In the matter of MacDonald Contracting Australia Pty Ltd (in liquidation)

[2024] NSWSC 729

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of MacDonald Contracting Australia Pty Ltd (in liquidation) [2024] NSWSC 729

Hearing dates:

23 April 2024

Date of orders:

17 June 2024

Decision date:

17 June 2024

Jurisdiction:

Equity - Corporations List

Before:

McGrath J

Decision:

Declaratory relief granted (see [97])

Catchwords:

CORPORATIONS — winding up — application by creditor seeking declaratory relief — dispute between creditor and liquidator as to perfected status of security interest — charge in favour of plaintiff over company’s property — where charge secured loans made by plaintiff to company — where the security interest is a dual transitional security interest and migrated security interest under the Personal Property Securities Act 2009 (Cth) — whether the security interest was perfected at all relevant times — whether seriously misleading defects in registration rendered it ineffective — whether the security interest otherwise vested in the company upon its winding up — HELD — the security interest was continuously perfected under the legislation and did not vest in the company

Legislation Cited:

Corporations Act 2001 (Cth), ss 471B, 500(2), 513B, 588FL, 588FM

Personal Property Securities Act 2009 (Cth), ss 10, 12, 56, 150, 153, 156, 163–165, 267, 267A, 306–308, 310, 319, 322, 330–333

Personal Property Securities Regulation 2010, r 5.5, Schedule 1

Cases Cited:

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421; [1972] HCA 61

Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd (2013) 283 FLR 122; [2013] NSWSC 1741

Northern Managed Finance Pty Ltd v 4 in 1 Wyoming Pty Ltd (2017) 120 ACSR 167; [2017] NSWSC 407

Re OneSteelManufacturing Pty Ltd (administrators appointed) (2017) 93 NSWLR 611; [2017] NSWSC 21

Texts Cited:

Nicholas Mirzai and Jason Harris, The Annotated Personal Property Securities Act 2009 (Cth) (4th ed, 2023)

Category:

Principal judgment

Parties:

Tarenast Pty Ltd ACN 128 672 766 (Plaintiff)
MacDonald Contracting Australia Pty Ltd ACN 125 842 631 (in liquidation) (First Defendant)
Darren John Vardy (Second Defendant)

Representation:

Counsel:
S Cominos and Y Truong (Plaintiffs)
No Appearance (Defendants)

Solicitors:
CT Law (Plaintiffs)
Kreisson (Defendants)

File Number(s):

2023/00449612

Publication restriction:

Nil

JUDGMENT

INTRODUCTION

1. This application arises in the context of the liquidation of the first defendant, MacDonald Contracting Australia Pty Ltd (MCA), and is made pursuant to ss 471B and 500(2) of the Corporations Act 2001 (Cth) and the Personal Property Securities Act 2009 (Cth) (PPSA). The application proceeds on an amended originating process which was filed by the plaintiff, Tarenast Pty Ltd, on 25 March 2024.

2. The primary form of relief sought by Tarenast is a declaration that a fixed and floating charge granted by MCA as chargor to Tarenast as chargee on 23 April 2009 (2009 Charge) has been continuously perfected for the purposes of s 56 of the PPSA and has not vested in MCA by virtue of the operation of s 588FL of the Corporations Act and/or s 267 of the PPSA.

3. The second defendant in these proceedings is Darren John Hardy (Liquidator), who was appointed as liquidator of MCA on 3 January 2023. The Liquidator and MCA filed a submitting appearance (save as to costs) in respect of the present proceedings on 22 March 2024.

4. The application was effectively heard ex parte, with only Tarenast leading evidence and making submissions. Mr S Cominos and Ms Y Truong appeared as counsel for Tarenast, instructed by CT Law. I was greatly assisted by their submissions.

5. The application raises several complicated issues regarding the operation of numerous provisions of the PPSA and their interaction with provisions of the Corporations Act. As many legal practitioners will have found since the commencement of the PPSA at midnight on 30 January 2012, the PPSA is a convoluted and tangled web of statutory provisions, especially when dealing with cases on the margins like this one.

RELEVANT FACTS

Corporate details of MCA and Tarenast

6. MCA was incorporated on 7 June 2007. It carried on business as a civil construction contractor, providing services including the drilling and installation of temporary and permanent ground anchors, rock bolting and rock face stabilisation, soil nailing, micro piling and shot concreting.

7. On 3 January 2023, MCA was placed into liquidation pursuant to a members’ resolution to voluntarily wind up the company and appoint a liquidator. On that same date, the Liquidator was appointed as liquidator of MCA.

8. From the time of MCA’s incorporation until the date on which it was wound up, Gregory Paul MacDonald was MCA’s sole director and secretary.

9. On 28 November 2007, Tarenast was incorporated. Tarenast is engaged in the business of hiring out plant and construction equipment. Mr MacDonald has been the sole director and secretary of Tarenast since its incorporation.

Tarenast Loans secured by the 2009 Charge

10. Since 2009, Tarenast has provided financial support in the form of loans to MCA to assist MCA to meet its business needs (Tarenast Loans), some of which have been repaid. The balance owing under the Tarenast Loans has fluctuated over the years. The financial statements of Tarenast as at 30 June 2023 indicate that the amount owing by MCA to Tarenast as at that date in respect of the Tarenast Loans was $2,227,571.00.

11. The Tarenast Loans were secured by the 2009 Charge.

12. The 2009 Charge is a “Fixed and Floating Charge”, the purpose of which was to secure the repayment of monies by Tarenast to MCA, including the Tarenast Loans, up to a prospective liability of $10 million.

13. In the 2009 Charge, MCA was defined as the Chargor and Tarenast was defined as the Chargee. In the terms of the 2009 Charge extracted below, “MCA” has been used in place of “the Chargor” and “Tarenast” has been used in place of “the Chargee”.

14. Relevant terms of the 2009 Charge are as follows:

1.   DEFINITIONS AND INTERPRETATION

1.1    Definitions

In this document, unless the context otherwise requires:

…

(33)   “Mortgaged Property” means

(a)   all the undertaking of [MCA] and all of its property, rights and other assets, which are owned at present or acquired in the future… and which are not excluded by Item 5 of the Schedule; and

(b)   any other property, rights, interests and assets charged or to be charged pursuant to this charge;

…

(41)   “Secured Moneys” means all amounts now or at any time in the future falling within the following categories:

(a)   all money:

(i)   which are [sic] owing and payable by [MCA] to [Tarenast];

(ii)   which are [sic] owing by [MCA] to [Tarenast], but not presently payable; …

(b)   all monies now or in the future owing by [MCA] to [Tarenast] irrespective of whether the monies are owing or become owing as a consequence of any past, present or future transaction between [MCA] or [Tarenast]…

…

(e)   all monies now or in the future owing by [MCA] to [Tarenast] under any judgment, order, deed or other thing into which any present or future obligation of [MCA] to [Tarenast] becomes merged;

…

(42) “Secured Obligations” means all obligations, covenants, warranties, terms, provisions, stipulations and work to be observed, performed or fulfilled by [MCA] pursuant to this charge or a Collateral Security;

…

2.   CHARGE

2.1   Grant of Charge

[MCA] charges, as beneficial owner, all of the Mortgaged Property held by [MCA] beneficially, and charges, as trustee of the Trust all of the Mortgaged Property, comprising the Trust Fund to [Tarenast] as security for the payment of the Secured Moneys and the performance of the Secured Obligations.

2.2   Nature

Subject to Clause 2.3, this charge operates as:

(1)   a fixed charge on all present and future:

(a)   freehold and leasehold property, plant, equipment and machinery of [MCA] and of the Trust;

(b)   uncalled and called but unpaid Capital of [MCA] and of the Trust;

(c)   goodwill of [MCA] and of the Trust;

(d)   securities, instruments (negotiable or otherwise) and documents of title at any time deposited with [Tarenast] by [MCA] for any purpose;

(e)   books of account and other documents relating to the business transactions of [MCA] and of the Trust;

(f)   Book Debts and other debts owing to [MCA] at any time;

(g)   Marketable Securities, instruments (negotiable or otherwise) and documents of title of [MCA];

(h)   Intellectual Property Rights;

(i)   Records; and

(j)   all other personal properly of [MCA] and of the Trust, that is not acquired for disposal in the ordinary course of the business or [MCA] or of the Trust; and

(2)   subject to Clause 2.3 and Clause 9.3, a floating charge on the Mortgaged Property not otherwise charged pursuant to Clause 2.2(1) …

15. By its terms, particularly cl 2.2, the 2009 Charge operates as a fixed charge on all present and future property, plant equipment and machinery owned or leased by MCA; debts owing to MCA; and personal property of MCA, and a floating charge on all present and future circulating assets owned by MCA.

Registration of the 2009 Charge on the ASIC Register and migration to the PPS Register

16. On 30 April 2009, the 2009 Charge was lodged with the Australian Securities and Investments Commission (ASIC) for registration on the ASIC Register of Company Charges (ASIC Register), maintained pursuant to the (now repealed) s 265 of the Corporations Act, as was required to be done by the former ss 263 and 264 of the Corporations Act (Tarenast registration).

17. At midnight on 30 January 2012, on the commencement of the PPSA, the contents of the ASIC Register was transferred to the Personal Property Securities Register (PPSR). As part of that process, the Tarenast registration was migrated to the PPSR. The PPSR Registration Number Search Certificate dated 27 October 2022, numbered 2197650508490002 and exhibited to the affidavit of Mr MacDonald affirmed 11 November 2023 (PPSR Search Certificate) records in respect of the Tarenast registration:

1. a registration number of 201112201662173;

2. registration kind “security interest”, also marked as transitional;

3. a registration start date and time of “30 January 2012 00:00:00” (with no stated end time); and

4. a collateral class description of “All present and after-acquired property — No exceptions”.

18. The PPSR Search Certificate identifies MCA and Tarenast — the former by its ACN and the latter by its ABN and organisation name — as grantor and secured party respectively. In the PPSR Search Certificate, under the heading “Secured Party Details”, the following appears:

Organisation identifier: 8612867266

Organisation identifier type: ABN

Organisation name: TARENAST PTY LTD (Verified)

Address for Service

Email: [email protected]

Mailing address: 59 ALEXANDER AVE

TAREN POINT NSW 2229

TAREN POINT

NSW 2229

Physical address: No address provided

Steps taken to “find and claim” the 2009 Charge

19. In November 2022, Mr MacDonald and his wife, Lee-Ann MacDonald, who was employed by MCA and provided administrative assistance to MCA from time to time and continues to provide administrative support to Tarenast, took steps to “find and claim” the Tarenast registration on the PPSR.

20. Between 14 and 17 November 2022, Ms MacDonald followed the “find and claim” process (as set out on the PPSR webpage entitled ‘Finding and claiming migrated registrations’, located at < which involved:

1. requesting access to the PPSR Find and Claim catalogue via email from Mr MacDonald’s email address to [email protected];

2. logging in to Tarenast’s existing PPSR account;

3. selecting the catalogue for the ASIC Register;

4. inputting relevant details and conducting relevant searches on the Find and Claim catalogue to locate the temporary “Secured Party Group” (SPG) that had been assigned to the Tarenast registration upon its migration from the ASIC Register to the PPSR; and

5. “claiming” the security interest constituted by the 2009 Charge (Tarenast security interest) by following the prompts on the PPSR website, which included entering the SPG details for Tarenast and details of the SPG access code (a security code generated by the PPSR system, linked to Tarenast’s SPG).

21. As a result of Ms MacDonald following the “find and claim process”, certain details of the Tarenast registration as they appeared on the PPSR were updated. These changes are detailed in and evidenced by two automated emails from [email protected] to Mr MacDonald’s email address, received on 17 November 2022 at 4:55pm, being:

1. an email advising that the transfer of registrations associated with Tarenast’s temporary SPG number to a new SPG number (103207653) had been completed; and

2. an email attaching a verification statement, provided pursuant to s 156 of the PPSA, which set out updated details in respect of the Tarenast registration, including, under the heading “New Secured Party Group Details”:

1. SPG number 103207653;

2. in the organisation identifier field: “128672766”;

3. in the organisation identifier type field: “ACN”; and

4. under the subheading “Address for Service”:

Contact name: Gregory MacDonald

Email: [email protected]

Mailing address: 59 Alexander Avenue

Taren Point

NSW 2229

AUSTRALIA

Physical address: No address provided

Deed of Loan dated 18 November 2022

22. On 18 November 2022, Tarenast as lender and MCA as borrower entered into a Deed of Loan. Pursuant to the Deed, the debt representing the amount owed by MCA to Tarenast under the Tarenast Loans — which was stated to be, as at 30 June 2022, $2,820,380.33 — was converted into a loan on terms as provided.

23. Clause 7.1(b) of the Deed sets out the parties’ agreement and acknowledgment that:

the [2009 Charge] secures to [Tarenast], amongst other things:

(i)   the payment of all monies owing and payable; and

(ii)   the performance of all obligations;

to be paid or performed by [MCA] pursuant to this deed.

Dispute between Tarenast and the Liquidator regarding the status of the 2009 Charge

24. After MCA was placed into liquidation and the Liquidator appointed as liquidator of MCA in January 2023, the solicitor for Tarenast and Mr MacDonald, Peter Chapman of CT Law, sent a number of emails to the Liquidator. These emails concerned Tarenast’s status as a secured creditor of MCA and were sent over the course of three months. In them, Mr Chapman indicated that the Tarenast security interest:

1. was constituted by the 2009 Charge, being “a general security interest over all present and after-acquired property of MCA which transitioned to the PPSR from the ASIC register […] on 30 January 2012 (security interest registration number 201112201662173)”;

2. as at the date of the Liquidator’s appointment, “secure[d] $2,227,571.39 (exclusive of interest) owing to Tarenast”; and

3. related to monies advanced by Tarenast to MCA to support the latter’s ongoing trading capacity.

25. On 29 March 2023, the Liquidator issued a statutory report in respect of MCA (Liquidator’s report) in which Tarenast was listed among MCA’s secured creditors, the amount owed to Tarenast stated to be $2,227,571.39, and the type of security identified as follows:

All PAP

5 x Other Goods (PMSI)

33 x Motor Vehicle (PMSI)

26. In respect of the Tarenast security interest, the Liquidator further noted in his report:

My investigations have revealed that the debt owing to Tarenast predominantly relates to the funds advanced by Tarenast to [MCA] during the period September 2021 to June 2022. …

[T]he Deed of Loan dated 18 November 2022 make [sic] specific reference to the [2009 Charge].

Consideration needs to be given to section 588FL of the [Corporations Act] which provides that PPSA security interests vest in the company if the security interest was registered within 6 months prior to the appointment of a Liquidator.

Legal advice has been sought with respect to the Deed of Loan dated 18 November 2022, it’s [sic] interaction and / or impact on the [2009 Charge] and the provisions of section 588FL of the [Corporations Act].

27. On 19 April 2023, the Liquidator’s solicitors, Kreisson, wrote to Mr Chapman, asserting that:

1. the Tarenast security interest was a transitional security interest which was deemed to be perfected during the “transitional period”;

2. the transitional period expired on 31 January 2014 with the result that a security interest in any collateral was no longer treated as perfected;

3. unless the Tarenast security interest was otherwise perfected, it vested in MCA immediately prior to the passage of the members’ resolution to wind up the company on 3 January 2023; and

4. accordingly, the Liquidator was entitled to realise the collateral.

28. On 1 May 2023, Mr Chapman responded to Kreisson’s letter articulating Tarenast’s position that the 2009 Charge, being both a transitional security interest and a migrated security interest, has been continuously perfected from the time immediately preceding the registration commencement time (1 February 2012) by virtue of ss 56, 322 and 333 of the PPSA, and did not vest in MCA pursuant to s 588FL of the Corporations Act.

29. In subsequent letters dated 5 May 2023, 18 May 2023 and 9 June 2023 to Mr Chapman, Kreisson made clear that it disputed that the 2009 Charge had been effectively registered, citing the following reasons:

1. migration alone does not perfect a security interest;

2. when the Tarenast registration migrated from the ASIC Register to the PPSR, there were “seriously misleading defects” in the recording of certain details (including Tarenast’s address for service and the fact that its ABN, rather than ACN, appeared in the organisation identifier number and type fields) which persisted until 17 November 2022; and

3. the presence of such defects rendered the Tarenast registration ineffective.

30. By December 2023, the stalemate between the parties on the question of whether the Tarenast security interest had been continuously perfected for the purposes of s 56 of the PPSA, or alternatively had vested in MCA pursuant to s 588FL of the Corporations Act or ss 267 or 267A of the PPSA, had not resolved.

31. On 12 December 2023, Tarenast commenced the present proceedings.

ISSUES, PRINCIPLES AND CONSIDERATION

32. In the following paragraphs, I identify the central issues that arise for determination in these proceedings, set out the applicable legal principles and give my reasoning for my determination.

ISSUE 1: Is the Tarenast security interest a security interest to which the PPSA applies?

33. A threshold question concerns the nature of the security interest created by the 2009 Charge and the consequences that flow under the regime established by the PPSA.

34. Section 12(1) of the PPSA defines “security interest” and s 12(2) provides examples of transactions generative of security interests. Those provisions are in the following terms:

(1)   A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).

(2)   For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation:

(a) a fixed charge;

(b) a floating charge;

…

35. Section 10 of the PPSA defines “personal property” as property that is not:

(a)   land; or

(b)   a right, entitlement or authority that is:

(i)   granted by or under a law of the Commonwealth, a State or a Territory; and

(ii)   declared by that law not to be personal property for the purposes of this Act.

36. Section 10 of the PPSA defines “security agreement” as an agreement or act by which a security interest is created, arises or is provided for, or writing evidencing such an agreement or act.

36. As I have noted above, the effect of cl 2 of the 2009 Charge (extracted above) in combination with relevant defined terms set out in cl 1.1 is that the 2009 Charge functions as a fixed charge on all present and future property, plant equipment and machinery owned or leased by MCA, debts owing to MCA and personal property of MCA; and a floating charge on all present and future circulating assets owned by MCA.

37. The 2009 Charge secures, among other things, the repayment of the Tarenast Loans.

38. Accordingly, on the evidence before me, I am satisfied that the terms of the Tarenast security interest plainly fall within the s 12 definition of a “security interest” in the PPSA — being an interest in “personal property” (in the sense provided for by s 10 of the PPSA) created by a “security agreement” (the 2009 Charge) that works to secure payment or performance of an obligation (namely, repayment of the Tarenast Loans) — and is the very sort of security interest to which the legislature contemplated the PPSA would apply. That conclusion is reinforced by the express inclusion of fixed and floating charges in the list of example transactions set out in s 12(2) of the PPSA that are stated to be capable of creating a s 12(1) “security interest”.

ISSUE 2: Did the Tarenast security interest cease to be perfected on 31 January 2014?

40. It was suggested by the solicitors for the Liquidator in written correspondence dated 19 April 2023 to Mr Chapman that by virtue of s 322(2)(f) of the PPSA, the Tarenast security interest — as a “transitional security interest” — ceased to be perfected upon the expiry of the 24-month transitional period, being 31 January 2014.

41. For its part, Tarenast submits that this assertion misapprehends the application of relevant provisions of the PPSA, in that it fails to account for the dual status of the Tarenast security interest as both a transitional security interest and a migrated security interest.

Transitional security interests

42. Part 9.4 of the PPSA deals with the transitional application of the PPSA and applies to transitional security interests.

43. The guide to Part 9.4, contained in s 319 of the PPSA, is in the following terms:

This Part deals with the transitional application of this Act.

This Part applies to transitional security interests, which are security interests provided for by security agreements (transitional security agreements) in force immediately before the registration commencement time. A transitional security interest may arise before, at or after the registration commencement time.

The registration commencement time is 1 February 2012 (the first day of the month that is 26 months after this Act was given the Royal Assent), or another time determined by the Minister.

Division 2 is about the attachment, perfection and priority of transitional security interests. Transitional security interests are declared to be perfected until the end of the month that is 24 months after the registration commencement time, or until they are earlier perfected by other means (for example, by registration).

Division 6 is about the migration of data about personal property from Commonwealth, State and Territory registers onto the Personal Property Securities Register. The Registrar may register migrated data about transitional security interests with effect from the registration commencement time. Such transitional security interests are known as migrated security interests.

Migrated security interests are perfected under Division 2 from immediately before the registration commencement time.

…

44. Section 307 of the PPSA defines “transitional security agreement” as:

a security agreement that is in force immediately before the registration commencement time [1 February 2012], and that continues in force at and after that time.

45. Section 308 of the PPSA defines “transitional security interest” as:

… a security interest provided for by a transitional security agreement, if:

(a) in the case of a security interest arising before the registration commencement time—this Act would have applied in relation to the security interest immediately before the registration commencement time, but for section 310; or

(b)   in the case of a security interest arising at or after the registration commencement time:

(i)   the transitional security agreement as in force immediately before the registration commencement time provides for the granting of the security interest; and

(ii)   this Act applies in relation to the security interest.

46. Section 310 of the PPSA provides that the PPSA only starts to apply to security interests at the registration commencement time (1 February 2012).

47. Section 322(1) and (2) of the PPSA deal with the perfection of transitional security interests and provide as follows:

(1)   A transitional security interest in collateral is perfected from immediately before the registration commencement time, whether the security interest arises before, at or after the registration commencement time (including a transitional security interest that arises after the end of the month that is 24 months after the registration commencement time). [Deemed perfection]

(2)   However, the transitional security interest stops being perfected under subsection (1) at the earliest of the following times: [Exception and replacement rules]

(a) when the security interest is perfected by registration under Division 6 (migration of personal property interests);

(b)   when the security interest is perfected by preparatory registration under Division 7;

(c) when a registration under Division 6 or 7 is amended so that the registration perfects the security interest;

(d)   when the security interest is otherwise perfected by registration, or is perfected by possession or control;

(e)   when the security interest is otherwise perfected (but not temporarily perfected) by this Act, other than under this section;

(f)   the end of the month that is 24 months after the registration commencement time.

48. Section 322 thus comprises a main rule (subsection (1)), whereby transitional security interests are deemed to have achieved perfection at a time immediately prior to the registration commencement time of 1 February 2012, and a set of exceptions and replacement rules (subsection (2)), pursuant to which deemed perfection ends 24 months after the registration commencement time (i.e. on 31 January 2014), and either a more permanent state of perfection is achieved or the transitional security interest becomes unperfected: see Nicholas Mirzai and Jason Harris, The Annotated Personal Property Securities Act 2009 (Cth) (4^th ed, 2023) at [322.5.2].

49. Importantly for present purposes, s 322(2)(a) provides for perfection by registration under Division 6 — that is, by the creation of a migrated security interest — to which I now turn.

Migrated security interests

50. Division 6 of Part 9.4 of the PPSA deals with the migration of personal property interests.

51. Section 332 defines “migrated security interest” as a security interest in personal property that satisfies the following conditions:

(a)   it is a transitional security interest in the personal property;

(b)   data in a transitional register in relation to the property is:

(i) given to the Registrar as mentioned in section 330 or 331; and

(ii)   accepted by the Registrar;

(c)   a registration in that transitional register in relation to the property was effective immediately before the time the data was given to the Registrar;

(d)   the registration in a transitional register was duly authorised by the law under which the register was maintained.

52. Relevant terms that appear in s 332 bear the following meanings:

1. Transitional register: a register containing data in relation to personal property maintained under a law of the Commonwealth, a State or Territory (s 10; s 330(a)).

2. Registrar: the Registrar of Personal Property Securities (s 10).

53. I consider that the ASIC Register, which was required to be maintained pursuant to the former s 265(1) of the Corporations Act and which served as a repository of details of company charges up until it was transferred to the PPSR, is a “transitional register” for the purposes of the PPSA. I also consider that pursuant to ss 262 and 265 of the Corporations Act (repealed from 30 January 2012), ASIC was required to record in the ASIC Register particulars of charges lodged including the following (as prescribed by s 265(2)):

(a)   if the charge is a charge created by the company, the date of its creation or, if the charge was a charge existing on property acquired by the company, the date on which the property was so acquired;

(b)   a short description of the liability (whether present or prospective) secured by the charge;

(c)   a short description of the property charged;

(d)   the name of the trustee for debenture holders or, if there is no such trustee, the name of the chargee.

54. Sections 330, 331 and 333 of the PPSA provide:

330   Scope of Division

Division [6] applies if, at or after the migration time, and before the registration commencement time [1 February 2012]:

(a)   an officer or agency of the Commonwealth, a State or a Territory gives the Registrar data, in relation to personal property, that is held by the officer or agency in a register (a transitional register) maintained under a law of the Commonwealth, a State or a Territory; and

(b)   the data is given in the approved form; and

(c)   the Registrar accepts the data.

331   Requirement for Commonwealth officers etc. to provide data

Upon a written request by the Registrar at or after the migration time, and before the registration commencement time, an officer of the Commonwealth, or the person in charge of an agency of the Commonwealth, must give the Registrar, in the approved form, data held by the officer or the agency in a transitional register.

…

333   Registration with respect to migrated data

Determination of registrable personal property

(1)   At or after the migration time, and before the registration commencement time, the Registrar may, by legislative instrument, determine a class of personal property to be registrable if:

(a) data in a transitional register in relation to personal property of that class is given to the Registrar as mentioned in section 330 or 331; and

(b)   registrations in that transitional register with respect to personal property of that class were effective immediately before the time the data was given to the Registrar.

Registration of determined personal property

(2)   If, in the opinion of the Registrar, personal property is in a determined class, the Registrar may register a financing statement with respect to the property at or after the migration time, and before the registration commencement time.

Note: The Registrar must give a verification statement to each secured party after the registration of a financing statement (see section 156).

…

Registration time

(5)   The registration time for the personal property is the registration commencement time.

55. “Migration time” is defined in s 306(1) as 1 January 2012.

Consideration

56. In short, I consider that it is correct to characterise the Tarenast security interest as both a “transitional security interest” under s 308 of the PPSA and a “migrated security interest” under s 332 of the PPSA and conclude, on the basis of that characterisation, that its perfected status survived the expiration of the 24-month transitional period.

57. My reasons for finding that the Tarenast security interest is a “transitional security interest” are as follows:

1. The 2009 Charge is a “transitional security agreement” in the sense provided by s 307 of the PPSA because it is a s 10 “security agreement” that was entered into on 23 April 2009 (prior to the registration commencement time of 1 February 2012) and continued on foot after the registration commencement time, as s 307 requires.

2. The Tarenast security interest meets the s 308(a) definition of a “transitional security interest”, insofar as:

1. it was generated by the 2009 Charge (a transitional security agreement);

2. it arose prior to 1 February 2012 (before the registration commencement date); and

3. the PPSA would have applied to the Tarenast security interest but for s 310 (it being a s 12 “security interest”, as stated above).

58. My reasons for finding that the Tarenast security interest is also a “migrated security interest” are as follows:

1. As s 332(a) of the PPSA requires, for the reasons stated above, the Tarenast security interest is a “transitional security interest”.

2. In terms of the requirements of ss 332(b) and (c), the legislative provisions are opaque as to the precise mechanics whereby the Registrar is “given” and “accepts” data in a transitional register in relation to the property; however, the Registrar must have been provided with and must have accepted the relevant data referred to in ss 330 and 331 pertaining to information stored on the ASIC Register, and (equally) must have registered it on the PPSR in line with s 333. That follows from the fact that the Tarenast registration was migrated to the PPSR at midnight on 30 January 2012, as evidenced by the PPSR Search Certificate. I give particular credence to the PPSR Search Certificate in light of s 174(1) of the PPSA, which provides that matters stated in a written search result in appropriate form is, in the absence of evidence to the contrary, to be treated as proof of the matters stated in it.

3. For the purposes of s 332(d), the 2009 Charge was entered on the ASIC Register on 30 April 2009 in accordance with relevant provisions of the Corporations Act pursuant to which the ASIC Register was itself maintained (ss 262 and 265, now repealed).

59. The status of the Tarenast security interest as a “migrated security interest” has consequences for its perfected (or, as it may be, unperfected) status following the expiry of the temporary, transitional period of deemed perfection arising from the terms of s 322(1). Being a security interest that successfully migrated to and was registered on the PPSR, the Tarenast security interest has the benefit of the replacement rule in s 322(2)(a). This means that the Tarenast security interest was perfected soon after its migration to and registration on the PPSR on 30 January 2012. As noted in s 319 of the PPSA, migrated security interests are perfected under Division 2 from immediately before the registration commencement time. In other words, the Tarenast security interest was perfected on 31 January 2012 and survived the temporary period of deemed perfection.

60. Moreover, the Tarenast security interest did not, after 31 January 2012, otherwise become unperfected.

61. Section 56(1) of the PPSA provides:

For the purposes of this Act, a security interest is continuously perfected after a particular time if the security interest is, after that time, perfected under this Act at all times.

62. Section 163 of the PPSA sets out situations in which a security interest that has been perfected by registration may, at particular times, lose its perfected status due to its registration losing effectiveness. Section 163 provides:

(1)   A registration with respect to a security interest that describes particular collateral, in relation to a secured party, is effective with respect to that collateral from the registration time for the description of the collateral until the earliest of the following times:

(a)   the end time (if any) registered for the collateral;

(b)   if the registration is amended to omit the collateral description—the amendment time;

(c)   the time when the description of the collateral in the registration stops being available for search in the register (by reference to that time) in respect of the secured party.

Note: For the registration time for collateral, see section 160.

(2) This section is subject to sections 164, 165 and 166 (defects in registration).

63. As stated above, there was no stated registration end time for the Tarenast security interest in the PPSR Search Certificate, and there is no evidence to suggest that any of the other intervening events mentioned in s 163(1) have taken place. That being so (and subject to my determination below concerning purported defects in the registration), the registration of the Tarenast security interest did not cease to become effective, and as such was continuously perfected from 31 January 2012.

ISSUE 3: Did the registration of the Tarenast security interest suffer from seriously misleading defects with the result that its registration was ineffective?

64. It was further contended by the Liquidator (through his solicitors in letters dated 18 May 2023 and 9 June 2023 to CT Law and in his affidavit filed 11 March 2024) that the Tarenast registration suffered from defects which rendered it ineffective pursuant to s 164(1)(a) of the PPSA. The relevant defects are said to comprise the following:

1. Tarenast’s email address for service was incorrectly recorded as “[email protected]” upon the migration of the 2009 Charge to the PPSR (email address defect); and

2. Tarenast’s ABN, rather than its ACN, appeared as its Organisation Identifier Number and Organisation Identifier Type (ABN defect).

65. In summary, the Liquidator’s line of reasoning appears to be as follows:

1. The email address defect and the ABN defect were not cured, and the Tarenast security interest did not first become enforceable against third parties, until 17 November 2022 when Ms MacDonald carried out the “find and claim” process, at which time certain details of the Tarenast registration — including Tarenast’s email address for service and its organisation identifier number and type — were automatically updated as set out above.

2. The Tarenast security interest was not effectively registered as at 3 July 2022 (being the date six months prior to the passing of the resolution to wind up MCA).

3. By operation of s 588FL(4)(a) of the Corporations Act, the Tarenast security interest vested in MCA immediately prior to the passing of the resolution to wind up MCA on 3 January 2023.

66. Sections 164 and 165 of the PPSA provide:

164   Defects in registration — general rule

(1)   A registration with respect to a security interest that describes particular collateral is ineffective because of a defect in the register if, and only if, there exists:

(a)   a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or

(b) a defect mentioned in section 165.

(2)   In order to establish that a defect is seriously misleading, it is not necessary to prove that any person was actually misled by it.

(3)   A registration that describes particular collateral is not ineffective only because the registration is ineffective with respect to other collateral described in the registration.

165   Defects in registration — particular defects

For the purposes of paragraph 164(1)(b), a defect in a registration that describes particular collateral exists at a particular time if any of the following circumstances exist:

(a)   in a case in which the collateral is required by the regulations to be described by serial number in the register—no search of the register by reference to that time, and by reference only to the serial number of the collateral, is capable of disclosing the registration;

(b)   in a case in which the collateral is not required by the regulations to be described by serial number in the register—no search of the register by reference to that time, and by reference only to the grantor’s details (required to be included in the registered financing statement under section 153), is capable of disclosing the registration;

(c)   if the registered financing statement (as amended, if at all) indicates that a security interest in the collateral is a purchase money security interest (to any extent)—the security interest is not a purchase money security interest (to any extent) in the collateral;

(d)   in any case—circumstances in relation to the data related to the registration that are prescribed by the regulations.

67. In the present case, I am satisfied that none of the circumstances described in s 165 existed at any relevant time. Accordingly, I need only be concerned with the application of the general rule in s 164.

68. The term “seriously misleading” is not defined in the PPSA. In Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd (2013) 283 FLR 122; [2013] NSWSC 1741, Brereton J at [5]–[7] gave consideration to the meaning of the phrase as it appears in s 165, stating:

[5] … [The] term [“seriously misleading”] is not defined in the PPSA, nor is there any guidance in respect of its meaning in the explanatory memorandum or the second reading speech. However, as is well-known, the PPSA is modelled on and derived from similar legislation in Canada and New Zealand and, as was observed in Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852, the Commonwealth Parliament in enacting legislation that was modelled on the New Zealand and Canadian legislation should be taken to have intended approaches and interpretations applied by the Courts of those countries to their legislation to apply in Australia. A similar view has been taken in New Zealand.

[6]   Canadian case law suggests that the test for whether a defect is “seriously misleading” is whether it will result in the registration not being disclosed on a search [see Re Lambert (1994) 7 PPSAC ( 2d); GMAC Leaseco Ltd v Moncton Motor Home & Sales (2003) 227 DLR ( 4th) 154 at [58]]. That makes sense, as the purpose of registration is to enable the existence of the security interest in the collateral to be searched and ascertained. A person searching in the PPSR is likely to be concerned with the identity of the grantor and/or the collateral. In terms of searching the PPSR, while there is facility to search by reference to the identity of the grantor and the collateral, there is no facility to search by reference to the identity of the secured party.

[7] In the present case, a search by reference to the identity of the collateral or the grantor would have disclosed the relevant security interest. Such a search would have identified clearly enough the secured party, namely Suncorp, even though its ABN and not ACN was stated. In my view, it is very clear that this defect was not seriously misleading or indeed for that matter misleading at all. Accordingly, it seems to me by operation of s 164(1) that the registration is not ineffective by reason of the defect that has been identified.

69. In Re OneSteelManufacturing Pty Ltd (administrators appointed) (2017) 93 NSWLR 611; [2017] NSWSC 21, Brereton J at [36]–[41] in obiter (having already determined the issue that arose there on the basis of s 165, rather than s 164) gave the following further analysis which also illuminates the practicalities of searching the PPSR (footnotes omitted):

[36] Lest my conclusion that s 165(b) is engaged be incorrect, it is appropriate to address the question whether the defect was seriously misleading within s 164(1)(a), such that the registration was ineffective for that reason. Alleasing [the secured party] submitted that the defect was not seriously misleading, because the financing statement refers unequivocally to OneSteel [the grantor] and the relevant collateral, and was in fact discovered by the administrators on search.

[37] As already explained, (CTH) Personal Property Securities (Approved Form) Instrument 2013 approves, for the purposes of PPSA s 302, two methods of searching the PPSR: an online interactive form accessible through the official website; and an electronic communication through a computer-to-computer interface, such as from a B2G provider. Even if a search by reference to the ACN though a B2G platform would reveal the original registrations, a direct search of the PPSR through the official PPSR website using only the ACN as a search parameter would not. A searcher who (legitimately) chose to use that mode of search would not discover the original registrations, and would be led to think, incorrectly, that there was no such registration.

[38]   Alleasing relied on the New Zealand case of Rabobank New Zealand Ltd v Stockco Ltd [2011] 13 TCLR 191, in which it was held that a financing statement which included the names of a married couple who operated a farm, rather than the name of their farming partnership, was not seriously misleading, as to the outside world the husband was the farmer. However, in Polymers International Ltd v Toon [2013] NZHC 1897, Asher J observed that Rabobank had been subject to criticism, and in any event distinguished it on facts much closer to the present: Polymers had registered a financing statement under (NZ) Personal Property Securities Act 1999 (‘NZPPSA’) against Interworld as debtor which admittedly failed to comply with the requirements of the NZPPSA, including because it did not include the debtor company's unique incorporation number. Asher J held that the preferable approach to the question whether an omission was seriously misleading, in the context of a registry which (like the Australian registry and unlike some Canadian registries) only provides returns that exactly match what is entered, was to ask whether the error would prevent a registration being disclosed by a properly formatted search in the relevant searchable field; and consequently that the omission of the company's number was seriously misleading, as it meant that those who searched the register by company number or through the Companies Office would not discover the relevant financing statement.

[39] I respectfully agree with Asher J. Such a construction furthers the purpose of the PPSA in ensuring the integrity and reliability of the PPS register, and visiting upon secured parties the obligation to ensure — if they are to enjoy the benefits of registration — that their registration be discoverable on search against the grantor's details required to be included in a financing statement under s 153. The facilitation of ascertaining whether there are prior registrations is a fundamental purpose of the PPSA.

[40]   It does not avail Alleasing that the administrators, apparently using a B2G interface, discovered the original registrations; it is unnecessary, for a defect to be misleading, to establish that anyone was in fact actually misled. It is the capacity or potential to mislead that is crucial. Here, the defect was such that searchers using one of the two authorised modes of search would not discover the registration. The circumstance that a searcher using one of the authorised means of search would not discover the registration renders the defect misleading, and seriously so - even if, as is suggested, most searchers (the evidence indicates 80%) use B2G platforms which, in the way that has been described, would reveal it.

[41] Thus the defect was seriously misleading, because the omission of the [grantor’s] ACN meant that searchers using one of the authorised modes of search would not discover the registration. Accordingly, the original registrations were ineffective pursuant to s 164(1)(a).

70. The factual scenario in OneSteel provides a useful foil for the situation under consideration here. Where in OneSteel Brereton J was called upon to determine whether the omission of the grantor’s ACN from the registration constituted a seriously misleading defect, here I am concerned with the omission of the secured party’s ACN. As Brereton J’s analysis across the two authorities makes clear, it is possible to conduct a search of the PPSR via reference to the former, but not the latter.

71. Future Revelation and OneSteel indicate that the test for “seriously misleading defect” for the purposes of 164(1)(a) is whether the irregularity in question results in the registration not being discoverable on a search of the PPSR.

72. In written and oral argument, Tarenast submitted that it is not possible for a search of the PPSR to be conducted using a secured party’s address for service and observed that it would be counterintuitive for a person who is seeking information about security interests registered against an entity with whom they intend to transact to do so via inputting the secured party’s details. I agree that that would be a very strange starting point. I also accept Tarenast’s submission that no facility exists whereby to search the PPSR by reference to a secured party’s details (such as its email address for service, or its organisation identifier number or type), which is supported by Brereton J’s reasoning in Future Revelation at [6]. The result is that the irregularities constituted by the email address defect and the ABN defect could not have meant that the Tarenast registration would not be disclosed on a search of the PPSR and did not render the Tarenast registration ineffective.

73. I was also taken to provisions in the PPSA and the Personal Property Securities Regulation 2010 (Regulations) pertaining to prescribed data and details that must be included in a financing statement in respect of a security interest that is sought to be registered on the PPSR. In this latter connection, Tarenast observed that for migrated security interests (and thus for the Tarenast security interest), the secured party’s ACN is not a detail that needs to be provided upon registration, and, given the lack of any requirement to provide that detail, its absence from the PPSR cannot — as a matter of logic or principle — amount to a defect in registration.

74. For the purposes of the PPSA regime, a “financing statement” is the relevant document, in relation to a security interest, that a person seeking to register that security interest may apply to the Registrar to register (s 150(1)(a) PPSA). “Financing statement” is defined in s 10 as:

data registered (or that is to be registered) pursuant to an application for registration under subsection 150(1).

75. A “financing statement”, in terms of the details and data it contains, must comply with certain requirements. Section 153(1) of the PPSA relevantly provides:

A financing statement with respect to a security interest (including such a financing statement as amended by the registration of a financing change statement) consists of data that complies with the following table:

…

76. In terms of prescribed data about the secured party (designated as Item 1 in the table) that needs to be included in a “financing statement”, s 153(1) refers to “the details prescribed by the [R]egulations.” Regulation 5.5(1) in turn refers to Schedule 1 of the Regulations as the source of “matters prescribed for items of the table in subsection 153(1) of the Act”. Turning to Schedule 1, which is headed “Financing statement matters for items of table in subsection 153(1) of Act”, clause 1.3 is in the following terms:

(1)   For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is a body corporate that:

(a)   is a trustee and has an ARSN; or

(b)   is not a trustee of a trust that has an ABN.

(2)   The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the body corporate mentioned in the item.

(3)   For subclause (2), the prescribed details are the details mentioned in the item of the table that:

(a)   applies to the body corporate; and

(b)   has the lowest item number.

(4)   Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act.

77. Given that there is no evidence that the secured party (Tarenast) is a body corporate that is a trustee of a trust that has an ABN, I am satisfied that cl 1.3 of Schedule 1 applies in the manner set out below.

78. I also note that because the Tarenast registration was migrated to the PPSR, no financing statement was lodged by Mr MacDonald or Ms MacDonald in the usual way; rather, as stated above, the Registrar was responsible for registering a financing statement with respect to the Tarenast security interest. As such, in accordance with cl 1.3(4), Item 1 in the table immediately above applies to the Tarenast registration.

79. As was submitted by Tarenast, the effect of cl 1.3(2) and (3) of Schedule 1 is that, supposing multiple item numbers in the table in cl 1.3 apply to the secured party, the details mentioned in the applicable item number with the lowest integer are the prescribed details that must be contained in the financing statement. Because in the present case Item 1 in the table applies, the prescribed details are Tarenast’s body corporate number or name, as recorded on the ASIC Register.

80. Consequently, there was no requirement to include Tarenast’s ACN in a financing statement concerning the Tarenast security interest for the purposes of complying with the Regulations. It was sufficient that either Tarenast’s body corporate name or number was provided, both of which details were, as the PPSR Search Certificate demonstrates.

81. This, in conjunction with the fact that (as stated above and emphasised by Brereton J in Future Revelation) it is not possible in practice to search the PPSR by reference to a secured party’s ACN (or indeed by reference to the secured party’s identity at all), compels the conclusion that the ABN defect would not have prevented the Tarenast registration from being disclosed on a search of the PPSR, and so does not engage s 164(1)(a) of the PPSA.

82. Accordingly, I reject the argument that the Tarenast registration was ineffective by reason of one or more seriously misleading defects and the argument that as a result the Tarenast security interest vested in MCA immediately prior to the passing of the resolution to wind up MCA on 3 January 2023.

ISSUE 4: Did the Tarenast security interest vest in MCA upon the winding up of MCA?

83. The remaining issue to be determined is whether the Tarenast security interest otherwise vested in MCA by virtue of the operation of s 588FL(4) of the Corporations Act or either of ss 267 or 267A of the PPSA.

84. Division 2A of the Corporations Act deals with the vesting in a company that is being wound up of PPSA security interests that have not been continuously perfected. Section 588FL provides as follows:

588FL Vesting of PPSA security interests if collateral not registered within time

Scope

(1)   This section applies if:  

(a)   any of the following events occurs:  

(i)   an order is made, or a resolution is passed, for the winding up of a company;  

… and

(b) a PPSA security interest granted by the company in collateral is covered by subsection (2).

Note: A security interest granted by a company in relation to which paragraph (a) applies that is unperfected at the critical time may vest in the company under section 267 or 267A of the Personal Property Securities Act 2009.  

(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;  

…

(iv) a later time ordered by the Court under section 588FM.

Note 1: For the meaning of critical time, see subsection (7).

Note 2: For when a security interest is enforceable against third parties under the law of Australia, see section 20 of the Personal Property Securities Act 2009.

Note 3: A security interest may become perfected at a particular time by a registration that is made earlier than that time, if the security interest attaches to the collateral at the later time (after registration). See section 21 of the Personal Property Securities Act 2009.

Note 4: The Personal Property Securities Act 2009 provides for perfection by registration, possession or control, or by force of that Act (see section 21 of that Act).

Vesting of security interest in company  

(4)   The PPSA security interest vests in the company at the following time, unless the security interest is unaffected by this section because of section 588FN:  

(a)   if the security interest first becomes enforceable against third parties at or before the critical time—immediately before the event mentioned in paragraph (1)(a);  

(b)   if the security interest first becomes enforceable against third parties after the critical time—at the time it first becomes so enforceable.

…

(7)   In this section:

critical time, in relation to a company, means:

(a) if the company is being wound up—when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day under section 513A or 513B; or

…

85. For the purposes of determining the “critical time”, s 513B applies to a voluntary winding up and is in the following terms:

513B   Voluntary winding up

Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced:  

(a)   if, when the resolution was passed, a winding up of the company was already in progress – when the last-mentioned winding up is taken because of this Division to have begun or commenced; or

(b)   if, immediately before the resolution was passed, the company was under administration – on the section 513C day in relation to the administration; or

(c)   if, immediately before the resolution was passed, a deed of company arrangement had been executed by the company but had not yet terminated--on the section 513C day in relation to the administration that ended when the deed was executed; or

(d)   if the resolution is taken to have been passed because the company's creditors:

(i)   passed a resolution terminating a deed of company arrangement executed by the company; and

(ii)   also resolved under section 445E that the company be wound up; on the section 513C day in relation to the administration that ended when the deed was executed; or  

(da)   if the resolution is taken to have been passed under section 446AA because of:

(i)   the making of an order under section 445D by the Court terminating a deed of company arrangement executed by the company; or

(ii)   the existence of circumstances that are specified in a deed of company arrangement executed by the company to be circumstances in which the deed is to terminate and the company is to be wound up; on the section 513C day in relation to the administration that ended when the deed was executed; or

(db)   if, immediately before the resolution was passed, the company was under restructuring--on the section 513CA day in relation to the restructuring; or

(dc)   if, immediately before the resolution was passed, a restructuring plan had been made by the company but had not yet terminated – on the section 513CA day in relation to the restructuring that ended when the plan was made; or

(e)   otherwise – on the day on which the resolution was passed.

86. Pursuant to s 588FL, where a company is being wound up, any PPSA security interest granted by the company which was perfected, registered or enforceable against a third party after the latest of certain times as listed in s 588FL(2)(b) will vest in the company for the benefit of creditors generally and the secured creditor will lose the benefit of the security: Northern Managed Finance Pty Ltd v 4 in 1 Wyoming Pty Ltd (2017) 120 ACSR 167; [2017] NSWSC 407, Gleeson JA at [30] and the authorities cited there.

87. I am satisfied that the Tarenast security interest is not a PPSA security interest to which s 588FL applies. That is because, by virtue of s 588FL(2)(b), the section only covers PPSA security interests for which the registration time postdates the latest of (i) six months after the critical time; (ii) 20 days after the relevant security agreement came into force; and (iii) such later time as the court may fix under s 588FM. Only (i) and (ii) are relevant here.

86. Set out below, I have considered the application of these times to the present case:

1. The “critical time” in the present case is the day on which the resolution to voluntarily wind up MCA was passed, being 3 January 2023. That is the result dictated by s 588FL(7)(a), which refers to s 513B. In accordance with s 513B, the time at which a company being wound up voluntarily is taken to have commenced is different depending on the specific circumstances surrounding the winding up (as set out in (a)–(e)). The residual provision in (e) is applicable here, meaning the winding up of MCA is taken to have begun on 3 January 2023.

2. As a result, the time in s 588FL(2)(b)(i) is 3 July 2022.

3. The time in s 588FL(2)(b)(ii) — 20 days after the agreement establishing the 2009 Charge was entered into — is 20 days after 23 April 2009, being 13 May 2009.

4. The latest of the times in s 588FL(2)(b) — which the registration time of the Tarenast security interest will need to post-date if s 588FL is to have any application here at all — is 3 July 2022.

5. The registration time for the Tarenast security interest (as I have determined above, and as s 333(5) of the PPSA prescribes in respect of “migrated security interests”) is midnight on 30 January 2012. That time predates 3 July 2022 by nearly 10 and a half years.

89. The result is that s 588FL has no application to the Tarenast security interest, and there is no question of it vesting in MCA upon MCA’s winding up by that mechanism.

90. Sections 267 and 267A of the PPSA constitute an additional mechanism pursuant to which unperfected security interests may vest in the grantor company as a result of its winding up. Those sections relevantly provide as follows:

267   Vesting of unperfected security interests in the grantor upon the grantor's winding up or bankruptcy etc.

Scope

(1)   This section applies if:

(a)   any of the following events occurs:

(i)   an order is made, or a resolution is passed, for the winding up of a company or a body corporate;

…

and

(b)   a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies:

(i) in the case of a company or body corporate that is being wound up – when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day (whether under section 513A or 513B of the Corporations Act 2001, under either section as applied by force of a law of a State or Territory, or otherwise);

…

(2)   The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs.

267A   Vesting in grantor of security interest that attaches after winding up etc.

Vesting of security interest

(1)   A security interest vests in the grantor when it attaches to the collateral if:

(a)   paragraph 267(1)(a) applies in relation to the grantor; and

(b)   before the time (the critical time) mentioned in paragraph 267(1)(b), the grantor enters into a security agreement with the secured party that provides for the secured party to take a security interest in collateral from the grantor; and

(c)   at the critical time:

(i)   the security interest has not attached to the collateral; and

(ii)   there is no registration that would perfect the security interest when it attaches to the collateral; and

(d)   after the critical time, the security interest attaches to the collateral; and

(e)   at the time of attachment:

(i)   the security interest is unperfected; or

(ii)   if the security interest is perfected, it is perfected only by a registration for which the registration time is after the critical time.

91. The alternative path whereby the Tarenast security interest might have vested in MCA pursuant to ss 267 or 267A of the PPSA is also closed. In relation to s 267, that is because the Tarenast security interest, as I have determined above, was not unperfected as at 3 January 2023 (the time at which MCA’s winding up is taken to have begun) and therefore was not susceptible to vesting in the grantor on its winding up. In relation to s 267A, that is because it was not the case, nor was there any suggestion, that the Tarenast security interest had not attached to the relevant collateral at the critical time (being 3 January 2023).

92. Accordingly, I am satisfied that the Tarenast security interest did not vest in MCA upon the winding up of MCA.

ISSUE 5: Extension of time under s 588FM of the Corporations Act

93. In light of the determinations I have made on the four issues set out above, it is not necessary for me to consider whether Tarenast would have obtained an extension of the time fixed under s 588L pursuant to s 588FM of the Corporations Act.

RELIEF SOUGHT

94. In these proceedings, Tarenast seeks a declaration that the security interest constituted by the 2009 Charge has been continuously perfected from immediately before 30 January 2012, and that this security interest has not vested in MCA pursuant to ss 267 or 267A of the PPSA or s 588FL of the Corporations Act.

95. The principles conditioning the court’s inherent and discretionary power to grant declaratory relief are set out in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421; [1972] HCA 61, where Gibbs J at 435–437 said (citations omitted):

The jurisdiction to make a declaration is a very wide one. Indeed, it has been said that, “under OXXV, r 5, the power of the Court to make a declaration, where it is a question of defining the rights of two parties, is almost unlimited; I might say only limited by its own discretion”… However, the jurisdiction may be ousted by statute, although the right of a subject to apply to the court for a determination of his rights will not be held to be excluded except by clear words…

…

It is neither possible nor desirable to fetter the broad discretion given by s 10 [of the Equity Act 1901 (NSW)] by laying down rules as to the manner of its exercise. It does, however, seem to me that the Scottish rules summarized by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd (1921) 2 AC 438, at p 448, should in general be satisfied before the discretion is exercised in favour of making a declaration:

“The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.”

96. I am satisfied that this is an appropriate case in which to grant declaratory relief. The dispute and the issues arising for determination are real and not theoretical, and notwithstanding the Liquidator did not appear or seek to be heard in the proceedings before me, it is not the case that Tarenast’s application has no proper contradictor. It is clear that the parties, by their respective positions on the status of Tarenast as a secured creditor of MCA, are at a stalemate, and that Tarenast’s rights and interests as a creditor of MCA are at stake in the liquidation. A declaration in the terms sought will sound in real consequences for both parties, and will allow the Liquidator to properly proceed with his task where until now he has been uncertain as to how to do so.

ORDERS

97. In light of the reasons stated above, I propose to make the following orders:

1. Declaration that the charge granted by the first defendant to the plaintiff on 23 April 2009 (security interest registration number 201112201662173) over all present and after-acquired property of the first defendant (Tarenast security interest) has:

1. pursuant to s 56 of the Personal Property Securities Act 2009 (Cth) been continuously perfected from immediately before the registration commencement time, being 30 January 2012; and

2. not vested in the first defendant pursuant to ss 267 or 267A of the Personal Property Securities Act 2009 (Cth) or s 588FL of the Corporations Act 2001 (Cth).

2. No order as to costs.

**********

Decision last updated: 17 June 2024