In the matter of Southern Engineering Services Pty Ltd (in liquidation) ACN 000 091 716

[2014] NSWSC 1882

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Southern Engineering Services Pty Ltd (in liquidation) ACN 000 091 716 [2014] NSWSC 1882
Hearing dates:	24 September 2014
Decision date:	24 September 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Interlocutory injunction restraining sale by liquidators of security granted: see para 11
Catchwords:	CORPORATIONS – personal property securities – registration of PPSA interest – extension of time for registration of PPSA interest – where failure to register due to inadvertence – whether parties acted to detriment in absence of registration – balance of convenience
Legislation Cited:	(Cth) Corporations Act 2001, s 588FM, s 588FL(2)(b)(iv).
Category:	Procedural and other rulings
Parties:	Hauhinco Maschinenfabrik G. Hausherr Jochums GmBH & Co Kg (plaintiff) Shaun Robert Fraser and Barry Fredrick Kogan as liquidators of Southern Engineering Services Pty Ltd (in liquidation) ACN 000 092 716 (second defendant) Southern Engineering Services Pty Ltd (in liquidation) ACN 000 092 716 (third defendant)
Representation:	Counsel: J Knackshedt (plaintiff) J M White (defendants) Solicitors: Schweizer Kobras (plaintiff) Colin Biggers & Paisley (defendants)
File Number(s):	2014/280883

Judgment – EX TEMPORE

1. HIS HONOUR: I am satisfied that there is a sufficiently arguable case that the omission to register the security interests in a timely manner was due to inadvertence, and the the Court should fix 4 August 2014 as the later time for the purpose the (Cth) Corporations Act 2001, s 588FL(2)(b)(iv), bearing in mind that, on the authorities, the mere fact of prejudice to unsecured creditors, including employees, is of slight significance on an application such as this, the more important consideration being whether it can be shown that the absence of the registration from the register has resulted in others acting to their detriment.

2. As to the balance of convenience, I approach the matter on the basis that the plaintiff offers an undertaking as to damages which, prima facie, is supported to the extent of about €500,000 by consignment stock held or in the possession of the defendants and, conversely, the defendants offer an undertaking to preserve the proceeds of the auction sale until a final determination of the plaintiff's claim. The difficulties with the defendant's undertaking, it seems to me, are, first, that on a quick perusal of the sale catalogue, it is not possible to segregate and identify separate lots attributable to the property that the plaintiff claims - and, indeed, where boxes or cages of goods are offered for sale, it may well be that goods claimed by the plaintiffs are mixed with other goods, which will render it very difficult to attribute sale proceeds to the plaintiff's goods.

3. Secondly, as the plaintiff submits, a sale in the circumstances currently proposed by the defendants, which is in the nature of a fire sale, may well result in a diminished return when compared to that which the plaintiff would be able to generate through a more orderly sale process.

4. The risk of detriment to the defendants is, essentially, through the requirement to retain premises on which the subject property is held until the matter can be resolved. It seems to me that that largely depends on how rapidly the plaintiffs can obtain access to those properties, and that prompt access may well enable the matter to be resolved in an expeditious manner. To the extent that it eventuates that prejudice is occasioned to the defendants, then the plaintiff's undertaking as to damages will cover that. To the extent that the present auction process is interrupted or wasted, really, that is a self-inflicted problem created by the defendants embarking on that course, even while an undertaking not to sell the property remained on foot.

5. I have given consideration to the plaintiff's delay in instituting these proceedings, most particularly during the period from when the administrators were appointed, when it should have been apparent that a critical event had occurred and that an order under s 588FM would be required. However, during the intervening period, an undertaking by the defendants not to sell the property which the plaintiff claims has been on foot, which does not expire until today. In those circumstances, I do not think it was incumbent on the plaintiffs to rush to court at the first opportunity when they were protected by an undertaking and when they might have achieved a consensual result.

6. Accordingly, I propose to grant the relief sought by the plaintiff.

7. I direct that the originating process be returnable on 10 October 2014 at 9.45am before me. I note the undertaking of Mr Scott Hedge of Colin Biggers & Paisley to file a Notice of Appearance on behalf of the defendants.

8. Upon the plaintiff by its counsel giving to the Court the usual undertaking as to damages, the Court orders that:

1. The defendants be restrained until 15 October 2014 from, by themselves, their servants or agents, alienating, encumbering, intermingling, or otherwise adversely dealing with any goods supplied to the second defendant by the plaintiff, being the collateral under the security interests asserted by the plaintiff.

2. The defendants provide the plaintiff with reasonable access to the second defendant's premises for the purpose of the plaintiff identifying and marking the goods in the second defendant's possession, which are said to be the subject of the security interests claimed by the plaintiff.

3. The plaintiff to serve any further affidavit evidence by 8 October 2014.

9. The Court directs that:

4. The plaintiff not be entitled to rely at the hearing on any affidavit evidence that has not been served by 3 October 2014.

5. The defendant not be entitled to rely on any affidavit evidence that has not been served by 10 October 2014.

6. The plaintiffs lodge with my Associate and serve an outline of its submissions by 13 October 2014.

7. The defendants lodge and serve an outline of submissions by 14 October 2014.

8. The proceedings are adjourned to 15 October 2014 at 10am for hearing.

10. These orders are to be entered forthwith.

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Decision last updated: 15 January 2015