FC Securities Pty Ltd v Menilden Creek Farming Pty Ltd

[2018] NSWSC 1681

Supreme Court

New South Wales

Medium Neutral Citation:	FC Securities Pty Ltd v Menilden Creek Farming Pty Ltd [2018] NSWSC 1681
Hearing dates:	1 November 2018
Date of orders:	01 November 2018
Decision date:	01 November 2018
Jurisdiction:	Equity - Corporations List
Before:	Parker J
Decision:	Order that the time for the registration of the financing statements be extended pursuant to Corporations Act 2001 (Cth), s 588FM.
Catchwords:	CORPORATIONS - registration time for security interests – application under Corporations Act 2001 (Cth), s 588FM(1) to extend registration time for financing statements registered pursuant to the Personal Property Securities Act 2009 (Cth) – failure to register financing statement because of accident or due to inadvertence
Legislation Cited:	Corporations Act 2001 (Cth), ss 588FL, 588FM Personal Property Securities Act 2009 (Cth)
Cases Cited:	Re Appleyard Capital Pty Ltd (2014) 101 ACSR 629; [2014] NSWSC 782 Re Cardinia Nominees Pty Ltd [2013] NSWSC 32
Category:	Principal judgment
Parties:	FC Securities Pty Ltd (Plaintiff) Menilden Creek Farming Pty Ltd (First Defendant) Menilden Creek Holdings Pty Ltd (Second Defendant)
Representation:	Counsel: N Mirzai (Plaintiff – appearing ex parte)   Solicitors: Banki Haddock Fiora Lawyers (Plaintiff)
File Number(s):	2018/335569
Publication restriction:	Nil

Judgment – EX TEMPORE

Revised and reissued 5 November 2018

1. In October 2017 the defendants granted to the plaintiff a number of security interests over their personal property. Those security interests fell within the terms of the Personal Property Securities Act 2009 (Cth) (“PPSA”). These proceedings concern twelve financing statement registrations on the Personal Property Securities Register (“PPSR”) with respect to those security interests (there are more registrations than there are security interests, but this arises from the fact that the registrations describe the security interests in different ways). The financing statements in question were registered in late August and in October of this year.

2. The plaintiff applies pursuant to the Corporations Act 2001 (Cth), s 588FM, to have the registration time for the financing statements the subject of the security interests extended. The effect of the orders sought would be, in effect, to back-date the twelve registrations to the time when the security interests were originally granted in October 2017.

3. The Corporations Act, s 588FL(2)(b)(ii) provides that in the ordinary course a security interest that is covered by a financing statement registered on the PPSR is protected against the subsequent appointment of an administrator or liquidator if the registration is made within twenty business days after the relevant security agreement came into force. In this case, no financing statements were lodged at the time.

4. The Court's power to make the orders sought is enlivened in the circumstances described in s 588FM(2) which provides:

(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.

5. Evidence in support of the application was given by Stephen Patrick Kevans who provides financial consulting services to the corporate group of which the plaintiff forms part. Mr Kevans deposes to the fact that at the time the security interests were granted, Mr Ben Lai was the in-house legal counsel for the group. Mr Kevans deposes that he assumed Mr Lai would arrange for registration of any necessary financing statements as part of his role as in-house counsel. For reasons which are not explained in the evidence, Mr Lai did not do so. On 15 March he wrote to the group's external solicitors, Banki Haddock Fiora, asking whether all the necessary PPSR registrations had been lodged. The solicitors responded by saying that they had not and suggested that registrations be made at the earliest opportunity. The solicitors advised that the matter was urgent and that "time was running".

6. In an email on 23 March, Mr Lai asked Mr Kevans whether it was necessary to get the solicitors to prepare a summary of registrations that needed to be done which could then be registered. Mr Kevans deposes that he asked Mr Lai to attend to the registration of the necessary financing statements. For reasons which do not appear from the evidence, that was not done. Mr Lai subsequently left the group.

7. In late August 2018, Mr Kevans sought further advice from the solicitors about this. This resulted in advice sent later the same day that the financing statements should be registered "pronto". There is no evidence as to what prompted Mr Kevans to ask for the advice. Four financing statements were registered shortly afterwards on 30 August. On 9 October two further financing statements were lodged followed by six more on 19 October.

8. Mr Kevans' affidavit was sworn on 24 October. It is clear that at some point after 30 August, advice must have been given to the plaintiff that it was necessary not only to have lodged the August registrations but also to make this application for extension of time. But Mr Kevans' affidavit does not identify when that advice was received and what prompted it. All Mr Kevans says is that the further eight registrations which were made in October resulted from advice that was received from the solicitors in the course of preparing to commence the present proceedings.

9. The authorities make it clear that failure to register may be “accidental or due to inadvertence" where the security holder is entirely ignorant of the requirement to register and also where the holder of the security interest operates under a mistake as to the consequences of failing to register the security interest: Re Cardinia Nominees Pty Ltd [2013] NSWSC 32.

10. The evidence in the present case is not entirely satisfactory. It is clear from the evidence that the management of the plaintiff was always aware of the registration requirements of the PPSA. The evidence does not explain why it was that in those circumstances the registrations were not made in the first place or how it was that that failure came to attention. Of course, any evidence on this question would have come from Mr Lai and he is no longer with the organisation, but the evidence also does not explain the delay between March, when Mr Kevans was aware of the failure to register and had instructed Mr Lai to do something about it, and the end of August when Mr Kevans apparently realised that this had not been done. Nor does the evidence explain when it was that the plaintiff was first advised of the need to bring these proceedings.

11. In an application such as this, the Court expects a plaintiff, who is seeking an indulgence from the Court, to provide a full explanation of the circumstances in which the application comes forward. That should include a full explanation of how the mistake originally came to be made and how it came to be discovered and, if there was any delay after the discovery of the problem, what the cause of that delay was. But despite the gaps in the evidence in the present case, I think I can infer that the failure to lodge the financing statements in question was "accidental" in the relevant sense.

12. Accordingly the Court has power to make the orders sought. The evidence before me shows that the defendants consent to the application and, for that reason, I have dispensed with service of the Originating Process on them and have dealt with the application on an ex parte basis.

13. The orders would only affect other creditors if one or other of the defendants were to go into liquidation within six months of the registration of the financing statements in question. The orders which I will make contain the usual liberty to a liquidator/administrator or deed administrator who might be appointed to the defendants to apply to discharge or vary the orders, if that were to happen: see Re Appleyard Capital Pty Ltd (2014) 101 ACSR 629; [2014] NSWSC 782. Accordingly, there is no immediate prejudice to any other interested party, but should such potential prejudice arise the question of extension can be reconsidered.

14. For these reasons, I will make orders extending time under s 588FM, subject to such liberty to apply, in the form sought in the application.

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Decision last updated: 05 November 2018