition of the Surefleet business by EFS was initially by vendor finance which was replaced with an asset finance facility from NAB. Evolution also has a loan facility with NAB. Both facilities are secured in large part by vehicles owned by EAM. The board of Evolution has sought, and is well advanced in negotiations with, refinancing with another financier, with a view to that financier acquiring the debt of NAB and entering into new facility agreements with the Evolution Group. It was during the due diligence process into this refinance during May 2022 that it was discovered that EFS had failed to register its security interests in the relevant vehicles, either effectively or at all. In particular, it was discovered in May 2022 that attempts in April 2022 by the then employed fleet administrator of Evolution to register a security interest in certain vehicles had been done incorrectly. The orders sought by the applicants are required to be made before the new financier will agree to refinance the facilities. Mr Stunden of counsel, who appeared for the applicants, submitted that that order needed to be made by 20 September 2022.APPLICATION PURSUANT TO SECTION 588FM CORPORATIONS ACTRelevant legislation Section 588FL(2)(b)(ii) of the Corporations Act requires a security interest to be registered within 20 business days of the security agreement that gave rise to the security interest coming into force. A later time may be fixed as provided for by s 588FL(2)(b)(iv) if an application is made under s 588FM(1).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I am therefore satisfied that it is just and equitable to make an order extending the number of business days in the period specified in s 62(3)(b) for the perfection by registration of each registration referred to in Schedule A to the further amended originating process so that the period will expire on 21 June 2022.CONCLUSION For these reasons, the following orders will be made:(1)The applicants have leave to amend the originating process in the form of annexure ALM-47 to the affidavit of Ms Alice Morrow affirmed on 12 September 2022;(2)Pursuant to s 588FM of the Corporations Act, 21 June 2022 is fixed as the time for the applicants to register on the PPSR each PPSR registration referred to in Schedule A and Schedule B annexed to these reasons for the purposes of s 588FL(2)(b)(iv) of the Corporations Act;(3)Pursuant to s 293(1)(a) of the PPSA, the number of business days set out in s 62(3)(b) of that Act is extended, in respect of each registration referred to in Schedule A to these reasons, so that the period will expire on 21 June 2022;(4)Any liquidator, administrator or deed administrator of any of the first to seventh, tenth to twelfth, fourteenth and sixteenth respondents has liberty to apply to discharge or vary order 2 if any winding up of any such respondent occurs, or an administrator is appointed to such respondent under ss 436A, 436B or 436C of the Corporations Act, or any such respondent executes a deed of company arrangement, within six months of 21 June 2022. In circumstances where material changes were made by the applicants to the originating process but without a further hearing having taken place, and because of the relative urgency associated with the application, I will also grant the applicants liberty to apply.

Ratio Decidendi

Legal Principle Established

This is an application pursuant to s 588FM(1) of the Corporations Act 2001 (Cth) for an order fixing a later time for the purposes of s 588FL(2)(b)(iv) of the Corporations Act in respect of registrations made by the applicants against certain collateral. An order is also sought pursuant to s 293(1) of the Personal Property Securities Act 2009 (Cth) (PPSA) for an extension of the number of business days in the period specified in s 62(3) of the PPSA. This is sought to protect what is known as super priority, which is conferred by ss 62 and 63 PPSA. There are some circumstances of urgency in relation to this matter as the orders are required to be made by 20 September 2022. Part of the applicants’ principal business activity is to manage a commercial vehicle hire business under the business name “Surefleet”. The orders are sought in circumstances where the applicants were late in registering certain security interests over a number of fleet vehicles on the Personal Properties Security Register (PPSR). Since the originating process was filed and the matter was heard on 23 August 2022, the applicants sought leave to amend the originating process in the form of annexure ALM-47 to the affidavit of Ms Alice Morrow affirmed on 12 September 2022. That leave will be granted because the effect of the amendments is to reduce the scope of the orders sought as well as the number of respondents, and there is no prejudice to any person caused by the amendments. The grantors of security interests in the vehicles, which are the subject of the modified application (Grantor Respondents), and their AllPAP security holders (AllPAP Respondents), were joined to the proceedings, were served, did not appear at the hearing on 23 August 2022 and expressly did not oppose the relief sought. For the reasons below, the orders sought by the applicants will be made in accordance with the terms of the proposed further amended originating process with a modification to paragraph 3, as discussed below. Further, the orders sought in paragraph 4 of the proposed further amended originating process were made on 23 August 2022.RELEVANT BACKGROUND TO APPLICATIONS Evolution Group Holdings Pty Ltd (Evolution) is the holding company of both applicants, Evolution Fleet Services Pty Ltd (EFS) and Evolution Asset Management Pty Ltd (EAM). These three companies form part of the Evolution Group. On 27 January 2017, Evolution and EFS entered into a business sale agreement to purchase the business known as “Surefleet Australia” from Cashcownow Pty Ltd. The internal structure of the Evolution Group is such that EAM owns vehicles and leases them to EFS, which in turn leases them to third party customers as part of the “Surefleet” business. Each of the leases to the third parties in this case are for a term of more than two years or are a lease for an indefinite term in a case in which the lessee, with the consent of EFS, has retained uninterrupted (or substantially uninterrupted) possession of the vehicle for a period of more than two years after the day on which the lessee first acquired possession of it. For that reason, each of the leases of the vehicles listed in the Updated Master Schedule annexed to the affidavit of Mr Andrew Baxter sworn on 9 September 2022, and the annexures to the further amended originating process, is a PPS lease within the meaning of s 13 of the PPSA. It follows that EFS has a security interest as well as a purchase money security interest or PMSI within the meaning of that Act: ss 12(3) and 14 PPSA.