IMO Securecam Pty Ltd
[2011] VSC 226
•27 May 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST-E
S CI 2011 00548
IN THE MATTER OF SECURECAM PTY LTD (ACN 082 328 461)
B E T W E E N:
| QR SCIENCES SECURITY PTY LTD (ACN 120 813 282) | Plaintiff |
| v | |
| SECURECAM PTY LTD (ACN 082 328 461) | First Defendant |
| - and - | |
| AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION | Second Defendant |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 May 2011 | |
DATE OF JUDGMENT: | 27 May 2011 | |
CASE MAY BE CITED AS: | IMO Securecam Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 226 | |
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CORPORATIONS –Application to rectify Australian Register of Company Charges pursuant to s 274 of the Corporations Act 2001 (Cth) – document lodged with ASIC incorrectly noting discharge of plaintiff’s charge – order made rectifying Register.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N. De Young | Norton Rose Australia |
| For the First Defendant | No appearance | |
| For the Second Defendant | No appearance |
HIS HONOUR:
The plaintiff, QR Sciences Security Pty Ltd (“QRS”), makes application for an order pursuant to s 274 of the Corporations Act (“the Act”) rectifying the Australian Register of Charges maintained by the Australian Securities and Investment Commission (“ASIC”) in relation to a charge granted by the first defendant, Securecam (“Securecam”) to QRS, on 2 November 2009. The need for rectification arises from the lodgement on 15 June 2010 of a memorandum in form 312 of the Corporations Regulations which noted the purported satisfaction of the charge.
The factual background to the matter is deposed to in an affidavit of one of the directors of QRS, Richard Stokes sworn 10 February 2011.
QRS is part of a group of companies which designs, supplies and delivers electronic security and technology systems. Securecam is a customer of QRS. Its sole director is Brett Robertson.
In September 2009, QRS agreed to advance Securecam funds pursuant to a loan deed. The loan, of approximately $535,000, was to be repaid in full by 4 February 2010. On 2 November 2009, Securecam granted a fixed and floating charge in favour of QRS over all of its assets as security for, among other things, the amounts owing under the loan deed.
On 13 November 2009, the charge was registered with ASIC and assigned the serial number 1888931 in the Australian Register of Company Charges.
Securecam failed to comply with its obligations under the loan deed to repay the loan by 4 February 2010. In March 2010, the parties negotiated an agreement about the payment of the amounts due. At about that time, Securecam approached QRS and requested that QRS provide Securecam with a new trading account in order that it could continue to purchase products from QRS. This was also agreed to by QRS. Securecam’s obligations under the new trading account were agreed to be secured by the charge.
By 8 November 2010, Securecam was indebted to QRS in the sum of approximately $257,000 and was in breach of its obligations in respect of both the debt under the loan deed and the new trading account agreed to in March 2010.
In November 2010, Mr Stokes instructed QRS’ solicitors, Norton Rose, to take steps to recover the amounts owing to it by Securecam. Following those instructions, he was informed by a solicitor at Norton Rose, Ms Cibich, that an ASIC historical company extract for Securecam revealed that the charge was noted as having been satisfied on 24 June 2010.
A copy of the Form 312 Notification of Discharge or Release of Property from a Charge which was lodged with ASIC on 24 June 2010 purporting to notify of the release of Securecam from the charge was obtained[1].
[1]Form 312 is the appropriate document to lodge at ASIC pursuant to s 269 of the Act when a charge has been satisfied in whole or in part.
Mr Stokes was not aware that the charge had been released prior to being informed about it by Norton Rose. He deposes that he did not sign any Form 312 pertaining to the charge and further, that he never told Mr Robertson or anyone else at Securecam that QRS was agreeable to the charge being released. He states that he would not have authorised anyone at QRS to take such steps whilst Securecam remained indebted to QRS under the loan deed and the new trading account.
The Form 312 which is exhibited to Mr Stokes’ affidavit and which was obtained from ASIC indicates that it has been signed by someone purportedly in the capacity as “Chargee” i.e. in the present context, by QRS. Mr Stokes says that the signature appearing on the document is not his signature. Further, Mr Stokes says that it is not the signature of the other director of QRS, Paul Thompson; he believes that in fact the signature is that of Mr Robertson. He states that he has seen Mr Robertson’s signature on a number of documents and that he believes by reference and comparison to those documents that the signature is Mr Robertson’s. That evidence is not admissible but this is of no great moment having regard to evidence which is given in Mr Stokes’ affidavit concerning subsequent concessions by Mr Robertson to which I shall refer to below. Mr Stokes states that he has made enquiries of employees at QRS regarding the execution and lodgement of the Form 312 as a result of which he believes that no‑one at the company signed the document or advised anyone at Securecam that QRS consented to the charge being released, either partially or in full.
After he had been informed by his solicitors of the situation, Mr Stokes telephoned Mr Robertson who stated that he did not sign any documents releasing the charge. On the same day, Mr Stokes received two emails from Mr Robertson. The first attached a copy of the Form 312 which had been previously provided to Mr Stokes by Norton Rose. The second email stated as follows:
You can tell your lawyers to keep their pants on. Please find attached documents I signed with ANZ/Esanda late May, early June.
I signed these, as I purchased a motor vehicle. These documents (scanned) were sent to the below person by email to make sure I had filled them out correctly and he acknowledges that all are in order.
He posted these after receiving this email. Hope this helps.
In early December 2010, Mr Stokes had a number of conversations with Mr Robertson about Securecam’s indebtedness to QRS and the issue of the charge. On 17 December 2010, Mr Stokes received an email and a letter from Mr Robertson. The letter states, among other things:
In regard to your allegation of fraud, I strenuously deny that Securecam or myself had any knowledge, intention whether by oversight or accidentally signing any document of any type on behalf of QRS or any associated entities that led to the removal of the charge. We have explained to you that around the time of the allegation, we had at leased a new motor vehicle for my wife and requested that they remove the ANZ/Esanda charge for her old vehicle which was unencumbered at that time. I have attached the documents that were forwarded for this purchase. We verily believe that the charge was removed by a third party without our knowledge, therefore your allegation will need to be taken up with the parties we suspect could have been involved that is the Motorama Group or ANZ.
The records maintained by ASIC for Securecam reveal that on 15 June 2010, the Australian and New Zealand Banking Group Limited (ANZ) lodged notification of a fixed charge over Securecam’s assets with ASIC. It appears that at or about the same time ANZ lodged the Form 312 noting the discharge of QSC’s charge.
Enquiries were made with ANZ in November 2010 about the circumstances leading up to the lodgement of the Form 312 and the subsequent release of the charge. Those enquiries reveal that in or around June 2010, ANZ provided Securecam with finance to purchase a motor vehicle. It was a condition of the finance that there be partial discharge of the QSC charge so that ANZ could take a first ranking fixed charge over the vehicle as security for Securecam’s obligations. In the course of that process ANZ was provided with a full discharge of the charge instead of a partial discharge as originally requested.
In addition, the ASIC extract reveals that John Hawkins Enterprises Pty Ltd (“John Hawkins”) was given a fixed and floating charge over the assets of Securecam on 23 December 2010.
Mr Stokes states that in December 2010 he had conversations with Mr Robertson regarding the debt still owing by Securecam to QRS under the loan deed and the new trading account. Mr Robertson indicated that he was expecting Suncorp Metway Limited (“Suncorp”), who held a first ranking fixed and floating charge over Securecam’s assets, to provide it with further financial accommodation. That further financial accommodation was apparently ultimately provided by Suncorp.
Mr Stokes states that Securecam remains indebted to QRS under both the loan deed and the new trading account and that its security position has been “significantly weakened” as a result of its charge being released without its consent. This is something of an understatement. He states that because of this it is just and equitable for the Court to make the order sought in the originating process.
QRS has reached agreement with those parties who appear to be directly affected by the orders sought, ANZ and John Hawkins, such that, in the event the Court makes an order of the type proposed by QRS, that the ANZ and John Hawkins’ charges will take priority to the “reinstated” QRS charge.
In addition, the holder of the first ranking fixed and floating charge, Suncorp Metway Limited, has indicated that it does not attend to appear in the application and neither consents to nor opposes the orders sought.
In a second affidavit of Mr Stokes sworn 23 February 2011, he deposes to contact with Mr Robertson on 15 February 2011. Mr Robertson telephoned Mr Stokes on that date and indicated that he had received a copy of QRS’ application seeking rectification and that he did not intend to instruct solicitors to act on behalf of Securecam in relation to the matter. He stated that he did not intend to oppose the application and conceded that the charge should be reinstated on ASIC’s Register of Charges. He maintained the position that the removal of the charge was not as a result of any wrongdoing on his behalf.
In a third affidavit of Mr Stokes of 17 May 2011, he confirms the position in respect of the priority of the charge given to John Hawkins and that QRS has entered into a priority deed of the type contemplated by s 279(2) of the Act with John Hawkins.
Mr Stokes also exhibits a recent extract of the records maintained by ASIC in respect of Securecam dated 16 May 2011. The extract indicates that no further fixed or floating charges have been granted by Securecam over its assets since its application was filed on 10 February 2011. He also deposes that Securecam continues to be indebted to QRS under the obligations described above.
QRS also relies on two affidavits of Karli Alexandra Cibich, who is an employed solicitor at QRS’s solicitors, Norton Rose. The first of those, sworn on 8 March 2011, deals with communications with the in-house legal advisers at ANZ concerning the discharge of the QRS charge. Those communications reveal that since the purported discharge of QRS’ charge in June 2010, ANZ has been granted three fixed charges over certain assets of Securecam as security for advances made to it. In a letter from Ms French of the ANZ legal department of 23 February 2011, Ms French states that ANZ will not oppose the application to have its charge reinstated on the Australian Register of Charges “subject to the receipt by ANZ of partial discharges from QR in relation to any assets the subject of a fixed charge granted to ANZ by Securecam subsequent to the charge (including, but not limited to) fixed charges numbered 2002516, 2107363 and 2108784)”.
In response to this letter, Ms Cibich wrote back to ANZ on 7 March 2011 stating the agreement of her client that if the Court makes an order directing ASIC to reinstate the charge on the Australian Register of Charges, QRS will execute a Form 312 releasing certain property which would otherwise be embraced by its fixed and floating charge to enable them to lodge such releases with ASIC.
In her second affidavit of 18 May 2011, Ms Cibich exhibits a letter of ANZ of 17 March 2011 confirming that ANZ would not object to Securecam obtaining such an order on the basis of the provision of the releases in respect of the three motor vehicles mentioned in that letter.
I note that ASIC has been served with this application and the material in support. By letter dated 9 March 2011, ASIC have indicated it neither consents to nor opposes the application “to have the Australian Register of Company Charges held by us rectified to reflect that charge No. 1888931 is still registered in its favour.”
By a letter dated 11 March 2011, Suncorp Bank, the first ranking security holder, indicates that it will not be appearing in relation to the application and that it does not intend to oppose it. Finally, by letter dated 11 May 2011, the solicitors for John Hawkins indicate that their client does not oppose the application that QRS’ charge be reinstated on the Register of Company Charges, ranking behind John Hawkins’ charge referred to in that letter. They also indicate that they would not be appearing on the return of the application nor would they be seeking any orders as to costs.
Legal principles
Section 274 of the Act provides:
Where the Court is satisfied:
(a)that a particular with respect to a registerable charge on property of a company has been omitted from, or misstated in, the Register or a memorandum referred to in s 269; and
(b)that the omission or misstatement:
(i)was accidental or due to inadvertence or to some other sufficient cause; or
(ii)is not of a nature to prejudice the position of creditors or shareholders; or
(iii)was due to a failure of an electronic system to lodge a notice in respect of a charge; or that on other grounds it is just and equitable to grant relief;
(iv)the Court may, on the application of ASIC, the company or any person interested and on such terms and conditions as seem to the Court just and expedient, order that the omission in the statement be rectified.
In State Bank of New South Wales v Berowra Waters Holdings Pty Ltd,[2] Needham J of the Equity Division of the Supreme Court of New South Wales considered an application pursuant to s 202 of the Companies (New South Wales) Code, the legislative precursor to s 274. The facts in that case are very similar to those in the present application. The plaintiff bank had taken a fixed and floating charge over the assets of the first defendant. The first defendant sought to re‑finance its borrowings and in anticipation of this occurring, representatives of the plaintiff bank executed discharges of, among other things, its charge to secure its indebtedness. The financing proposal did not eventuate. The first defendant’s indebtedness to the bank increased and its overdraft limit was exceeded. Because of that increased liability, the charge had to be re‑stamped for duty and the documents, including the executed discharges, were sent from the bank’s branch which had negotiated the securities with the first defendant to the head office of the bank.
[2]Eq 4408 1985 (unreported) BC8500500.
After the documents were re‑stamped, an employee of the bank at the head office mistakenly took the view that the discharges which were on the file should be lodged for registration. The bank, having discovered the discharge of the various securities it held, including the charge, approached the Corporate Affairs Commission to cancel the discharges and the Commission indicated that an application to the Court was necessary. After quoting the terms of s 212 of the Code (which is in very similar terms to s 274 of the Act) Needham J stated:
It seems to me that the plaintiff comes within s 212 in that a particular with respect to a registrable charge, namely the particular as to its discharge, or satisfaction, has been misstated in the register, and I think that the Court, accordingly, has power, on the application of the plaintiff, or a person interested, to order that the omission or misstatement be rectified.
A more narrow view as to whether the Register may be “rectified” by striking out all reference to an instrument such as a memorandum of release is to be found in the decision of Murray J of the Supreme Court of Western Australia in Re St Barbara Mines; Commonwealth Bank of Australia v ASIC.[3] In that case, by accident or by inadvertence, the form of release which was filed, rather than partially discharging the security, wholly discharged it. Murray J observed[4]:
And so in this case I interpret s 274(b) as empowering the Court to make an order under section where it is satisfied of a matter set out in paragraph (a) and, subject to what follows as to the proper interpretation of paragraph (b), any one of the matters set out therein. Upon being so satisfied the Court has no discretion but to make an order even though, for example, it is satisfied that on some ground it is just and equitable to grant relief.
Further it is important in this case to identify with some precision what it is that the section empowers the Court to do. This is an application to rectify the Register. I have set out above the terms in which it is made. I presume the contention to be that there is a misstatement in the Register in that following the lodgement of the form of release, which is described in the Register as a “notification of discharge” the charge … is shown as “satisfied”, but that would not appear to be a misstatement which is capable of satisfying any condition stipulated in s 274(b) so as to justify or require rectification of the Register.
In my view the contention ought to be that there is a relevant misstatement in the memorandum of release given under s 269 in that it informed the respondent that the charge was “paid or satisfied in full and all property was released”. If that misstatement was rectified, I presume that, having regard to s 269(2), [ASIC] would be obliged to enter in the Register the particulars of the matters which would then be stated in the memorandum which would then, presumably as from the date of its original document, be a notification of what had occurred in respect of the charge which would be left otherwise in force as from its original registration … I am asked to order that the Register be “rectified” by effectively striking out all reference to the memorandum of release and that clearly is not within the terms of s 274 and is beyond the power conferred upon the Court by [that] section, limited as it is to omissions from or errors in the Register or memorandum.
Murray J went on to dismiss the application.
[3](1998) 29 ACSR 238.
[4](1998) 29 ACSR 238 at 243.
In my view, the approach of Needham J in the Berowra Waters case is to be preferred. As the authors of Ford’s Principles of Company Law at paragraph 19.384 observe:
On a narrow view, an order of this kind does not relate to an omission from or misstatement in the Register, and therefore the order is not authorised by s 274: [citing Re St Barbara Mines]. The broader view is that s 274 empowers the Court to correct any misstatement with respect to the discharge or satisfaction of a charge, such as might arise by virtue of the incorrect registration of a memorandum of release, [citing the Berowra Waters decision]. With respect there is no obvious reason for restricting the power of the Court where the Register is in a misleading form. But where an application is brought by the company alone in the absence of a contradictor, it is not appropriate to make an order removing from the Register all references to the charge, although the Court may, if it is satisfied that the charge is no longer enforceable, grant leave to amend the Register to note that this is so.
I agree with the submissions of Mr De Young, counsel for QRS, that the Register contains a misstatement in that it refers to the charge being satisfied when it has not been. I also agree with his submission that the misstatement in the Register was “accidental or due to inadvertence” (on the part of Mr Robertson or some other person signing the notice) or “to some other sufficient cause” such as to bring the current circumstances within the scope of s 274.
Further, the interests of those who are potentially affected by the order have, in my view, been satisfactorily accommodated. To the extent that the correction of the Register may be prejudicial to the persons who have relied on the Register, that is, the subsequent secured creditors, QRS has reached agreements with them that the “reinstated” charge will rank behind the charges of ANZ and John Hawkins Enterprises.
I also agree with Mr De Young’s submission that the rights of unsecured creditors of Securecam are not likely to be prejudiced if the orders sought by QRS are made.
The circumstances which are described above results in a conclusion in my view that it is just and equitable that the Register be rectified in the manner sought. QRS’ interests have been directly and significantly affected by the inappropriate discharge of its security without any involvement whatsoever on its part. I will make orders which redress the situation in this regard.
As to the question of costs, the involvement of Securecam in these circumstances is not completely explained, despite this application and the supporting affidavits being served on it. Securecam has indicated it wishes to take no part in the application and has filed no affidavit material contradicting the account of the circumstances outlined in Mr Stokes’ first affidavit. It is still quite unclear who actually signed the Form 312. Tentatively, I consider that the costs of QRS should be paid by Securecam including costs reserved but will enable it to be heard on that question before making such an order. The plaintiff is to serve a copy of these reasons on the first defendant as soon as practicable. Unless the first defendant gives notice in writing to my associate of its intention to oppose the making of an order against it in favour of the plaintiff for its costs of this application within 14 days of such notice being served on it, I will order that the first defendant pay the costs of this application including reserved costs. In the event that such notice is given to my associate, the hearing as to costs shall be set down for hearing on a date to be fixed.
Mr De Young submitted proposed orders which have been prepared in consultation with ASIC and I will make orders in those terms with some modifications as follows:
1.Pursuant to s 274 of the Corporations Act2001, the Australian Register of Company Charges be rectified so as to change the status of charge No. 1888931 granted by the first defendant to the plaintiff from “satisfied” to “registered” on the condition that charge No. 2110624 granted by the first defendant in favour of John Hawkins Enterprises Pty Ltd be entitled to priority over the plaintiff’s charge;
2.The second defendant remove any reference to the Form 312 dated 15 June 2010, purporting to discharge the charge referred to in the preceding paragraph, from the register of documents accessed by the public;
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