In the matter of Tankstream Rail (SW-2) Pty Limited

[2015] NSWSC 2069

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Tankstream Rail (SW-2) Pty Limited [2015] NSWSC 2069
Hearing dates:	22 June 2015
Date of orders:	23 June 2015
Decision date:	23 June 2015
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Judicial advice given.
Catchwords:	CORPORATIONS – personal property securities – notice of charges – failure to give notice – whether void under (CTH) Corporations Act 2001, s 266 –construction of Corporations Act, s 1504 – meaning of “void”
Legislation Cited:	(CTH) Corporations Act 2001, Ch 2K, s 263, s 266, s 588FL, s 1502, s 1503, s 1504 (CTH) Personal Property Securities Act 2009, s 150 (CTH) Personal Property Securities (Corporations and Other Amendments) Act 2010 (NSW) Trustee Act 1925, s 63
Texts Cited:	C Wappett, B Whittaker and S Edwards (eds), Personal Property Securities in Australia (LexisNexis, 2010)
Category:	Principal judgment
Parties:	Perpetual Trustee Company Ltd (ACN 000 001 007) (plaintiff)
Representation:	Counsel: S A Lawrance (plaintiff)   Solicitors: Allens (plaintiff)
File Number(s):	2015/111388

Judgment (ex tempore)

1. HIS HONOUR: The plaintiff Perpetual Trustee Company is the trustee of two trusts which, for the sake of convenience, may be called the Virtue 1 and the Virtue 2 trusts. In each case, the trust property includes an interest as chargee in rolling stock acquired by eight companies in various partnerships named in the originating process, with funds advanced to those companies for that purpose by Perpetual as trustee of one or other of the Virtue trusts. The relevant charges were given by a nominee company as agent for various of the partner companies.

2. Perpetual accepts, in my view correctly, that when the charges were granted they were charges of personal chattels – namely, rolling stock – granted by each relevant partner company, even though they were executed only by the nominee company as their agent, and that they were therefore registrable charges under (CTH) Corporations Act 2001, Ch 2K, as it then was. Although a timely notice was lodged with ASIC under Corporations Act, s 263, of the charge given by each of the three nominee companies, no notice was given of the charges given by the partner companies until 28 August 2013, when a financing statement under the (CTH) Personal Property Securities Act 2009 ("PPSA"), s 150, was registered, naming each of the partners as grantor of the relevant security interest.

3. The consequence of the failure to give timely notice of the charges by the partner companies was therefore that if a chargor partner company had gone into liquidation or administration, or had become the subject of a deed of company administration, the charge would have been void against the liquidator, administrator or deed administrator, respectively, of that chargor [Corporations Act, s 266(1)]. None of the chargor partner companies named in the originating process have had a liquidator or administrator or deed administrator appointed to them.

4. Corporations Act, s 266, relevantly provided as follows:

(1) Where:

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

(b) an administrator of a company is appointed under section 436A, 436B or 436C; or

(ba) a company executes a deed of company arrangement;

a registrable charge on property of the company is void as a security on that property as against the liquidator, the administrator of the company, or the deed’s administrator, as the case may be, unless:

(c) a notice in respect of the charge was lodged under section 263 or 264, as the case requires:

(i) within the relevant period; or

(ii) at least 6 months before the critical day; or

(d) in relation to a charge other than a charge to which subsection 263(3) applies—the period within which a notice in respect of the charge (other than a notice under section 268) is required to be lodged, being the period specified in the relevant section or that period as extended by the Court under subsection (4), has not ended at the start of the critical day and the notice is lodged before the end of that period; or

(e) in relation to a charge to which subsection 263(3) applies—the period of 45 days after the chargee becomes aware that the registrable body has been registered as a company under Part 5B.1, or registered under Part 5B.2, has not ended at the start of the critical day and the notice is lodged before the end of that period; or

(f) in relation to a charge to which section 264 applies—the period of 45 days after the chargee becomes aware that the property charged has been acquired by a company has not ended at the start of the critical day and the notice is lodged before the end of that period.

(2) The reference in paragraph (1)(c) to the relevant period is to be construed as a reference to:

(a) in relation to a charge to which subsection 263(1) applies—the period of 45 days specified in that subsection, or that period as extended by the Court under subsection (4) of this section; or

(b) in relation to a charge to which subsection 263(3) applies—the period of 45 days after the chargee becomes aware that the registrable body has been registered as a company under Part 5B.1 or registered under Part 5B.2; or

(c) in relation to a charge to which section 264 applies—the period of 45 days after the chargee becomes aware that the property has been acquired by a company.

(3) Where, after there has been a variation in the terms of a registrable charge on property of a company having the effect of increasing the amount of the debt or increasing the liabilities (whether present or prospective) secured by the charge:

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

(b) an administrator of a company is appointed under section 436A, 436B or 436C; or

(ba) a company executes a deed of company arrangement;

the registrable charge is void as a security on that property to the extent that it secures the amount of the increase in that debt or liability unless:

(c) a notice in respect of the variation was lodged under section 268:

(i) within the period of 45 days specified in subsection 268(2) or that period as extended by the Court under subsection (4) of this section; or

(ii) not later than 6 months before the critical day; or

(d) the period of 45 days specified in subsection 268(2), or that period as extended by the Court under subsection (4) of this section, has not ended at the start of the critical day and the notice is lodged before the end of that period.

(4) The Court, if it is satisfied that the failure to lodge a notice in respect of a charge, or in respect of a variation in the terms of a charge, as required by any provision of this Part:

(a) was accidental or due to inadvertence or some other sufficient cause; or

(b) is not of a nature to prejudice the position of creditors or shareholders;

or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, by order, extend the period for such further period as is specified in the order.

5. However, with effect from 30 January 2012, the Corporations Act was amended by the (CTH) Personal Property Securities (Corporations and Other Amendments) Act 2010. Relevantly, that Act repealed Corporations Act, Ch 2K, and inserted transitional provisions found in Corporations Act, Pt 10.13. Those transitional provisions relevantly include the following:

1502 Repeal of Chapter 2K (charges)—general

(1) For the period of 7 years after the commencement time, the amendments made by Part 2 of Schedule 1 to the amending Act do not apply in relation to registrable charges.

Note: The amendments made by Part 2 of Schedule 1 to the amending Act repeal Chapter 2K and make consequential amendments to other provisions.

(2) This section applies subject to sections 1503 to 1506.

1503 Repeal of Chapter 2K (charges)—cessation of requirements in relation to documents or notices

Scope

(1) This section applies if, immediately before the commencement time, a document (however described) or notice is required to be lodged or given by a company or other person under one of the following provisions:

(a) paragraph 263(1)(a), (b) or (c);

(b) paragraph 263(2)(b);

(c) subsection 263(3);

(d) paragraph 264(1)(a) or (b);

(e) paragraph 265(6)(b);

(f) paragraph 268(1)(a) or (b);

(g) subsection 268(2);

(h) subsection 269(1) or (2);

(i) subsection 270(4).

Requirements that stop applying

(2) Whichever of the following requirements would otherwise apply stops applying at the commencement time:

(a) the requirement to lodge or give the document or notice;

(b) the requirement for ASIC to enter or delete particulars in the Register in relation to the document or notice.

1504 Repeal of Chapter 2K (charges)—application of section 266

(1) Subject to this section, section 266 stops applying at the commencement time in relation to registrable charges.

(2) However, if a registrable charge is void under section 266 immediately before the commencement time, that section continues to apply in relation to the charge, subject to subsection (3) of this section.

(3) The Court may, on such terms and conditions as seem to the Court just and expedient, by order, declare a registrable charge not to be, and never to have been, void under subsection 266(1) or (3), if:

(a) before the commencement time, the charge is void under subsection 266(1) or (3) (as the case requires); and

(b) either:

(i) an application is made to the Court under subsection 266(4) before the commencement time for an extension of the relevant period, and as at the commencement time, the Court had not made a decision in relation to the application; or

(ii) an application is made to the Court at or after the commencement time for an order under this subsection; and

(c) the Court is satisfied of the matters set out in subsection 266(4).

6. By originating process filed on 15 April 2015, Perpetual applies, pursuant to (NSW) Trustee Act 1925, s 63, for judicial advice as to whether it is justified in not proceeding to seek a declaration under Corporations Act, s 1504(3), in respect of the subject charges. Alternatively, it applies pursuant to Corporations Act, s 1504(3), for a declaration that the charges are not, and never have been, void under Corporations Act, s 266(1).

7. In connection with the application, Perpetual has provided a memorandum of counsel's advice of Mr S A Lawrance, who appeared for Perpetual on the hearing of the application, which comprehensively addresses the relevant issues and analyses the relevant considerations. The Court has been much assisted by Mr Lawrance's advice and is indebted to him for that assistance. Essentially, Perpetual contends that no application under s 1504(3) is required because, by reason of s 1504(1), s 266 ceased to apply to these charges with effect from the commencement date under the PPSA; namely, 30 January 2012. Alternatively, Perpetual seeks a declaration under s 1504(3).

8. On the present application which focused on the primary, rather than the alternative, claim, the essential question is whether s 266 has ceased to apply in respect of the subject charges. As s 1504(1) is in clear and general terms, that question really reduces to whether the exception contained in s 1504(2) is engaged so as to preserve, for the purpose of the relevant charges, the operation of s 266.

9. The condition which engages s 1504(2) is "if void immediately before the commencement date". On the face of s 266(1), a charge is only void if a liquidator, administrator or deed administrator has been appointed. None of those events has occurred in respect of any of the relevant chargor partner companies. Section 1504(2) would be engaged only if the term "if void immediately before the commencement date" were construed as meaning "contingently void" – that is to say, contingent upon the appointment of a liquidator, etc, or "liable to be voided" if a liquidator etc, were appointed.

10. Adoption of such a construction would answer an argument adverted to by Gallimore and Fraser in Chapter 6 – ‘Transition Issues in PPSA’ in C Wappett, B Whittaker and S Edwards (eds), Personal Property Securities in Australia (LexisNexis, 2010), to the effect that otherwise there would be a gap in the operation of the legislation, in that a registrable charge created before 30 January 2012 which had not been registered under Corporations Act, s 263, would not be liable to be avoided under Corporations Act, s 588FL, because it is not a PPSA security interest but a "transitional security interest" which is excluded from the definition of “PPSA security interest”. Thus, there would be no provision avoiding such a charge upon liquidation etc, even though it was and remained unregistered.

11. While that argument is not without force, it is not what s 1504(2) says. The provision uses the terminology "is void", and it is clear not only from s 266(1) but also from s 266(3) that a charge is void in the relevant sense only upon appointment of a liquidator etc. Neither counsel nor I have been able to find any authority on the construction of s 1504(2), so one is left with the words of the section, the context in which it appears, and such assistance as one can derive from extraneous material to which the Court can permissibly resort. The correspondence of the words "is void" in s 1504(2) with the terminology of ss 266(1) and (3) is a strong indication that it is used in the same sense in s 1504 and, as I have said, a charge is void under the earlier sections only if one of the relevant events has taken place.

12. Such a construction of s 1504(2) is also consistent with s 1503, the effect of which is that because there is no longer any requirement to maintain a register of charges, it is no longer required or possible to register a charge under s 263 after 30 January 2012. One consequence of this is that it would be no longer possible to cure partially, by belated registration, the problems caused by a failure to give timely notice of a charge to ASIC.

13. In addition, although it is marginal, such assistance as can be derived from the Explanatory Memorandum tends to favour the construction that “void” means void. Paragraph 7.3 of the Explanatory Memorandum says that the repeal of Ch 2K would not immediately apply to registrable charges under the Corporations Act, "except to the extent necessary to close the Corporations Act register to new registrations, and to limit the effect of Corporations Act, s 266 (the voiding of registrable charges)". Perhaps a little more tellingly, paragraph 7.7 says "Corporations Act, s 266(4), would continue to apply to registrable charges which became void under Corporations Act, s 266, before the commencement time". That suggests that the legislature was proceeding on the basis that a registrable charge which had become void by appointment of a liquidator etc, prior to the commencement time was what was intended to be the subject of the preservation of s 266(4).

14. For those reasons, in my opinion, the better construction of s 1504(2) is that it applies only where a registrable but unregistered charge has become void as a result of the appointment of a liquidator etc, prior to the commencement date – that is to say, 30 January 2012. As no such event had happened in respect of any of the relevant companies, s 1504(2) does not apply here. It follows that s 266 ceased to apply to these charges with effect from 30 January 2012. It is therefore not necessary to make an application under s 1504(3) for a declaration that the charges are not and never have been void. That section was intended to confer a discretionary power equivalent to the former power to extend time for registration.

15. Notice of this application has been given to each of the chargor partner companies. None has sought to appear on the hearing. Although a not straightforward question of construction arises, it seems to me appropriate that the trustee be given the benefit of the Court's advice and the protection of that advice on an issue such as this. In my view, the trustee should be given the advice it seeks.

16. The Court therefore orders that:

1. pursuant to Trustee Act, s 63, on the facts set out in the statement of facts which is exhibit PX01 herein, the plaintiff would be justified in not proceeding to seek a declaration under Corporations Act, s 1504(3), in respect of the following charges:

1. The charges granted by Tankstream Rail (SW-2) Pty Limited, Tankstream Rail (SW-3) Pty Limited and Tankstream Rail (SW-4) Pty Limited under the deed of charge (fixed) – Swanston franchise, dated 30 March 2000;

2. the charges granted by Tankstream Rail (BY-2) Pty Limited, Tankstream Rail (BY-3) Pty Limited and Tankstream Rail (BY-4) Pty Limited under the deed of charge (fixed) – Bayside franchise, dated 30 March 2000; and

3. the charges granted by Rolling Stock (VL-2) Pty Limited and Rolling Stock (VL-3) Pty Limited under the deed of charge (fixed) – V/Line Passenger franchise, dated 21 November 2001.

2. The plaintiff's costs be paid on an indemnity basis out of the assets of the Virtue Trust and the Virtue Trust 2 in the following proportions:

1. as to two-thirds out of the assets of the Virtue Trust; and

2. as to one-third out of the assets of the Virtue Trust 2.

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Decision last updated: 11 March 2016