Re ABHG Contracting Pty Ltd & Ors
[2023] VSC 263
•19 May 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2022 05111
IN THE MATTER of ABHG CONTRACTING PTY LTD (ACN 160 008 22) & Ors (according to the attached schedule)
| SCANIA FINANCE AUSTRALIA (ACN 609 637 596) | Plaintiff |
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JUDGE: | ATTIWILL J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 April 2023 (further submissions filed 5 May 2023) |
DATE OF JUDGMENT: | 19 May 2023 |
CASE MAY BE CITED AS: | Re ABHG Contracting Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2023] VSC 263 |
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CORPORATIONS – Security interests – Registration – Application to extend time pursuant to s 588FM of the Corporations Act 2001 (Cth) – Where grantors not joined as defendants but given notice – Inadvertence in registration – Where security interest initially registered against grantor trustees’ ACN, not ABN – No apparent prejudice to secured creditors – Risk of prejudice to unsecured creditors protected by order reserving leave to vary or discharge order – Where likely that unsecured creditors were aware of plaintiff’s invalid registration and therefore did not act on basis of grantor being unencumbered - Joinder of grantors as defendants to the proceeding - Application granted on conditions, including order reserving leave to vary or discharge order – ss 588FL, 588FM of the Corporations Act (Cth) – In the matter of Accolade Wines Australia Limited and other companies [2016] NSWSC 1023 applied.
COMMERCIAL LAW – Personal Property Securities – Application to extend time for registration of purchase money security interests pursuant to s 293 of the Personal Property Securities Act 2009 (Cth) – Inadvertence in registration – Where security interest initially registered against grantor trustees’ ACN, not ABN – Where other secured creditors with perfected security interests granted by the same grantor in the same collateral given notice of proceeding – Where likely that other secured creditors were aware of plaintiff’s invalid registration and therefore did not act on basis of grantor being unencumbered – Joinder of secured creditors as defendants to the proceeding - Application granted on conditions, including order reserving leave to vary or discharge order – ss 62, 293 of the Personal Property Securities Act 2009 (Cth) - In the matter of Accolade Wines Australia Limited and other companies [2016] NSWSC 1023 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C R Brown with Ms R N Malone | Holley Nethercote Lawyers |
HIS HONOUR:
INTRODUCTION
The plaintiff, Scania Finance Australia Pty Ltd (Scania Finance), by originating process filed 12 December 2022, applied for orders that:
(a) under s 588FM of the Corporations Act2001 (Cth) (the Corporations Act) specified dates be fixed as the registration time for the purposes of s 588FL(2)(b)(iv) of the Corporations Act in respect of collateral in which Scania Finance was granted a security interest arising out financing agreements entered into with the eight grantor entities listed in the originating process (grantors);
(b) pursuant to s 293 of the Personal Property Securities Act 2009 (Cth) (the PPSA), the number of business days set out in s 62(3)(b) of the PPSA be extended by the appropriate number of business days such that each of the registrations made by Scania Finance against the grantors on the personal property securities register (PPSR) fall within the time prescribed by that section.
For the reasons I am about to give I will make the orders substantially sought by Scania Finance.
MATERIAL RELIED UPON
Scania Finance relied upon the affidavits of:
(a) Alison Jean Rees, Senior Associate at Holley Nethercote Lawyers, the lawyers for the plaintiff, made 12 December 2022 (Rees affidavit);
(b) Meagan Jane Stammers, Credit Risk Manager at Scania Finance, made 12 December 2022 (Stammers affidavit);
(c) Alison Jean Rees, made 27 April 2023 (Second Rees affidavit); and
(d) Meagan Jane Stammers, made 5 May 2023.
Scania Finance also relied upon the affidavits of service of:
(a) Dianne Soisoi, Training Manager at Holley Nethercote Lawyers, made 21 February 2023;
(b) Rochelle Turner, Executive Assistance at Holley Nethercote Lawyers, made 21 February 2023 (Turner affidavit);
(c) Alison Jean Rees, made 22 February 2023; and
(d) Ursula Claire Noye, Solicitor at Holley Nethercote Lawyers, made 9 March 2023 (Noye affidavit).
Scania Finance filed its primary submissions on 23 February 2023 (primary submissions) and further submissions on 27 April 2023 (further submissions), 28 April 2023, and 5 May 2023 (further supplementary submissions). Scania Finance made submissions during the hearing on 28 April 2023.
BACKGROUND
Scania Finance operates a commercial equipment leasing and chattel mortgage business.[1] Scania provides financing and leasing options for purchasers of equipment manufactured and supplied by other companies in the same corporate group as Scania Finance, being, mainly, heavy vehicles such as trucks, buses and coaches and trailers as well as industrial and marine power systems.[2]
[1]Stammers affidavit, [6].
[2]Ibid [7].
Scania Finance usually provides finance to customers by way of chattel mortgage.[3] The process of Scania Finance providing funds under a chattel mortgage is as follows:
[3]Ibid [11].
(a) the seller of the equipment (be it Scania Finance or a third party) sends the invoice for the equipment to Scania Finance;[4]
[4]Ibid [12(a)].
(b) Scania Finance undertakes an assessment of the customer and, if approved, prepares its chattel mortgage documentation and has the customer sign the same;[5]
(c) once signed, Scania Finance issues a release note to the seller of the equipment and pays the finance amount directly to the seller;[6]
(d) the seller does not release the equipment unless and until they receive a release note and payment in full for the same.[7]
[5]Ibid [12(b)-(c)].
[6]Ibid [12(d)].
[7]Ibid [12(e)].
The process is structured so that the customer receives the finance that Scania Finance has agreed to provide (ie, it is paid to the seller) on the day that the equipment that has been acquired is ready to be delivered to the customer.[8] The terms of the chattel mortgages executed with customers are based upon Scania Finance’s standard terms and conditions, the most recent version of which was published in 2018.[9]
[8]Ibid [11].
[9]Ibid [15].
Scania Finance’s system for the registration of security interests on the PPSR is as follows:
(a) on the date when Scania Finance enters into a financing agreement (ie, a chattel mortgage) with a customer it registers the security interest granted to it under the financing agreement on the PPSR;[10]
(b) the registration process is automated, except where the grantor is a trust, in which case a manual registration of the security interest granted must be made on the PPSR;[11]
(c) a manual registration is required because Scania Finance’s system for automatic registration of security interests on the PPSR is incapable of identifying where the ABN of a trust should be used to identify a grantor of a security interest instead of the ACN of that trust’s corporate trustee.[12]
[10]Ibid [16].
[11]Ibid.
[12]Ibid [17].
Scania Finance discovered invalid PPSR registrations made by it (the subject of this proceeding) as follows:
(a) in February 2022, Ms Stammers received a notice which stated that an administrator had been appointed to one of Scania Finance’s customers which operated through a trust and a corporate trustee and which had received finance from Scania Finance by way of chattel mortgage;[13]
[13]Ibid [20(a)].
(b) in around May 2022, the administrator of the customer asserted that the equipment the subject of that chattel mortgage had vested in the customer immediately upon the administrator’s appointment;[14]
[14]Ibid [20(b)].
(c) on 14 June 2022, Scania Finance received a letter from the lawyers for the administrator explaining that Scania Finance’s security interest in the collateral, the subject of the chattel mortgage, was invalid on the basis that the grantor details on the PPSR registration were incorrect as they referred to the ACN of the corporate trustee of the grantor, rather than the ABN of the trust, which was the entity that had in fact granted the security interest;[15]
[15]Ibid [20(d)-(e)].
(d) Ms Stammers subsequently undertook an investigation to identify how the invalid registration had come about and discovered that a settlements clerk who had been responsible for registering the security interest on the PPSR, had failed to take the necessary manual steps to register the security interest against the ABN of the trust;[16]
(e) in June 2022, Ms Stammers began an audit of all Scania Finance’s PPSR registrations made in respect of grantors with a corporate trustee to determine whether any other registrations incorrectly referred to the ACN of the corporate trustee. The audit concluded in July 2022 having discovered over 100 registrations affected by this issue;[17]
(f) following discovery of the invalid registrations Scania Finance undertook a process of making new registrations for each invalid registration (ie, registrations against the ABN of the relevant trust) (new registrations).[18]
[16]Ibid [22].
[17]Ibid [23]-[25].
[18]Ibid [26].
Although Scania Finance’s audit of PPSR registrations discovered over a hundred invalid registrations, this application concerns only certain registrations which it “viewed as a priority”.[19]
[19]Ibid [28].
THE APPLICATIONS
The relief sought by Scania Finance is set out in the originating process:
1.An order pursuant to subsection 588FM of the Act that the following dates are fixed as the registration time for the purposes of s 588FL(2)(b)(iv) of the Act for the security interests grated (sic) to the plaintiff in the collateral referred to in the following registration numbers in the register established under the PPSA:
[sub-paragraphs (a)-(y) set out, for each grantor, the relevant PPSR registration number/s and the corresponding date/s which it sought be fixed as the registration time/s]
2.An order that, pursuant to section 293 of the PPSA that the number of business days set out in section 62(3)(b) of the PPSA be extended by the appropriate number of business days for each of the following PPSR registration numbers such that each of those PPSR registrations fall within the time prescribed by s 62(3)(b):
[sub-paragraphs (a)-(y) set out, for each grantor, the relevant PPSR registration number/s and specified that “the appropriate number of business days” for the extension was the number of business days between the chattel mortgage/s executed with the grantor and the date of the new registration/s].
3. [orders for confidentiality in respect of the Stammers affidavit].
4.Such further or other orders, declaration or directions as the Court deems fit.
The further supplementary submissions annexed an updated version of the orders it sought. Order 1 addressed an amendment to the name of one of the grantors. Orders 2 and 3 provided for the joinder as defendants of the grantors and the other relevant security holders. Scania Finance’s position had been, prior to the hearing on 28 April 2023, that no other party needed to be a party to the proceeding. Orders 4 and 5 were in substantially the same terms as paragraphs 1 and 2 of the originating process, as set out above. Orders 6-8 provided as follows:
6.By 4pm on [date], the defendants (being the parties listed in order 2 - the Grantors - and order 3 -the Affected Secured Parties - above) be served with a copy of these orders and any accompanying reasons.
7.Any person or entity who has a perfected security interest over the collateral the subject of any of the registrations set out in order 4 or 5 above has liberty to apply to set aside, amend or vary orders 4 or 5 of these orders on seven days’ written notice to the plaintiff.
8.Liberty to apply is also reserved to any person or entity who satisfies the Court that they are adversely affected by orders 4 or 5 above.
NOTICE
This proceeding is ex parte. Scania Finance originally submitted to the Court that the relief it sought could be granted without any other person or entity being a party to the proceeding.[20] Accordingly, it did not join any other person or entity to the proceeding.
[20]See for e.g., primary submissions, [28]-[29].
The grantors, being the entities who granted Scania Finance the security interests which are the subject of this application, were, in lieu of being joined, served by Scania Finance with a copy of the originating process,[21] and pursuant to the orders of 24 February 2023, a letter giving notice of the hearing of the application.[22] Each grantor confirmed with Scania Finance that they had received the documents served upon them.[23] Each grantor, except one (ABHG Contracting Pty Ltd), confirmed that they would not be attending the final hearing.[24]
[21]Turner affidavit, exh RT-1.
[22]Scania Finance initially gave notice of the final hearing date of 24 March 2023: Noye affidavit, exh UCN-1. Scania Finance then gave notice that the final hearing date was adjourned to 28 April 2023: Second Rees affidavit, exh AR-3.
[23]Second Rees affidavit, exh AR-3, 84-87.
[24]Ibid.
Scania Finance also did not join as defendants any other entity who registered security interests on the PPSR granted by the same grantor in the same collateral as Scania Finance’s security interests the subject of this application. As will be addressed later in these reasons, these entities may be affected by the relief that is sought under s 293 of the PPSA. The relevant security holders are all security holders who registered an “All Present and After-Acquired Property” (AllPAP) security interest (AllPAP holders). Scania Finance submitted that “[a]ccording to the PPS searches conducted the plaintiffs, there are no security holders…other than general security holders whose security is all present and after acquired property”.[25]
[25]Further submissions, [6].
In lieu of their joinder Scania Finance served on each AllPAP holder a copy the originating process[26] and a letter giving notice of the hearing of the application.[27] Each of the AllPAP holders, except one (ANZ), confirmed to Scania Finance that they had received the documents served upon them and that they would not be attending the hearing.[28] ANZ did not respond.[29]
[26]Turner affidavit, exh RT-1.
[27]Scania Finance initially gave notice of the final hearing date of 24 March 2023: Noye affidavit, exh UCN-1. Scania Finance then gave notice that the final hearing date was adjourned to 28 April 2023: Second Rees affidavit, exh AR-3.
[28]Second Rees affidavit, exh AR-3, pg 84-87.
[29]Ibid.
Scania Finance’s position in relation to the joinder of the grantors and the AllPAP holders changed at the hearing of the application on 28 April 2023. At the hearing counsel for Scania Finance conceded that, consistent with the authorities, it was appropriate for the grantors and the AllPAP holders to be joined as defendants to the proceeding. Scania Finance then proposed, in the orders annexed to its further supplementary submissions, that the grantors and AllPAP holders be joined as defendants concurrently with the relief being granted under s 588FM of the Corporations Act and s 293 of the PPSA.
APPLICABLE LAW
Corporations Act
Section 588FL of the Corporations Act provides:
Vesting of PPSA security interests if collateral not registered within time
Scope
(1) This section applies if:
(a) any of the following events occurs:
(i)an order is made, or a resolution is passed, for the winding up of a company;
(ii)an administrator of a company is appointed under section 436A, 436B or 436C;
(iii)a company executes a deed of company arrangement under Part 5.3A;
(iv)a restructuring practitioner for the company is appointed under section 453B;
(v)a company makes a restructuring plan under Division 3 of Part 5.3B; and
(b)a PPSA security interest granted by the company in collateral is covered by subsection (2).
Note:A security interest granted by a company in relation to which paragraph (a) applies that is unperfected at the critical time may vest in the company under section 267 or 267A of the Personal Property Securities Act 2009.
(2) This subsection covers a PPSA security interest if:
(a)at the critical time, or, if the security interest arises after the critical time, when the security interest arises:
(i)the security interest is enforceable against third parties under the law of Australia; and
(ii)the security interest is perfected by registration, and by no other means; and
(b)the registration time for the collateral is after the latest of the following times:
(i) 6 months before the critical time;
(ii)the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;
(iii)if the security agreement giving rise to the security interest came into force under the law of a foreign jurisdiction, but the security interest first became enforceable against third parties under the law of Australia after the time that is 6 months before the critical time - the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier;
(iv) a later time ordered by the Court under section 588FM.
…
Vesting of security interest in company
(4)The PPSA security interest vests in the company at the following time, unless the security interest is unaffected by this section because of section 588FN:
(a)if the security interest first becomes enforceable against third parties at or before the critical time - immediately before the event mentioned in paragraph (1)(a);
(b)if the security interest first becomes enforceable against third parties after the critical time - at the time it first becomes so enforceable.
…
(7) In this section:
"critical time", in relation to a company, means:
(a)if the company is being wound up - when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day under section 513A or 513B; or
(b)if the company is under administration or is subject to a deed of company arrangement - when, on a day, the event occurs by virtue of which the day is the section 513C day for the company; or
(c)if the company is under restructuring or is subject to a restructuring plan - when, on a day, the event occurs by virtue of which the day is the section 513CA day for the company.
Section 588FM of the Corporations Act provides:
(1)A company, or any person interested, may apply to the Court (within the meaning of section 58AA) for an order fixing a later time for the purposes of subparagraph 588FL(2)(b)(iv).
(2) On an application under this section, the Court may make the order sought if it is satisfied that:
(a) the failure to register the collateral earlier:
(i) was accidental or due to inadvertence or some other sufficient cause; or
(ii) it is not of such a nature as to prejudice the position of creditors or shareholders; or
(b) on other grounds, it is just and equitable to grant relief.
(3) The Court may make the order sought on any terms and conditions that seem just and expedient to the Court.
The effect of the provisions set out above is that s 588FM allows a Court to fix a later date for the registration of collateral so that the consequences of s 588FL – the vesting of security interests in the company upon, inter alia, the company’s winding up or an administrator being appointed – are avoided.
Inadvertence
In Re Bellerine Heights Pty Ltd[30] (Re Bellerine), Sloss J summarised the meaning of inadvertence in this context, with reference to the authorities, as follows:[31]
In Re Accolade Wines Australia Ltd, Brereton J considered the concept of ‘inadvertence’ and its meaning in the context of section 588FM, and stated:
For the purpose of s 588FM(2)(a)(i), “inadvertence” includes failure to advert to or understand the requirement for registration within the specified period, and innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequences of not doing so. Inadvertence will readily be found where an error of a secured creditor in not attending to registration of its security within time is innocent and does not result from any disregard of its statutory obligations.
In Bluewaters Power 1 Pty Ltd, Vaughan J observed that inadvertence ‘is concerned with human error or oversight or being “not properly attentive”’. His Honour continued, noting that inadvertence ‘will readily be found where an error of a secured creditor in not attending to registration of its security within time is innocent and does not result from any disregard of statutory obligations.’
[30][2020] VSC 874 (Re Bellerine).
[31]At [47]-[48] (citations omitted).
Prejudice
First, the particular prejudice in applications such as the present is the prejudice attributable to the delay in registration as competing interests of unsecured creditors may have arisen.[32]
[32]In the matter of Accolade Wines Australia Limited and other companies [2016] NSWSC 1023 (Accolade Wines) [18]; Re Bellerine (n 30) [49] and [66].
Secondly, secured creditors are not affected by an order under s 588FM.[33] This is because “their priorities are established under Pt 2K.3 [of the PPSA]”[34] and the security interest the subject of an order under this provision lies only from the date of registration. Accordingly, the existing priority of secured creditors is not disturbed.
[33]See for e.g., Re Imagine UN Ltd [2009] VSC 50 (Re Imagine) [28]; Re Appleyard Capital Pty Ltd [2014] NSWSC 792 (Appleyard) [15]; Accolade Wines (n 32) [10].
[34]Appleyard (n 33) [15].
Thirdly, unsecured creditors may also be affected by an order under s 588FM because the order will deprive them of the benefit of having the security vest in the company (ie, the grantor) upon, inter alia, that company entering into administration, winding up, or the execution of a deed of company arrangement. The impact on unsecured creditors was explained by Brereton J in Re Transurban CCT Pty Ltd (in its own capacity and as trustee for the Transurban CCT Trust):[35]
On the other hand, the interests of unsecured creditors are a relevant consideration, since in the only event that will make the order sought of practical importance they will be deprived of the benefit of having the security vest in the company and it will instead be preserved for the benefit of the unsecured creditors. Thus it is relevant to consider the financial position of the company, because if the company is shown to be financially secure and it is unlikely that a “critical day” will arise in the foreseeable future and solvency is established, that is likely to be the end of the matter. On the other hand, where the Court cannot be satisfied that there is no risk that unsecured creditors could be adversely affected, they are entitled to be heard against the making of the order, although that may be sufficiently achieved, depending on the degree of risk involved, by suspending the operation of the order or imposing a term reserving leave to apply to set it aside in the event of a liquidation or administration.
[35][2014] NSWSC 1909 [10] (citations omitted).
In Re Imagine UN Ltd[36] (Re Imagine), Robson J summarised the principles that apply to the provision of evidence of the grantors’ solvency:[37]
[36][2009] VSC 50.
[37]At [28].
(11) An applicant for an extension should bring forth evidence of the solvency of the company and the likelihood of its solvency being maintained into the foreseeable future: In re L.H. Charles & Co Ltd and Re Guardian Securities Ltd per McLelland J.
(12) In the absence of such evidence, an extension should not be granted unless steps are taken to protect the interest of unsecured creditors: Re Guardian Securities Ltd per McLelland J.
(13) If insufficient or no evidence of solvency is adduced, then either:
(i) one or more unsecured creditors might be joined as representative parties;
(ii) directions might be given as to notification of unsecured creditors of the application with a view to their being heard in opposition to it, if they so desired; or
(iii) the extension of time might be granted reserving, however, a right to the company or any unsecured creditor or any person representing the interests of unsecured creditors to apply at a later stage to discharge or vary the order: Re Cinema Art Films Ltd; Re LH Charles & Co Ltd; and Re Guardian Securities Ltd.
In In the matter ofAccolade Wines Australia Limited[38] (Accolade Wines), Brereton J observed that the grant of relief will not likely affect any person adversely where the grantor is shown to be financially secure. Brereton J considered that a term reserving leave to apply to set it aside in the event of a liquidation or administration may be imposed if the Court is not satisfied that there is no risk that unsecured creditors could be adversely affected by the order.[39]
[38][2016] NSWSC 1023 [19].
[39]Ibid.
In Re Bellerine, Sloss J reiterated the approach to be taken in circumstances where the Court could not be satisfied of there being no solvency risk, at [52]:
It remains the case that where an applicant is unable to demonstrate the grantor’s solvency and the likelihood of its solvency being maintained into the foreseeable future, steps will usually be taken to preserve the interests of unsecured creditors by reserving liberty to apply to any external administration appointed within six months of the date on which registration for the security interest is fixed.
Discretionary factor – delay
The power conferred by s 588FM is discretionary. Even if a Court is satisfied that one of the grounds specified under s 588FM(2) is established, it has a discretion as to whether to make the order sought.[40]
[40]Primary submissions, [21]-[22].
A delay in registering a security interest on the PPSR is a relevant factor in the Court’s discretion because of the possibility of competing interests having arisen, particularly through others having dealt with the company (ie, the grantor) on the footing that the company or the relevant collateral was unencumbered.[41] There are a number of cases where orders have been made under s 588FM in circumstances of delay,[42] including, in at least one case, where the delay was upwards of five years between the date the registration should have been made and the date of the application.[43]
[41]Accolade Wines (n 32) [18].
[42]Primary submissions, [24].
[43]Re Psyche Holdings Pty Limited [2018] NSWSC 1254 (Ward CJ).
Ex parte applications and joinder
In Accolade Wines, Brereton J emphasised the necessity for the grantors to be joined as defendants in a proceeding for relief under s 588FM, which the plaintiff in that case had failed to do:[44]
The application is made ex parte. In Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd I explained that applications seeking relief pursuant to CORPA, s 588FM, ought generally not be brought ex parte, a view which was reiterated in Re Transurban CCT Pty Ltd (in its own capacity and as trustee of the Transurban CCT Trust), where it was said that in circumstances where the grantor company’s rights are unquestionably affected by the application, the grantor company should be joined as a defendant and given notice of the application.
…
…a Grantor – particularly one which may be on the brink of insolvency – must have regard to the interests of its creditors as well as those of its members. Circumstances may arise in which, in discharge of that duty, it may be right to oppose the grant of relief if to do so may operate to the advantage of creditors generally.
[44]At [6] and [8].
The same does not apply, however, to secured creditors, given the absence of any prejudice resulting to them. Accordingly, as observed by Brereton J, “want of notice to them is not an objection to proceeding [ex parte] on the s 588FM application”.[45] In circumstances where the grantors had been notified of the proceeding, and none had sought to oppose the application, Brereton J proceeded to grant the relief and to concurrently order the joinder of the grantors as defendants, and warned that the ex parte approach should not considered as a default in future cases. That course was explained as follows:[46]
As explained in Transurban CCT, the effect of an order of the kind sought here is to prevent property – which might otherwise vest in the grantor in certain events – from doing so. In those circumstances, the grantor is a proper and necessary party and should be joined, and I propose to order that the Grantors be joined, not least so that they bound by the orders. However, although they have not yet been joined, the Grantors have been given notice of the application, and invited to appear or to inform the Plaintiffs of their position in respect of it prior to the hearing. Some Grantors have indicated consent, some non-opposition, and some have not responded; none has indicated opposition, and none has sought to appear. That significantly mitigates the objections to proceeding ex parte, as does the usual reservation of leave to any liquidator or administrator who might be appointed within six months to apply to set aside or vary the order.
…
Accordingly, although it will be appropriate to make an order joining the Grantors as defendants, directing service on them and reserving to them liberty to apply, I am prepared to proceed on the s 588FL application ex parte at this stage. I do so somewhat reluctantly, as the necessity for joining the grantors has previously been referred to more than once, and it should not be assumed that this approach will be acceptable in future cases. However, the evidence of giving notice of the proceedings to the Grantors permits that course be adopted here.
[45]Accolade Wines (n32) [10].
[46]Ibid [9], [11] (citations omitted).
In Re Appleyard Capital Pty Ltd[47] (Appleyard), an earlier decision of Brereton J’s referred to by his Honour in Accolade Wines, Brereton J stated that the application being made ex parte was “highly undesirable”.[48] Although the relief sought under s 588FM was granted upon the plaintiff’s ex parte application, Brereton J ordered the concurrent joinder of the grantor, required service of the originating process on it, and reserved to it liberty to apply to set aside the relief within 7 days of being served. Such an approach was available because the case “should be regarded as exceptional, and in order to avoid the incurring of additional costs”.[49]
[47][2014] NSWSC 792.
[48]Ibid [34].
[49]Ibid.
In In the Matters of 4 in 1 Wyoming Pty Ltd & Others[50] (4 in 1 Wyoming), Gleeson JA observed that the plaintiff’s approach of joining the grantors as defendants to its application under s 588FM was consistent with “remarks in earlier cases that applications under s 588FM ought generally not be brought ex parte”.[51] Further, whereas the plaintiff in Accolade Wines had submitted that it was appropriate to not join the grantors because there were 31 such entities, this point was not taken by the plaintiff in 4 in 1 Wyoming despite there being 255 grantors.
[50][2017] NSWSC 407 (4 in 1 Wyoming).
[51]Ibid [20].
In contrast, in Re Amotran Pty Ltd,[52] Judd J granted relief under s 588FM on an ex parte basis without ordering the grantor be joined, despite notice not having been given. Citing Brereton J’s decisions in Accolade Wines and Appleyard, Judd J observed “this application was made ex parte. There are instances where ex parte applications have been made and approved”.[53] Although Judd J took support from Brereton J’s decisions for the relief being granted ex parte, both were in fact instances where the Court had been critical of the ex parte approach and had granted relief only on the basis that the grantors were concurrently joined and liberty to apply reserved to them.
[52][2017] VSC 637.
[53]Ibid [21] (citations omitted).
In circumstances where grantors are not joined, notice to the grantors (and confirmation of their non-opposition) are factors that may ameliorate the concerns that may otherwise arise in making the orders ex parte, as does the usual reservation of leave to an affected person to apply to set the order aside should the grantor, inter alia, enter liquidation or administration within a set timeframe.
PPSA
Section 62 of the PPSA deals with when a purchase money security interest (PMSI) takes priority over other security interests. Section 62(3)(b)(i) provides, inter alia:
(3) The purchase money security interest has priority if:
…
(b)the purchase money security interest is perfected by registration before the end of 15 business days after whichever of the following days applies:
(i)for goods - the day the grantor, or another person at the request of the grantor, obtains possession of the property.
Section 293 of the PPSA relevantly provides:
Timing - applications for extension of time
(1)On application, a court may make an order extending the number of business days in a period specified in the following provisions if the court is satisfied that it is just and equitable to do so:
(a)paragraphs 62(3)(b) (perfection of purchase money security interests);
…
(3)In making an order to extend a period under subsection (1), the court must take into account the following:
(a)whether the need to extend the period arises as a result of an accident, inadvertence or some other sufficient cause;
(b)whether extending the period would prejudice the position of any other secured parties or other creditors;
(c)whether any person has acted, or not acted, in reliance on the period having ended.
While 588FM of the Corporations Act is concerned with the potential prejudice arising from “the failure to register the collateral earlier”, s 293 of the PPSA is concerned with prejudice from “extending the period”.[54] As observed by Brereton J in Accolade Wines:[55]
[t]his directs attention not to the impact on other secured parties or creditors of the delay in registration, but to the impact of making an order extending the period; to evaluate the prejudice for that purpose, one compares the position of creditors if an extension is granted, with their position if no extension is granted, and usually there will be a difference as priorities will be disturbed.
[54]Accolade Wines (n 32) [27] (Brereton J).
[55]Ibid.
The likelihood of prejudice resulting from an order being made under s 293 of the PPSA has not prevented such orders being made. In Accolade Wines, Brereton J accepted that there was prejudice to competing AllPAP holders but held that “such prejudice, while not irrelevant, is not conclusive”.[56] Given that the “essential purpose” of s 293 is to reinstate the priority of a PMSI, his Honour observed that “in any case in which the remedy is of any practical utility, there will be prejudice to a prior AllPAP holder”.[57]
[56]Ibid [29].
[57]Ibid.
In 4 in 1 Wyoming, Gleeson JA cited Brereton J’s observations in Accolade Wines and added that “to the extent that an Earlier AllPAP holder will be prejudiced, it is only by losing a windfall arising from inadvertence”.[58]
[58]At [67].
Ex parte applications and joinder
It is clear from the authorities that what is necessary is the joinder of other persons who hold a perfected security interest granted by the same grantor in the same collateral, the subject of the application, as these security holders will be affected by the shifting of the priorities that results from relief being granted under s 293 of the PPSA. The Court was not taken to any authority where relief was granted under this provision without the joinder of the other security holders.
In Accolade Wines, the plaintiff had not joined other security holders in respect of the relief it sought under s 293 of the PPSA. Brereton J said at [38]:
[t]o disturb a secured party’s priority is an interference with a proprietary right, in respect of which the secured party is entitled to be heard… They are proper and necessary parties and ought to have been joined.
Although Brereton J was unambiguous about the necessity of joinder, his Honour was satisfied that, as it was a “compelling” case, the orders could be made ex parte so long as the secured parties were concurrently joined, and liberty to apply to set aside or vary the orders reserved to them. His Honour explained why an order reserving liberty to apply (referred to as a Guardian Securities condition), without joinder of secured parties, is usually inadequate in these applications:[59]
While years of practice reflected in the cases demonstrate that the approach reflected in a Guardian Securities condition is an available one, it should be used with caution where it is clear that the rights of other parties will be adversely affected. A Guardian Securities condition is typically used in circumstances where it is unclear whether or not creditors will in fact be adversely affected – because the relevant company may well not go into liquidation or administration within six months. It is much clearer that the priority to which other secured parties are entitled will be disturbed if an s 293 order is made. In that context, an s 293 order should be made ex parte, reserving liberty to apply to set aside or vary the orders within a reasonable time, only where the case for an extension appears prima facie a very compelling one.
[59]At [43].
In 4 in 1 Wyoming, the order made by Gleeson JA granting liberty to apply was in broader terms compared to the order in Accolade Wines:[60]
One further matter should be mentioned. The plaintiff’s proposed orders make provision for liberty to apply by any person who has a perfected security interest over collateral the subject of any of the registrations set out in Schedules 1 or 2 to the orders below (other than any second defendants or third defendants) to set aside, amend or vary any of orders 1, 2 or 3 of the orders below on three days’ written notice to the plaintiff. A similar order, although not in exactly the same terms, was made in Accolade Wines at [53(8)]. It is appropriate to make such an order here to guard against the possibility that the plaintiff’s searches of the PPS Register for the purposes of this application may have not identified a person or entity (other than the second defendants or third defendants) having a perfected security interest over collateral the subject of the plaintiff’s new registrations in November 2016 and in one case in January 2017.
[60]At [75].
SUBMISSIONS
Scania Finance’s primary submissions in relation to the application under s 588FM of the Corporations Act were as follows:
(a) the circumstances of the invalid registrations constitute inadvertence or just and equitable grounds and therefore fall within the scope of grounds for relief under s 588FM(2), in reliance on:
(i) Re Cardinia Nominees Pty Ltd,[61] where Black J found that just and equitable grounds can include uncertainty or confusion by the secured party and/or its agents and the grantor as to who is responsible for registration of the security interest;[62] and
[61][2013] NSWSC 32.
[62]Primary submissions, [32(a)].
(ii) 4 in 1 Wyoming, where Gleeson JA found that reliance on a defective internal guide that had led to defective registrations amounted to inadvertence for the purposes of s 588FM;[63]
[63]Ibid [32].
(b) in relation to prejudice to other parties, such parties may include unsecured creditors, secured creditors, the grantors, and shareholders. Unsecured creditors are the most likely to be affected by an order preventing vesting of a security interest;[64]
[64]Ibid [17]-[18].
(c) in relation to secured creditors, the making of an order under s 588FM does not affect the priority of security interests;[65]
[65]Ibid [18].
(d) relying on Appleyard, there is the possibility of competing interests having arisen during the period of delay, in particular through others having dealt with the company on the footing that the collateral was unencumbered;[66]
[66]Ibid [22]-[23].
(e) applications have been granted in the past where there has been considerable delay;[67]
(f) notwithstanding that there is no prejudice to creditors, s 588FM(3) allows the Court to make the orders on any terms and conditions that seem just and expedient to it, and accordingly, if the Court has any concern for the interests of other creditors, the Court may make an order for liberty to apply;[68]
(g) Scania Finance initially submitted that, given the notice to grantors and the proposed reservation of liberty to apply, it was appropriate for the Court to grant the relief ex parte without joinder of the grantors.[69] At the hearing counsel for Scania Finance conceded that it was appropriate for the grantors to be joined, and Scania Finance then sought orders to that effect.[70]
[67]Ibid [24].
[68]Ibid [35]-[37].
[69]Ibid [28]-[29].
[70]Transcript of Proceedings, Re ABHG Contracting Pty Ltd & Ors (Supreme Court of Victoria, S ECI 2022 05111, Attiwill J, 28 April 2023) 54.12-22 (Mr Brown) (Transcript of Proceedings 28 April 2023).
Scania Finance’s primary submissions in relation to the application under s 293 of the PPSA were as follows:
(a) the considerations arising under s 293 of the PPSA are similar to those under s 588FM of the Corporations Act;[71]
[71]Primary submissions, [20].
(b) the prejudice potentially suffered by parties in relation to the application of s 293 of the PPSA is the shifting of priorities. AllPAP security holders that were registered before Scania Finance’s registrations will, if relief is granted, defer to Scania Finance’s PMSI in relation to the collateral;[72]
(c) however, prejudice of this kind only arises as a result of the loss of a windfall which otherwise would have accrued to the security holder as a result of inadvertence;[73]
(d) Scania Finance initially submitted that it is not necessary for potentially affected parties such as the other security holders to be joined to the proceeding in circumstances where they have been notified of the proceeding and where doing so would likely incur unnecessary expense and extend the time required to determine the proceeding.[74] At the hearing counsel for Scania Finance conceded that it was appropriate that other security holders be joined, and Scania Finance then sought orders to that effect.[75]
[72]Further submissions, [12].
[73]Ibid.
[74]Ibid [2(d)].
[75]Transcript of Proceedings 28 April 2023 (n 68) 54.12-22 (Mr Brown).
CONSIDERATION
Corporations Act
Inadvertence
I am satisfied that the failure by Scania Finance to effect valid registrations was due to inadvertence for the purposes of s 588FM(2)(a)(i) of the Corporations Act.
Scania Finance’s systems ordinarily automatically registered a security interest on the PPSR when Scania Finance entered into a financing agreement except, as is relevant here, where the grantor entity was a trust, in which case a manual registration was required. This is because the system automatically entered the ACN of the corporate trustee on the registration, including in circumstances where the grantor entity was the trust (and not the corporate trustee).[76] A Scania Finance settlements clerk failed to take the necessary manual step to ensure the registration identified the ABN of the trust of the grantor entity.[77]
[76] Reasons, [9].
[77]Reasons, [10].
I am satisfied, in these circumstances, that a bona fide attempt was made to register the security interests that are the subject of this application. The failure to validly do so, as a consequence of the erroneous listing of the ACN of the corporate trustee of the grantor, was the result of an innocent error on behalf of a settlements clerk.[78]
[78]See for e.g. Accolade Wines (n 32) [14]; Appleyard (n 33) [11].
Prejudice
I am satisfied that there will not be prejudice to creditors or shareholders and that, in any event, any prejudice may be dealt with appropriate orders as I address later in these reasons.
First, as to secured creditors, the Stammers affidavit sets out, for each grantor, the details of the security interests registered against the grantors by other parties between the date of the invalid registration and the subsequent registration with the correct grantor details.[79] Scania Finance has given notice of this application to secured creditors who hold an AllPAP security interest over one or more of the grantors, being an interest over the whole of the assets of the company.[80] None of these security holders have sought to oppose or participate in the application.
[79]See for e.g., in respect of ABHG Contracting Pty Ltd: Stammers affidavit, [37]. The relevant exhibit to the Stammers affidavit is confidential.
[80]Reasons, [17].
Scania Finance submitted, and I accept, as set out above,[81] that the interests of secured creditors are not affected by an order made under s 588FM as the existing priority of secured interests will not be disturbed.
[81]Reasons, [24].
Secondly, as to unsecured creditors, Scania Finance also adduced evidence of the kind referred to in Re Imagine above:
(a) Ms Rees exhibited current and historical ASIC extracts for each of the grantors.[82] This includes, relevantly, for each grantor, information obtained from the ASIC ‘CreditorWatch’ search service, including, inter alia, the Credit Score, Credit Rating Grade and Risk Level;
(b) Ms Stammers gave evidence, for each grantor, of Scania Finance’s awareness of solvency issues including whether there has been any defaults under the contracts between Scania Finance and the grantors;[83] and
(c) Ms Stammers exhibited, for each grantor, an Equifax Swiftcheck company report which includes information such as the ‘Equifax Score’ and a ‘credit risk’ assessment.[84]
[82]Rees affidavit, exh AR-1, 6-108.
[83]Stammers affidavit, [38], [61], [68], [75], [82], [125], [144], [159].
[84]See for e.g., in respect of ABHG Contracting Pty Ltd: Stammers affidavit, exh MS-2, 177-180 (confidential exhibit).
In its primary submissions, Scania Finance summarised the evidence concerning the grantors’ solvency:
26. Scania is not aware of any current creditors of the relevant entities the subject of this application, noting:
a. Each of the trusts have not defaulted on any payments since the date of entering their respective chattel mortgage;
b. An Equifax Swiftcheck company report in respect of each of the relevant corporate trustees of the trusts confirms that the trust has a good Equifax score and is deemed a low credit risk, with the exception of the trustees of:
i. Enviro Trust and Eroglu Trust, each of which has an average Equifax score and is deemed an average credit risk, and
ii. Pausco Trust which has a below average Equifax score and is deemed a high credit risk. The Equifax Swiftcheck company report in respect of Pausco Trust nevertheless reports that no payment defaults and no reported legal actions have been recorded and there have been no external administrators appointed and in these respects, gives the trustee a ‘good’ rating.[85]
[85]Primary submissions, [26] (citations omitted).
I do not accept Scania Finance’s submission that, based on the evidence it has adduced, as summarised above, there are no material solvency concerns in relation to any of the grantors.
First, the Equifax Swiftcheck reports were generated on, and are therefore current to, 21 November 2022. There may have been relevant changes since that time. Second, the ASIC CreditorWatch and Equifax Swiftcheck reports are based on past events, such as registered defaults and court judgments, and do not disclose a comprehensive picture of the actual current financial position of the grantors. Third, none of the information relied on has been verified or subject to self-assessment by the grantors.
The correct registrations took place more than 6 months ago. There is no evidence of any “event”, within the meaning of s 588F(1)(a), occurring concerning any of the grantors. If an “event” has occurred, the unsecured creditors will not be prejudiced as I will give liberty to apply to any person or entity who satisfies the Court that they are adversely affected by the order extending the time. I address this further below.
The potential prejudice to unsecured creditors must also be considered in light of the delay in the registration of the security interests. This is because delay has the potential to “impact on unsecured creditors who may have dealt with the company on the basis that its assets were unencumbered”.[86] I refer to the table at exhibit MS-1 of the Stammers affidavit.[87] The registrations for which extensions are sought range between January 2019 at the earliest, to July 2022 at the latest. Scania Finance submitted, and I accept, that applications have been granted in the past where there has been considerable delay. I am satisfied that the risk of a party dealing with any of the grantors on the footing that there was no PMSI registered, when in fact there was, is reasonably low given that Scania Finance had made a registration, albeit that it was on the ACN of the corporate trustee rather than the ABN of the trust of the grantor entity. This is because it is unlikely that a creditor, relying on a search of the register in extending credit to a grantors, would in fact have been unaware of Scania Finance’s security interest. I address this further later in these reasons at [74]-[75].
[86]Re Bellerine (n 30) [66].
[87]130-132.
Finally, Scania Finance initially proposed orders that provided for liberty to apply within 6 months of the dates of the new registrations (ie, the dates to which it seeks the registration time be extended to). By the time of the hearing of this proceeding more than 6 months had passed from those dates. In the further supplementary submissions, Scania Finance amended the proposed order to grant liberty to apply “to any person or entity who satisfies the Court that they are adversely affected by” the order extending the time.[88]
[88]Further supplementary submissions, annexure B, 16, order 8.
In my view, such an order is appropriate.
Ex parte application
The grantors should have been joined as defendants. In the present circumstances, I am satisfied that it is appropriate that the relief sought by Scania Finance be granted on an ex parte basis. Consistent with the orders proposed by Scania Finance annexed to the further supplementary submissions, I will order that the grantors be joined as defendants and that the orders made upon this application and these reasons be served upon them. It is also appropriate to order that the liberty to apply reserved to the grantors be available within 28 days after service of the orders on them. This is consistent with the approach of Brereton J in Accolade Wines and Appleyard and Gleeson JA in 4 in 1 Wyoming.
First, Scania Finance has served notice of the proceeding on the grantors (as well as the secured creditors). Each of the grantors have been in contact with Scania Finance to confirm the service upon them and that they did not intend to participate in the proceeding.[89] As observed by Brereton J in Accolade Wines, the giving of notice “significantly mitigates the objections to proceeding ex parte”.[90]
[89]Reasons, [15].
[90]At [9].
Secondly, Scania Finance has adduced some evidence concerning the solvency of the grantors. The evidence does not establish that there is no solvency risk in relation to any of the grantors; however, that none of the grantors have defaulted on any payments under the chattel mortgages offers some comfort.[91] In contrast to the circumstances before me, in Appleyard Brereton J granted relief on an ex parte basis (while also concurrently joining the grantor) despite a “high degree of likelihood that [the relevant grantor] is insolvent and will go into liquidation or administration within six months”.[92]
[91]I take into account [144] of the Stammers affidavit which is to the effect that Zlatra Transport Pty Ltd has previously defaulted on chattel mortgages held with Scania Finance and that each default has been remedied in a timely fashion and that it is not currently in default.
[92]At [32].
In any event, as I have already said above, the correct registrations took place more than 6 months ago.
Finally, I am satisfied that the proposed order for liberty to apply – which will be available to any person who can satisfy the Court they are adversely affected by the orders.
Conclusion
As a result, I will exercise my discretion to fix the later times for registration under s 588FM of the Corporations Act in respect of the registrations the subject of this application as sought by Scania Finance.
PPSA
Inadvertence
I am satisfied that the requirement for the extension under s 293 of the PPSA arises because of inadvertence. I refer to my earlier reasons concerning the application pursuant to s 588FM of the Corporations Act.
Prejudice
As stated above, s 62(3)(b)(i) of the PPSA relevantly provides that, in respect of goods (as is relevant here), a PMSI takes priority, over other perfected security interests granted by the same grantor in the same collateral, where it is perfected by registration before the end of 15 business days after the day the grantor obtains possession of the property.
Ms Stammers exhibits grantor search results taken from the PPSR for each grantor.[93] In respect of each grantor, except Zlatra Transport Pty Ltd, the grantor search results disclose that there are other parties who hold an AllPAP security interest over the grantor. An order made under s 293 of the PPSA will prejudice the AllPAP holders. This is because it will give Scania Finance’s PMSIs priority ahead of the interests registered by the AllPAP holders.
[93]See for e.g., with respect to ABHG Contracting Pty Ltd: Stammers affidavit, MS-2, 149-176 (confidential exhibit).
The observations set out earlier in these reasons of Brereton J in Accolade Wines and Gleeson JA in 4 in 1 Wyoming regarding the nature of the prejudice that arises under s 293, and the essential purpose of the provision, apply in this context. I agree with them. In circumstances where each of the other AllPAP holders have been given notice of the proceeding,[94] have not sought to oppose the application,[95] I am satisfied that the prejudice to them is not such to prohibit the making of the order.
[94]Reasons, [17].
[95]Reasons, [17].
Reliance
The issue contemplated by s 293(3)(c) is the prospect that another party may deal with a grantor, and take a security interest over property that is subject to the PMSI that an extension is sought in respect of, on the basis that there was no perfected PMSI that would trump its interest.[96] Similar considerations were addressed above in relation to potential prejudice arising under s 588FM of the Corporations Act as a consequence of delay and the searches that prudent parties would undertake prior to granting finance in return for a security interest.[97] Those observations apply in this context.
[96]At [69].
[97]Reasons, [59].
In the context of s 293(3)(c), Scania Finance’s application is also supported by the observations of Brereton J in Accolade Wines and Gleeson JA in 4 in 1 Wyoming.
In 4 in 1 Wyoming the application under s 293 of the PPSA was made because the security interests registered by the plaintiff on the PPSR erroneously failed to indicate that the security interests were in the nature of PMSIs, with the consequence that it was not clear to parties registering later AllPAP interests that there was a security interest that would trump theirs. In determining the application, Gleeson JA did not have (as I do not in this case), the benefit of any expert evidence regarding the searches that would be undertaken by a prudent financier considering providing finance to a grantor in exchange for a security interest in collateral. Gleeson JA was nonetheless satisfied that, had any later AllPAP holder searched the PPSR prior to granting finance, “the results would have identified the plaintiffs’ security interest in the specific goods or equipment described in the financing statement and that the class of collateral was over ‘all present and acquired property’”.[98] In essence, his Honour was of the view that it was sufficiently likely that the erroneous registration alerted later security holders to the fact that there was existing security over the relevant collateral.
[98]At [72].
In contrast, in Accolade Wines the plaintiff adduced expert evidence regarding the searches that would be undertaken by a prudent financier. Brereton J concluded that the evidence “establishe[d] that financiers commonly search the PPSR across ABN, ACN and company name for existing security interests in respect of a particular grantor”.[99]
[99]At [21].
I am satisfied that the risk of a party dealing with any of the grantors on the footing that there was no PMSI registered, when in fact there was, is reasonably low given that Scania Finance had made a registration, albeit that it was on the ACN of the corporate trustee rather than the ABN of the trust of the grantor entity. In this regard I also take into account the fact that each of the relevant AllPAP security holders have been given notice of this proceeding and have not sought to oppose it or take an active role. Further, the grantor search results exhibited to the Stammers affidavit identify that certain of the AllPAP security holders registered by other security holders were in fact registered against both the ABN of the trust and the ACN of the corporate trustee of the relevant grantor.[100] Consequently, this increases the likelihood that other security holders are aware of Scania Finance’s interest prior to registering their own (as their lodgement on the ACN allows for the inference that they would have searched the PPSR in respect of the ACN of the grantor’s corporate trustee and identified Scania Finance’s invalid registration).
[100]See for e.g., with respect to ABHG Contracting Pty Ltd: Stammers affidavit, MS-2, 160 (a record of Rabobank’s registration over the trust’s ABN); and Stammers affidavit, MS-2, 175 (a record of Rabobank’s registration over the trustee’s ACN) (confidential exhibit).
Ex parte application
As set out above, Scania Finance initially submitted that it was not necessary for the AllPAP holders to be joined to the proceeding as defendants and that, in lieu of their joinder, it was sufficient that they be given notice of the application.
As the AllPAP holders’ propriety rights will be disturbed by a grant of relief under s 293, and as they can be identified, they are necessary parties and ought to have been joined by Scania Finance. As I have already said, I was not taken to any decision where relief was ordered under s 293 without other secured parties being joined as defendants.
At the hearing on 28 April 2023, Scania Finance changed its position and conceded that it was appropriate that the AllPAP holders be joined. This was confirmed by proposed orders annexed to the further supplementary submissions which provided for the AllPAP holders to be joined concurrently with the relief being granted.
Despite the necessity for the joinder, I am satisfied that this is a case where it is appropriate for the relief to be granted on an ex parte basis and to concurrently order that the AllPAP holders be joined and that the orders and these reasons be served upon them. This course is available because, consistent with the approach of Brereton J in Accolade Wines, I am satisfied that the present case is “a very compelling one”.[101]
[101]At [43].
First, Scania Finance did register its PMSIs, albeit defectively, within the prescribed period on the PPSR. Second, the PMSIs are each in respect only of the specific collateral to which the relevant chattel mortgage relates – not the grantor’s assets generally. Third, the only other competing interests in the relevant collateral are general security interests (i.e., AllPAPs) and these are always liable to be trumped by a PMSI in respect of specific after-acquired collateral. Fourth, in respect of AllPAP holders whose interest was registered prior to Scania Finance’s invalid registration, the prejudice is merely the loss of a windfall arising from inadvertence. Fifth, as set out above, I am satisfied that it is reasonably likely that AllPAP holders who registered their interest after Scania Finance’s invalid registration did not acquire their security interests from the same grantors on the footing that the relevant collateral was unencumbered. Finally, Scania Finance has notified the other AllPAP holders and none have taken any steps to oppose the application.
In addition to ordering the joinder of the AllPAP holders and service of the orders upon them, it is also appropriate, in my view, to order that liberty to apply be available to the AllPAP holders within 28 days of service of the orders upon them. This is consistent with the approach of Brereton J in Accolade Wines.[102]
[102]See orders 7-8 at [54].
The AllPAP holders who will be joined pursuant to this procedure are those who Scania Finance has identified through its grantor searches on the PPSR.[103] In addition, consistent with the order made by Gleeson JA in 4 in 1 Wyoming, I will also order that liberty to apply to set aside, vary or amend the order be reserved to any person or entity who has a perfected security interest that is granted by the same grantor in the same collateral that is the subject of Scania Finance’s application on seven days’ written notice to Scania Finance. This provides a safety net for any relevant security holder who Scania Finance failed to identify in its searches of the PPSR.
[103]These are the entities identified in the grantor search results exhibited at MS-2-9 of the Stammers affidavit (confidential exhibits) and set out in table form at Annexure A of the further supplementary submissions.
Conclusion
I will extend the number of business days set out in s 62(3)(b) of the PPSA by the appropriate number of business days such that each of the registrations the subject of this application fall within the time prescribed by that section.
CONCLUSION AND ORDERS
For the reasons given, I will grant the relief sought by Scania Finance under s 588ML of the Act and s 293 of the PPSA.
It is appropriate to make the following orders:
1.The title of the proceeding be amended so that “Zlatra Pty Ltd (ACN 113 182 595)” is amended to “Zlatra Transport Pty Ltd (ACN 113 182 595)”.
2.The grantors the subject of the proceeding be joined as defendants, being:
(a)ABHG Contracting Pty Ltd as trustee for the ABHG Trust ABN 26 127 17 4 175 (ABHG Trust);
(b)BGA Homes Pty Ltd as trustee for the BGA Homes Trust ABN 17 154 203 554 (BGA Trust);
(c)Dosanjh Pty Ltd as trustee for the Dosanjh Family Trust ABN 50 659 155 181 (Dosanjh Trust);
(d)Enviro Bins Pty Ltd as trustee for Enviro Bins Unit Trust ABN 78 687 484 808 (Enviro Bins Trust);
(e)Gill Vic Pty Ltd as trustee for Gill Vic Family Trust ABN 69 937 995 897 (Gill Vic Trust);
(f)Lawson Investments Pty Ltd as trustee for Eroglu Family Trust ABN 26 799 101 425 (Eroglu Trust);
(g)Pausco Pty Ltd as trustee for the Pausco Trust ABN 98 113 405 233 (Pausco Trust); and
(h)Zlatra Transport Pty Ltd as trustee for the Zlatra Family Trust ABN 99 811 097 657 (Zlatra Trust);
(the Grantors)
3.The secured parties who hold a “all present and after-acquired personal property” security interest (including an “AllPAP-except” interest) registered on the Personal Property Securities Register (PPSR) against any of the Grantors be joined as defendants to the proceeding, being:
(a) Rabobank Australia Limited (ACN 001 621 129);
(b) Commonwealth Bank of Australia (ACN 123 123 124);
(c)Australia and New Zealand Banking Group Limited (ACN 005 357 522);
(d) National Australia Bank Limited (ACN 004 044 937);
(e) ACN 601 158 507 PTY LTD (ACN 601 158 507); and
(f) Westpac Banking Corporation (ACN 007 457 141)
(the Affected Secured Parties)
4.Pursuant to s 588FM of the Corporations Act 2001 (Cth) (the Act), the following dates are fixed as the registration time for the purposes of s 588FL(2)(b)(iv) of the Act for the security interests granted to the plaintiffs in the collateral referred to in the following registration numbers in the register established under the Personal Property Securities Act 2009 (PPSA):
ABHG Trust
(a)PPSR registration number 202207050014428 registered against ABHG Trust, 5 July 2022;
BGA Trust
(b)PPSR registration number 202206280081453 registered against BGA Trust, 28 June 2022;
(c)PPSR registration number 202207050014221 registered against BGA Trust, 5 July 2022;
(d)PPSR registration number 202207060012059 registered against BGA Trust, 6 July 2022;
(e)PPSR registration number 202207060017533 registered against BGA Trust, 6 July 2022;
(f)PPSR registration number 202209170007351 registered against BGA Trust, 17 September 2022;
Dosanjh Trust
(g)PPSR registration number 202206270079723 registered against Dosanjh Trust, 27 June 2022;
Enviro Bins Trust
(h)PPSR registration number 202207060017902 registered against Enviro Bins Trust, 6 July 2022;
Gill Vic Trust
(i)PPSR registration number 202206280081955 registered against Gill Vic Trust, 28 June 2022;
Eroglu Trust
(j)PPSR registration number 202206270072216 registered against Eroglu Trust, 27 June 2022;
(k)PPSR registration number 202209180001552 registered against Eroglu Trust, 18 September 2022;
(l)PPSR registration number 202206280083272 registered against Eroglu Trust, 28 June 2022;
(m)PPSR registration number 202206280083390 registered against Eroglu Trust, 28 June 2022;
(n)PPSR registration number 202206280085017 registered against Eroglu Trust, 28 June 2022;
(o)PPSR registration number 202206280090057 registered against Eroglu Trust, 28 June 2022;
(p)PPSR registration number 202206280090116 registered against Eroglu Trust, 28 June 2022;
(q)PPSR registration number 202206280090185 registered against Eroglu Trust, 28 June 2022;
(r)PPSR registration number 202207050006467 registered against Eroglu Trust, 5 July 2022;
(s)PPSR registration number 202207050008793 registered against Eroglu Trust, 5 July 2022;
Pausco Trust
(t)PPSR registration number 202206270073307 registered against Pausco Trust, 27 June 2022;
(u)PPSR registration number 202206270078465 registered against Pausco Trust, 27 June 2022;
(v)PPSR registration number 202209260049612 registered against Pausco Trust, 26 September 2022;
(w)PPSR registration number 202207060001627 registered against Pausco Trust, 6 July 2022;
Zlatra Trust
(x)PPSR registration number 202206280081756 registered against Zlatra Trust, 28 June 2022; and
(y)PPSR registration number 202207060012754 registered against Zlatra Trust, 6 July 2022
5.Pursuant to section 293 of the PPSA, the number of business days set out in section 62(3)(b) of the PPSA is extended in relation to each of the following PPSR registration numbers so that each registration falls within the time period prescribed by section 62(3)(b):
ABHG Trust
(a)PPSR registration number 202207050014428 registered against ABHG Trust, being the number of business days between the date of the Chattel Mortgage being 26 February 2021 and the date of the registration being 5 July 2022;
BGA Trust
(b)PPSR registration number 202206280081453 registered against BGA Trust, being the number of business days between the date of the Chattel Mortgage being 5 February 2020 and the date of the registration being 28 June 2022;
(c)PPSR registration number 202207050014221 registered against BGA Trust, being the number of business days between the date of the Chattel Mortgage being 25 February 2021 and the date of the registration being 5 July 2022;
(d)PPSR registration number 202207060012059 registered against BGA Trust, being the number of business days between the date of the Chattel Mortgage being 6 August 2021 and the date of the registration being 6 July 2022;
(e)PPSR registration number 202207060017533 registered against BGA Trust, being the number of business days between the date of the Chattel Mortgage being 28 October 2021 and the date of the registration being 6 July 2022;
(f)PPSR registration number 202209170007351 registered against BGA Trust, being the number of business days between the date of the Chattel Mortgage being 29 July 2021 and the date of the registration being 17 September 2022;
Dosanjh Trust
(g)PPSR registration number 202206270079723 registered against Dosanjh, being the number of business days between the date of the Chattel Mortgage being 29 November 2019 and the date of the registration being 27 June 2022;
Enviro Bins Trust
(h)PPSR registration number 202207060017902 registered against Enviro Bins, being the number of business days between the date of the Chattel Mortgage being 30 November 2021 and the date of the registration being 6 July 2022;
Gill Vic Trust
(i)PPSR registration number 202206280081955 registered against Gill Vic, being the number of business days between the date of the Chattel Mortgage being 28 February 2020 and the date of the registration being 28 June 2022;
Eroglu Trust
(j)PPSR registration number 202206270072216 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 31 January 2019 and the date of the registration being 27 June 2022;
(k)PPSR registration number 202209180001552 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 22 February 2019 and the date of the registration being 18 September 2022;
(l)PPSR registration number 202206280083272 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 27 March 2020 and the date of the registration being 28 June 2022;
(m)PPSR registration number 202206280083390 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 27 March 2020 and the date of the registration being 28 June 2022;
(n)PPSR registration number 202206280085017 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 25 May 2020 and the date of the registration being 28 June 2022;
(o)PPSR registration number 202206280090057 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 25 May 2020 and the date of the registration being 28 June 2022;
(p)PPSR registration number 202206280090116 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 25 May 2020 and the date of the registration being 28 June 2022;
(q)PPSR registration number 202206280090185 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 25 May 2020 and the date of the registration being 28 June 2022;
(r)PPSR registration number 202207050006467 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 4 September 2020 and the date of the registration being 5 July 2022;
(s)PPSR registration number 202207050008793 registered against Eroglu Trust, being the number of business days between the date of the Chattel Mortgage being 8 December 2020 and the date of the registration being 5 July 2022;
Pausco Trust
(t)PPSR registration number 202206270073307 registered against Pausco Trust, being the number of business days between the date of the Chattel Mortgage being 31 May 2019 and the date of the registration being 27 June 2022;
(u)PPSR registration number 202206270078465 registered against Pausco Trust, being the number of business days between the date of the Chattel Mortgage being 23 September 2019 and the date of the registration being 27 June 2022;
(v)PPSR registration number 202209260049612 registered against Pausco Trust, being the number of business days between the date of the Chattel Mortgage being 19 January 2021 and the date of the registration being 26 September 2022;
(w)PPSR registration number 202207060001627 registered against Pausco Trust, being the number of business days between the date of the Chattel Mortgage being 26 February 2021 and the date of the registration being 6 July 2022;
Zlatra Trust
(x)PPSR registration number 202206280081756 registered against Zlatra Trust, being the number of business days between the date of the Chattel Mortgage being 13 February 2020 and the date of the registration being 28 June 2022; and
(y)PPSR registration number 202207060012754 registered against Zlatra Trust, being the number of business days between the date of the Chattel Mortgage being 25 August 2021 and the date of the registration being 6 July 2022.
6.By 4pm on 31 May 2023, the plaintiff file an Amended Originating Process naming the Grantors and Affected Secured Parties as defendants in accordance with orders 2 and 3 above and thereafter serve the same on the Grantors and the Affected Secured Parties, together with:
(a) these orders; and
(b) the reasons for judgment published on 19 May 2023;
7.The defendants have liberty to apply to set aside, amend or vary orders 4 or 5 of these orders on seven days’ written notice to the plaintiff, within 28 days of being served in accordance with order 6.
8.Any person or entity who has a perfected security interest that is granted by the same grantor in the same collateral the subject of any of the registrations set out in order 5 above has liberty to apply to set aside, amend or vary order 5 of these orders on seven days’ written notice to the plaintiff.
9.Liberty to apply is also reserved to any person or entity who satisfies the Court that they are adversely affected by orders 4 or 5 above to apply to set aside, amend or vary orders 4 or 5 on seven days’ written notice to the plaintiff.
10.Subject to further order of the Court, confidential exhibits MS-2 to MS-9 (inclusive) of the affidavit of Meagan Jane Stammers filed 12 December 2022 are confidential and must not be published or made available to any persons (including the Grantors and the Affected Secured Parties) except to the Court.
I will provide the plaintiff with an opportunity to consider these orders and provide any comment on them by email to Chambers by 4pm on 23 May 2023. In the event no email is received I will make orders in the form set out above.
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SCHEDULE
IN THE MATTER OF:
ABHG CONTRACTING PTY LTD (ACN 160 008 220)
BGA HOMES PTY LTD (ACN 163 970 116)
DOSANJH PTY LTD (ACN 163 861 247)
ENVIRO BINS PTY LTD (ACN 628 080 615)
GILL VIC PTY LTD (ACN 113 223 564)
LAWSON INVESTMENTS PTY LTD (ACN 113 564 560)
PAUSCO PTY LTD (ACN 115 443 779)
ZLATRA PTY LTD (ACN 113 182 595)
SCANIA FINANCE AUSTRALIA PTY LTD (ACN 609 637 596)
Plaintiff
0
6
0