National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd

[2003] VSC 1

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST  No. 5330 of 2001

In the Matter of an application pursuant to section 266 of the Corporations Law
and
In the Matter of Davis & Waddell (Vic) Pty Ltd

NATIONAL AUSTRALIA BANK LIMITED	Plaintiff
v
DAVIS & WADDELL (VIC) PTY LTD	Defendant

---

JUDGE:	Hansen J
WHERE HELD:	Melbourne
DATE OF HEARING:	29 and 30 April 2002
DATE OF JUDGMENT:	13 February 2003
CASE MAY BE CITED AS:	National Australia Bank Limited v Davis & Waddell (Vic) Pty Ltd
MEDIUM NEUTRAL CITATION:	[2003] VSC 1	Revision 18.2.03

---

Corporations – Charge – Registration – Failure to register in 45 day period – Late registration – Administrator appointed – Application to extend time to register – Liquidation – Accident, inadvertence or other cause – Exceptional circumstances – Corporations Law s 266(4).

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mrs S M Crennan Q.C. with Mr J F Styring	Mallesons Stephen Jaques
For the Defendant	Mr S E K Hulme Q.C. with Mr P J Cosgrave	Madisons

HIS HONOUR:

1. This is an appeal from the refusal of a Master to extend the time in which to lodge notice of a charge.  The charge was given by Davis & Waddell (Vic) Pty Ltd ("Davis & Waddell" or "the company") to the National Australia Bank Ltd ("NAB") by a mortgage debenture on 6 December 2000.  It was a fixed and floating charge over the undertaking and all present and future property and assets of Davis & Waddell including any such property and assets held as trustee.  It secured all monies which now or in the future may be owing on any account to the NAB by Davis & Waddell, including as trustee of the John Vincent Family Trust.  The NAB lodged notice of the charge on 15 February 2001.  That was 24 days, or 18 business days, after the period of 45 days within which it should have been lodged.  It was not until 10 April 2001, following the appointment of an administrator to Davis & Waddell on 6 April 2001, that the NAB filed the present application for an extension of time.  On 12 April 2001 two events occurred: the first meeting of creditors was held and, pursuant to the debenture, the NAB appointed receivers and managers to the company's assets.  Subsequently, on 10 May 2001, at the second meeting of creditors, it was resolved that Davis & Waddell be wound up, and as a result the administrator became the liquidator of the company.  Following a hearing of the NAB's application in November 2001, the Master gave judgment on 31 January 2002.  The application was dismissed.  Subsequently, on 20 February 2002, the Master ordered that the NAB pay the company's costs of the proceeding.  It is from those orders that the NAB appeals.[1]

   [1]The appeal is brought by notice dated 5 February 2002 which, because of its date of filing, related to the first order.  No separate notice was filed in respect of the order for costs.  The appeal was conducted on the basis that the notice filed be treated as an appeal against the costs order.

1. The NAB’s application was made under s 266(4) of the Corporations Law ("the Law").  In view of the transitional provisions in the Corporations Act ("the Act"), the application is to be determined under the relevant provisions of the Act. This is not significant, as the relevant provisions of the Law and the Act are the same.

Evidence

1. For the purpose of the hearing, which under the Rules of Court presently operating in Victoria is a re-hearing de novo, the parties agreed, and at their request  I ordered by consent, that the evidence on the appeal be limited to the evidence before the Master.[2]  This evidence was included, together with the Master's reasons and some other formal documents, in a court book tendered before me.  That constituted the evidence on the appeal.

   [2]In the particular circumstances, there having been reference to the possibility of additional evidence, it apparently suited the parties to have this order.  Of course, under rule 77.05(7)(b) a party is not entitled to rely on evidence in addition to that before the Master without special leave of the Judge.

1. On such an appeal from a Master the Judge is not "fettered by the decision of the Master, but [gives] such weight to the decision of the Master as appears proper".[3] The decision of the Master in this case is contained in a written judgment of 24 pages. The Master concluded that the NAB failed to establish any of the grounds in s 266(4) and, accordingly, that the application must fail. He further concluded, on the assumption that any ground was established, that the discretion to grant relief should not be exercised. In presenting the case counsel referred to the judgment. It is convenient to mention that, in doing so, counsel for the NAB challenged, in particular, the Master's finding, in para [58] of the judgment, that Mr Stribbles was the "superior" of Mr Stilve, and that it was Mr Stribbles’ "decision" to defer registration.[4]  For their part, counsel for Davis & Waddell supported the Master's finding.  I deal with this issue below and conclude to the contrary of the Master on the matter of the "decision" to defer registration.  Having mentioned this point, it is also convenient to mention that I conclude to the contrary of his finding in para [98] of the judgment (and see too para [41]) that when the NAB lodged notice of the charge on 15 February 2001 it had serious grounds for concern about the financial position of the company.

   [3]Southern Motors Pty Ltd v Australian Guarantee Corporation Ltd [1980] VR 187, 190.

   [4]See also para [68] of the judgment.

Facts

1. In 1987, Davis & Waddell commenced business as a supplier of homeware products to retailers in the homeware industry.  There were three directors at all material times:  John Paul Vincent, his wife, Julie Anne Vincent, and Malcolm Barry Harrison.  Mr Harrison was also the company secretary and accountant.  All decisions regarding the conduct of the company business were made by Mr Vincent.

1. In May 2000 the NAB became Davis & Waddell's banker.  Ross Andrew Hardy was the business banking manager responsible for the relationship between the company and the NAB.  On 5 May 2000, the NAB provided finance which enabled Davis & Waddell to discharge its liability to its previous banker, the Hong Kong & Shanghai Banking Corporation ("HSBC"), and also to discharge a mortgage loan on a property to the Westpac Banking Corporation ("Westpac").  As Mr Hardy described it, the facilities provided by the NAB "were in essence a refinancing of facilities previously provided to [Davis & Waddell] by other banks." 

1. The HSBC liability was secured by a mortgage debenture, notice of which was lodged with the Australian Securities and Investments Commission ("ASIC") on 1 May 1996.   The HSBC debenture was a fixed and floating charge, dated 29 March 1996.  A schedule to the charge specified a maximum prospective liability of $10 million.  The HSBC charge was discharged on 15 February 2001, when the NAB lodged its mortgage debenture and notice of charge, and a discharge of the HSBC charge.  The HSBC was preceded as Davis & Waddell's banker by the Australia and New Zealand Banking Group Ltd ("ANZ").  The ANZ provided financial facilities to Davis & Waddell between 1994 and 1996 on the security of a fixed and floating charge dated 22 September 1994, registered by ASIC on 28 September 1994, and discharged on 1 May 1996, upon registration of the HSBC charge.

1. The financial accommodation provided by the NAB was limited at approximately $5.35 million.  It comprised an overdraft facility with a limit of $1 million, a documentary letter of credit and/or surrenders, and/or trade refinance facility with a limit of $3.6 million and a revolving lease/lease purchase line of credit.  It was secured by a mortgage debenture executed under seal by the company, guarantees from the Vincents, Villa Corporation Pty Ltd ("Villa") and Vincent Enterprises Pty Ltd ("Enterprises") (companies of which the Vincents were directors and shareholders), and three mortgages over property owned, respectively, by the Vincents, Villa and Enterprises.  The security documents were given to Mr Hardy by Mr Vincent, duly executed, on or about 1 May 2000.  Davis & Waddell did what was required of it to accept the NAB's offer, and the NAB provided the company with financial accommodation.

1. In August 2000, Mark Stilve, a business banking officer employed by the NAB, discovered funds in a suspense account dedicated to the payment of stamp duty and registration fees in respect of the security documents executed in May.  He could not ascertain the purpose for which the funds were set aside.  He informed Mr Hardy of his reconciliation of the suspense account.

1. In September 2000, Davis & Waddell sought additional short term finance to purchase stock for, and to provide for delays in payments for stock prior to, the Christmas season.  The NAB provided $750,000 in additional short term finance.  The existing guarantors gave further guarantees to secure the increased debt.

1. Mr Hardy handed the September guarantee to Mr Stilve for upstamping.  Mr Stilve sought to ascertain the amount of stamp duty that had previously been paid.  He was informed by the lending services department that no security packet, nor a record of it, could be found, and he so informed Mr Hardy.  Concluding that the documents obtained in May had not been registered, the NAB began searching for the documents, and the titles to the properties subject to the mortgages.  The documents and titles were not located.

1. In November 2000, the company's overdraft facility exceeded its limit, as the NAB debited to it amounts which were outstanding under the trade refinance facility.  Consequently, the company was obliged to pay a penalty interest rate on the amount exceeding the agreed limit of the overdraft facility.  The company was also unable to draw further cheques on the overdraft facility.

1. In order to alleviate the interest burden, the NAB proposed to realign the company's trade refinance facility by making the excess liability the subject of bills of exchange drawn by the company in favour of the bank.  Mr Hardy was authorised to proceed with the realignment in December 2000, and documents required for its implementation and for the replacement of the missing securities were prepared.  The documents reflected the increase in the financial accommodation provided to the company.  

1. The Master's findings regarding the conflicting accounts of the circumstances preceding the preparation and execution of the documents were not challenged by the parties.  As such, and having considered the evidence for myself, I accept the accuracy of those findings and restate them without reference to the contrary accounts submitted in evidence.

1. Mr Hardy met with Mr and Mrs Vincent on 5 December 2000 to execute the documentation required to realign the trade refinance facility.  At the meeting, Mr Hardy explained that the NAB had lost the original security documentation executed in May, and the titles to the properties the subject of mortgages, and asked the Vincents to execute replacement documentation. Mr Vincent executed the documents on 5 December 2002.  Mrs Vincent executed the documents at a further meeting the following day.  The replacement debenture did not specify an amount as the maximum prospective liability under it. 

1. The financial accommodation offered by the NAB was outlined in a letter of offer dated 6 December 2000.  The letter of offer provided for a commercial bill facility in the sum of $2 million with an expiry/review date of 31 January 2001, and a rollover facility in respect of part of that sum, $1.5 million, with an expiry/review date of 28 February 2001.  It also included an overdraft facility of $1.5 million, a documentary letter of credit and/or surrenders and/or trade refinance facility with a limit of $1.75 million, and a revolving lease/lease purchase line of credit, all reviewable on 28 February 2001.

1. Following execution of the replacement security documentation, Mr Hardy gave the documentation to Mr Stilve for stamping and registration.  Mr Hardy also asked Mr Stilve to seek a replacement discharge of the HSBC debenture registered with ASIC.  Mr Stilve proceeded to collate all relevant documents and prepare the information required by the lending services department which attends to the stamping and registration of security documents.

1. It is appropriate at this point to refer to two findings of the Master concerning the evidence of Mr Hardy and Mr Stilve.[5]  The first finding is that Mr Hardy and Mr Stilve believed that it was a requirement that a mortgage debenture be registered within 45 days after its execution.  It is Mr Stilve's evidence that he was aware of the requirement for registering a mortgage debenture within 45 days.  Mr Hardy's evidence is that he was aware of the requirement to register a debenture, and that there was a fixed time in which to do so.  While in an affidavit he stated that he was generally aware of the need to register within 45 days, in cross-examination he explained that he did not know the fixed time without checking it.  Hence, his evidence is subject to the latter refinement.

   [5]At [52] of his judgment.

1. The second finding is that Mr Hardy and Mr Stilve believed that it was necessary to obtain the replacement discharge prior to delivering the security documentation to the bank's lending services department to lodge it for registration.  This is correct.

1. In addition, Mr Hardy and Mr Stilve believed that the consequence of non-registration within the stipulated period was the payment of penalty fees on registration. Mr Hardy referred to this in his oral evidence, and it is evident in his instructions referred to at [22]. I do not overlook the fact that in cross-examination Mr Hardy was asked if he was "perfectly well aware of the significance of the charge becoming registered" and he responded that he was. But the cross-examiner did not specify what that significance was, and did not ask Mr Hardy to identify it. The cross-examiner left the "significance" undefined. I note that in further cross-examination Mr Hardy said that he was not aware of being able to apply to the court for an extension of time. Mr Stilve said in his affidavit that:

"The implication which I understood to flow from late lodgement was the payment of a penalty registration fee.  I did not appreciate that late registration of a mortgage debenture may invalidate that debenture as against a liquidator of a customer.  I was also unaware that a mortgage debenture could be registered without all related documents, such as guarantees and a statutory declaration in relation to the assets of the customer covered by the mortgage debenture, being provided to Lending Services."

1. After unsuccessfully attempting to contact the HSBC by telephone prior to Christmas, Mr Stilve sent a facsimile to the HSBC on 29 December 2000 requesting a replacement discharge of its debenture.  He also sent a facsimile to Westpac requesting a discharge of its mortgage.  Subsequently, Mr Stilve spoke to a representative of the HSBC in relation to the discharge and, on 4 January 2001, sent a further facsimile to the HSBC inquiring as to when the documentation would be available for collection.  On 12 January 2001, the HSBC sent Mr Stilve a copy of the replacement discharge by facsimile.

1. Mr Hardy commenced leave on Monday 15 January 2001.  Before departing, he left a note instructing Mr Stilve and the relieving business banking manager, Robin Stribbles, to:

"Lodge caveat on titles for Davis & Waddell and follow-up replacement discharge documents from HSBC and WBC, to enable finalisation of security docs, for immediate registration of same.  Mark – matter is now urgent to avoid further penalties!"

1. Mr Stribbles collected the original HSBC replacement discharge documents on 16 January 2001.  He handed them to Mr Stilve that day.  Mr Stilve then reviewed the documentation and discovered that Mr Hardy had failed to sign part of the guarantee.  In his affidavit Mr Stilve said that after speaking to Mr Stribbles,

"I deferred sending the security documents to Lending Services until the return of Ross Hardy from leave.  I appreciated that this course would result in late registration of the mortgage debenture, however, it was my understanding that late lodgement would only result in an increased registration fee by way of penalty." 

1. By a letter addressed to Mr Stilve dated 17 January 2000, Westpac provided a discharge of its mortgage. 

1. On 22 January 2001, the period for registering notice of the charge expired.

1. It is convenient to now deal with the disputed finding in para 58 of the Master's judgment.  The Master stated:

"I infer that Mr Stilve consulted Mr Stribbles as his superior, in order to determine what to do or to have his authority for what he had decided he should do and that Mr Stribbles authorised him to defer registration.  There is no evidence from Mr Stribbles as to what his belief was as to the effect of non compliance with the requirement to register within 45 days even though it was his decision which was the relevant one for the purpose of considering whether the discretion to relieve from the consequences of non compliance with the requirement is enlivened on the grounds of inadvertence."

1. Counsel for the NAB challenged the finding that it was Mr Stribble's decision to defer registration.  Counsel for Davis & Waddell answered with reasons why the Master was correct.  The submissions were put in the manner appropriate for an appeal in the strict sense, as distinct from an appeal by re-hearing de novo.  Each counsel proceeded in this way.  It was a convenient way of identifying and dealing with the point.  Nevertheless, strictly speaking, it is a re-hearing de novo as mentioned earlier, and I determine the issue on that basis.

1. According to counsel for the NAB, the proper inference, and most reasonable deduction, to be drawn from the facts deposed to by Mr Stilve in his affidavit, and quoted above, is that it was Mr Stilve's decision to defer delivery of the security documents to the lending services department.  It is important to note that Mr Stilve was not cross-examined, and that Mr Stribbles did not swear an affidavit or give oral evidence.  It was further submitted that there was no evidence that Mr Stilve was required to obtain Mr Stribbles authority to make such a decision or was under his direction on this issue.  Further, as Mr Stilve was not cross-examined, he was not given the opportunity to clarify to whom responsibility for the decision ought be attributed.  Moreover, Mr Hardy, when cross-examined on the issue, resisted the assertion that the NAB hierarchy was such that the decision would have been made by Mr Stribbles rather than Mr Stilve.  Mr Hardy stated that the decision was one within Mr Stilve's authority.  Given the evidence of Mr Stilve and Mr Hardy, counsel for the NAB submitted that the Master's conclusion was not founded on fact, but on conjecture.  It was further submitted, in the alternative, that the finding that Mr Stribbles decision was "the relevant one" was inconsistent with Mr Stilve's evidence and it was not otherwise supported by the evidence. 

1. In contrast, counsel for Davis & Waddell submitted that although it is unclear whether the decision was ultimately that of Mr Stilve or Mr Stribbles, the correct view is that Mr Stribbles was responsible for the decision.  Mr Stilve, in his affidavit, deposed that it was his role, as a business banking officer, to assist the business banking manager, a position occupied at the relevant time by Mr Stribbles.  In response to questions asked by counsel, Mr Hardy indicated that if a business banking officer encountered a difficulty he or she would refer the problem to the relevant business banking manager, and the business banking manager would provide the officer with guidance.  Given the evidence of Mr Stilve and Mr Hardy, counsel for Davis & Waddell submitted that it is to be expected "in the hierarchical system which a large company structure inevitably reflects", that a superior would take responsibility for the actions of his or her subordinates, and conversely, that a subordinate would obey the instructions given by his or her superiors.  According to counsel for Davis & Waddell, in instructing both Mr Stribbles and Mr Stilve to register the charge, Mr Hardy recognised Mr Stribbles' authority and charged him with a responsibility, which was separate and additional to the responsibility placed on Mr Stilve, to obtain registration of the charge.  Mr Stilve, as a business banking officer, would not contradict a decision of his manager, Mr Stribbles.  Therefore, counsel contended that it is appropriate to conclude that Mr Stribbles fulfilled his duty, acting in accordance with the NAB's procedures and with the responsibility placed on him by Mr Hardy, and made the decision to defer registration of the charge.  In further support of the defendant's submission, counsel for Davis & Waddell added that at no stage did Mr Stilve state that the decision was his. 

1. In the absence of an affidavit sworn by Mr Stribbles clarifying his role in the decision to defer registration of the notice of charge, counsel for Davis & Waddell invited the Court to infer that Mr Stribbles' evidence, such as it might have been, would not have assisted the NAB.[6]  Counsel submitted that this unexplained dearth of evidence entitled the Court to make a finding adverse to the NAB. 

   [6]See Insurance Commissioner v Joyce (1948) 77 CLR 39; Jones v Dunkel (1959) 101 CLR 298; O’Donnell v Reichard (1975) VR 916; Transport Industries Insurance Co Ltd v Longmuir (1997) 1 VR 125.

1. Counsel for the NAB rejected this assertion.  According to counsel for the NAB, Mr Stribbles did not swear an affidavit as his evidence was unnecessary.  Mr Stilve provided evidence as to the circumstances of his decision to delay registration of the charge.  Counsel for the NAB submitted that the rule in Jones v Dunkel does not require the provision of unnecessary evidence.

1. I note that before the Master, Mr Hardy was cross-examined.  I also note that the Master found him to be a truthful witness.  Considering the matter for myself, I accept Mr Hardy's evidence.  Mr Stilve was not cross-examined before the Master.  In other words, counsel for Davis & Waddell had been, and remained before me, content for his evidence to stand untested by cross-examination.  There was no evidence contradicting Mr Stilve's evidence.  I accept his evidence.

1. I agree with the submissions of counsel for the NAB.  In my view, the evidence does not establish, on the balance of probabilities, that the decision to defer registration was made by Mr Stribbles, or that the decision was one for which Mr Stribbles was responsible, in the sense of actually making the decision.  Such a construction of the facts requires undue supposition and conjecture.  In contrast, I conclude that both on its terms, and as a matter of reasonable inference from Mr Stilve's evidence and Mr Hardy's evidence, it was Mr Stilve's decision to defer registration of the charge.  That Mr Stilve was responsible for the decision to defer registration is a conclusion consistent with Mr Hardy's evidence that the decision was one within Mr Stilve's authority.

1. On 9 February 2001, Mr Stilve went on leave for one week.  Mr Hardy returned from leave on 12 February 2001 and immediately sought to have the notice of charge and debenture lodged for registration.  The notice of charge and the debenture were lodged for registration on 15 February 2001.   The notice stated, inter alia, that the charge was created on 6 December 2000, that no maximum prospective liability was specified in the charge, and that all the undertaking, property and assets of the company were charged including all property and assets held as trustee.  I should record my finding, in view of a statement in para [41] of the Master's reasons, that the notice was lodged because the debenture was a required part of the NAB's security, and not because of apprehension concerning the financial situation of the company and the need to preserve the NAB's rights under the debenture as against an administrator or liquidator.

1. On 2 March 2001, Mr Vincent met with Mr Hardy and Mr Stafford, a regional business manager.  Mr Vincent advised them of financial difficulties.  He sought an increase of $500,000 in the trade bill facility, until June, to meet orders and replace depleted stock reserves.  He presented the NAB with a cash flow statement indicating that the company could not repay the NAB the $1.75 million due on bills by February or March.  He proposed a revised payment program commencing in May, with a payment of $50,000.  According to Mr Vincent, the need for additional finance was caused by a deceleration in the retail market, resulting in substantial overstocking, delays in the collection of payments from debtors, and difficulties with the company's computer system.  After reviewing the situation, the NAB refused the company further financial accommodation.

1. Davis & Waddell continued to trade, but in view of the company’s apparent difficulties the NAB appointed an independent investigating accountant Simon Wallace-Smith of Deloitte Touche Tohmatsu to provide a report on the financial affairs of the company.  On 4 April 2001 he provided the NAB with a discussion paper, dated that day, regarding the company's financial position.  The report revealed that the company had probably made losses of approximately $1.9 million in the last 12 months and that it held obsolete stock.  The financial position of the company had rapidly deteriorated.  On 6 April 2001, the directors resolved that the company was insolvent and appointed Barry Keith Taylor as administrator of the company.  On 10 April 2001, the NAB filed the originating process in this proceeding.  On 12 April 2001, the first meeting of creditors was held, and the NAB appointed receivers and managers to the company's assets pursuant to the debenture.  On 10 May 2001, at the second meeting of creditors, it was resolved that the company be wound up and, as a result, the administrator became the liquidator of the company.

1. In an affidavit sworn on 10 May 2001, following the second meeting of creditors, Paul Vartelas, an official liquidator in the employ of Mr Taylor, stated that if the NAB’s application succeeds, it will receive all, or virtually all, of the proceeds of the liquidation, almost the entire amount it was owed.  However, if the NAB’s application fails, and it ranks as an unsecured creditor, the unsecured creditors can expect a return in the vicinity of between 40 and 50 cents in the dollar.

Law

1. Under s 263(1) of the Act, where a company creates a charge, the company must ensure that a notice containing the information identified in s 263(1)(a) is lodged within 45 days following the creation of the charge.  The notice is to be lodged with ASIC which, under s 265(1), is required to maintain a register of company charges.  Section 265(2) provides that when a notice of a charge is lodged, ASIC must record in the register information including the time and date when the notice was lodged, a short description of the liability secured by the charge and of the property charged.  Section 270(1) provides that the notice may be lodged by the company or by any interested person, which includes the NAB as chargee under the debenture.[7]

   [7]Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) (1991) 2 Qd R 456 at 460.

1. The requirement to register company charges is entrenched in company law.[8]  The register exists to enable persons considering engaging in business with a company to ascertain whether the company has encumbered its property.  In this way, the register functions to protect potential unsecured creditors of a company.  It also provides notice to persons who are creditors.

   [8]See Re Yolland, Husson & Birkett Ltd [1908] 1 Ch 152 at 156 & 158; Re Jackson & Bassford Ltd [1906] 2 Ch 467 at 476; Esberger & Sons Ltd v Capital and Counties Bank [1913] 2, 158 Ch 366 at 374; Wilde v Australian Trade Equipment Co Pty Ltd (1980) 145 CLR 590 at 596-597; Bloodstock Air Services of Australia Pty Ltd (in liq) v Roadrunner Equipment Pty Ltd (1985) 3 ACLC 733 at 738.

1. The consequences of failing to lodge a notice of a charge are identified in s 266(1). Section 266(1) provides that 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 six months before the critical day … "

1. Section 266(2) provides that the relevant period referred to in s 266(1)(c) is:

"(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 … "

1. The critical day is defined in s 266(8). In circumstances in which a company is being wound up, s 266(8) provides that the critical day is the day the winding up commenced. In the present circumstances, the day the winding up commenced is defined as the day on which the administration of the company commenced, which is 6 April 2001.[9]

   [9]See s 513B and s 513C.

1. Under s 266(4) of the Act, the Court has power to extend the period within which a company may lodge notice of a charge, and thus avoid the consequences of a failure to lodge a notice identified in s 266(1). Section 266(4) provides that the Court, if satisfied that the failure to lodge a notice of a charge:

"(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."

1. The failure to be examined by the Court is the failure to lodge the notice within the period of 45 days following the creation of the charge.[10]  That is the failure to lodge the charge created by the debenture executed on 6 December 2000, not the earlier misplaced debenture.

   [10]Campbell Finance v Vivistan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340 at 347.

1. The presence of the disjunctive "or" makes it clear that para (a) contains three separate grounds any one of which, if established, will enliven the court's power to extend time.  There is the further ground in para (b) and the just and equitable ground, making a total of five separate grounds or instances in which the power to extend time arises.[11]  Counsel proceeded on this basis and addressed a submission on each ground.  However, I do not consider it necessary to inquire beyond the three grounds identified in para (a).

   [11]See Re Ashpurton Estates Ltd [1983] 1 Ch 110, 119; Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1 at 8.

Criticism of the NAB - Davis & Waddell's opening submission

1. At the outset of his submissions, counsel for Davis & Waddell criticised the NAB. These criticisms generally concerned the five grounds and the exercise of the discretion under s 266(4). In the first place, he described the failure to register the charge as a knowing and deliberate failure to act in accordance with well-known requirements of the law, in the full realisation that doing so was improper and could expose the NAB to penalties. Counsel stated that the NAB sought the court's assistance to relieve it from the consequences of its failure to register the charge because it found that the penalty was higher than it had supposed. Counsel further criticised the NAB, a "major financial institution" responsible for lodging the notice of its charge, on the basis that it had omitted to enforce procedures to ensure timely registration of the charge. According to counsel, the NAB sought relief to avoid the consequences of its omissions and ineptitude.[12]

   [12]See para 2 of Davis & Waddell's written submission.

Accidental failure to lodge the notice

1. Counsel for Davis & Waddell commenced his submission in relation to the first of the grounds identified in s 266(4) by referring to the Oxford English Dictionary definition of "accidental" as "happening by chance, undesignedly, or unexpectedly; produced by accident; fortuitous." Counsel submitted that the failure of the NAB to register the notice of a charge did not happen by chance. It did not occur undesignedly, or unexpectedly. The NAB's failure to lodge the notice was deliberate and intentional. It was not produced by accident.

1. As stated at [18], Mr Hardy was aware of the requirement to register the charge, and that there was a fixed time in which to do so.  However, although he was generally aware of the 45 day registration period, he did not what the precise registration period was without checking.  Counsel for Davis & Waddell submitted that at the time Mr Hardy instructed Mr Stilve and Mr Stribbles to finalise the documentation and register the debenture, prior to his departure on leave, he "clearly enough did know the precise limit."  Counsel submitted that the urgency which Mr Hardy conveyed in his instructions to Mr Stilve and Mr Stribbles betrayed his knowledge of the precise time limit within which registration was required.  In my view, this submission is not supported by the evidence of Mr Hardy.  It is speculative, and I reject it.  In his evidence Mr Hardy explained that the failure to ensure that the charge was registered by 20 January 2001 was "due to the delay in receiving replacement discharges and inadvertence on my part", which he believed to be caused by work pressure he was experiencing in preparing for his annual leave to commence on 13 January 2001.

1. In his affidavit, Mr Stilve said that he was aware of the obligation both to register the debenture, and to do so within 45 days.  Mr Stilve stated, however, that he did not appreciate that late registration of the mortgage debenture would invalidate the charge as against a liquidator.  Nor did he realise that it was possible to register an incomplete debenture.[13]  Mr Stilve understood that in deferring registration of the charge until Mr Hardy signed the guarantee, following the expiration of the 45 day registration period, Davis & Waddell would merely incur a penalty registration fee.  Mr Hardy's note to Mr Stilve and Mr Stribbles was consistent with that understanding, in its reference to "further penalties".

   [13]See s 265(4).

1. Counsel for Davis & Waddell submitted that Mr Stilve's underestimation of the consequences of failing to register the charge ought not be regarded as accidental.  Rather, Mr Stilve's decision to defer registration was considered and deliberate.  Mr Stilve queried whether to proceed with, or defer, registration, raised his query with Mr Stribbles, and then awaited Mr Hardy's return before registering the charge.

1. In contrast, counsel for the NAB contended that the combination of Mr Stilve's ignorance of the fact that the NAB would be rendered an unsecured creditor in the event of a liquidation if it failed to register the mortgage debenture within 45 days,[14] and his belief that without all related documents and Mr Hardy's signature on the guarantee the documentation was incomplete and incapable of registration, was the cause of the bank's failure to register the mortgage debenture. According to the NAB, the failure was accidental.

   [14]See s 266(1).

1. Counsel for the NAB, noting that the definition of "accidental" in the Oxford English Dictionary includes "produced by accident", referred to the definition of "accident".  "Accident" is defined to include both an event which occurs by chance and "an unfortunate event, a disaster, a mishap".  The NAB submitted that Mr Stilve's failure to lodge the debenture because he misunderstood what documents were required was an unfortunate event or a mishap, and in either sense was accidental.

1. Davis & Waddell relied on the decision in Re Wilson Tyres Pty Ltd.[15] In that case an accidental failure to register a charge was considered synonymous with an "unintentional" failure to do so.  That view had been stated by Sangster J in Re Flinders Trading Co Pty Ltd.[16]  The applicant in Re Wilson Tyres, a bank (in fact, the NAB), failed to lodge notice of a charge within the 45 day registration period in circumstances in which it was not aware of the existence of the charge until 15 days prior to the expiration of the registration period.  The bank lodged the notice of a charge two days after the registration period expired.  The company was wound up and the charge was thus considered void as against the liquidator.  The bank subsequently sought to extend the registration period by two days.  The Senior Master attributed the failure to lodge the documents within the relevant period to the inadvertence of the bank's securities department in omitting to inform those responsible for  stamping the documents of the urgency with which the documents were required to be stamped and lodged for registration.  According to the Senior Master, the failure to lodge the notice was inadvertent or accidental, in the sense that it was "unintentional".

   [15](1992) 7 ACSR 318 at 334.

   [16](1978) 20 SASR 14 at 29.

1. As I understand the circumstances of the present proceeding, it cannot be said that the failure to lodge the debenture was accidental, in the sense that it was unintended.  Mr Stilve clearly intended to defer registration until after the expiration of the 45 day registration period, pending Mr Hardy's return from leave. 

1. In Rynmarc Pty Ltd v Classic Ergonomic Chairs Pty Ltd[17] Underwood J held, in circumstances in which a solicitor was aware of the statutory obligation to register a charge, although ignorant of the 45 day registration period, yet failed, for over eight months, to register the charge, that the failure to lodge was not accidental.  The solicitor registered the charge only after being informed that the chargor could appoint an administrator (which it did, three days later).  Counsel for Davis & Waddell, emphasising similarities between Rynmarc and the present proceeding, relied on Rynmarc in contending that the failure of the NAB to lodge the mortgage debenture was not accidental.

   [17](1994) 12 ACLC 1038.

1. Counsel for the NAB submitted that Rynmarc was distinguishable.  In Rynmarc the debenture had been executed in March 1993.  The solicitor was aware of the requirement to register the charge, but not of the 45 day time limit.  He thought that the requirement was to do so "as soon as practicable", "soon", or "not later than the end of April 1993".[18]  Underwood J found that from the middle of 1993 the solicitor was continually conscious of the need to register the charge.  Yet, he did nothing.  His failure was not due to ignorance of the law, or inadvertence, nor was it accidental.  It was due to "some inexplicable paralysis of mind".[19]  That is not the situation in this case.  In this case the reason for the delay was the mistaken understanding that all of the documents relating to the mortgage debenture were necessary, and required to be completed, prior to registration of the charge.  According to the NAB, it is this critical mistake which distinguishes the present circumstances from those in Rynmarc, and which makes the failure to register accidental, notwithstanding the fact that a conscious decision was made to defer registration of the charge.

   [18]Ibid, at 1046.

   [19]Ibid.

1. According to counsel for the NAB, accident includes the concept of mistake. Mr Stilve's mistake was accidental in view of the fact that he was unaware both of the consequences of failing to lodge a notice of a charge, under s 266, and of the fact that the documents could be registered in an incomplete form. Counsel for the NAB referred to the observation of Romer LJ in In re MIG Trust Ltd, that the legislative provisions extending the time for registering a charge had been passed "for the purpose of protecting a secured creditor from the results of a perfectly innocent mistake made by him and by the company as mortgagor".[20]  The present proceeding concerned an innocent mistake.  Mr Stilve deferred registration of the charge as he mistakenly believed that the notice of a charge could not be registered without complete documentation.  Consequently, counsel for the NAB submitted that the bank's failure to lodge the notice of a charge was accidental within the terms of the legislation.

   [20][1933] 1 Ch 542 at 570.

1. I find that the failure to lodge the notice of a charge was accidental.  Certainly, it appears that Mr Stilve formed an intention not to register the charge, but that intention was founded on a mistake, a misapprehension of the registration requirements.  Mr Hardy also had a misapprehension as to the need to have all of the documents to be able to effect registration.  Mr Stilve decided to defer registration of the charge at a time when he was ignorant of the consequences of failing to register the charge in the event of a liquidation.  There is no evidence to suggest that the decision to defer registration was devised with delinquent intent or knowing disregard.  Mr Stilve's understanding that he could not register an incomplete charge, and his belief that Davis & Waddell would merely incur a penalty registration fee if he deferred registration until after the registration period expired, deterred him from registering the mortgage debenture.  He (and Mr Hardy) sought to act properly, not improperly.  The mistake was innocent.  This unfortunate concurrence of circumstances is the cause of the bank's failure to register the mortgage debenture; it is also, in my view, accidental within the ordinary meaning of the word and the terms of the Act. 

1. The Court need only be satisfied that there is evidence of one of the grounds identified in s 266(4) to enliven its discretion to extend the time in which to lodge a notice of a charge. As such, it is not necessary to examine the bank's failure to register the charge in the context of the other grounds identified in s 266(4). However, it seems to me that the facts are such as to establish not only that the failure to register was accidental, but also that the failure to register was due to inadvertence, or that it may be attributed to some other sufficient cause. Accordingly, and as it may be helpful to do so, I now discuss those grounds.

Inadvertent failure to lodge the notice

1. Counsel for Davis & Waddell commenced his submission on this part by referring to the prime meaning of "inadvertence" in the Oxford English Dictionary, viz., "the fact or habit of being inadvertent; want of advertence, failure to observe or pay attention; inattention".  It includes "an instance of this; an act or fault of inattention; an oversight".

1. Mr Hardy's lack of awareness of, and failure to enquire as to, the precise time within which registration of the charge was required, and the consequences of non-registration, amounts to a failure to properly advert to the registration requirements.  Mr Stilve's ignorance of the consequence that the charge would be void as against a liquidator unless registered within 45 days is, similarly, a fault of inattention, as is the mistaken understanding that the charge could not be registered without all of its composite parts.  In  each instance, had the NAB's officers endeavoured to ascertain the precise registration requirements they would have been accurately apprised of their legal obligations, and would, in my view, have had the debenture registered as and when required.  Thus, the NAB's want of attention was the cause of the failure to lodge the notice and  debenture.

1. This conclusion is consistent with the authorities.  In Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) Kelly SPJ, with whose judgment Macrossan CJ and Connolly J agreed, held that ignorance of the legal requirement to register is sufficient to constitute inadvertence.[21]  Kelly SPJ also held that a failure to appreciate the time within which compliance with the legislation is required may be indicative of inattention and, therefore, inadvertence.[22]  On this basis, Mr Hardy's ignorance of the specific period within which registration was required may, and in my view does, amount to inadvertence.  

   [21][1991] 2 Qd R 456 at 461.

   [22]Ibid.

1. In Re Freightlines Northern Territory Pty Ltd (in liq), Thomas JA examined the content of the principle that a failure to register due to ignorance of the law may amount to inadvertence.[23]  Thomas JA held that ignorance of the law includes ignorance of the adverse effects of a failure to register a charge.[24]  Mr Stilve's ignorance of the consequences of failing to lodge the mortgage debenture in the event of a liquidation is, in this sense, an instance of inadvertence.

   [23][1999] 2 Qd R 384 at 385.

   [24]Ibid.

1. Vaisey J in In re Kris Cruisers Ltd observed that

"[t]here is a statutory right in the mortgagee or chargee to come to the court to be relieved of the consequences of his own negligence and lack of caution provided that the court is satisfied that the omission to register was not an omission with any fraudulent intention"

but was due to one of the grounds identified in the Act.[25]  According to Vaisey J, the kind of case in which relief should be refused would be

"where there was some fraudulent or improper motive in withholding the knowledge of the existence of the charge from the public, to whom the registration of it would have given the appropriate notice."[26] 

[25][1949] 1 Ch 138 at 141.

[26]Ibid, at 141-142.

1. In my view, the NAB's failings, although regrettable, particularly perhaps for such a large lending institution, were not made with any fraudulent or improper intention and, as such, are not beyond the scope of those acts or omissions for which the curative power of the court under s 266(4) is intended. The failings were attributable to human error, oversight or inadvertence. It is precisely circumstances of this kind for which the provision is designed.

Failure to lodge the notice due to some other sufficient cause

1. The circumstances which found the grounds of accident and inadvertence, in my view, are also sufficient to support a finding that the failure to lodge the mortgage debenture was due to "some other sufficient cause".  I agree with the submissions of counsel for the NAB that the bank's conduct was negligent and not, as counsel for Davis and Waddell submitted, wilful and in deliberate contravention of the law. 

1. It may be pertinent to state the observations of Vaisey J as to the interpretation of the United Kingdom equivalent of s 266(4) in In re Kris Cruisers.  Vaisey J considered the section to be "a benevolent section" in the sense "that it appears to give the mortgagee or the chargee a complete and unfettered opportunity for repentance and … to place him in the same position … as if he had been careful and not careless, diligent and not negligent."[27]

   [27]Ibid, at 142.

1. As, in my view, the discretion of the Court is enlivened, I do not consider the other grounds identified in s 266(4). I now consider the exercise of the discretion to extend the period for registering the mortgage debenture.

Exercise of discretion

1. Section 266(4) confers a discretion on the Court to grant an extension of time. If the jurisdiction is enlivened the Court "may … and on such terms and conditions as seem … just and expedient … extend the period". The section does not state the criteria to be considered by the Court in deciding whether to exercise the discretion. The purpose of conferring a discretion in these terms is to ensure that the Court is able to do that which is just and equitable in all the circumstances of the particular case.[28]  However, the Court exercising the discretion is not at large; it is a judicial discretion, the approach to the exercise of which McGarvie J, as a member of the Full Court in McKenna v McKenna, articulated as follows:

"[T]he Judge, on the facts established before him and the legal situations of the respective parties ascertained or assessed by him, must, excluding irrelevant considerations, and taking into account and giving appropriate weight to all relevant considerations, make the decision he considers just, having regard to the competing considerations and interests in the circumstances of this particular case."[29]

[28]See Mallett v Mallett [1984] 156 CLR 605 at 609.

[29]McKenna v McKenna [1984] VR 665 at 674.

1. In the course of argument I was referred to many cases concerning the construction and application of s 266(4) and its preceding statutory provisions. I have regard to all that counsel said, and I have read and considered the authorities to which counsel referred. They provide a guide as to what have been regarded as relevant factors in deciding whether to exercise the discretion. It is appropriate to have regard to the authorities for such guidance as they may provide. Sometimes appellate courts may be found to have provided guidelines for the exercise of a judicial discretion. However, a judicial discretion being of the nature it is, the ultimate question in each case remains whether it is just and equitable to exercise the discretion.[30]  In this respect, as McGarvie J pointed out in McKenna v McKenna,[31] decisions in earlier cases, and their identification and discussion of relevant considerations:

"… can not create either a formula to be followed or conditions precedent to be satisfied before the discretion can be exercised in a particular way.  That would involve an impermissible fettering of the discretion.  In that way judicial decision would destroy the flexible discretion which the law had conferred on the judge."

[30]Norbis v Norbis (1986) 161 CLR 513 at 533-538; McKenna v McKenna [1984] VR 665 at 674.

[31][1984] VR 665 at 674.

1. Furthermore, the language used in the authorities is not always the same, indeed sometimes the language, the approach, or the results appear inconsistent or irreconcilable.  It is important to bear in mind that I am concerned with the exercise of a judicial discretion, and that the proper exercise of that discretion requires attention to the facts and circumstances of the particular case at hand.  I agree, with respect, with the observation of Thomas JA in Re Freightlines Northern Territory[32] that:

"There is little purpose in making a point by point comparison with other cases which in the end reveal a particular exercise of discretion on a different combination of facts".

[32][1999] 2 QdR 384 at 390.

1. A relevant factor in the present case is that Davis & Waddell has been in liquidation since the creditors' resolution on 10 May 2001.  The winding up is taken to have commenced on 6 April 2001, when the administrator was appointed.  As the debenture was void as against the liquidator (and administrator), the unsecured creditors (including the NAB) stand to participate pari passu in the distribution of the company's estate (s 501).  Hence, if an order is made extending time, the unsecured creditors (other than the NAB) will lose the benefit of their "right" under s 501.  In Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (in liq)[33] Menzies J said that:

"It is a deeply rooted principle of company law that, when liquidation has commenced, one creditor should not be assisted by the court to improve its position vis-à-vis other creditors."

[33](1973) 131 CLR 605 at 613.

1. There was some discussion before me of the nature of the "right" possessed by the unsecured creditors in this respect; as to whether, in a winding up, s 501 imposes a statutory trust under which the unsecured creditors have an accrued or vested right, subject to preferential payments, to the company's assets and to receive a distribution of the assets pari passu[34] or, on the contrary, there is no statutory trust, as property in the assets remains vested in the company (and not the liquidator) until distribution, with the unsecured creditors having a beneficial interest in the assets under the statutory scheme for distribution.[35] The discussion of the issue was somewhat limited and, in my view, it is neither appropriate nor necessary to express a conclusion on the point. Whatever be the true nature of the unsecured creditors' "right", it was common ground before me that the discretion to extend time under s 266(4) remains, notwithstanding liquidation.

   [34]See Re Ashpurton Estates Ltd (1983) ChD 110 at 123; JJ Leonard Properties Pty Ltd v Leonard (WA) Pty Ltd (in liq) (1988) 6 ACLC 247 at 250.

   [35]See Gough, Company Charges, 2^nd ed (1996), 772-773.

1. I note in that respect, and for completeness, that counsel for Davis & Waddell did not address the erroneous submission Thomas JA considered, and rejected, in Re Freightlines Northern Territory, [36] that the discretion was precluded where an order for extension had not been obtained, or the notice of charge had not been lodged, prior to liquidation.  The argument rejected by Thomas JA was based on the unsecured creditors having obtained a statutory right akin to a proprietary right in the administration of the assets and their distribution pari passu. As Thomas JA described it, "the rights of creditors upon a winding up are contingent upon the possible exercise by the court of [the] discretion" under s 266(4).[37]

   [36][2000] 2 Qd R 384 at 389.

   [37]Ibid.

1. I further note that counsel for Davis & Waddell stated that Lord Brightman, in giving the judgment of the English Court of Appeal in In re Ashpurton Estates Ltd went too far in saying that "the court must invariably refuse to extend the time for registration once the company has gone into liquidation".[38] Counsel for Davis & Waddell said that in that passage the expression "must invariably" put the matter too highly. In my view that concession was correct. A court cannot, by judicial qualification, negate the statutory discretion in s 266(4), which on its terms is applicable pre- and post-liquidation. Furthermore, it is otherwise apparent from Lord Brightman's judgment that the practice, as he described it, rested on a discretion, not a rule of law, and that cases could be imagined in which an order would be made.[39]

   [38]In re Ashpurton Estates Ltd (1983) 1 Ch 110 at 123.

   [39]Ibid, at 124.

1. It is clear then, that the fact of liquidation, and the detriment to unsecured creditors if time is extended, are factors which militate against ordering an extension of time, but they are not necessarily fatal to the application.  Furthermore, they are to be considered together with all of the other relevant factors.  However, it has been said in a number of cases that when a company is in liquidation an order extending time will only be granted in exceptional circumstances.[40]  For instance, in Re Freightlines Northern Territory Thomas JA referred to:

"the principle that after the commencement of the winding up exceptional circumstances need to be shown before making any order which will adversely affect the overall interests of the unsecured creditors.  But the discretion remains, and a balancing exercise is necessary."[41]

[40]It is sufficient to refer to Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456 at 464-465; Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd [1998] 2 VR 340 at 350; Re Freightlines Northern Territory Pty Ltd (in liq) [2000] 2 Qd R 384 at 389-390; Re Fairline Furniture (Aust) Pty Ltd (in liq) (1998) 12 ACLR 787; Citibank Ltd v Linput Pty Ltd (in liq) [1998] 2 VR 340; Re Wilson Tyres Pty Ltd (1992) 7 ACSR 318 at 335.

[41][2000] 2 Qd R 384 at 390.

1. Counsel proceeded on the basis that the NAB is required to show exceptional circumstances. I proceed on that basis accordingly, which is, in any event, consistent with the balance of the authorities. I should add though, in fairness to counsel for the NAB, that I also understood her submission at one point to suggest that even the requirement of establishing exceptional circumstances involved the imposition of a judicial fetter upon the otherwise unqualified discretion in s 266(4). The submission is that while the fact of liquidation and the effect upon unsecured creditors of an order extending time is a relevant consideration, it is only one of the relevant considerations and, as such, should be considered with all of the other relevant considerations. In doing so, the court should give to each relevant consideration such weight as is appropriate in the circumstances in determining whether to exercise the discretion, without elevating any one of those considerations to the level of an exceptional circumstance which must be overcome by another factor or factors before the discretion can be exercised. The Corporations Act includes both s 266(4) and s 501, but does not require evidence of exceptional circumstances in a post-liquidation situation. The court should not place a hurdle in the path of an applicant, requiring an applicant to demonstrate exceptional circumstances to overcome the negative effect of an order on unsecured creditors in a winding up, when s 266(4) imposes no such hurdle. The better approach is perhaps that adopted by Street J in Re Dudley Engineering Pty Ltd[42] and Needham J in Vector Capital Ltd v SNS Software Network Systems Pty Ltd.[43]  However, as I have said, I mention this only to be fair in stating the submissions of counsel for the NAB.  I did not understand her to submit that I should engage in a review of the authorities concerning the requirement of exceptional circumstances and conclude that it constitutes an impermissible fetter, and I do not do so.  In any event, whatever my view may be, given the state of the authorities, and having regard to the statement of the High Court in Australian Securities Commission v Marlborough Gold Mines Ltd, [44] consideration of the issue is appropriate for an appellate court.

   [42][1968] 1 NSWR 483.

   [43](1988) 12 NSWLR 1.

   [44](1993) 177 CLR 485 at 492.

1. Counsel for the NAB identified the following as the relevant factors in favour of the exercise of the Court’s discretion to grant the extension of time.

(a)The NAB would not have advanced funds to Davis & Waddell without the required security, which included the debenture.

(b)In addition to Davis & Waddell being aware of (a), both the NAB and the company intended that the advances be so secured.

(c)Notice of the charge was lodged on 15 February 2001, whilst Davis & Waddell was trading and prior to the appointment of an administrator to the company on 6 April 2001.

(d)The time which elapsed between the date by which the notice should have been lodged, 22 January 2001, and the date on which it was lodged, 15 February 2001, a difference of 24 days, or 18 business days, was short[45] and not in any way "significant", as the company was trading on both dates.

[45]Counsel referred to the decision in Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1989) 7 ACLC 15, in which Pidgeon J held the two months between the date on which the notice ought to have been lodged and the date on which the notice was lodged to be a short period. The short period which elapsed influenced Pidgeon J in exercising the discretion to extend the time for registering the charge.

(e)The NAB remedied its default "within a reasonable time."[46]  The notice was lodged as soon as Mr Hardy returned from leave.

[46]Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 QdR 456 at 466(b).

(f)The NAB gave value for the charge and, in the absence of such an order, would be deprived of that value.[47]  The value provided was the initial accommodation of $5.35 million plus the further $750,000, a total of $6.1 million.[48]

[47]Ibid, at 466(d); Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1989) 7 ACLC 15 at 19.

[48]See the affidavit of Mr Hardy sworn 9 April 2001, para 5, in which he states the then amount of the facility as approximately $6.1 million in total.

(g)There is no evidence that any unsecured creditor extended credit or advanced money to the defendant between 23 January 2001 and 15 February 2001, after searching the register at a time when the register should have but did not disclose the existence of the charge,[49] or because any such unsecured creditor was unaware of the NAB's claim to be a secured creditor.

[49]Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 QdR 456 at 466(e).

(h)Nor is there evidence that any creditor of Davis & Waddell gave credit or lent money to the company, or engaged in a relevant transaction with the company, in the period in which lodgement of the notice was outstanding.

(i)In any event, in the period in which lodgement of the notice was outstanding, any person searching the register would have discovered the HSBC charge, being security for up to $10 million, over all of the assets and undertaking of the company.  It remained on the register until 15 February 2001.  Although the charge recorded in the register did not reflect reality, it ensured that a creditor searching the register prior to transacting with the company would be aware of a charge over the property of the company.

(j)Further, until 15 February 2001 (when the HSBC charge was discharged), the NAB was entitled to be subrogated to the HSBC charge in respect of the $4,091,645.11 it had paid the HSBC.  This was a further reason why the failure to register could not be of such a nature as to prejudice the creditors of Davis & Waddell.

(k)The NAB's subrogated rights terminated on lodging the discharge of the HSBC charge.  In this way, the NAB may be seen to have acted to its detriment in lodging the HSBC discharge.

(l)There is no evidence that Davis & Waddell was insolvent, or that the NAB ought to have been concerned as to the solvency of the company, at the time of creation of the charge.  Mr Hardy deposed that at the inception of the credit and banking facilities in April 2000, and when taking replacement securities in December 2000, Davis & Waddell was solvent.  Mr Hardy stated that he had no concerns regarding the company's financial position.  Mr Vincent affirmed Mr Hardy's evidence that Davis & Waddell was solvent at the time of creation of the charge in December 2000.  I accept this evidence.  I further find that it was not until the meeting on 2 March 2001 that the NAB became aware of Davis & Waddell's financial difficulties which, in his affidavit sworn 9 April 2001, Mr Hardy described as "significant cash flow problems".  It is apparent that the NAB's application to extend time was accelerated, if not triggered, by the appointment of the administrator, the circumstances leading to that having only come to the NAB's notice in the preceding weeks.

(m)The notice was lodged almost three months before the resolution to wind up on 10 May 2001.  Under s 513(c) the winding up is taken to have commenced on 6 April 2001, the date on which the administrator was appointed.  The application to extend time was filed four days later, on 10 April 2001.

(n)It is reasonable to infer that a significant proportion of the assets of the company reflected the funds advanced by the NAB.[50] The first matters relied on as a basis for the inference were the amount secured by the HSBC debenture (evidenced by the payment by the NAB to the HSBC of $4,091,645.11), the assets of Davis & Waddell when the debenture was created,[51] and the sums lent to Davis & Waddell. Given those matters it was reasonable to draw the inference in relation to the assets, both in the period from May to the execution of the second debenture on 6 December 2000, and in the period from 6 December 2000 to the appointment of the administrator on 6 April 2001. In further support of the submission, the NAB relied upon an admission by Mr Vincent that Davis & Waddell "used the National Australia Bank money in the course of running the business and buying merchandise". At another point in his evidence Mr Vincent said that he used $750,000 to pay "for the merchandise". The reference to merchandise was the stock purchased for resale. In re-examination he affirmed this, stating that the $750,000 was used to purchase merchandise for the Christmas period. Counsel further relied on Mr Vartelas' statement on behalf of the administrator at the first meeting of the company's creditors on 12 April 2001, that the "main asset of the company is the stock", the value of which he estimated at approximately $3.5 to $4 million. Counsel also referred to the statement of assets in the administrator's report for the second meeting of creditors. The report stated the assets to be –

[50]See Re Wilson Tyres Pty Ltd (in liq) (1992) 7 ACSR 318 at 339.

[51]See the administrator's report for the second meeting of creditors.

Book Value	Estimated Realisable Value
Trade debtors	2,170,186	1,600,000
Office equipment/plant & equipment	530,543	48,670
Stock	4,206,000	3,000,000
$6,906,729	$4,648,670

Hence, it was submitted that if the court dismissed the application, the dividend which the other creditors would receive would be in the nature of a windfall, and the NAB would suffer an unjustified loss of security for which it had given value.[52] 

[52]Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1989) 7 ACLC 15 at 19; Re Wilson Tyres Pty Ltd (in liq) (1992) 7 ACSR 318 at 339.

Counsel for Davis & Waddell, in contrast, submitted that the argument that the assets of the company were attributable to funds advanced by the NAB was "misconceived and contrary to the statute." It was misconceived for the following reasons.  The last sum provided by the NAB was the $750,000 advanced in September 2000, seven months prior to the appointment of the administrator.  No additional funds were provided by the NAB as a consequence of the execution of the 6 December 2000 debenture.  The argument presumed that it would be possible to isolate an individual creditor, investigate the creditor's contribution to the assets on hand at 6 April 2001 (which mainly comprised stock), and establish that the contribution exceeds what is available to the creditor on a pari passu distribution of the assets of the company.  Counsel submitted that the distributable assets of the company are the accumulation of the entire history of the company, a history which includes the receipt of contributions made in money, and in goods, services and labour, at the end of the company's existence and earlier, a history which also includes payments made by the company over time, for money, goods and services.  It is not possible to delineate any part of the company's total distributable property as being properly attributable to one contributor as distinct from another.  It is illogical to dissect the history of the company and to seek to influence the allocation of its assets by reference to events which occurred at a particular point in time.

Davis & Waddell further submitted that the NAB's contention is contrary to the statute.  The framework established under the Corporations Act is not one of distribution of assets in consonance with perceived moral rights.  The legislation directs that, subject to specific provisions of the Act, the assets be distributed pari passu amongst creditors with provable debts. Section 266(4) does not operate in a preferential manner in the distribution of assets. Rather, it has the effect of removing secured assets from the distributable property of the company.

The evidence does not permit an analysis of Davis & Waddell's balance sheet and trading history of the kind referred to by counsel for Davis & Waddell.  Indeed, such an exercise is not appropriate in the circumstances of the present application.  However, the evidence clearly indicates that since May 2000 the NAB was the company's only banker.  The business sold homeware products to retailers.  The stock was first purchased from suppliers, the major one being Soehnle, a German company.  The business was seasonal, with most sales occurring in the period leading up to Christmas.  This period, as the Master correctly found, "was normally one of reduced liquidity caused by increased purchases and delays in payment for the goods sold.  Additional short term finance was required from [the company’s] banker in about September of each year to tide it over this period."[53]  Thus, the requirement for the additional $750,000.  Apart from receipts from sales of stock, the NAB was the source of the company’s finance.  It is  reasonable to infer that following May 2000 the company sold stock on hand and purchased further stock.  The $750,000 was required to enable such purchases.  While it is not possible to make a direct correlation between any particular funds and the purchase of stock, I am satisfied that it is reasonable to infer that a proportion of the defendant's assets reflected funds provided by the NAB.  Furthermore, the inference is reasonably open, and properly to be drawn, that in an approximate sense the proportion of the assets thus represented was "significant".  It does not follow that the contribution of receipts from trade sales following May 2000, and the supply of goods and services by unsecured creditors, constituted an  insignificant part of the assets on hand at 6 April 2000.  Although the extent of the NAB's contribution cannot be assessed on the evidence, the feature which distinguishes the contribution of the NAB from that of receipts from trade sales and unsecured creditors is the relative level or amount of the NAB's debt, considered in isolation and in relation to the overall assets of the company.

[53]See para [8] of the Master's judgment.

(o)No evidence was proffered to suggest that any creditor of the company would suffer particular hardship if the extension was granted and the NAB recognised as a secured creditor of Davis & Waddell.[54]

[54]Re Wilson Tyres Pty Ltd (in liq) (1992) 7 ACSR 318 at 338(a).

That is correct.  However, an order extending time would, if granted, deprive the unsecured creditors of their "right" to a pari passu share in the assets of the company in the winding up.  The displacement of the right of the unsecured creditors in the liquidation is a relevant factor against extending time, as mentioned earlier.  There is no evidence whether, beyond that displacement, any creditor would suffer particular hardship.  The administrator's report for the second meeting of creditors contains some relevant information concerning creditors.  The report stated liabilities to be:

Employee entitlements	69,515
Secured creditor	5,776,239
Unsecured creditors	3,182,892
Contingent liabilities	262,007
$9,290,653

In notes, the report identified the NAB as the claimed secured creditor.  It further stated that the unsecured creditors totalled 76 in number and $2,471,332 in value.  The five largest creditors were:

Soehnle	1,520,639
Vincent Imports	391,695
Villa Corporation	319,865
Pro Corp	257,974
Australian Tax Office	164,291
$2,654,464

It is apparent that the administrator calculated the amount of $2,471,332 by deducting $711,560 (the amount of the Vincent Imports and Villa Corporation debts) from the total amount of $3,182,892.  That may have been because they were Vincent companies and should be regarded as being in a different position from the other unsecured creditors. At least, that seems a reasonable assumption.  After all, the Vincents must always have considered the NAB as a secured creditor.  Apart from the Vincent companies, the major unsecured creditor was Soehnle.  There is no evidence as to whether any and, if so, what, proportion of the stock sold by Soehnle remained as stock on hand at 6 April 2001, or had earlier been sold and, if sold, whether the sale price had been received or was represented in debtors.

The other two major unsecured creditors were Pro Corp, as to the nature of whose claim there is no evidence, and the Australian Tax Office, whose position as a creditor is obvious, and all the more so if the NAB’s application succeeds.

Furthermore, in the context of their windfall argument, counsel for the NAB addressed a conclusion of the Master in para [93] of his judgment.  I mention this because it was in their submissions, although I did not understand counsel for Davis & Waddell to rely on the particular conclusion of the Master.  The point concerns the NAB's submission that the unsecured creditors will achieve a windfall gain if the order is not made.  The Master said that the submission was based on the premise that if the application was refused the NAB would be unjustly deprived of the full recovery of its debt.  The Master said that the premise could not be tested without evidence, which it was incumbent on the NAB to provide, that the other securities held would not, when realised, enable it to recover its debt.  The NAB did not provide such evidence.  Counsel submitted that this approach was erroneous, and I think that submission is correct.  The NAB was entitled to pursue its rights under the several securities in the order, and as and when it chose.[55]  It is no answer to the present application for the unsecured creditors of Davis & Waddell to say that the NAB should first establish the likely extent of recovery, let alone exercise its rights, under its other securities and only rely on the debenture for such balance of its debt as appears likely to, or may then, exist.  As the security holder, the NAB is entitled to pursue its rights under the debenture according to its terms and as the law may allow.  Moreover, in terms of the present application, it was important for the NAB to apply with expedition, and not delay on account of seeking to ascertain the position concerning other securities.  In a real sense, if the extension is not granted, there is a windfall gain to the unsecured creditors, as it was always the intention of the company and the NAB that the NAB be a secured creditor, and the company conducted business on that basis.

(p)There was no "relevant delay" in the NAB’s application to extend the period within which to lodge the notice of the charge.  The NAB lodged the notice on 15 February 2001 and applied to the Court for an extension of time on 10 April 2001.  In the intervening period, on 6 April 2001, an administrator was appointed.  Counsel for Davis & Waddell submitted that there had been an unreasonable delay, and that the NAB had only made the application when such an application appeared to be necessary to protect its rights, and when the administrator had spoken to the NAB, which, it would seem, occurred at the time of his appointment.  Of course the application might have been made earlier, but the company was trading and it was only in March that the NAB first became aware of the company’s financial difficulties.  It was only two days after the NAB received the independent accountant's report that the directors resolved that the company was insolvent and appointed an administrator.  I agree with the submission of counsel for the NAB that, in the circumstances, the NAB did not unduly delay in applying for an extension of the registration period.

(q)The accidental or inadvertent nature of the NAB's failure to lodge the notice.  Although this is not conclusive, it is "of considerable importance in the exercise of the discretion".[56]

[55]Re McCann [1985] 2 QdR 381.

[56]Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1 at 8.

1. I referred at [46] to Davis & Waddell's opening submission.  I have found that Mr Stilve decided to defer registration of the charge on the basis of a misunderstanding of the registration requirements.  Neither Mr Stilve nor Mr Hardy appreciated that late registration would render the debenture void as against an administrator or a liquidator.  There was also the misapprehension as to the need to have all of the documents registered at the same time and in a complete form.  The mistaken views as to these matters were innocent in nature, and honestly made.

1. Of course, s 263(1) imposes the obligation on the chargor company to lodge the notice of charge.  Davis & Waddell took no step in that regard.  The reality of the matter is that the NAB retained control of the security documents, as a mortgagee/chargee would be expected to do to protect its interests, which included attending to the formalities of registration.  Consequently, the failure to lodge notice of the charge within the 45 day period meant that Davis & Waddell was in breach of its obligation under s 263(1), exposing it to a penalty.  That consequence might be said to occasion an extra degree of responsibility on the part of the NAB, as the party in control of the documents, to ensure due lodgement.

1. Hence, counsel for Davis & Waddell submitted, the failure to lodge the notice and debenture within the 45 day period was attributable to the NAB, and this failure had several aspects: the inaction and decisions of the NAB’s employees, and the failure of the NAB's training and supervising systems.  The failure occurred in circumstances involving an Australian bank engaged in corporate lending on a large scale.  It is evident that the security arrangements required as a term of the financial accommodation were of a nature that is commonplace.  It is also reasonable to assume that a lender, and taker of securities, such as the NAB, would be aware of the registration requirements concerning charges, and would have procedures in place to ensure compliance with such requirements.  Counsel submitted that high standards of compliance should be required of a bank such as the NAB.  Doubtless, that is so.  Furthermore, counsel submitted that a failure in this respect is a relevant consideration in the present application.

1. The NAB had a system in place under which the lending branch was to send executed documents to the lending services department with a form requesting that they be lodged.  A copy of the form was to be kept by the branch, which was also required to monitor the progress of the registration process.  In May/June 2000, the original set of documents was forwarded to the lending services department, or so it seemed from the evidence of Mr Hardy concerning a memorandum of Mr Seddon, but no copy of the request form was retained, or at least none was subsequently found.  In addition, there was no record at the branch of when registration was due, or to alert staff as to the progress of the documents through the registration process.  It was Mr Stilve's discovery of the unused suspense account funds that led to the discovery that the debenture had not been lodged.

1. The failure or omissions at the branch level are clear enough.  They indicate a failure of ordinary requirements to oversee progress, maintain an appropriate forward diary system, and retain a copy of the request form.  However, it is hard to know precisely what happened to the documents in this case.  There is evidence, and I find, that the security documents, including the debenture, were sent to the lending services department.  An important part of the evidence is the fact that the NAB's mortgage on Villa Corporation's land, in Queensland, was lodged with the Queensland authority on 9 May 2000 at 9.02 am.  Senior counsel for Davis & Waddell properly drew this to my attention.  The date of its lodgment serves to qualify Mr Seddon's record (see exhibit REH2 to Mr Hardy's affidavit sworn 9 April 2001) as to the documents being sent to lending services on or after 22 May 2000.  It indicates an earlier transmission of the documents, or at least some of them.  It also indicates an awareness within the NAB of the importance of lodging security documents.  It is most unlikely, and I find it did not happen, that the branch itself sent that mortgage to Queensland for registration.

1. Otherwise, as a result of the failures and omissions at the branch, and the loss of documents including the original debenture, it is difficult to know what happened at any particular point in time.  What is clear is that the debenture was lost, and thus, not lodged for registration.

1. I do not accept the suggestion in Davis & Waddell's submission that the evidence suggests, let alone establishes, that the NAB did not usually have a well-run system.  Nor do I accept that the evidence establishes a failure on the part of the NAB to appreciate the importance of observing the registration requirements.  This case is concerned with one set of circumstances, it has not been an inquiry into the appropriateness, sufficiency and general operation of such systems as the NAB may have in relevant areas for the proper conduct of its lending business, and it would be wrong to make a finding of a general nature reflecting on such matters.  Rather, the evidence indicates that in this particular case there was a blunder of the type consistent with human error which can occur in any organisation, including a large and well-organised one.

1. Mr Hardy was criticised for omitting to inform Mr and Mrs Vincent that there was doubt whether the debenture had been registered, before they signed their guarantee in September.  Counsel for Davis & Waddell submitted that they should have been "fully informed".  Mr Hardy did not inform the Vincents of the loss of the documents until 5 December 2000.  Yet, the fact is that there was always to be a debenture.  The company conducted business on that basis, and it is a fact which the Vincents could not deny.  In my view, the explanation for Mr Hardy's omission to inform them of the possible or actual loss of the document was one of embarrassment in the circumstances, and a failure to address the issue expeditiously.

1. Counsel for Davis & Waddell emphasised the facts preceding the execution of the 6 December 2000 debenture and the failure to register it within the 45 day period.  They referred, inter alia, to Campbell Finance v Vivstan Packaging (Aust) Pty Ltd (in liq),[57] a case with an entirely different factual history, including an "adventitious" dating of a charge, which Batt J (as his Honour then was) took into account in an obiter discussion in relation to the discretion under s 266(4). The critical failure for consideration is the failure to lodge the 6 December 2000 debenture, which failure arose in circumstances comprehended by s 266(4)(a). As that is the critical failure, the matters which precede it would seem to be of limited significance. However, in considering the exercise of the discretion, I am prepared to, and do, have regard to the events concerning the original debenture and the several matters relied on by Davis & Waddell. I have regard to the facts as I have found them to be. I note too that counsel for Davis & Waddell relied on those matters in submitting that the NAB had shown unreasonable delay in acting to protect its rights and in making the present application.

   [57][1998] 2 VR 340.

1. I referred earlier[58] to the absence of evidence as to whether any unsecured creditor extended credit or advanced money to Davis & Waddell, between 23 January 2001 and 15 February 2001, after searching the register at a time when it did not, but should have, disclosed the existence of the NAB's charge, or because any such unsecured creditor was unaware of the NAB's claim to be a secured creditor.  There is also no evidence of any creditor having entered into a transaction with the company in the period in which the notice was outstanding.  The liquidator did not rely on any such evidence before the Master.  That is, the liquidator, who for this purpose represents the unsecured creditors, did not seek to place any such evidence before the Master.  The possibility of the liquidator being ordered to send a letter to the creditors, which it might reasonably have been supposed would provide some evidence on these matters, was referred to at a directions hearing prior to the hearing of the appeal.  The liquidator declined to take that course and required that the appeal be determined on the evidence as it was before the Master.  In these circumstances the NAB did not ask me to make an order requiring the liquidator to send a letter to the unsecured creditors to ascertain whether they had transacted with Davis & Waddell in the relevant period after searching the register.  The possibility of such an order, or the provision of evidence on the point, was not raised again.  There is no doubt that such evidence is relevant.  The purpose of the register is to enable persons minded to deal with a company to be able to find out whether it has encumbered its property.[59]  Evidence that such persons have not searched the register prior to transacting with a company is relevant to the matter of relative prejudice, and there are instances of judges requiring that the fact be ascertained, and the evidence provided, to facilitate the appropriate resolution of the case at hand.[60]  In view of the way the case has been conducted before me, so carefully and advisedly, I have not taken that course.  The fact is, therefore, that there is no evidence of the nature referred to, and that the absence of such evidence is advised and deliberate on the part of the liquidator.  The liquidator may have taken that course because he did not wish to risk ascertaining, or bringing forward, facts that may distinguish between the position of the unsecured creditors, or militate against the application of the proviso often added to an order extending time.  Whatever the reason might have been, the fact is that the liquidator has not sought to put evidence of the nature in question before the Court.

   [58]At [77] (g) and (h).

   [59]Wilde v Australian Trade Equipment Co Pty Ltd (1980) 145 CLR 590 at 596.

   [60]See Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1989) 7 ACLC 15 at 19.

1. I conclude, considering all relevant matters, that the circumstances are exceptional and that an extension of time should be ordered. I take account of all that has been submitted by counsel for Davis & Waddell, in particular the important matter of the effect of the order on the unsecured creditors, and the overall conduct and failures of the NAB until the notice was ultimately lodged. At all times a charge appeared on the register and, in so far as the HSBC charge was concerned, the NAB was entitled to be subrogated under it in respect of a substantial part of its debt until 15 February 2001, when it lodged the discharge. I do not consider it helpful or profitable to speculate as to what a person minded to transact with Davis & Waddell might have been informed if he or she had made an enquiry of the HSBC. Not only is there no evidence of any such enquiry, but the central point is that the purpose of the register is to put persons minded to transact with a company on notice, and there is no evidence of any person searching the register or acting on the basis of what the register disclosed. Furthermore, the reasonable enquiry of any such person could as well have been with Davis & Waddell, as with the apparent lender, and any inquiry of the borrower must have produced advice of the company’s true position. The true position is that at all times since May 2000 the company relied on financial accommodation provided by the NAB, without which it could not have conducted its business, and which was always intended to be secured by a registered debenture. Moreover, as stated, there is no evidence that any person, whether an existing creditor or a person minded to transact with Davis & Waddell, searched the register, or that the NAB's failure to register its debenture misled or caused prejudice to any such person. Furthermore, it is in circumstances comprehended by s 266(4)(a) that the NAB does not have the protection of registration. In addition, at all relevant times the NAB believed that the company was solvent, and the delay in lodging the notice was relatively short. Regarding the matter overall, I conclude that the circumstances are exceptional and that it is just and equitable to grant the extension sought.

1. This raises the question whether, as counsel for Davis & Waddell submitted, the order should include a proviso.  A proviso may be included to protect persons who have acquired a right in relation to property of the company that is covered by the debenture in the period between the date of creation of the charge and its registration, and to protect unsecured creditors if the company enters into liquidation prior to registration of the charge.[61]  The proviso states that the order is without prejudice to the rights of parties acquired in the period between the date of creation of the charge and the date of its registration.  A proviso in those terms could be imposed to cover both categories of persons.  The proviso can be moulded to suit the circumstances, as is just and appropriate, or refused.  An example appears in Re Freightlines Northern Territory, in which the proviso was added, but in terms which limited it to dealings with any property of the company the subject of the charge between the date of its creation and the date of notice to ASIC.[62] In the circumstances of that case, Thomas JA refused to extend the benefit of the proviso to the unsecured creditors generally. To have done so would have rendered the order to extend time nugatory "and render pointless such contests as the present under s 266(4)".[63]  There are numerous instances of courts ordering extensions without the addition of a proviso.

   [61]See Re Ashpurton Estates Ltd [1983] 1 Ch 110; Gough, Company Charges, 2^nd ed (1996), 772-773; In re Joplin Brewery Co Ltd (1902) 1 Ch 79 at 81; In re Spiral Globe (1902) 1 Ch 396; In re Abrahams & Sons (1902) 1 Ch 695; JJ Leonard Properties Pty Ltd v Leonard (W.A.) Pty Ltd (in liq) (No. 2) (1987) 5 ACLC 838 at 843; In re Ehrmann Brothers Ltd [1906] 2 Ch 697 at 707.

   [62][2000] 2 Qd R 384 at 392.

   [63]Ibid.

1. In  Re Freightlines Northern Territory there was evidence of third party rights in relation to property.  There is no evidence of any such rights in this case.  There is no evidence that any unsecured creditors of Davis & Waddell searched the register before transacting with the company in the relevant period.  Nor is there evidence that any unsecured creditor was misled or prejudiced as a result of the NAB's debenture not being registered when it should have been.  In any event, Mr and Mrs Vincent's companies must be taken to be creditors which knew, at all times, that the NAB was intended to be secured by the debenture.  Hence, those companies can hardly be considered to suffer prejudice if they stand aside for the NAB.

1. Considering the matter in its entirety, I consider that it is not just or appropriate to add a proviso to the order.

1. Counsel used the opportunity of the hearing to address submissions on costs.  Having considered their submissions I propose that the Master's order for costs stand and that Davis & Waddell pay the costs of the appeal.  I do not consider it appropriate to order that Davis & Waddell have costs on a solicitor and client or indemnity basis before either the Master or myself.  Indeed, there is an element of generosity in the Master's order as the liquidator was unsuccessful on some issues he raised and which must have prolonged the hearing before the Master.

1. Subject to anything counsel may say, I will order that:

(a)The appeal be allowed.

(b)The order of the Master made on 31 January 2002, whereby the proceeding was dismissed, be set aside.

(c)In lieu of such order, the period for lodging with the Australian Securities and Investments Commission notice of the charge given by the defendant to the plaintiff dated 6 December 2000 be extended to 15 February 2001.

(d)Subject to further order, this order not be authenticated for 14 days.

(e)The defendant pay the plaintiff's costs of the appeal including reserved costs.

---